ENERVESTMANAGEMENT PARTNERS, LTD.
IPAA/TIPRO Luncheon Buying & Selling through the Cycles
John B. Walker
President and Chief Executive Officer
September 14, 2005
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Company Overview
Approximately $1 billion available for acquisitions and development of oil and gas properties
Consistently generated superior returns for its institutional partners across capital market and commodity price cycles
6 partnerships exited with a realized 28.1% internal rate of return after management fees, back-ins and hedge payments
Operate approximately 10,500 wells in 9 states
Experienced management team with extensive network of industry relationships
Over 300 employees with headquarters in Houston
Recognized in 2003, 2002 and 2001 by the Houston Business Journal as the “Best Place to Work in Houston” (across all industries)
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John B. Walker – President and CEO Co-founder of EnerVest Chairman of IPAA Member of National Petroleum Council and Natural Gas Council Former President and COO of Torch Energy Advisors, Inc. Former “All American” Energy Analyst on Wall Street
Jon Rex Jones – Chairman Co-founder of EnerVest Co-founder of JM Petroleum, Taurus Energy and Global Exploration Former “Oilman of the Year” and “Chief Roughneck” Past Chairman of IPAA National Petroleum Council Member
Mark Houser – Executive Vice President and COO Former Vice President, U. S. Operations of Occidental Petroleum (NYSE: OXY) Responsible for $3.65 Billion Acquisition of Elk Hills Naval Petroleum Reserve Former Vice President of Exploration for Canadian Occidental (NYSE: NXY)
Jim Vanderhider – Executive Vice President and CFO Former Executive Vice President and CFO of Torch Energy Former head of Internal Audit (Corporate) of The Coastal Corporation, now a
division of El Paso (NYSE: EP)
Experienced Executive Management Team
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What We Are Focused on making money and generating earnings for institutional
investors Second largest manager of oil and gas assets for institutional investors Acquisition, exploitation, and operating company focused on:
upstream property/corporate acquisitions in North America willingness to sell assets to maximize returns
Private company which operates wells and distributes a significant
monthly return to investors
What We Are Not Financiers/capital providers Explorationists
What We Are – What We Are Not
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Operating Areas – September 2005
Permian PropertiesReserves 101.1 BCFE
Production 10.4 MMCFE/D
South Louisiana PropertiesReserves 61.9 BCFE
Production 15.4 MMCFE/D
San Juan PropertiesReserves 57.5 BCFE
Production 7.8 MMCFE/D
Ark-La-Tex PropertiesReserves 107.8 BCFE
Production 13.2 MMCFE/D
Appalachian PropertiesReserves 224.1 BCFE
Production 44.6 MMCFE/D
Michigan PropertiesReserves 173.4 BCFE
Production 26.1 MMCFE/D
Proven + Probable Reserves (Risked)726 BCFE
78% Gas (16.3 year R/P)
Production 118 MMCFE/D
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EnerVest Management Partners, Ltd.
Eastern Division Ken Mariani
Southern DivisionBarbara King
Ark-La-Tex DivisionBill Page
Ohio PropertiesFund IX (CGAS, B&B)
Permian PropertiesFund IX
Monroe GE Capital
Olanta FieldAEGON
EnerVest WVLiberty Mutual
EnerVest AppalachiaGE Capital
Oriskany Horizontal DrillingEVMP, Jones, Sandefer
Michigan – FreuhaufFund IX
Jacobs Property EVMP
Coalbed MethaneEVMP
Bayou PropertiesEnerVest Energy
San JuanFund IX
ShilohFund IX
PITCOFund X
Belden & BlakeFund X
Primos PropertyEVMP
Below Red Line reflects
New Acquisitions since 1/05
EnerVest Assets/Partnerships
SellingSOLD Selling
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Bell Ringers
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Successfully Raised $550 Million in Equity for Fund X Raised an additional $47 million equity in an alongside investment Fund X now has approximately $1 billion of potential investment capacity
Significant Acquisition Activity since January Closed on 7 transactions totaling >$700 million All in costs - $1.74/mcfe Includes the largest deal ever done by EnerVest 6 of 7 transactions are direct negotiations
Significant Divestiture Activity Property in Pennsylvania sold in August Sale of South Louisiana properties pending Sale of all Permian properties announced
2005 – Bell Ringers
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Most Acquisitive Companies (2005 YTD)
$0
$500
$1,000
$1,500
$2,000
$2,500
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est
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Most Acquisitive Companies
Acq
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(20
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Source: Richardson Barr
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Track Record/Performance History
FUND INSTITUTIONAL SIZE ACTUAL FUND# FUND ($MM) IRR STATUSI South Lake Arthur, L.P. 54.5 9.8% Exited
II EnerVest Acquisition - II, L.P. 12.7 27.7% Exited
III EnerVest East, L.P. 24.6 25.8% Exited
IV EnerVest Texoma, L.P. 60.9 33.9% Exited
V EnerVest San Juan, L.P. 85.6 38.1% Exited
VI EnerVest Monroe, L.P. 67.3 >15.0% Acquiring Add-On Interests
VII Specified Appalachian Investments: EnerVest Appalachia, L.P. 48.6 >15.0% Developing Fields EnerVest WV, L.P. 9.0 >15.0% Developing Fields EnerVest Olanta, L.P. 14.1 28.4% Exited
VIII EnerVest Energy, L.P. 194.1 >15.0% Preparing for Exit
IX EnerVest Energy Fund IX, L.P. 215.2 >40.0% Capital Fully Committed
X EnerVest Fund X, L.P. 1,029.0 Beginning Investment Period
1,815.6
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Institutional Fundraising History
0
200
400
600
800
1000
1200
1999 2000 2001 2002 2003 2004 2005
Ava
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pen
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g C
apac
ity,
$ M
illi
ons
Taxable Non-Taxable Debt Belden & Blake Debt Co-Investment
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Proud Soccer Dad
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Acquisition Focus on extensive industry contacts and relationships with majors, independents,
and individuals active in the A&D market Constantly monitor the markets and update intelligence database Follow a strict discipline and stay patient Identify assets possessing our desired, pre-defined investment characteristics Engineer all properties in-house Acquire additional interests at higher IRR following the initial investment
Operation and Exploitation Reduce field operating costs immediately Conduct engineering and geological field studies Implement exploitation programs quickly and effectively Proactively hedge commodity prices to maximize investment IRR
Asset Divestiture Develop an asset exit strategy in connection with the acquisition Constantly assess the market for strategic/momentum buyers Exit assets when capital markets and industry cycles provide premium valuations
or where strategic buyers can be located
Strategies for the Investment Cycle
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Target IRR 6% - 10%
Bank Loan
Wildcat Funding
Target IRR 50%
Portfolio Investments
PDP Reserves
PDNP PUD Proved Reserves
Probable Possible Exploration
Target IRR 20%
EnerVest
Primarily Engineering Risk Increased Geological RiskSource: EnCap
Oil and Gas Industry Risk Spectrum
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Acquisitions and Divestitures
EnerVest M&A Activity
Year: 2000 2001 2002 2003 2004 2005 YTDDeals Scoped: 230 321 210 181 228 180Evaluations Performed: 49 40 37 35 50 32Bids/Offers Made: 28 25 31 23 39 22Bid Exposure (mm): $441.2 $853.1 $684.0 $1,101.6 $1,572.6 $1,671.8Avg Bid Size (mm): $15.8 $34.1 $22.1 $47.9 $40.3 $76.0Acquisitions Closed: 7 6 4 5 3 7 - % of Deals Scoped: 3% 2% 2% 3% 1% 4% - % of Bids: 25% 24% 13% 22% 8% 32%Divestitures Closed: 5 3 5 1 1 1Swaps Closed: 0 1 0 1 0 0Transactions Closed: 12 10 9 7 4 8Total Acquistion Value (mm): $82.4 $25.8 $0.2 $84.4 $16.0 $706.9Total Divestiture Value (mm): $124.6 $26.6 $65.7 $32.5 $26.5 $25.2
6 Year Results
Deals Scoped 240 per year
Evaluations Performed 43 per year
Bids Made 30 per year
% of Bids Closed 21% per year
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EnerVest Fund IX InvestmentsFocus on Minimizing Competition in Acquisition Marketplace
ACQUISITION NATURE OF ACQUISITIONCGAS Acquired out of bankruptcy
Belden & Blake Negotiated transaction, complementary Undeveloped Acreage to CGAS Acquisition
Permian Basin Fields Assets marketed directly by seller Permian Add-ons Negotiated transaction
San Juan Negotiated transaction
Michigan Negotiated transaction
Michigan Add-on Negotiated transaction
Ark-La-Tex Negotiated transaction
>$200 Million in Total Fund IX Acquisitions
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-10.00
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Nov-94 Feb-96 Nov-96 Feb-98 Nov-98 Nov-99 Nov-00 Feb-02 Feb-03 Nov-03 Feb-05 Aug-05Gas
Pri
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$(125.0)
$(100.0)
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Purchase/(Sale) $mm HENRY HUB
EnerVest Acquisitions(Compared to Natural Gas Prices)
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Direct negotiated corporate transaction
Great fit with EnerVest’s existing assets
Large oil and gas asset base Reserves of over 300 BCFE Daily production of 46
MMCFE/Day 4,126 wells Approximately 565,000 net
acres Attractive benchmarks vs.
recent similar transactions Top 5 Producer in Appalachian
and Michigan Basins
Belden & Blake Acquisition
BBCAssets
Appalachia/Michigan Basin Assets
EnerVest Belden Combined
20.2 46.1 66.3 MMCFE/D
119.8 302.3 422.1 BCFE
680,000 627,988 1,307,988 Gross Acres
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Where’s Walker?
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Case Study: EnerVest East, L.P.
(Appalachia)
Purchased 4.1 MMCFD for $17.4 Million in July 1995 Acquired for PV 10% and tax credit value of $4.6 Million Average working interest 37% Initially valued as PDP only reserves
Increased working interest in fields by add-on acquisitions Average working interest increased to 72% Cost of additional reserves were $.48/mcf Field production essentially unchanged
Sold small, non-core assets
Engineering/Geoscience effort identified significant “non-PDP”
opportunities
Sold after 9 years for 26% ROR
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Case Study: Loma Vieja Field, South Texas
Overview Seller in lawsuit with mineral owners Purchased for $12MM in September 2000
Operating Achievements Drilled 1 well Reworked 3 wells Reconfigured compression Increased rate from 8 to 20 MMCF/D
Results Capital Spending: $3.1MM Net Cashflow: $9.4MM March 2002: Sold for $25.3MM ($2.12/mcf) Life-cycle ROR = 77%
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Case Study: San Juan
September, 1996 – Purchased $67 million of properties and tax
credits in San Juan Basin
67% of value was attributable to tax credits
Operated 48 of 50 wells (95% value)
Technical/Land Effort Quadrupled reserves
Drilled or performed workovers on 20 wells in 4 years
2nd Quarter 2000 – received regulatory approval for infill
development program, adding extensive value
Sold in January 2001 for $121 million (15% tax credits);
38 % IRR
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Glasscock
ScurryBorden
Howard
Sterling
Mitchell
SACROC
Sharon Ridge
Howard-Glasscock
Iatan
Conger
Westbrook
Westbrook Field (Acquired 2003) Production from Upper and
Middle Clearfork at 2,600’
Iatan Field (Acquired 2003) Production from San Andres,
Glorieta, Upper Clearfork at
2,600’
Ackerly Field (Acquired 2004) Martin County, Texas Spraberry Trend, Production from
Dean Sand at 8,500’
Consolidated acreage position ~
8,000 net acres
100% operated, 93% - 100% WI
R/P > 20 years
Case Study: Permian Basin Area
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Case Study: Permian Basin Area
Performed 2 year exploitation program:
Returned numerous wells to production
Performed 50+ workovers (refrac and add pay)
Drilled 27 infill / extension wells
5 distinct reservoirs / zones
$13.1 Million capital spending
Increased net production from 1,050 BOE/D to 1,790 BOE/D
Increased proved and probable reserves to 18.5 MMBOE
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Blue: booked. Red: unbooked. 15
5
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Identified Exploitation PotentialA potential capture of >15 MMBO may exist over a 4-7 year period
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Future Plans
Build on Institutional Franchise
Create Basin Dominance in a Few Areas
Create a Separate Public Vehicle
Be an even Greater Place to Work
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ENERVESTMANAGEMENT PARTNERS, LTD.
IPAA/TIPRO Luncheon Buying & Selling through the Cycles
John B. Walker
President and Chief Executive Officer
September 14, 2005