002.Joe Gladbach

8/8/2019 002.Joe Gladbach

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Jefferies & Company, Inc.

Member SIPC

DUG EastPresentation by Jefferies & Co.

November 4, 2010
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2/13

Overview of Jefferies Energy Group

Jefferies is consistently among the top three global advisors to the oil & gas industry

We are the foremost advisor in shale-related transactions:

Have advised on eight of the nine largest shale deals, more than all other advisors combined

Unparalleled experience related to both technical and commercial issues

Senior team has executive relationships throughout the oil and gas industry

Have served 40 of the 50 largest worldwide energy companies including ExxonMobil, BHP

Billiton, Shell, Statoil, Total, CNOOC, and Conoco, completing multiple projects for most

We have the largest, most experienced technical group in the industry, which is a hallmark of thefirm and sets us apart from our competition

We have particular expertise in the Marcellus, and have evaluated:

Over 4 million prospective Marcellus acres across NY, PA, and WV

Over 200 horizontal and 100 vertical Marcellus wells

Hundreds of miles of 2D and 3D seismic

Hundreds of logs and approximately 50 full cores

Well design, completion process, and development strategies for some of the most active

Marcellus operators1


3/13

Introduction

The oil and gas business is going through a major transition; shale plays represent afundamental industry shift

For North American natural gas, the huge recoverable resource has critical long-termimplications

Potential for gas to be a cornerstone of U.S. energy policy

Ability of large energy users to make long-term commitment to gas as fuel source

Large unconventional oil projects are emerging and appear promising

Of the U.S. gas shale plays, the Marcellus has risen to the top for several reasons, including:

Scale of the play

Superior per-well economics: 30%+ IRRs at $5.00 / MMBtu

Close to U.S. population centers and significant interstate pipeline access

Geologically stable area; structurally uncomplicated

Significant additional resource potential within the play (Utica, Huron, Burkett, etc.)

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4/13

Increasing International Interest in Shale Plays

With the success of the shale plays, the super majors and particularly the large internationalO&G companies have emerged as the premium buyers of U.S. shale assets

Date BuyerBuyerDomicile Seller

ResourcePlay

TransactionValue($MM)

Sept-08 BP United Kingdom Chesapeake Energy Fayetteville Shale $1,900

Nov-08 Statoil ASA Norway Chesapeake Energy Marcellus Shale 3,375

May-09 ENI Spa Italy Quicksilver Resources Barnett Shale 280

Jun-09 BG Group United Kingdom EXCO Resources Haynesville Shale 1,055

Dec-09 Total SA France Chesapeake Energy Barnett Shale 2,250

Feb-10 Mitsui & Company Japan Anadarko Petroleum Marcellus Shale 1,400

Mar-10 Statoil ASA Norway Chesapeake Energy Marcellus Shale 253

Apr-10 Reliance Industries India Atlas Energy Marcellus Shale 1,700

May-10 BG Group United Kingdom EXCO Resources Marcellus Shale 950

Jun-10 Reliance Industries India Pioneer Natural Resources Eagle Ford Shale 1,150

Aug-10 Reliance Industries India Carrizo Oil & Gas Marcellus Shale 392

Aug-10 Sumitomo Japan Rex Energy Marcellus Shale 140

Oct-10 Statoil / Talisman Norway / Canada Enduring Eagle Ford Shale 1,325

Oct-10 CNOOC China Chesapeake Energy Eagle Ford Shale 2,160

Total Since 9/08 $18,330

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5/13

M&A Outlook

We will continue to see consolidation and joint ventures in the shales as companies look torationalize their acreage positions and / or bring in investors / partners

Most large acreage holders cannot develop their positions alone

M&A / JV interest remains strong

The competitive landscape for high-quality transactions is increasing

Private equity has become more active and is willing to be competitive

4


6/13

Natural Gas Price Environment

NYMEX Forward Natural Gas

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

5-Year Henry Hub Forward Curve Spot Price

Natural gas prices likely to remain weak near-term due to:

Weak economy

Shale play performance significantly exceeding expectations; well performance is above the type curves

Significant non-economic drilling to hold acreage

Significant drilling to expend JV carries

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7/13

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$8.96

$7.08

$5.80 $5.58 $5.38$4.96

$4.51 $4.36

$3.55

Required Pricing for 20% Pre-tax Return vs. NYMEX Strip(1)

The Marcellus is the Most Attractive Shale Play in the U.S.

Key Points

Gas prices havedeclined since mid-2008 as a result ofcontinued high levels ofdrilling activity to holdacreage in emergingplays

This decline has madedifferentiation amongthe plays moreimportant

The Marcellus has thelowest breakeven price

of all the plays and willremain attractivethroughout thecommodity cycle

NYMEX 5-YR Average Forward Price Price Required to Generate 20% IRR ($ / Mcfe)(2)

(1)Assumes 12:1 natural gas to crude oil conversion ratio.(2)Based on Jefferies internal estimates and publicly available shale production information.

Woodford

Ba

rnett

Fay

etteville

Haynesville

EF

Dry

EF

Oil

EF

Wet

Bak

ken

Marc

ellus

NYMEX 5-YR Average: $5.12

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8/13

Largest Marcellus Shale Transactions 2008 to Date

Jefferies acted as advisor

May-10 Shell East Resources, Inc. $4,700.0 650,000 $7,230 / acre

Mar-10 Consol Energy Dominion Resources Inc 3,475.0 491,000 $4,000 / acre

Nov-08 StatoilHydro Chesapeake Energy 3,375.0 585,000 $5,769 / acre

Apr-10 Reliance Industries Atlas Energy 1,700.0 120,000 $14,100 / acre

Feb-10 Mitsui & Company, Ltd. Anadarko Petroleum Corporation 1,400.0 100,000 $14,000 / acre

May-10 BG Group EXCO Resources 950.0 93,000 $5,914 / acre

Apr-08 XTO Energy Incorporated Linn Energy LLC 600.0 152,000 $4.13 / Mcfe

May-10 Williams Alta Resources 584.0 42,000 $14,000 / acre

Jan-10 Undisclosed Hunt Oil 500.0 NA NA

Aug-09 Enerplus Resources Chief Oil & Gas 406.0 116,000 $3,500 / acre

Dec-09 Ultra Petroleum NCL Appalachian Partners 400.0 80,000 $5,000 / acre

Aug-10 Reliance Industries Ltd Carrizo Oil & Gas 392.0 62,600 $6,262 / acre

Jun-09 Kohlberg Kravis Roberts & Co. East Resources, Inc. 350.0 NA NA

Jun-08 Antero Resources Corporation Dominion Resources Inc 347.0 114,259 $3,037 / acre

Selected

Metrics

Date

AnnouncedBuyers Sellers Value

($MM)

Net Acreage

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9/13

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

$8.00

$8.50

$9.00

Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10

Marcellus Valuation Trends vs. Natural Gas Prices

1

2

5

7

8

9

10

3

64

11

1

2

5

8

9

10

3

6

4

11

711/11/2008: Chesapeake/ StatoilHydro, $5,769

8/19/2009: Chief/ Enerplus, $3,500

12/21/2009: NCL/ Ultra, $5,000

3/15/2010: Dominion/ Consol, $4,000

2/1/2010: Anadarko/ Mitsui, $14,000

4/9/2010: Atlas/ Reliance, $14,100

5/10/2010: Exco/ BG, $5,914

5/25/2010: Alta/ Williams, $14,000

5/28/2010: East/ Shell, $7,230

8/5/2010: Carrizo/ Reliance, $6,262

8/31/2010: Sumitomo/ Rex, $9,000

X Transaction Date: Seller/ Buyer, Acreage Value ($/acre)

$/Acre

5-YearForwardHenryH

ub

8


10/13

Key Marcellus Trends / Market Dynamics

Development is accelerating rapidly

Results are improving from longer laterals, new fracing methods

The core of the play is expanding to the West

Off-the-ground leases are becoming scarce

Environmental concerns are increasing

Deeper potential is emerging, particularly to the West

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11/13

Topic Comments

Asset Quality

Location of acreage in relation to other publicly announced results

Contiguous nature of acreage position, royalty rates, percentage of acreage held byproduction (HBP), expiration schedule of leases

Asset Maturation

Number of horizontal wells across acreage position

Time-span of production data

Need for development and expansion of gathering infrastructure

M&A Demand

Transaction size, resource potential and play attractiveness drawing large, well-

capitalized new entrant buyersNew entrant buyer pool shrinking as deals occur; likely to see several transactions in

the next 6-12 months

Transaction ValuationKey buyer relationships, strong technical and commercial presentation and a highly

competitive process are critical to achieving top-tier results

Capital AvailabilityCapital markets extremely supportive of shale development; debt and equity markets

are open and available to fund acquisitions and JVs

Natural Gas Prices

Currently depressed gas prices should persist over the near-term

New entrants utilizing long term price deck at the NYMEX strip with a $4.00 - $5.00 /MMBtu sensitivity case

Competitive Threat

of Other Assets

Steady flow of deals in the market

Number of companies currently pursuing JVs

Evaluation Points for a Marcellus Transaction

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12/13

Detailed Technical and Commercial Presentations Are Critical toAchieve Premium Valuation

Critical to achieving a premium valuation are:

A thorough technical and commercial data set that fully validates valuation expectations

An aggressive but credible development plan

Significant and active market knowledge of the buyer universe and their key objectives,requirements, concerns, process and value drivers

A thorough and deliberate sales process; precedent transactions validate that a poorprocess results in a 25% - 50% discount to fair value

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13/13

Notable Recent Marcellus Shale Transactions

Largest Marcellus Shaletransaction to date by value

Entrance of a Super-major

into the Marcellus

High watermark Marcellusvaluation

Entrance of a foreign O&G

company into U.S. gasshales

Sale of premium Marcellusacreage

Little technical data / few

wells drilled at time oftransaction

$4,700,000,000

Sale to

Royal Dutch Shell P lcSole Financial Advisor

May 2010Energy

has agreed to enter into aMarcellus Shale Joint Venture with

Reliance Industries.

Lead Financial Advisor

$1,700,000,000

April 2010Energy May 2010

$584,000,000

Sold certain Marcellus Shaleassets to

WilliamsFinancial Advisor to the selle r

Energy

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Documents

002.Joe Gladbach