Capodian Investment Management

CAPODIAN LLC

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Presentation Table of ContentsPresentation Table of Contents

Presentation Contents:

Section I: Slides 3-8 Introduction

Section II: Slide 9-14 Investment Objectives

Section III: Slides 15-24 Investment Process

Section IV: Slides 25-36 Process Management

Section V: Slide 37 Conclusion

Appendix 1: Slides 38-41 Available Investment

Appendix 2: Slides 42-43 Management Profiles

Contact: Slide 44 Contact Information

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Introduction: Introduction: CapodianCapodian LLC (CIM)LLC (CIM)

WHY? There is an extreme lack of liquidity in the U.S. E&P market, specifically in the “small independent operator” sector.

In the U.S., this sector has traditionally been overlooked. Many have started their investment activity here but swiftly moved ‘up-market’ due to ample capital and the desire to gain mass and do larger transactions. What they neglected was the fact that because it is an underserved space, returns were higher and easier to achieve. Recent events have exasperated the situation and present an excellent opportunity to provide capital to the small, independent North American oil and gas producer.

A majority of small ‘exploration and production’ companies “micro E&P’s” are “one-company”-“one-project” concerns and once a project is harvested the opportunity exists to fund the next. Capodian targets this micro E&P sector and encourages serial develop and harvest strategies. Capodianhas identified several specific oil and gas investment opportunities, it generally expects to invest in the following types of companies:

Small producers who have not had the experience working in the realm of institutional capital markets; Projects that offer drilling potential that is conventional, and in known producing basins; Companies that focus within their geological, geographic or functional expertise; Companies that can create additional value through exploitation of acquired properties, re-completions, and drilling of development wells using updated stimulation and completion technology; and Companies with management possessing strong technical and operational backgrounds.

As oil and gas assets are depleting by nature, larger private and public E&P companies have a constant need to replace reserves through either acquisition or drilling. As a result, successful projects of micro E&P’s are frequently sold up the chain to these larger players. The greatest challenge for micro E&P’s is attaining the capital required to realize their full asset value and to create sufficient cash flow to make them candidates for acquisition or more traditional funding, such as bank debt.

The relationships Capodian managers have developed will afford them the opportunity to assist these companies in moving to the “next level” and thus can expect higher returns. Capodian will particularly target areas of personal familiarity where their experience can have the greatest impact on the project.

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WHY NOW?Domestic Upstream E&P Sector: Fundamentals

The U.S. domestic E&P sector will provide attractive investment opportunities as a result of a variety of factors. Domestic oil and gas consumption in the US is relatively stable, and in the long term expected to grow annually through 2025 resulting in strong fundamental demand. The domestic E&P business is a mature industry characterized by a declining rate of production from existing properties, more rapidly declining reserves, and increasing marginal costs to find and produce oil and gas, driving the need for additional capital.

Clearly, commodity prices have taken a tumble from the highs achieved in early September 2008. This is an excellent time to begin investing in this sector. In a February report, 1,104 rigs were drilling for natural gas - down 502 rigs from the mid September 1,606 record high. That’s a 30% decline in ‘new production’ which will be delayed and put upward pressure on prices.

Further, the 2008/2009 winter was not particularly harsh. Yes, parts of the country were cold, but the south has had a milder than normal winter. With overall production now in a downtrend any ‘normal’ weather will again change the consensus view of prices. The fact of the matter is that keeping up with demand in times of normal winter, and summer weather is difficult and the current price a consensus reaction to a mild fall.

It is expected that a gas price rally will resume from the lows of this price drop assisted by a good, while not great, winter demand season, low expectations which will create a market shift to a higher view and increased obstacles to production growth (Increased taxes on the industry and areas closed to exploration.) A key factor is that overall gas demand is trending up – but it is difficult to extract that factor due to the lack of a truly cold winter.

Our peak production occurred in July 2008 at just under 58 Bcf per day. Consider the fact that in February 2007 average monthly demand was over 90 Bcf. In that month, which we can assume was the most strenuous on storage withdrawals, approximately 16 Bcf was able to be drawn from storage. Not only is the supply/demand relationship tight, but also the ability to draw stored reserves.

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WHY NOW?

Finally, in evaluating the last four major cycles as shown below, there is further historical cause for anticipating a rebound in prices. The time from market trough to trough has ranged from 56 months to 37 months while we are currently in month 29 from the last trough. However, if we measure the time from the previous peak to its ensuing trough we find that it has steadily gotten shorter from 24 months to 13 months to 11 months. We are 12 months from the June 2008 peak and indications are that the market recovery from downturns is shorter, most likely due to the supply constraints inherent in the U.S. Energy markets ability to produce sustainable long-lived reserves.

HISTORICAL NATURAL GAS AND OIL PRICESIdentifying Four Major Cycles

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Capodian SummaryTarget Investments ranging between $8MM and $40MM. Provide capital to oil and gas companies positioned for growth and expansion.Targeted Fund Return of 24+ percent.Investment life will be 3 to 5 yearsHighly Structured investment vehicles providing capital preservation and exposure to equity returns.Staffed by a team of professionals with management, land, exploration, development, production and financial experience.The principals have closed financings well in excess of $500MM.

The investment strategy emphasizes achieving high returns, however, investments in oil and gas development activity is not without risk. CIM will mitigate the inherent risk to the maximum extent possible through structure, due diligence and ongoing oversight.

Mitigating risk through deal structure will include a ‘protect and reward’ approach focusing on return of capital first, then participation in the rewards of success. Further mitigation efforts require due diligence in assessing the reasonableness of reserve estimates, the probability of drilling success, and land and legal confirmations.

Finally, by closely monitoring its investments, selectively hedging commodity price volatility and intervening early if a project does not proceed as expected; CIM will act swiftly to preserve invested capital.

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Introduction: Introduction: Business PhilosophyBusiness Philosophy

Capodian Business PhilosophyStructure transactions to ‘protect and reward’ focusing on return of capital first, then participation in the rewards of success. Offer the client company an alternative to typical industry deals.Align Investor interest with company management.Invest in management teams that understand the Capodian ‘opportunity acceleration’ model for the creation of wealth.Invest in management teams positioned for growth and expansion primarily through the development of reserves.Approach all transactions with a ‘trust and verify’ posture through extensive due diligence policy.Incorporate knowledge and experience of CIM managers with the portfolio company management team.Structure transactions to reward the fund for success with ample opportunity for management team to achieve wealth.

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Introduction: Investment ObjectivesIntroduction: Investment Objectives

Capodian Investment Objectives

Utilize Preferred Equity Structure whereby investors, CIM managers, and operator function in partnership.

Position capital to achieve a minimum investor rate of return of 24%.

Provide current yield of 9% to 11%.

Target capital gains of 20% to 50%.

Full cycle return of capital in three to five years.

Mitigate risks to maximum extent possible through structure, due diligence and ongoing oversight.

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Objectives: Target InvestmentsObjectives: Target Investments

Target InvestmentsInvestment in United States oil & gas projects.Oil and/or Gas drilling and development opportunities with an available inventory of drill sites. Investment commitments of $8MM to $40MM. Investments involving as many as 30 drill sites to develop a project area; or as few as 3 drill sites to prove the project concept for further development.The reserves are generally classified as P1 (Proved Producing, Behind Pipe or Undeveloped) or P2 (Probable) drilling locations.Provide Structured Returns of 24% to 50%+ (as adjusted for initial risk composition).Company management team capable, knowledgeable and understanding of the Capodian concept.

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Objectives: Opportunity AccelerationObjectives: Opportunity Acceleration

The Capodian Advantage: Opportunity AccelerationCapodian offers oil & gas producers the opportunity to accelerate projects resulting in greater company value creation over time:

Project I

Project II

Project I

Project III

Time

Com

pany

Val

ue -- Capodian Funded

-- Other Funding

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Objectives: Target ReturnsObjectives: Target Returns

Target ReturnsThe Fund will target a Rate of Return of 24% or better primarilytargeting projects returning 20% to 50%.

Will focus its investment activity where there is FIRST a high degree of confidence in the return of capital, with overall rate of return considered secondary to that goal.

It is important to note that the “Target Rate of Return” for each Investment will be a “structured” return where the various risk components are factored in to the return parameters. The Manager will have the belief that each and every transaction should meet and likely exceed

the target rate.

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Objectives: Scope of OpportunitiesObjectives: Scope of Opportunities

Significant leasehold collateral Minimal leasehold collateral

Current Production Little/No current production

Low per well cost High per well cost

Capodian Scope of Investment Opportunities

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PRIMARY FOCUS OF CAPODAIN STRUCTERED

INVESTMENT ACTIVITY

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Objectives: StructureObjectives: Structure

Primary Structure

Convertible PreferredHighly Structured Preferred Equity, including protective rights, financial controls, and future funding contingencies functioning like a structured debt deal, however, avoiding Lender Liability and Bankruptcy issues.

Alternative Structure

Mezzanine DebtTypical Senior Secured promissory note with equity kickers in the form of warrants and/or Overriding Royalty Interests.

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Objectives: TermsObjectives: Terms

Structured Equity or Debt TermsCoupon bearing instrument of 8% to 12%.

Equity in the form of Overriding Royalty Interest, Net profits Interest, Preferred Stock or Warrants will be included to achieve return targets.

Payout from investments will usually be less than 4 years.

Transaction structure will create a fixed 3-5 year maturity date.

Financial control and review mechanisms to be put in place as condition to closing.

Development funds will be subject to performance review and issued on a cash call basis.

Equity Rights and/or Negative Covenants will include increasingly aggressive control and cash reclamation terms in the event of underperformance. Annual

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Process: SourcingProcess: Sourcing

Capodian managers have a well established network through a combined 50 years in the energy industry. Their experience and established relationships span all major facets of

the upstream chain:

Experience:

Land Acquisition

Exploration/Prospecting

Reserve Engineering

Development/Exploitation

Production/Operations

Sales/Marketing

Banking

Deriviatives/Hedging Strategy

Mezzanine Lending

Relationships:

Producers

Drillers & Service Entities

A&D Groups

Contract Engineers

Lawyers

Bankers

Land Personnel

Agents & Brokers

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Target CompaniesCapodian will target small producers who are generally "unsophisticated" in the realm of institutional capital markets; Companies that acquire and develop oil and gas wells within their geological, geographic or functional expertise;Companies that can create additional value through exploitation of acquired properties, re-completions, and drilling of development wells using updated stimulation and completion technology; andCompanies with management possessing strong technical and operational backgrounds.The relationships Capodian managers have developed will afford them the opportunity to assist these companies in moving to the “next level” and thus can expect higher returns.Capodian managers will particularly target areas of personal familiarity where their experience can have the greatest impact on the project.

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CompetitionCompetition for these transactions will come from industry partners doing traditional working-interest (“third for a quarter”) transactions and disparate small private equity sources, often individuals. Our proposed structure will be attractive to producers when compared to these options because:

The company retains a larger share of eventual proceeds,Capodian will have the ability to rapidly fund follow-on transactions,Capodian will provide an independent verification of the project without the threat of losing the project to a competitor.

AvailabilityThese types of transactions are plentiful in today’s market. The Capodian Managers currently operate in this segment and have identified transactions which meet the criteria. In the US market, Private Investing largely targets transactions requiring commitments in excess of $50 Million.We anticipate a robust market for the Capodian investment strategy in the current commodity environment where developing reserves is the most likely avenue for companies of this size.

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Process: Initial ReviewProcess: Initial Review

Initial Review Material Supplied by Company

Corporate Overview

A summary of the company’s history, present condition and future objectives.

Current financial condition.

Reserve Report

Preferably a ‘Third-Party’ engineering study detailing gross and net reserves, operating expense, production taxes, capital costs and future cash flows.

Use of Proceeds

A detailed schedule of capital expenditures over the investment period of the project including drilling expenses and immediate capital needs.

Profiles of Key Management Personnel; References.

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Process: Initial ReviewProcess: Initial Review

Initial Review Material Supplied by CompanyField Summary

A summary of current property interests and/or interests to be acquired including cumulative production to date, number of wells drilled, lease positions, current daily production rate, etc.

Delivery PointsInformation on natural gas and crude marketing arrangements.

Development Plan

A description of the development activity to take place including the number of wells, time to drill and complete, transportation and marketing costs, etc.

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Process: Initial AssessmentProcess: Initial Assessment

Initial Review Assessment

Capodian will model the transaction and make the following determinations:

Does the opportunity fit the Investors criteria?

Is the plan viable under existing market conditions?

Does the management team represent a good risk?

Under what structure and terms would Capodian invest?

Capodian will verbally communicate ‘general’ structural parameters to the company

Technical and Operational Review

Upon agreement of ‘general terms’ a Technical Review follows

Technical staff meet to for a an in-depth review of the company’s engineering, geology, operations, land, and intended development activity.

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Term Sheet IssuedTerm Sheet issued following positive technical review

Non-binding document addressing the size of the investment and terms and conditions used to consider the investment.

Upon review and acceptance, the company enters exclusive negotiations with Capodian

Move to CloseDue Diligence

Engineering: Verify engineering via third party audit of reserves.Financial: Review and evaluate accounting and reporting process.Land: Review title and any other pertinent land issues.Environmental: “Phase I” environmental report assessing any risk.Management: Professionally conducted background checks.

Process: Terms & ClosingProcess: Terms & Closing

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Process: Close & PostProcess: Close & Post‐‐CloseClose

ClosingDocumentation and Execution

Post-Closing AdministrationDaily Drilling/Activity ReportsBi-Weekly Update Calls Monthly Reports:

Actual and Forecasted ProductionRecap of drilling activity to date – as compared to planImmediate development activityActual Historical Financials and Forecasted Cash Flow

Quarterly Board Meetings and Financial ReportsSemi Annual Reserve Report updated (may be done annually)Annual Audited Financial Statements

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Process: Management StructureProcess: Management Structure

Management Structure

Capodian LLC (“CIM” or the “Manager"), a Texas Limited Liability Corporation will be the sole agent under a management agreement with the Investors. Capodian majority owner is Anthony C. Schnur.

The Manager will establish a Board of Advisors composed of selected representatives of the Investors. The Board of Advisors will advise the Manager and be available at least quarterly for periodic updates on the investments.

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Process: Portfolio BuildingProcess: Portfolio Building

Building a Portfolio

Committed Capital: The Manager will target and present to investors transactions totaling approximately $100 million in 2009. It is the intent of the Manager to develop an understanding of investor preferences and over time narrow the investment selection process to those of general appeal.

Diversification: The Manager will work to introduce Investors to transactions in both Oil and natural Gas, and in various U.S. basins in an effort to diversify the overall U.S. exposure of the Investors.

Portfolio Parameters: The Manager will endeavor to achieve minimum annualized returns of 24% while diligently pursuing investments that have a high degree of likelihood to return invested capital.

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Management: ReportingManagement: Reporting

Reporting

Reports to Board of Advisors: The Manager will meet with the Board of Advisors on a quarterly basis to review and discuss the Manager's investment activities, portfolio positions and outlook.

Reports to Investors: The Manager will furnish audited financial statements annually to all Investors. On a quarterly basis, each Investor will be furnished with an un-audited financial overview of each investment.

Investor Meetings: The Manager will hold annual meetings offering Investors the opportunity to review and discuss the Manager's investment activities. Capodianpersonnel will also make themselves available to Investors during the year as necessary.

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Management: TimingManagement: Timing

Timing of Investment DecisionsInvestment Proposal: The Manager will produce and provide an Investment Overview to the Investors. With-in five business days of this submittal a Question and Answer (Q&A) session will be held.

Consideration Period: Five business days following the Q&A session will be the Determination Date by which all investors must make a Go/No-Go decision for the investment.

Unanimous Decision: In the case of agreement with all Investors to proceed, standard documents will be drawn, signed and funds placed in escrow for closing.

Split Decisions: In the case of a Split Decision, Investors who have opted to invest will have another five business days to determine if they want to proceed with the investment on higher ratio amongst the remaining investors.

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Management: TimingManagement: Timing

Timing of Closing and Funding

Closing: The Manager will conduct closing preparation within 60 days from the date of approval by Investors.

Funding: Transaction Funding will occur at closing.

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Management: Financial TransparencyManagement: Financial Transparency

Income and Expense TransparencyIncome: The Manager’s fees received will be charged to the Investment company as an expense. Interest Income, Capital Gains, Overrides, etc., will be paid to the Investors.

Expenses: The Management Fee(s) and Incentive Fees (discussed later) will be the sole source of revenue of the Manager. From the Management Fee, the manager will pay all ordinary operating expenses of the Manager for salaries, rent and similar expenses (including travel and maintenance of the Manager offices) in connection with the investigation of investment and disposition opportunities for the investments and monitoring of the Investments.

Manager Audit: Capodian management believes in total transparency. Investors will havethe right to audit the manager to ensure compliance with all agreements. Manager will also provide a “State of the Manager” overview as part of the Annual Investment Review Process.

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Management: Financial ControlManagement: Financial Control

Financial Controls

Requires Investor To Transfer By Written Instruction at Closing

Requires Capodian To Transfer Dual Consent Investor & Capodian

Capital Control

CAPODIAN

LOCKBOX

(Investor Viewing Access)

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Capodian

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EscrowCAPITAL

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& RoyaltiesMgmt

Fees

Operating

Expense

G & A

Production TaxesClient Company

Revenue

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Management: Investor CommitmentsManagement: Investor Commitments

Initial and Drawdown Requirements

Investor Commitment: Once an Investor Commits to a particular transaction, that Investor is committing to an “Initial Drawdown” and potentially “Subsequent Drawdowns.” By agreement, penalties will be enforced for unmet Subsequent Drawdowns; those penalties to inure to the benefit of the remaining Investors.

Initial Drawdown: The initial drawdown for each Investor will include such Investor's proportionate share of the Investment which will include: (i) Company capital required, (ii) Manager’s Structure Fee; and (iii) the legal and administrative cost to close the transaction.

Subsequent Drawdowns: Commitments are expected to be drawn down as needed during the Commitment Period, with not less than 5 business days' prior written notice.

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Management: Investor CommitmentsManagement: Investor Commitments

Tax and Withdrawal Considerations

Tax Considerations: The Investments will most likely be treated as Equity in a Limited Liability Corporation for federal income tax purposes and each Investor will be taxable on its share of income, regardless of the amount of distributions to the Investors. Tax implications resulting from Investments in the fund may be different for specific investors and as such should be reviewed by each prospective investor and its investment, tax or other advisors, accountants, and legal counsel.

Withdrawals and Transfers: Interests in Investments will not be assignable or transferable without the prior written consent of the Manager. Further, an Investor may not withdraw any amount from the Investment except as those amounts agreed in accordance with the terms and conditions of the transaction.

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Management: ManagerManagement: Manager’’s Fees and Expensess Fees and Expenses

Managers Compensation: Management Fee Structure Fee of 1.0% to 2.0% of funds committed, paid as drawn.Management Fees of 1.0% to 3.0% of revenue generated during the life of the Investment.Annual Engineering Fee of 0.25% of Invested Amount, but not less than $20,000 per year charged to company.From the Management Fee, the manager will pay all ordinary operating expenses of the Manager in connection with the Fund's investments.The Management Fee will commence as of the date of the initial closing based on total The Manager may elect, at its sole discretion, to reduce and/or return any amount of the management fee it deems appropriate at any time.

Managers Compensation: Incentive FeeManager to receive Incentive Fees based on performance (discussed later.)

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Management: ManagerManagement: Manager’’s Fees and Expensess Fees and Expenses

Organizational Start-Up Expenses:The Investors will pay to the Manager's up to $500,000 for activities in establishing Base Documents, securing office space and initiate the acivitiy of the Management Company. These expenses will include legal, tax consulting and related activity specific to the establishment of Capodian LLC and Preferred Equity and Mezzanine Base Documents. One-Half of the final amount paid will be credited back to the investors against the Manager’s Structure Fee’s over the course of the first year of operation. If organizational expenses exceed $500,000, the Manager will pay all amounts in excess of $500,000.

Extraordinary:From the Management Fee(s), the Manager will pay all legal expenses to protect the Fund's investments unless, however, any proceeding or proceedings involving a single Portfolio Investment is estimated to cost an amount greater than 15% of the Investment’s annual Management Fee. In such a case the Manager may elect to charge the Company (and expect Funding of) an ‘extraordinary legal fee’ in an amount equal to the difference in 15% of the Management Fee and actual applicable legal charges.

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Management: Fees and ExpensesManagement: Fees and Expenses

Incentive Fee The Manager will receive an “Incentive Fee” based on the performance of each Investment.

The Incentive Fee will be calculated as follows:The Incentive Fee is 0% on an annualized Fund Return of 15% or less,The Incentive Fee is 3% of the nominal cash value of an annualized investment Return in excess of 15.0%, up to 24.9%,The Incentive Fee is 5% of the nominal cash value of a Fund Return greater than 25.0% up to 36.9%, The Incentive Fee is 8% of the nominal cash value of a Fund Return greater than 37.0%,

For illustration purposes we outline the incentive payment reaching the 24% threshold amount, and reaching a 57% return Incentive Fee will be calculated as follows: (see next slide)

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Management: Waterfall IllustrationManagement: Waterfall Illustration

Incentive Fee: Deal Returning 24% IRR To Investor

Incentive Fee: Deal Returning 57% IRR To Investor

INCENTIVE STRUCTURE: The proposed incentive structure is designed to promote active investment management and the maximization of value for each investment.

Investment 16,974,791 Investment: (16,974,791) 2% of First 15% 361,000 -0- of First 15% 0

Revenue 10,164,794 Interest Income 1,762,500 15% of 15%-25% 190,647 3% of 15%-25% 47,662

Capital Expense (16,560,000) Capital Return 16,974,791 24% of 25%-37% - 5% of 25%-37% -

Company Exp (4,321,132) Gain 2,064,639 37% of 37%+ - 8% of 37% + -

Exit / Cash Out 15,685,579 Incentive Income 47,662

Fee Income 542,792

Cash Available 4,969,241 Total Return 3,827,139 Company Gain 551,648 Manager Total 590,454

MANAGER METRICSIINVESTMENT METRICS COMPANY METRICSINVESTOR METRICS

Investment 16,974,791 Investment: (16,974,791) 2% of First 15% 361,000 -0- of First 15% 0

Revenue 10,164,794 Interest Income 1,762,500 15% of 15%-25% 238,329 3% of 15%-25% 59,582

Capital Expense (16,560,000) Capital Return 16,974,791 24% of 25%-37% 700,598 5% of 25%-37% 145,958

Company Exp (4,321,132) Gain 8,022,918 37% of 37%+ 2,386,789 8% of 37% + 516,063

Exit / Cash Out 25,452,868 Incentive Income 721,603

Fee Income 542,792

Cash Available 14,736,530 Total Return 9,785,418 Company Gain 3,686,717 Manager Total 1,264,394

INVESTOR METRICS MANAGER METRICSCOMPANY METRICSIINVESTMENT METRICS

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Management: DistributionsManagement: Distributions

Income DistributionsIncome Distributions, such as Interest Income, and Royalty Income will be distributed to the investors on a monthly basis.

Capital Gain DistributionsAny Capital Gains generated due to the liquidation of a Portfolio Investment will be paid out to the investors within 30 days after the end of the Calendar Quarter in which it occurs. The Manager’s Incentive Fee for that Investment will also be calculated coincidentally and paid at that time.

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Conclusion:Conclusion:

Capodian combines experience, knowledge and networks to attract and consummate profitable transactions.

The Capodian managers have on-the-ground experience in engineering assessment, operations, field development, oil & gas accounting, financial management, and valuation & structures to ably operate a portfolio of oil field investments.

Capodian is a well thought and informed opportunity to invest in energy commodities in North American and take advantage of the tight capital markets where intelligent money can reap handsome rewards.

CapodianCapodian takes ittakes it’’s reputation seriously. s reputation seriously. HonestyHonesty, , IntegrityIntegrity and and StewardshipStewardship

are the fundamental mission of the company are the fundamental mission of the company ––all else is secondary.all else is secondary.

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Appendix 1 :Appendix 1 : Available InvestmentAvailable Investment

Investment OpportunityA company in Houston is in need of development capital to exploit P1 reserves. The company has an immediate inventory of 9 drilling locations, 4 of which they would like to drill and then sell. The Capital Budget Requirement $18.0 million.

Investment StructureCapodian and it’s Investors agree to fund the company in return for Convertible Preferred Shares. Other Terms and conditions are as follows:

Preferred Equity Commitment $18,000,000 Initial Draw $10,600,000Preferred Interest Rate 9.00%Common Equity Issuance Hurdles:

2% at Closing12% after Preferred Achieves a 15% IRR24% after Preferred Achieves a 25% IRR37% after Preferred Achieves a 37% IRR

Management Fee (on Revenue) 2.0%Structure Fee (On Draws) 2.0%Engineering Fees/Yr. $20,000

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Capodian funds the necessary capital to develop the assets, on a net of operating cash flow basis, thereby limiting it’s exposure and ensuring company proceeds are reinvested. The company kicks off development, begins to achieve substantial growth in cash flow and once the development program complete, proceeds to re-purchase the preferred, according to the agreed Hurdle Rates

Income Statement:

INC & EXP 2009 2010 2011 Total

Operating Revenue Production Revenue 0 8,658 1,506 10,164Total Revenue 0 8,658 1,506 10,164Expenses LOEs / Production Cost 0 543 99 16,049 Production Taxes 0 741 125 11,688Production Expenses 0 1,285 224 27,737

Net Income from Ops 0 7,374 1,282 8,656Corporate Expenses Manager Fee 212 173 30 415 G&A / Closing Fees 1,187 1,875 175 3,237 Interest Expense 318 1,214 135 1,667Total Corporate Exp 1,505 3,089 310 5,319

Net Inc Before Taxes (1,505) 4,285 972 3,753

Annual Projected Income Statement(In Thousands of Dollars)

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Following the development the company is estimated to be able to sell the property for a conservative $40 million U.S. With $54 million in Producing Reserves and an additional $13 Million in P1, yet undrilled value, $40 million is a fair estimate even in this market.

Cash Flow:

CASH FLOW 2009 2010 2011 TotalNet Income Before Taxes (1,505) 4,285 972 3,753Plus: Advance from Investor 10,600 7,400 0 18,000Less: Capital Expenditures (7,400) (9,160) 0 (16,560)Plus: Sale of Property 0 0 40,000PROCEEDS FROM SALE:Less: Investors Equity 0 0 (31,009) (31,009)Less; Managers Incentive 0 0 (1,607) (1,607)Less; Company Owners Adv. 0 0 (8,356) (8,356)

Net Cash Flow Before Taxes 1,695 2,525 0 4,220

(In Thousands of Dollars)Annual Projected Statement of Cash Flows

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Capodian will require two maturity points in it’s Convertible Preferred structure, one being a hard maturity date, and secondly threshold dates at which time certain rights may be escalated and enforced, over 36 months or less. Similarly, the Mezzanine structure will have coverage and other covenants as well as a hard maturity date.

Resulting Metrics of “Available” Investments:

Payout Term (months) 17

Investor IRR% 88.6%

Investor Ave Annual Yield 10.91%

Cash Over Investment $15,61,2103

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Appendix 2:Appendix 2: Management TeamManagement Team

Anthony C. Schnur, Managing Director

Mr. Schnur has 20 years of extensive experience in the oil and gas and financial management industries. He has held various roles including CFO of Llano Operating Corporation, Interim CEO and Finance Director (CFO) of NT Energy plc. Areas of responsibility have included the financial accounting, procedures and reporting, treasury and credit management functions. He has participated in strategic development planning of company oil and gas assets, lease acquisition and maintenance; securing and managing company credit and funding; as well as the management of Accounting, Human Resources and IT functions.

Mr. Schnur was principal of a private oil and gas capital advisory company specializing in corporate strategy and planning. His services encompassed capital restructuring, including successful of work-outs, acquisitions and divestitures, arranging debt finance and providing financial management and control. In these positions he placed over $40 million in commitments and divested $30 million in assets. Previous experience includes Director of Structured Transactions at Aquila Energy Capital Corporation, where assisted in the structuring and sale of Aquila Inc.’s energy mezzanine loan portfolio. As a transaction originator, Mr. Schnur closed eight mezzanine transactions totaling $152 million and reviewed over 150 transactions as potential areas of interest for Aquila. Mr. Schnur earned an MBA from Case Western Reserve University, Weatherhead School of Management majoring in Marketing and Corporate Finance. And holds a B.S. in Business Administration from Gannon University, Dahlkemper School of Business.

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Appendix 2: Management TeamAppendix 2: Management Team

[Name Withheld], Director Individual is currently employed and will be available at a time suitable to review their experience and commitment to Capodian.

He has over 25 years of extensive and diverse experience in the oil and gas industry including business development, divestitures and acquisitions, commercial finance, engineering and oilfield valuation, due diligence, and field operations management. Currently acts as an independent petroleum consultant specializing in business development, advisory and property valuations. Under contract to generate drilling and production business opportunities and assisted CEO with set-up of a new public E&P company

Prior to starting his consulting practice, he served as Director, Divestment Services for Madison Energy Advisors; Director of Concert Capital Resources where he assisted in the execution of a successful liquidation of a $375 million structured finance portfolio. He also has experience as an Asset Analyst for Aquila Energy Capital, where he drew on field operations experience to advise/consult with underwriters in the development and review of documentation and credit agreements for highly structured oil and gas project finance packages; developed and implemented the process to monitor activity on loans with a combined value of $500 million and made recommendations to management regarding continued funding, exit and foreclosure. Developed a strategies to move forward and maximize returns via liquidations, where deemed necessary. Prior experience also includes Sr. Engineering Analyst with Kerr McGee. and spent 15 years at Sonat Exploration, in offshore production operations and the production and reservoir engineering departments. He holds a B.S. in Petroleum Services Technology from Nicholls State University.

44 CAPODIAN LLC

DRAKE’S WELL TITUSVILLE, PAAUGUST 27, 1859

SPINDLETOP BEAUMONT, TX

JANUARY 10, 1901

Capodian Investment Management

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