Timothy Knobloch and Benjamin Thomas

James Engineering, Inc.

Marietta, Ohio

The Merger and Acquisition Report

2006

Materials Presented

Materials are drawn from public sources: press releases, SEC reports, etc.

Materials should be viewed as “approximately” correct. 

Materials are not being recommended as a basis for decision making, but

are presented as useful market information.

The Perfect Storm Continues???

Last transmission from the Andrea Gail

“She’s comin’ on boys,and she’s comin’ on strong”

Captain

Billy Tyne

Presentation Outline

• Price Drivers• Pricing Yardsticks• Prime Rate, Gas Price, and Oil and Gas

Asset Prices• Review of Recent Mergers and

Acquisitions• Comparison of Recent Mergers and

Acquisitions Price Drivers and Pricing Yardsticks

Price DriversFactors Influencing Asset

Values • Asset Size• Cash Flow • Daily

Production• Net Reserves• Geographic

Location • Well Count • Risk

• Miles of Pipeline

• Operated vs. Non Operated Interests

• Developed and Undeveloped Acreage

• Distribution of Reserves

Pricing YardsticksPrice Determination Methods

Quick Look Multiples

• Dollars paid per mcfeq

• Dollars paid per mmcfdeq

• Multiple of Annual Cash flow

Reserve Based Methods

• % of Discounted Net Cash Flow

• Discounted Net Cash Flow Hurdle Rates

• Profit to Investment Ratio

• Payout

Avg. Prime Lending Rate vs Time

3456789

1011

1990 1992 1994 1996 1998 2000 2002 2004 2006

Years

Prim

e R

ate,

%

Current Rate 8.00%

Nymex Strip, $/Mcf

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.001

16 31 46 61 76 91

106

121

136

151

166

181

196

211

226

241

256

271

286

301

316

331

346

361

376

391

406

421

436

Years

$/M

cfe

Nymex Natural Gas Futures

12 Month Strip Avg. Price

97 98 99 00 01 02 03 04 05 06

P r o v e d R e s e r v e V a l u e s , $ / M c f e A p p a l a c h i a v s U S O n s h o r e G a s

$ 1 . 1 8$ 1 . 2 3

$ 0 . 3 9

$ 0 . 5 8

$ 1 . 3 5

$ 1 . 7 5

$ 1 . 0 5$ 0 . 9 7

$ 0 . 7 1

$ 1 . 0 9

$ 1 . 8 0

$ 1 . 5 4

$ 0 .0 0

$ 0 .2 0

$ 0 .4 0

$ 0 .6 0

$ 0 .8 0

$ 1 .0 0

$ 1 .2 0

$ 1 .4 0

$ 1 .6 0

$ 1 .8 0

$ 2 .0 0

2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5

Y e a r

$/M

cfe

C o u r te s y o f R i c h a r d s o n B a r r & C o .

Example: @ $1.5/mcfe

10 bcfe = $15 Million

Proved Reserve Values, $/McfeAppalachia vs US Onshore Gas

$1.75

$1.35

$1.18$1.23

$0.39

$0.58

$1.80

$1.54

$1.05$0.97

$1.09

$0.71

$3.90 $3.68$4.24

$8.92

$6.42

$5.40

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

2000 2001 2002 2003 2004 2005

Year

$/M

cfe

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

Av

era

ge

Nym

ex

Str

ip $

/mm

btu

Courtesy of Richardson Barr & Co.

P r o d u c t i o n M u l t i p l e s , $ M M / m m c f e / dA p p a l a c h i a v s U S O n s h o r e G a s

$ 1 4 . 1

$ 5 . 1

$ 2 . 8

$ 4 . 7$ 4 . 2

$ 9 . 5

$ 1 1 . 9

$ 9 . 6

$ 5 . 4

$ 4 . 4$ 4 . 0$ 4 . 1

$ 0 .0

$ 2 .0

$ 4 .0

$ 6 .0

$ 8 .0

$ 1 0 .0

$ 1 2 .0

$ 1 4 .0

$ 1 6 .0

2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5

Y e a r

$MM

/mm

cfe/

d

C o u r te s y o f R i c h a r d s o n B a r r & C o .

Example: @ $10MM/mmcfe/d

Gross: 1,000 mcfe/d Net (50%): 500 mcfe/d = $5 MM

P r o d u c t i o n M u l t i p l e s , $ M M / m m c f e / dA p p a l a c h i a v s U S O n s h o r e G a s

$ 4 .2$ 4 .7

$ 2 .8

$ 5 .1

$ 9 .5

$ 1 4 .1

$ 4 .1 $ 4 .0 $ 4 .4

$ 5 .4

$ 9 .6

$ 1 1 .9

$ 5 .4 0

$ 6 .4 2

$ 8 .9 2

$ 4 .2 4$ 3 .6 8$ 3 .9 0

$ 0 . 0

$ 2 . 0

$ 4 . 0

$ 6 . 0

$ 8 . 0

$ 1 0 . 0

$ 1 2 . 0

$ 1 4 . 0

$ 1 6 . 0

2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5

Y e a r

$M

M/m

mc

fe/d

$ 1

$ 2

$ 3

$ 4

$ 5

$ 6

$ 7

$ 8

$ 9

$ 1 0

Ny

me

x S

trip

$

/mm

btu

C o u r te s y o f R i c h a r d s o n B a r r & C o .

Recent Acquisitions and Mergers

• Great Lakes Acquires Pine Mountain

• NCL Appalachian Partners Acquires Equitable’s Pennsylvania and Ohio Assets

• EnerVest Acquires Belden and Blake– Comparison to Capital C/TPG

• Chesapeake Acquires CNR/Triana – Comparison to Triana/Nisource

Great Lakes Acquires Pine Mtn Price Drivers

• Asset Size $219 MM• Cash Flow $? MM per year• Daily Production, Net 14.8 mmcfdeq• Net Reserves: 40% PDP 205 bcfe • Geographic Location VA, WV• Well Count 1,872*• Miles of Pipeline 277• Acreage 417,000 (1550 loc)*cbm, royalty interest – 1,317 wells wi/royalty – 519 wells, wi only-39 wells

Great Lakes Acquires Pine Mtn.

Pricing Yardsticks• Dollars paid per mcfeq ($219MM/205 bcfe)

$1.07 per mcfeq of reserves

• Dollars paid per mmcfdeq($219MM/14.8 mmcfdeq)

$14.8 million per producing million

• Multiple of Annual Cash flow ($219MM/?) Unknown – cashflow not available from

public data sources

NCL Appalachian Partners Acquires

Equitable PA/OH AssetsPrice Drivers• Asset Size $147 MM

• Annual Cash Flow $ ? MM• Daily Production 10 mmcfd • Net Reserves: 90% PDP 66 bcfe • Geographic Location PA, OH• Well Count 1,200 • Miles of Pipeline 400 • Acreage **220 proven and probable locations

NCL Appalachian Partners Acquires

Equitable PA/OH Assets Pricing Yardsticks

• Dollars paid per mcfeq ($147MM/66 bcfe) $2.22 per mcfeq of reserves

• Dollars paid per mmcfdeq($147MM/10 mmcfdeq)$ 14.7 million per producing million

• Multiple of Annual Cash flow ($147MM/$?MM) Unknown – cashflow not available from public data

sources

EnerVest Acquires Belden and Blake Aug 2005

Price Drivers• Asset Size $309 MM*• Annual Cash Flow $50 MM(SEC 8K) • Daily Production 48 mmcfdeq• Net Reserves: 77% PDP 285 BCFE • Geographic Location OH, PA, NY, MI• Well Count 3,650 • Miles of Pipeline 1,268• Acreage 712,267 (gross) • *$116MM Cash + $192MM Debt• ** Gas prices hedged through 2013

Enervest Acquires Belden and Blake Aug 05 Price Drivers

• Dollars paid per mcfeq ($309MM/285BCFE)$1.08 per mcfeq of reserves

• Dollars paid per mmcfdeq ($309MM/48mmcfdeq)$6.4 million per producing million

• Multiple of Annual Cash flow($309MM/$50MM)6.2

Belden and Blake Acquisition Buyer

ComparisonCapital C EnerVest 2004 2005

• Asset Size $352$352 $309$309• Cash Flow, mm/yr $60 $50• Daily Prod, mmcfdeq 45 48• Net Reserves, bcf 355** 285**• Well Count, operated 3,400 3,650• Acreage 1,118,512712,267• $/mcfeq $0.99 $1.08• $MM/mmcfdeq $7.8 $6.4

Chesapeake Buys Columbia Natural Resources

Price Drivers• Asset Size $2,950 MM*• Annual Cash Flow $?MM • Daily Production 125 mmcfed • Net Reserves 70% PDP 1,100 BCFE** • Geographic Location OH, PA, NY, WV,KY• Well Count 8,200 • Miles of Pipeline – 100% 6,500 • Acreage (9435 locations) 4,100,000* $2,200MM Cash +$750MM Hedging

Liabilities**1.4 tcfe prob/poss (1316 pud, 6286 poss, 1833 prob)

Chesapeake Acquires Columbia Natural Resources

Pricing Yardsticks• Dollars paid per mcfeq ($2950MM/1100BCFE)

$2.06 per mcfeq of reserves (1.4 TCF Prob-Poss)

• Dollars paid per mmcfdeq ($2950MM/125 mmcfdeq)$18.2 million per producing million

• Multiple of Annual Cash flow ($2950MM/$?MM)Unknown – cashflow not available from public data sources

CNR Acquisition Buyer Comparison

Triana Chesapeake 08/2003 10/2005

• Asset Size, $MM $800 $2,950• Cash Flow, $mm/yr $97 $?• Daily Prod, mmcfdeq 145 125• Net Reserves, bcf 1,100 1,100

• Well Count, operated 8,200 8,200• Acreage 4,000,0004,100,000• $/mcfeq $0.73 $2.06• $MM/mmcfdeq $5.5 $18.2

BuyerSeller

Asset Size$MM

Daily Prod

mmcfd

Res.BCFE

% PDP

$MMPer

Mmcfd

$

PerMcfe

Range ResourcesPine Mountain

$219 14.8 205(40%)

14.8 $1.07

NCL App PartnersEquitable– OH, PA

$147 10 66(90%)

14.7 $2.22

EnervestBelden Blake

$309 48 285(77%)

6.4 $1.08

ChesapeakeCNR

$2,950

125 1,100(70%)

18.2 $2.06

Acquisition Summary

The Merger and Acquisition Report

What do we know?• Every transaction is unique.• Every transaction is supported by

a reserve report.• Every transaction is supported by

a team of professional advisors.•Asset Preparation•Asset Presentation•Asset Placement

Thank you.

Timothy Knobloch and Benjamin Thomas

James Engineering, Inc.

Marietta, Ohio

The Merger and Acquisition Report