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0% 5% 10% 15% 20% 25% 30% 35% 40% 30,000 60,000 90,000 120,000 150,000 180,000 210,000 2007 2008 2009 2010 2011 2012F
% Diversifying Growth vs Legacy Annual Average Production (Mcfe/d)
Legacy Shallow Gas Production GOB Deemed Production Diversifying Growth Assets 2007 Dispositions 2008 Dispositions 2009 Dispositions 2010 Dispositions 2011 Dispositions 2012 Dispositions % Diversifying Growth Assets (Excluding Deemed)
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0% 5% 10% 15% 20% 25% 30% 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412E Q113E Q213E Q313E Q413E BOE/d Oil Production NGL Production % Oil and NGLs
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0% 10% 20% 30% 40% 50% 60% 5 10 15 20 25 30
Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412E Q113E Q213E Q313E Q413E
$MM Oil and NGL Revenue Oil and NGL % of Total Revenue
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Geographically synergistic with shallow
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6 Lloyd, 5 Sparky, 1 Basal Quartz > 200 MMbbl Original Oil in Place(1) > 10 MMbbl @ 5% recovery factory(1) Current Production ~ 3,000 bbl/d Low cost HZ development HZ ~ $1,050 K /well No stimulations required Average initial rate over 100 bbl/d Evaluating downspacing, waterflood
Additional exploration ongoing 4#;5J$5 &$;%%%
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(1) Internal Estimate
12 500 1,000 1,500 2,000 2,500 3,000 3,500
Actual Daily from Field Revised Budget
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2012 DRILLS
00/11-35 00/09-36 02/08-36 02/01-36 02/14-25 03/14-25
00/15-27
R9 R8W4 T50
> 24% DENSITY POROSITY 12 m OIL PAY
50 100 150 200 250 300 350 400 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
Oil Prod (bbl/d) Cum Oil (bbl)
00/08-36-050-09W4 00/01-36-050-09W4 Blofled Type curve 02/08-36-050-09W4 02/01-36-050-09W4 02/14-25-050-09W4 03/14-25-050-09W4
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> 24 % DENSITY POROSITY
6 m OIL PAY
Mid Sand
OOIP = 29 MMbbls Cumulative to date 252 Mbbls Recovery Factor to date < 1% - Expect 5-8% on Primary 2 wells drilled in 2012 (late August) 11 locations remaining to be drilled based on 100 m spacing Preparing for implementation of enhanced recovery scheme
00/01-04 00/08-32 2012 DRILL
50 100 150 200 250 15,000 30,000 45,000 60,000 75,000
Oil Prod (bbl/day) Cum Oil (bbl)
00/13-33-050-08W4 02/13-33-050-08W4 00/14-33-050-08W4 00/15-33-050-08W4 Type Curve 00/01-28-050-08W4 00/02-28-050-08W4 03-28-050-08W4 00/16-32-050-08W4 02/16-32-050-08W4 02/04-04-051-08W4 03/04-04-051-08W4
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2012 DRILL
00/08-14 00/01-14 00/14-29 00/03-20 00/12-16
> 24 % DENSITY POROSITY
4 m OIL PAY
Mid Sand
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(1) McDaniel Year End 2011 Reserve Report
100 200 300 400 500 600 700 800 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20
Oil Production (bbl/d)
Oil Production (Sales - Field Estimates) McDaniels P+PDP Decline 4 New Drills Secondary Recovery Wedge
Lost production due to shutting in producers to implement secondary recovery. Gained production due to secondary recovery
Possible Infill Drilling and Secondary Recovery Scenario
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(1) Internal estimate (2) Portion of entire pool
Exploration
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Pricing $4/Mcf; $95/bbl WTI = $66.30/bbl NGLs ($3/Mcf; $105/bbl WTI = $76.50/bbl NGLs) Operating Costs $6.45/BOE Well Depth 3,900 M HZ; 2,400 TVD Type Curve IP 3.5 MMcf/d, 1 year exit rate 1.85 MMcf/d 36 bbls/MMcf NGL’s/condensate Reserves 3 Bcfe per well Royalties 5% new well royalty rate for 500 MMcf Risk Unrisked
Capital (D,C & T) $4.9 MM NPV @ 10 %
$3.6 MM BT ($2.3 MM BT)
ROR
53% BT (37% BT)
F&D $10.47/ BOE Capital Efficiency <$12,000 BOE/d Recycle Ratio 2.5 (2.2) *%"#$'*,"'**'1;>C'*"'-$9
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Cycle 2: Q2 2011 – Q1 2012
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10,000 GJ/d fixed @ $3.84/GJ (9% of forecast 2013 gas production (1)
WTI collars with an average floor price @ $88/bbl & ceiling price @ $102/bbl (49% of forecast
WTI collars with floor protection @ $85/bbl & ceiling price @ $91.15/bbl
(1) 2013: 107,780 GJ/d estimated actual plus deemed gas production (2) 2013: 4,090 bbls/d estimated oil and NGL production
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