January 14, 2009

IPAA Private Capital Conference

Jason T. MeekManaging Director, Corporate Finance

RBC Capital Markets

Conditions in the Energy Capital Markets

2

’09 Energy Capital MarketsPrivate EquityBanks

Conditions in the Energy Capital Markets

3

Overview of RBC Capital Markets

Assets $632 B Credit Rating Aaa / AA-

Ranking by Assets in North America #5 Market Cap ~$42 B

Assets under Admin. $562 B Employees Worldwide ~80,000

#1 in E&P Equity for 2008

$28 Billion Committed to North American Energy Companies

Top Tier A&D Advisor in-house (Richardson Barr)

Top-Tier Research (Equity and High Yield)

4

Emerging Leader in North AmericaRBC has maintained its strong capital position relative to its competitors

RBC has demonstrated unique stability during the market dislocation and increased its leadership across investment banking products

Ascending rank by % marketcap lost

(1) Source Bloomberg and FactSet. Write-downs and equity capital raised based on Q3 2007 to date

RBC on Top Again Financial PostJanuary 31, 2008

RBC Capital Markets Hires from U.S. Rivals to Expand Bloomberg NewsAugust 20, 2008 RBC Hires Again on Credit Crunch Fallout

Financial PostJuly 08, 2008Moody’s Affirms RBC’s Ratings

Moody’sMay 30, 2008

Battle for the 'bulge' business; RBC gets paws on global customersNational PostSeptember 29, 2008

WriteDowns (1) $14 B $97 B $66 B $56 B $16 B $27 B $49 B $13 B $5 B $21 B $2 B

Equity Capital Raised (1) $14 B $11 B $74 B $30 B $25 B $56 B $31 B $11 B $21 B $45 B $1 B

Market cap. (US$bn)(1)

Current (1/9/09)

2007 (1/1/07)

$108.6

$12.0

$85.4

$20.2

$273.7

$36.8

$82.3

$18.6

$127.0

$42.3

$239.8

$65.2

$88.7

$33.2$84.8

$27.9

$96.9

$61.0

$41.5

$41.4

$0.0

$167.6

5

Energy Capital Markets

Current global recession

Global oil demand expected to decline 0.6% in 2009

US natural gas demand expected to remain flat for 2009

Uncertainty of new administration

Volatility of current equity markets

Ongoing credit crunch

Necessity to shore up liquidity position

Decrease in borrowing bases by 15 percent to 20 percent(3)

OPEC is dependent of oil prices around $50.00/bbl to fund domestic programs and capital investments(1)

December production cuts of of 2.2 mmb/d; previous cut of 1.5 mmb/d in October

2H 09 Forward curve average of ~$56.00/bbl(2)

Tax cuts / economic stimulus package

Institutions on sidelines

E&P companies trading at below average multiples

Ample supply of private equity

Drop in natural gas rig counts should provide near-term price support

Headwinds Tailwinds

(1) “OPEC puts faith in deep cut to revive oil price” 12/16/08.(2) Bloomberg as of 1/9/09.(3) “Credit issues ahead for energy sector” 12/26/08.

E&P stock prices down approximately 52% for the year 2008

Commodity prices have dropped significantly through the second half of 2008

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Energy Equity Market Overview (January 2007 – present)

Source: Bloomberg, as of 1/9/09.

(100%)

(50%)

0%

50%

100%

150%

Re

lati

ve

Pri

ce

Pe

rfo

rma

nc

e

Large-Cap (3.5%) Mid-Cap (18.8%) Small-Cap (59.4%)

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E&P Sector – Multiple Comparison

Source: Factset, as of 1/9/09. Figures represent closing price at quarter end divided by trailing twelve months cash flow from operations.

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Current

Pri

ce

/ LT

M C

ash

Flo

w

Small-Cap Mid-Cap Large-Cap 10-year Average

8

3.0x

5.0x

7.0x

9.0x

11.0x

13.0x

15.0x

$6,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000

TEV / NTM Production ($/mcfe/d)

TE

V /

NT

M E

BIT

DA

Large-Cap Avg. Mid-Cap Avg. Small-Cap Avg. E&P MLPs

E&P Sector – Multiple Analysis

Source: Bloomberg, FactSet and Wall Street research. Note: “Peak” based on average of peak TEV / NTM EBITDA multiples for 2008.

7/11/08 “Peak”

1/9/2009

9

208

245

35

95114

248

146

292

156

230

289

179

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

0

50

100

150

200

250

300

350

Equity Market Activity

Source: Dealogic and FactSet as of 12/31/08.Note: Bold denotes RBC managed transaction.

2008 E&P Equity Deals

($ billions)

Equity Issuances – All Sector Equity Issuances – E&P Sector

0

6

11

8

11

7

9

5

10

4

5

3

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

0

2

4

6

8

10

12

14

16

($ billions)

Deal Pricing Transaction Deal Pricing TransactionType Date Issuer Shares Offered Offer Price Size (mm) Type Date Issuer Shares Offered Offer Price Size (mm)

FO 8/11/08 Petrohawk Energy Corp 28,750,000 26.53 762.7 FO 5/8/08 Petrohawk Energy Corp 28,750,000 26.39 758.7 FO 8/7/08 Kodiak Oil & Gas Corp 6,820,000 2.75 18.8 FO 5/5/08 Rex Energy Corp 8,500,000 20.75 176.4 FO 7/23/08 XTO Energy Inc 29,900,000 48.00 1,435.2 IPO 4/30/08 Pioneer Southwest Energy Partners 9,487,500 $19.00 $180.3 FO 7/17/08 GMX Resources Inc 2,000,000 70.50 141.0 FO 4/30/08 Range Resources Corp 4,435,300 66.38 294.4 FO 7/9/08 Chesapeake Energy Corp 28,750,000 57.25 1,645.9 IPO 4/24/08 Whiting USA Trust I 11,677,500 20.00 233.6 FO 7/8/08 Goodrich Petroleum Corp 3,000,000 64.00 192.0 FO 3/27/08 Chesapeake Energy Corp 23,000,000 45.75 1,052.3 FO 6/26/08 Cano Petroleum Inc 7,000,000 8.00 56.0 FO 3/19/08 BPZ Resources Inc 2,200,000 20.00 44.0 FO 6/20/08 Cabot Oil & Gas Corp 5,002,500 65.27 326.5 CONV 3/4/08 Bill Barrett Corp nm nm 172.5 FO 5/28/08 Arena Resources Inc 2,501,250 47.75 119.4 FO 2/14/08 XTO Energy Inc 23,000,000 55.00 1,265.0 CONV 5/21/08 Carrizo Oil & Gas Inc nm nm 373.8 FO 2/13/08 Carrizo Oil & Gas Inc 2,587,500 54.50 141.0 CONV 5/20/08 Chesapeake Energy Corp nm nm 1,380.0 CONV 2/11/08 GMX Resources Inc nm nm 125.0 FO 5/15/08 Atlas Energy Resources LLC 2,070,000 41.50 85.9 FO 1/29/08 Petrohawk Energy Corp 20,700,000 15.00 310.5

CONV 1/15/08 Pioneer Natural Resources Co nm nm 500.0

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High Yield Market Update

Source: Bloomberg

Spread (bps)

HistoricalAverage =

553 bps

12/30/90 = 1,096 bps

01/09/09 = 1,683 bps

Bear MarketsEarly ’90s = 717 bps1998-2003 = 752 bps

Bull Markets1980s = 377 bps

Mid ’90s = 400 bps

Bull Market2004-2007 = 372 bps

10/10/02 = 1,126 bps

Historical High Yield Composite Index Spreads

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High Yield Market UpdateHigh Yield Spreads Since January 2008

Source: Bloomberg

Spread (bps)

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

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

HY Index Spread

BB Spread

B Spread

CCC Spread

On January 9th

3,037 bps

1,683 bps

1,450 bps

1,141 bps

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E&P High Yield – Spread to Treasuries

“BB” rated

Note: RBC data; comprised of a sampling of bonds from each rating category.

“B” rated

Spread (bps) Spread (bps)

417 bps

1,007 bps

200

400

600

800

1,000

1,200

1,400

1/8/08 1/9/09

+141% Increase

571 bps

2,236 bps

400

800

1,200

1,600

2,000

2,400

2,800

1/8/08 1/9/09

+334% Increase

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($1,307)

($2,323)

$452$185

$950

($647)

($1,856)

($1,118)($971)

$2,254

($41)

$1,017

($3,000)

($2,400)

($1,800)

($1,200)

($600)

$0

$600

$1,200

$1,800

$2,400

$3,000

Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

High Yield Market

Fund Flows – All Sector

New Issuances – All Sector New Issuances – E&P Sector

Source: DealogicNote: Bold denotes RBC managed transaction.

2008 E&P High Yield Deals($ millions)

($ billions) ($ billions)

Pricing Principal Call Ratings Coupon Offer YTW SpreadDate Issuer (MM) Maturity Provision Mdy/S&P (%) Price (%) (bps)

12/09/08 El Paso Corp $500.0 12/12/13 MW T+50 Ba3/BB- 12.000 88.909 15.250 1362 06/24/08 Linn Energy $255.9 07/01/18 NC-5 B3/B- 9.875 97.684 10.250 616

06/24/08 Quicksilver Resources $475.0 08/01/15 MW-4 T+50 Ba3/B 8.250 98.655 8.500 475 06/16/08 Petrohawk Energy - ADD $300.0 06/01/15 NC-4 B3/B 7.875 98.750 8.110 455 05/20/08 Plains Exploration $400.0 06/01/18 NC-5 B1/BB 7.625 100.000 7.625 384 05/20/08 Chesapeake Energy $800.0 12/15/18 MW T+50 Ba3/BB 7.250 100.000 7.250 345 05/19/08 Forest Oil - ADD $250.0 06/15/19 -- B1/B+ 7.250 100.250 7.203 309 05/15/08 Sandridge Energy $750.0 06/01/18 NC-5 B3/B- 8.000 100.000 8.000 407 05/09/08 Petrohawk Energy $500.0 06/01/15 NC-4 B3/B 7.875 100.000 7.875 455 05/06/08 Atlas Energy - ADD $150.0 02/01/18 NC-5 B3/B 10.750 104.750 9.851 628

05/05/08 Newfield Exploration $600.0 05/01/18 NC-5 Ba3/BB- 7.125 100.000 7.125 329 05/01/08 Range Resources $250.0 05/01/18 NC-5 Ba3/BB 7.250 100.000 7.250 351

02/01/08 Petroleum Development $203.0 02/15/18 NC-5 B3/B- 12.000 98.572 12.250 867 01/17/08 Atlas Energy $250.0 02/01/18 NC-5 B3/B 10.750 100.000 10.750 713 01/11/08 Southwestern Energy $600.0 02/01/18 MW T+50 Ba2/BB+ 7.500 100.000 7.500 368

4

6

1

0

3

4

3

34

9

14

11

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

90

131

84

131

143

177

39

63

13

61

15

3$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

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Region Seller

Estimated

Value ($MM) Region Seller

Estimated

Value ($MM)

Appalachia Norse Energy (Nornew) $250.0+ Mid Continent Canaan* $300.0+ Appalachia Ultra/East (JV) 100.0+ Mid Continent Panther Energy 300.0+ Appalachia Victory* 100.0+ Mid Continent Pablo 200.0+ Appalachia Hanley & Bird 50.0+ Mid Continent Upland 30.0+

$500.0+ $830.0+

Ark-La-Tx Cubic* $250.0+ Permian Marathon* $300.0+ Ark-La-Tx EnCana (JV Partner) 200.0+ Permian Encana 100.0+

$450.0+ $400.0+

Barnett Shale Joint Resources $150.0+ Rockies Anschutz (Williston) $60.0+ $150.0+ Rockies Windsor (Williston) 50.0+

$110.0+ Gulf of Mexico Helix $250.0+ Gulf of Mexico Rosetta 100.0+

$350.0+

E&P A&D Market

Successful Deals

Q1 2009 Deals in the Market

Approximately $3 Billion currently being marketed

Very few deals on the market currently

RBC anticipates a much busier second quarter with many packages coming from Public sellers

($ millions)

Source: RBC Richardson Barr database.

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008

Completed Deal Amount Failed Deal Amount

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What This All Means

Entry point for long-term commodity bullish investors

Low commodity prices + low valuations

Expected Distressed Situations – Bankruptcies?

Lower cash flow

Lower investment = slower / no reserve and production growth

Downward borrowing base adjustments

Negative reserve revisions

Little access to cash from asset sales until buyers return

Over-Equitized Equity Investment by Private Equity

2009 is “The Year of the Merger or JV”

Strong + Weak

Weak + Weak

JV for cash or carried interest to preserve liquidity

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It’s Not All That Bad, is it?

Yes it is – for now

However…

High Yield Market showing signs of life for BB names

Select equity transactions for opportunistic acquisitions or salvation

Significant assets should be available in 2009 for liquid buyers as a result of downward borrowing base adjustments

Merger of equals on an equivalent value basis always an opportunity but subject to bank participation

“It’s darkest before the dawn”

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Contact Information

Jason T. MeekManaging Director

Phone: (713) 403-5620Email: jason.meek@rbccm.com

For an email of the presentation, please send “IPAA Presentation” in the subject line to

jason.meek@rbccm.com