Chalker Energy Partners, LP 2007 IPAA Private Capital Conference

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Chalker Vitality Accomplices, LP 2007 IPAA Private Capital Meeting. Houston, Texas January 2007. Foundation on Chalker?. Chalker I Shaped in December 2003 Constructed an East Texas Centered Organization Outstanding Operational and Land Group Complete Value Duty of $25MM from QEP II

Presentation Transcript

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Chalker Energy Partners, LP 2007 IPAA Private Capital Conference Houston, Texas January 2007

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Background on Chalker? Chalker I Formed in December 2003 Built an East Texas Focused Company Exceptional Operational & Geological Team Total Equity Commitment of $25MM from QEP II Sold to Forest Oil for $225MM, Closed 3/31/06 Chalker II Up and Running

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The Chalker I Team Alan Smith President & CEO Tom Campbell EVP & COO Gary Hall VP – Geoscience Larry Tolleson VP – Operations Janie Isbell Sr. Building Tech Gayla Massey Sr. Official Assistant

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Chalker I Strategy Initially an Acquire/Exploit Approach in Tight Gas Sand Basins Evolved into Drilling Strategy in East Texas Focus in Cotton Valley Sands Utilize Relationships & Local Knowledge to Access Opportunities Leverage Engineering, Operational & Geological Strengths Creative Deal Structures

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Why Tight Gas Basins & Multiple Pays? Longer Life Assets with Predictable Reserves Higher Margin Assets – Lower Operating Costs Few Dry Holes Drilled – Basin Centered Gas, Stacked Pays East Texas Stratigraphy - Rodessa -Cotton Valley A-D Sands - Pettet -Bossier - Travis Peak -Cotton Valley Lime Technology has Enhanced Reserve Recoveries

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Focus Areas Panhandle 4 County Drilling Area East Texas South Texas

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Chalker I Results Made 17 Producing Property Acquisitions - $17MM Acquired 16,000 Net Acres in Cotton Valley - $6MM Gained Access to Three Drilling Rigs Drilled 42 Wells, 30 Operated, All Successful Spent $46MM Through the Drill Bit, Avg F&D $1.40/Mcfe

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Lease Position East Texas

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Production – Base + Uplift Actual Results 3 Rigs 1 Rig

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Reserves & Production Summary Production Proved Reserves 2004 YE 15.7 Bcfe, 58% Gas 2005 YE 112.8 Bcfe, 90% Gas 2004 2005 2006

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Chalker I Sale Proved Up Acreage Thru the Drill Bit Excellent Market Fundamentals Simmons & Griffis Ran a Formal Process Forest Preempted with Signed PSA on 2/9/06 Sales Price - $225MM Reserve Cost - $2.32/Mcfe (Announced) Production Multiple - $19,900/Mcfed (Announced) Outstanding Results ROI – 7.4X IRR – 331%

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Lessons Learned We can Make Money in Up or Down Cycle – Must Adjust Acquisitions & Drilling Allocations In Drilling Mode, Land Function Highly Critical Deal Creativity is Very Important Geographically Focused Asset Base Adds Significant Premium at Exit Equity Partner Can & Did Add Value in Managing Leverage, Risk Management, Exit Deal Structure & As a Technical Sounding Board

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Chalker II Formation & Strategy Smith is Chairman of Chalker II, Full-Time at Quantum Doug Krenek Joined Chalker Team, April 1, 2006 as President & CEO Equity Commitment of $50MM from QEP III, $7MM from Management and Other Investors Continued Focus in East Texas & Other Tight Gas Basins in Texas Leverage Off of Technical Knowledge in Focus Areas Be Opportunistic!

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The Chalker II Team Alan Smith Chairman Doug Krenek President & CEO Gary Hall VP – Geoscience Larry Tolleson VP – Operations Bill Dukes VP - Land Janie Isbell Sr. Building Technician

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Chalker II Update Closed Two Acquisitions - $50MM $45MM Acquisition in Rusk County $5MM Acquisition in North Texas Total Net Acerage – 35,000 Acres East Texas – 13,000 Acres Houston County – 14,000 Acres North Texas – 8,000 Acres Current Production – 4.5 Mmcfed Four Rigs Running in East Texas 2007 Drilling Capex - $60MM