[PPT] - I nvestor Presentation Carbon Natural Gas Company June 2013 PowerPoint Presentation

SLIDE 1

I nvestor Presentation June 2013 Carbon Natural Gas Company

SLIDE 2

Appalachian and Illinois Appalachian and Illinois Basins Basins

I llinois Basin Properties Appalachian Basin Properties

2

SLIDE 3

stem Series Horizon

Poi nt , OH t on Land, KY

r t h

gt on, KY her , KY

ut h

gt on, KY her KY per t i es n Fuel s, W V her W V per t i es Ri v er , TN

Southern Southern Appalachian Basin Producing Horizons Appalachian Basin Producing Horizons

Sys

Sout h Po Addi ngt o K No Addi ngt Ashe Sou Addi ngt Ot he Pr ope Car bon W Ot he Pr ope New Ri v

Penn Penn M i dd i ddl e l e

Br eat Br eat hi t t hi t t

Cow Run s

Cow Run sandst one andst one

Sal t

Sal t Sands Sands

☼

M ax M axon

n
☼
☼

☼

Penn Penn Lo Lowe wer

☼ ☼ ☼

Li t t l e Li t t l e Li m e Li m e Bi g Li m e Bi g Li m e / M

nt eagl e

/ M

nt eagl e

☼ ☼

☼

☼ ☼

Ft . P

Ft . Payne ayne

Bi g I

Bi g I nj un nj un

☼

W ei r ei r

☼
☼

☼ ☼

Sunbur y Sunbur y Shal e Shal e

☼

M i s M i ssi ssi ppi si ssi ppi an an Up Uppe per Lo Lowe wer

Sunbur y Sunbur y Shal e Shal e

☼

Ber ea Sa Ber ea Sandst one ndst one

☼

☼ ☼

Cl evel an Cl evel and Shal e d Shal e

☼ ☼

Devoni an Devoni an Si l t st one Si l t st one

☼

Lower Hur Lower Hur on Shal e

n Shal e

☼ ☼ ☼ ☼ ☼ ☼ ☼ ☼

Chat t anoo Chat t anooga Shal e ga Shal e

☼

Rhi nest r e Rhi nest r eet Shal e et Shal e

☼ ☼

Devoni an evoni an Up Uppe per

Rhi nest r e Rhi nest r eet Shal e et Shal e

☼ ☼

M ar cel l u M ar cel l us Shal e s Shal e

☼

M i dd i ddl e l e

Onondag Onondaga l i m e a l i m e

Lo Lowe wer

Or i skany Or i skany Sandst one Sandst one

Up Uppe per

Cor ni f Cor ni f er ous er ous

☼ ☼

Bi g Si x Bi g Si x

☼

Cl i Cl i t

☼

i l ur i an i l ur i an Lo Lowe wer

Cl i Cl i nt on

n

☼

Ut i ca Shal e Ut i ca Shal e Tr en Tr ent on t on

M i dd i ddl e l e

Bl ack Ri ver Bl ack Ri ver

Lo Lowe wer

Knox nox

☼

Up Uppe per

Ros Rose Run e Run

☼

S Or Or dovi ci a dovi ci an Up Uppe per n

Conasaug Conasauga Shal e a Shal e

☼

Rom e

m

e

Lo Lowe wer

M t . S M t . Si m

n

i m

n

Oil ● Gas ☼

Cam br Cam br i a i an M i dd i ddl e l e

3

SLIDE 4

Highlights Highlights

Multiple Horizontal Resource Play opportunities
Significant Undeveloped Resource Potential with large inventory of

Horizontal development drilling locations

Significant opportunity for expansion of production, reserves and

cash flow at low finding and development and lease operating costs

Over 1,100 development locations

, p

Horizontal Berea Sandstone
Horizontal Seelyville CBM
Horizontal Lower Huron Shale / Siltstone
Horizontal Chattanooga Shale

Horizontal Chattanooga Shale

259,633 net acres of oil and gas and coalbed methane rights
> 50% Held by Production
> 40% expire greater than 5 years

> 40% expire greater than 5 years

Horizontal Berea Oil Development Program
22,175 net acres
Additi

l il d l t t iti id tifi d

Additional oil development opportunities identified

4

SLIDE 5

Highlights Highlights

High BTU natural gas in close proximity to market
Low Finding and Development Costs
Low Finding and Development Costs
Low Lease Operating Expenses
I nterests in over 800 wells
90% properties are operated
Strong technical team with acquisition, production and drilling

expertise in unconventional reservoirs p

5

SLIDE 6

Management T Management Team am

Patrick McDonald, CEO and Director Patrick R McDonald Mr McDonald is Chief Executive Officer of Carbon Natural Gas Company (OTC:CRBO) a company involved in the oil and natural gas Patrick R. McDonald Mr. McDonald is Chief Executive Officer of Carbon Natural Gas Company (OTC:CRBO), a company involved in the oil and natural gas exploration and production business in the Appalachian and Illinois Basins of the United States. From 1998 to 2003, Mr. McDonald was Chief Executive Officer, President and Director of Carbon Energy Corporation (AMEX:CRB), an oil and gas exploration and production company which in 2003 was merged with Evergreen Resources, Inc (NYSE:EVG). From 1987 to 1997 Mr. McDonald was Chief Executive Officer, President and Director of Interenergy Corporation, a natural gas gathering, processing and marketing company which in December 1997 was merged with KN Energy Inc (NYSE:KNE). Prior to that he worked as an exploration geologist with Texaco International Exploration Company where he was responsible for oil and gas exploration efforts in the Middle East and Far East Mr McDonald received a Bachelor’s degree in Geology and Economics from Ohio Wesleyan University and a Masters in Business East and Far East. Mr. McDonald received a Bachelor s degree in Geology and Economics from Ohio Wesleyan University and a Masters in Business Administration (Finance) from New York University. Mr. McDonald is a Certified Petroleum Geologist and is a member of the American Association of the Petroleum Geologists and of the Canadian Society of Petroleum Geologists. Mark Pierce, President Mark D. Pierce, President, has been with the company since 2001. For 20 years he had various roles at Ashland Exploration Inc., from Staff Engineer to Vice President Eastern Region of Ashland Exploration, Inc. Prior to joining Ashland, Mr. Pierce was a Production Engineer with Texaco, Inc. Mr. Pierce has a B.S. in President Eastern Region of Ashland Exploration, Inc. Prior to joining Ashland, Mr. Pierce was a Production Engineer with Texaco, Inc. Mr. Pierce has a B.S. in Civil Engineering from Rose-Hulman Institute of Technology and attended Harvard University’s Graduate School of Business Advanced Management Program. He is a registered Petroleum Engineer in Kentucky, West Virginia and Ohio and a member of the Society of Petroleum Engineers. Kevin Struzeski, CFO, Secretary, and Treasurer Kevin D. Struzeski, Chief Financial Officer, Secretary and Treasurer, has been with the company since 2004. From 2003 to 2004 Mr. Struzeski was a Director of Treasury of Evergreen Resources Inc., and from 1998 to 2003, he was Chief Financial Officer, Secretary and Treasurer of Carbon Energy Corporation. Mr. y g , , , y gy p Struzeski holds a B.A. in Business Administration from Colorado State University and a M.S. in Accounting from the University of Colorado. He is a Certified Public Accountant. Steven Ferris, Vice President of Exploration, Steven Ferris joined the company in 2000. Mr. Ferris has over 25 years of exploration and development experience including 15 years with Conoco Inc. and as a consultant with Exxon-Mobil, Snyder Oil and Halliburton. Mr. Ferris holds a B.S. Mineralogy from Miami University, an M.S. Geology from the University of Cincinnati and an M.B.A. from Xavier University. He is a Registered Professional Geologist and a member of AAPG, SPE, and SEG. Richard Finucane, Vice President of Engineering Richard Finucane, Vice President of Engineering, has been with the company since 1998. From 1982 to 1997 he was Engineering Manager of Ashland Exploration Inc. Prior to joining Ashland, Mr. Finucane was a Petroleum Engineer with Texaco, Inc. Mr. Finucane holds a B.S. in Civil Engineering from the University of Tennessee. 6 Lloyd Hall, Vice President of Operations Lloyd Hall has been with the company since 2011. Mr. Hall has over 35 years of experience. His most recent role was Vice President Compression and Pipeline Operations for EQT Midstream/Equitable Gathering. He is a member of the Society of Petroleum Engineers and sits on the board of the Southeast Energy cooperative.

SLIDE 7

Berea Sandstone Horizontal Oil Development

7

SLIDE 8

Berea Sandstone Play Berea Sandstone Play

The Berea trend

covers over 50,000 square miles in Kentucky, Ohio, Pennsylvania, Virginia & West Virginia & West Virginia

Entire Berea play has

produced ~ 2 TCF in > 100 years

Oil window is

OH PA

USGS Berea Assessment Unit

Oil window is

significantly under- developed in Kentucky

Carbon focus area

WV KY VA 8

SLIDE 9

Regional Location Regional Location Map – Map – Carbon Acreage arbon Acreage

OH

Horizontal Berea Oil

600 sq. mi. prospective area
> 32,000 gross Oil & Gas acres

Northern Area: Greenup Co.

Long term or HBP leases are the

majority

Current acreage supports

significant horizontal well development plan

WV Southern Area: Torchlight Lawrence Co.

development plan

Currently leasing additional

acreage

Liberty Energy has participated

in 15 wells to date on a

KY

in 15 wells to date on a promoted basis. Liberty has 40% interest in 26,111 acres.

VA KY VA TN

9

SLIDE 10

Northern Area: Greenup Co

Berea Sandstone Horizontal Development Program Berea Sandstone Horizontal Development Program

Northern Area: Greenup Co.

Horizontal Drilling in a Proven Berea Sandstone Oil Field

13 h

i t l ll d ill d th h

13 horizontal wells drilled through

12/ 31/ 12

7 additional horizontal wells drilled in

2013 through April 2013

25 horizontal wells permitted or in

Greenup Co.

25 horizontal wells permitted or in

process

2,500’ - 3,000’ laterals with multi-stage

fracturing

$600,000 - $650,000 well cost

Greenup Co.

Exploration program to delineate

additional areas underway

EUR estimates 20,000 - 60,000 bbls

1 Mile 10

Drilled Well Permitted / I n progress

SLIDE 11

Torchlight Southern Area:

Berea Sandstone Horizontal Development Program Berea Sandstone Horizontal Development Program

Lawrence County

Horizontal Drilling Offsetting Proven Berea Oil Production

1 horizontal well drilled through

12/ 31/ 12

4 additional horizontal wells drilled

in 2013 YTD

2 500’

3 000’ l l i h l i

Torchlight Trust Lease

2,500’ - 3,000’ laterals with multi-

stage fracturing

$650,000 - $700,000 well cost
Deeper depth to target but similar

well design as Greenup Co. Costs

Torchlight Trust Lease

Co. well design as Greenup Co. Costs and reserves expected to be marginally higher.

EUR estimates 30,000 – 40,000 Bbls

1 Mile 11

Drilled Well Permitted / I n progress Offset Operators

SLIDE 12

Berea Sandstone Horizontal Development Program Berea Sandstone Horizontal Development Program

Greenup Co. KY

Oil

Well cost $600,000
Multiple oil zones
Drills in 6-8 days

Oil Oil

2,500’ lateral
12% - 15% porosity
9+ stage frac in one day

Oil

Packer / sleeve completion
25,000 lbs of sand per stage
30-day I P: 30 BOPD

Oil

Brice Shepherd # 1 Vertical Log

Well Path Design Example Well Log 12

SLIDE 13

Brice Shepherd # 1 (H) McCarty # 1 (V) ALC Wright # 2 (H) Salley-ALC # 1 (H)

Berea Sandstone Horizontal Development Program Berea Sandstone Horizontal Development Program

A A’

Upper Zone Middle Zone Lower Zone

A

Greenup Co. KY

A’

1 Mile

Berea Porosity / Oil Zones Primary target of horizontal well (V) Vertical well (H) Horizontal well

13

SLIDE 14

Illinois Basin

14

SLIDE 15

Illinois Basin Development Illinois Basin Development Program Program

I llinois Basin Coal Bed

Methane

Wabash Valley CBM Joint Venture

Regionally extensive Permian

age coals

Carbon is first to apply

horizontal drilling technology t CBM i I lli i B i

Sullivan Energy

to CBM in I llinois Basin

Over 73,000 net acres in

I llinois Basin

50% working interest in

W b h V ll CBM P j t

Sullivan Energy Minority I nterest

Wabash Valley CBM Project

36 vertical wells drilled
1 horizontal well currently

producing 350 mcfd

1,050 mcfd gross production

15

SLIDE 16

Indiana Coal Stratigraphic Column

Illinois Basin Development Illinois Basin Development Program Program

SYSTEM GROUP FORMATION COAL BED NUMBER AVAILABLE DATA CBM POTENTIAL MATTOON COHN Aerially Restricted Poor BOND FAIRBANKS Aerially Restricted Poor PARKER No Data Poor MCLEANSBORO PATOKA RABEN BRANCH No Data Poor HAZELTON BRIDGE Regional Poor DITNEY Regional Fair / Unknown SHELBURN PIRTLE Regional Fair / Unknown DANVILLE VII Regional Good HYMERA VI Regional Good VANIAN CARBONDALE DUGGER HYMERA VI Regional Good HERRIN Regional Good BUCKTOWN V b Regional Poor PETERSBURG SPRINGFIELD V Regional Good HOUCHIN CREEK IV A Regional Good LINTON SURVANT IV Regional Good PENNSYLV LINTON IV COALCHESTER III A Regional Fair / Unknown STAUNTON SEELYVILLE III Regional Good DEKOVEN Aerially Restricted Fair / Unknown DAVIS No Data Fair / Unknown UNNAMED No Data Fair / Unknown RACCOON CREEK BRAZIL MINSHALL Regional Fair / Unknown BUFFALOVILLE Aerially Restricted Fair / Unknown UPPER BLOCK Regional Fair / Unknown LOWER BLOCK Regional Fair / Unknown SHADY LANE No Data Fair / Unknown MARIAH HILL Aerially Restricted Fair / Unknown MANSFIELD MARIAH HILL Aerially Restricted Fair / Unknown BLUE CREEK Aerially Restricted Fair / Unknown PINNICK Aerially Restricted Fair / Unknown

ST. MEINRAD

No Data Fair / Unknown FRENCH LICK Aerially Restricted Fair / Unknown

16

SLIDE 17

Illinois Basin Development Illinois Basin Development Program Program

Seelyville Coal Thickness Map
Seelyville Coal is

regionally extensive

C b I t t L Carbon I nterest Leases

< 2’ 2’- 4’ 4’ 6’ Coal Thickness 4’- 6’ 6’- 8’ > 8’

Scale: 5 miles

17

SLIDE 18

36 vertical wells

Illinois Basin Development Illinois Basin Development Program Program

Wabash Valley CBM Project

1 horizontal well

currently producing 350 mcfd

1,050 mcfd gross

production

Carbon’s Multi-lateral well

production

Direct tie in to Texas Gas

pipeline

Owned gathering and

compression system

Negotiating with

Marathon refinery for long term sale

970 BTU
No contaminants issues
No contaminants issues

(3.5% N2, 1% CO2)

Scale:

18 Carbon I nterest Leases

0.5 miles

SLIDE 19

H i t l D l t Pl

Illinois Basin Development Illinois Basin Development Program Program

Horizontal Development Plan

Opportunity to bring multi-

lateral horizontal drilling to CBM d l t i I lli i CBM development in I llinois Basin

Approximately 90 multi-

laterals shown

d

l ill

Future development will

feature significant efficiency gains by drilling more and longer laterals from fewer surface locations locations

Carbon I nterest L 19 Leases

Scale: 2 miles

SLIDE 20

Illinois Basin Development Illinois Basin Development Program Program

Woodworth # 1

Ten days to drill and complete 9000’ of lateral exposed to coal

p

Coal drills quickly and easily

20

SLIDE 21

Illinois Basin Development Illinois Basin Development Program Program

700

Wabash_Valley - Robert_C_Fuller_1-D

Woodworth # 1 Multi-Lateral

500 600

M

200 300 400

M C F D

100 200

1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 10/12/2011 11/12/2011 12/12/2011 1/12/2012 2/12/2012 3/12/2012 4/12/2012 5/12/2012 6/12/2012 7/12/2012 8/12/2012 9/12/2012 10/12/2012 11/12/2012 12/12/2012 1/12/2013 2/12/2013 3/12/2013

21

SLIDE 22

Appalachian Shale Plays

Lower Huron and Chattanooga Shales Lower Huron and Chattanooga Shales

22

SLIDE 23

Southern Appalachian Horizontal Wells

West Virginia West Virginia

Carbon leases situated within

Lower Huron horizontal development fairway

Carbon Fuels and North

Addi t l i f

Carbon Fuels

Kentucky Addington leases prime for development. Virginia

North Addington

KY WV Horizontal Wells Virginia Horizontal Wells

23

SLIDE 24

Tennessee New River Lease

24

SLIDE 25

New River, TN

Asher Block Asher Block

Devonian Chattanooga Shale Development
Mississippian Lime Oil Potential
CNX drilled 3 unsuccessful Monteagle Lime

tests in 2012 tests in 2012

70,000 acre contiguous Block – HBP
6,050 acres developed and earned by operator CNX

(CONSOL Energy) as of 12/ 31/ 12

63 925 acres undeveloped and surrounded by proven

63,925 acres undeveloped and surrounded by proven production

$3/ acre annual royalty paid to Carbon on

unearned acreage

Carbon has right to participate from 20% up

to 50% working interest on proposed wells to 50% working interest on proposed wells until May 2016

Gas delivered to East Tennessee Gas Pipeline

New River, TN

25

SLIDE 26

Mississippian Limestone Oil Potential

Miller Energy CPP-H-1 CNX CNX / Carbon Natural Gas

Fort Payne Oil: Bryozoan-rich carbonate mounds. 10’ - 40’ pay zones. 12 -22% porosity. Over 12 million barrels oil produced to date from fields to the west of CNX/ Carbon New River Block.

Scale

0 1 2 Miles

26

SLIDE 27

Additional Oil Opportunity

27

SLIDE 28

Rome Trough Shale Potential Rome Trough Shale Potential

Carbon has > 13,000 acres of

leases with rights to all depths within Rome Trough

Highly organic-rich Cambrian
Highly organic rich Cambrian

Rogersville Shale is potential target for oil

Test well on trend in Lawrence

County, KY by Cimarex expected this year.

28

SLIDE 29

Appalachian CBM

29

SLIDE 30

Southern Appalachian Southern Appalachian CBM CBM Play Play

CDX Penn Virginia Misc Properties Carbon Fuels EQT Geomet CDX USX EQT CNX Miller

CNX Total CBM 3P: 1 6 TCF

North Addington Miller South

EQT Total CBM 3P: 0.6m TCF 1.6 TCF Miller 5 Well Ave. I P: 66 MCFG Natural

South Addington High Top New River

30

SLIDE 31

Company Statistics

31

SLIDE 32

Net Proved Net Proved Reserves Reserves

Reserves Oil

(MBO)

Gas

(BCF)

Total

(BCFE)

Proved Developed Producing 489 29.7 32.7 Proved Developed Non-Producing 0.3 0.3 Proved Undeveloped 383 0.2 2.5

Total Proved Reserves 872 30.3 35.5

SEC methodology and pricing as of 12/ 31/ 12 $2.757 per mmbtu and $94.71 per bbl NYMEX PRI CI NG 2013 -YTD thru June- $3.714 per mmbtu 2013-2014 futures strip as of 6/ 11/ 13- $3.92 per mmbtu

32

SLIDE 33

Acreage Position Acreage Position

25 90,000 100,000 60 000 70,000 80,000 Developed 33,545 acres Undeveloped 226 ,320 acres

Total 259,633 acres

93,580 24,144 40,000 50,000 60,000

Net Acres

28,423 43,364 46,516 337 7,554 1,485 10 000 20,000 30,000 6,703 7,734 7,554 10,000 Ohio West Virginia Illinois Indiana Kentucky Tennessee 33

SLIDE 34

Net Net Daily Daily Average Average Production Production

34

SLIDE 35

Net Net Oil Oil Sales Sales

35

SLIDE 36

36

SLIDE 37

37

SLIDE 38

38

SLIDE 39

39

SLIDE 40

40 1700 Broadway Suite 1170 Denver, CO 80290 2480 Fortune Drive, Suite 300 Lexington, KY 40509 www.carbonnaturalgas.com