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					COGA/IPAA Denver Private Capital
         Conference



           August 10, 2006
EnCap Investments L.P.
Background
The leading source of private equity to the independent sector of the oil and
gas industry
    Formed in 1988
       Offices in Dallas and Houston


    Four Co-Founders and Partners
       Worked together over 25 years
       100 years collective experience in oil and gas finance


    Supported by strong team comprised of 14 investment professionals
       Average 10 years of related experience




                                        2                EnCap Investments L.P.
EnCap Investments L.P.
Current Organization
                                                   PRINCIPALS
                                           David Miller         Partner
                                           Gary Petersen        Partner
                                           Marty Phillips       Partner
                                           Bob Zorich           Partner




           ADMINISTRATIVE STAFF                      INVESTMENT STAFF
         Bobby Haier           CFO          Brent Bechtol          Mng. Dir.
         Donna Wright     Controller        Jason DeLorenzo        Mng. Dir.
         Audrey White      Sr. Acct.        Murphy Markham         Mng. Dir.
         John Stricker     Sr. Acct.        Sean Smith             Mng. Dir.
                                            Wynne Snoots           Mng. Dir.
                                            Doug Swanson           Mng. Dir.
                                            Mitch Hovendick        Vice Pres.
                                            Jason McMahon          Vice Pres.
                                            Jonathan Shepko        Vice Pres.
                                            Mark Welsh              Asst. VP
                                            Jimmy Crain            Associate
                                            Ryan Devlin              Analyst
                                            Todd Hassen              Analyst
                                            Kyle Kafka               Analyst




                                       3                      EnCap Investments L.P.
EnCap Investments L.P.
Business Concept
“Conduit” between institutional capital sources and oil and gas investment
opportunities
    12 Institutional Oil & Gas Investment Funds
       Total capital commitments of approximately $4.0 billion


    1988 - 1994
       3 Mezzanine Debt Funds
       3 Reserve Acquisition Funds


    1994 - 2006
       6 Private Equity Funds


    Closed new fund (sixth private equity fund) on May 17th with $1.5 billion in
     total commitments

                                         4               EnCap Investments L.P.
EnCap Investments L.P.
EnCap Energy Capital Fund VI
   Fund Size: $1.5 billion
   100 Institutional Investors
      Consists of insurance companies, university endowments, energy banks,
       foundations and wealthy family trusts
   Investment Mandate
      Private Equity
      Transaction Size: $20MM to $100MM
      Upstream and Midstream Sectors
      North America and select international

   Target Returns
      2.0x ROI
      25% IRR



                                      5              EnCap Investments L.P.
EnCap Investments L.P.
Business Concept
Long history of helping companies grow and create shareholder
value

    Provided 130 companies with growth capital

    Hallmark of investment record is consistency of returns across
     multiple industry and hydrocarbon price cycles

    Investment approach continues to evolve with changing
     industry environment / market dynamics



                                  6             EnCap Investments L.P.
EnCap Investments L.P.
Investment Strategy / Philosophy
  Equal emphasis on capital preservation and value creation
   Back seasoned management teams with compelling business plans and like-
    minded approach to risk management

   Provide growth capital to companies with acquire and exploit and/or
    repeatable drilling strategies

   Structure designed to achieve alignment of interest with management

   Capital generally advanced in tranches as attractive opportunities are
    presented

   Engineerable reserve value substantially underpins invested capital




                                        7                EnCap Investments L.P.
EnCap Investments L.P.
Deal Structure / Management Incentive
   EnCap generally contributes 95%+ of equity capital

   Capital structure incorporates senior bank debt in addition to
    private equity

   Multi-tiered back-in arrangement positions management to earn
    a blended 20% - 25% of the company

   Our management teams averaged making $35 million in
    conjunction with 10 companies sold last year



                                   8             EnCap Investments L.P.
EnCap Investments L.P.
Private Equity Truths
    Pool of capital and number of fund managers have expanded substantially
    All seeking opportunities to back established money-makers, but open-
     minded to “un-proven” teams
    Majority of deals are start-ups
    With abundance of capital and increased competition for investment
     opportunities, entry into business never been easier
    Management teams have the value creation strategies
    Input from private equity partner relates largely to risk management and
     strategic issues
    Strong sense of reality and appreciation for cyclicality of business



                                          9                EnCap Investments L.P.
EnCap Investments L.P.
Natural Resource Funds

                                         Number of Funds        Dollars Committed   Average Fund Size
                                            Created                 (Billions)          (Millions)
         1991 - 1995                           12                     $1.6                $133

         1996 - 2000                           22                     $5.1                $232

         2001 - 2005                           37                     $16.1               $435

  Source: Private Equity Intelligence.


    Average IRR for 1996 - 2003 vintage natural resource funds was 23%
              versus 3.25% for all Private Equity Funds
              and -3.60% for all Venture Capital Funds



                                                           10                 EnCap Investments L.P.
EnCap Investments L.P.
Private Equity Myths
    Over involved in business
    Exercise too much control / influence
          Board representation is a function of size of investment
          19 out of 20 times we say “yes”
          Do not tell people who to . . . what to . . . when to . . .
    Third-Party Engineering
          Utilized more in a “hand holding” capacity than for detailed evaluations
          Our sense of potential value and risk profile is shaped substantially by
           management
          Generally do not require anything more than banks
    Impatient money


                                             11                 EnCap Investments L.P.
EnCap Investments L.P.
Management Team Attributes

   Honesty, Integrity and Forthrightness
   Strong technical and operational backgrounds
   Well-defined business plan / value creation strategy consistent
    with experience
   Adaptability
   Common understanding of risk management
   Receptive to “partnership” relationship




                                 12             EnCap Investments L.P.
EnCap Investments L.P.
Differentiation between Proven and Unproven Teams

    Proven money-makers have demonstrable track record of
     creating value
         Initial commitments typically larger
         Receive somewhat more favorable terms
         Greater upfront spending flexibility
    Unproven teams
         Emphasis more on background/experience and strength of
          business plan
         Greater receptivity early on to strategic input

                                     13             EnCap Investments L.P.
EnCap Investments L.P.
Reality and Importance of Adaptability

    There are multiple forces that affect the industry
       Hydrocarbon   Prices                 Capital Availability

       Public   Market Dynamics             People

       Costs                                M&A Opportunities

       Supply   of Rigs & Services          Regulatory   Issues
        Technological   Advancements


    All your projects won’t be successful
    What works today and what will work in 2-3 years probably will be
     different



                                        14                    EnCap Investments L.P.
EnCap Investments L.P.
Private Equity Investment Example
      Commitment Size: $50 million
           $48.5 million from EnCap; $1.5 million from Management Team
      Spend $5-$10 million of equity acquiring acreage and drilling initial test wells
      Initial success facilitates accelerated drilling program funded largely by additional
       equity. Equity supplemented by senior bank debt as PDP value grows.
      Likely add acreage and bolt-on acquisitions
      Over a 2 to 4 year time horizon, drill a total of 25 wells, establishing proof of concept
           Creating net daily production of 12.5 MMcfed, plus substantial inventory of
            PUD and Probable drilling locations
      Sell to a large independent for $250 million
           Waterfall results in payday for management team of $40 million



                                               15                  EnCap Investments L.P.
    COGA/IPAA Denver Private Capital
             Conference



      Houston Office                   Dallas Office
         1100 Louisiana             3811 Turtle Creek Blvd.
           Suite 3150                      Suite 1080
       Houston, TX 77002                Dallas, TX 75219
         (713) 659-6100                  (214) 599-0800
mphillips@encapinvestments.com   dmiller@encapinvestments.com

				
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