Randall & DeweyA division of Jefferies & Company, Inc.

Member, SIPC

IPAA/COGA – Denver Private Capital Conference

David C. RockecharlieManaging Director

August 10, 2006

CONFIDENTIAL

2

Overview of Randall & Dewey, a division Overview of Randall & Dewey, a division of Jefferies of Jefferies

Jefferies was voted 2005 middle market investment bank of the Jefferies was voted 2005 middle market investment bank of the yearyear

Focused on private companies and middle market public Focused on private companies and middle market public companiescompanies

2,000 employees across 25 offices worldwide2,000 employees across 25 offices worldwide

Randall & Dewey is the oil and gas group of JefferiesRandall & Dewey is the oil and gas group of Jefferies Largest E&P team on Wall Street - 125 global E&P Largest E&P team on Wall Street - 125 global E&P

professionalsprofessionals

Randall & Dewey serves the entire E&P marketRandall & Dewey serves the entire E&P market Work with E&P startups Work with E&P startups the Majorsthe Majors $15 billion in M&A transactions$15 billion in M&A transactions $5 billion in public and private financing transactions$5 billion in public and private financing transactions Deal sizes from $2 million to $2+ billionDeal sizes from $2 million to $2+ billion Advisor on nearly 50% of U.S. MA&D transaction volumeAdvisor on nearly 50% of U.S. MA&D transaction volume

3

Selected R&D TransactionsSelected R&D Transactions

M&A

Capital Markets January 2006

Sale of Royalty Interests in Brea Olinda Field

$49,750,000Financial Advisor to the Seller

December 2005

$250,000,000Senior Secured Notes Offering

Sole Placement Agent

November 2005

$81,250,000

Follow-on OfferingCo-Manager

December 2005

$100,500,000

Public Equity OfferingSole Book-Running Manager

Convertible NotesSole Manager

$50,000,000

July 2006 July 2006

$276,250,000

Follow-on Equity OfferingJoint Bookrunner

W T F F S H O R EI N C O R P R A T E DO

May 2006

Financial Advisor to the Seller

has been acquired by

$750,000,000

June 2006

Financial Advisor to the Seller

$1,246,000,000

has been acquired by

December 2005

$2,450,000,000Financial Advisor to the Seller

has been acquired by

Pending

Financial Advisor to the Seller

$2,200,000,000

has been acquired by

November 2005

Transaction Advisor to the Seller

Sale of Denver Julesburg Basin Assets acquired by

4

State of the Energy Market…State of the Energy Market…

Newton Discovers the Theory of Commodity Prices

5

Preliminary Term SheetPreliminary Term Sheet

6

An Abundance of Capital SourcesAn Abundance of Capital Sources

Commercial BanksCommercial Banks

Mezz FundsMezz Funds

Private EquityPrivate Equity

Venture CapitalVenture Capital

Royalty FundsRoyalty Funds

Hedge FundsHedge Funds

Insurance FundsInsurance Funds

MunicipalsMunicipals

End-user IndustrialsEnd-user Industrials

UtilitiesUtilities

MLPs/LLCsMLPs/LLCs

Pension FundsPension Funds

High Net-Worth IndividualsHigh Net-Worth Individuals

Large-Cap Industry Players Large-Cap Industry Players

(CVX, RD, CHK, etc.)(CVX, RD, CHK, etc.)

Traditional Public Markets Traditional Public Markets

(NYSE, NASDAQ, AMEX, LSE)(NYSE, NASDAQ, AMEX, LSE)

Emerging Public Markets Emerging Public Markets

(AIM, TSE, Dubai)(AIM, TSE, Dubai)

7

8

Traditional Corporate Finance Traditional Corporate Finance Alternatives Were Easily Classified…Alternatives Were Easily Classified…

9

The Increasing Gray Area…Create Order The Increasing Gray Area…Create Order From ChaosFrom Chaos

VPP High Yield ConvertibleDebt

Bank Debt MezzanineDebt

Public Equity Private EquityRoyalty Sale

Proved Reserves (Engineering Risk) 3P Reserves (Geological Risk)Risk Profile

Cost of Capital

Low High

Lines are starting to blur as financial instruments are being structured in unique ways to take on new characteristics

Warrants coverage

Participating interest rates (pegged to commodity prices, dividends, etc.)

Convertible Features

Increasing Risk Profile

Pref. Rights

Ultra Short/Long Maturities

Security

Covenants

Amortization / Bullet / Zero

10

The Elegant Solution is not Always The Elegant Solution is not Always ApparentApparent

Equity dilution vs. operational control?

Leverage against my assets?

Cost of Capital?

Gives me credit for today’s commodity prices?Values my upside potential?Structural Flexibility?

Einstein develops his theory of negativity.

Case Studies:Case Studies:Solving the PuzzleSolving the Puzzle

12

Blacksand EnergyBlacksand Energy

In early 2005, Blacksand Energy undertook a recapitalization of In early 2005, Blacksand Energy undertook a recapitalization of the Companythe Company

Key considerations for Blacksand’s management team:Key considerations for Blacksand’s management team: Provide growth platformProvide growth platform Align asset characteristics with new capital structureAlign asset characteristics with new capital structure Increase equity ownershipIncrease equity ownership Maintain operating controlMaintain operating control

Explored range of alternatives to find the right solutionExplored range of alternatives to find the right solution ResultsResults

Management nearly doubled equity stake in companyManagement nearly doubled equity stake in company Secured commitments of $250MM in debt and $50MM in Secured commitments of $250MM in debt and $50MM in

equity from strong partnersequity from strong partners Executed on acquisition and divestiture planExecuted on acquisition and divestiture plan Sold Company in ideal commodity price/capital markets Sold Company in ideal commodity price/capital markets

environmentenvironment

13

Blacksand Energy: Solving the PuzzleBlacksand Energy: Solving the Puzzle

Recapitalization Buyout PartnerBank DebtSub DebtPrivate EquityHedge

Monetization Royalty Sale 1Royalty Sale 2

Growth Offset Acquisition

Exit = $ Sale to recent IPO Company

Acquisition of AssetsManagement EquityPrivate Equity

14

Other Creative Financing Case StudiesOther Creative Financing Case Studies

High Yield Debtwith Warrants

Recap + Development Capital

Long-Term VPP Acquisition of BP San Juan Assets

Leveraged Recap/VPP

Recap + Acquisition andDevelopment Capital

Convertible DebtDevelopment Capital

Bank Debt Warrant Exercise

Financing S. Louisiana AssetPurchase

High Yield/PrivateEquity/Hedges

Structured acquisition ofBelden & Blake