DUG East

Presentation by Jefferies & Co.

November 4, 2010

Jefferies & Company, Inc.

Member SIPC
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 the
firm 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 operators
1
Introduction

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

 For North American natural gas, the huge recoverable resource has critical long-term
implications
 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.)

2
Increasing International Interest in Shale Plays

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

Transaction
Buyer Resource Value
Date Buyer Domicile Seller Play ($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

3
M&A Outlook

 We will continue to see consolidation and joint ventures in the shales as companies look to
rationalize 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
Natural Gas Price Environment

NYMEX Forward Natural Gas

$14.00

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$-

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

5
The Marcellus is the Most Attractive Shale Play in the U.S.

Key Points Required Pricing for 20% Pre-tax Return vs. NYMEX Strip(1)
 Gas prices have
declined since mid-
2008 as a result of $10.00
continued high levels of $8.96
drilling activity to hold
acreage in emerging $8.00
$7.08
plays
 This decline has made $6.00 $5.80
$5.58 $5.38
differentiation among $4.96 NYMEX 5-YR Average: $5.12
$4.51
the plays more $4.36

important $4.00 $3.55

 The Marcellus has the

Fayetteville

Haynesville
Woodford

lowest breakeven price

Marcellus
Barnett

EF Dry

EF Wet

Bakken
$2.00

EF Oil
of all the plays and will
remain attractive
throughout the $-
commodity cycle
NYMEX 5-YR Average Forward Price Price Required to Generate 20% IRR ($ / 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.
6
Largest Marcellus Shale Transactions – 2008 to Date

Date Selected
Buyers Sellers Value Net Acreage
Announced Metrics
($MM)

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

Jefferies acted as advisor

7
Marcellus Valuation Trends vs. Natural Gas Prices
$9.00 $16,000

$8.50 4 6 8 $14,000
5-Year Forward Henry Hub

$8.00
$12,000
$7.50

$ / Acre
$10,000
$7.00
11

$6.50 $8,000
9
$6.00 7 10
1 $6,000
3
$5.50
5
2 $4,000
$5.00
$2,000
$4.50

$4.00 $-
Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10

X Transaction Date: Seller/ Buyer, Acreage Value ($/acre) 6 4/9/2010: Atlas/ Reliance, $14,100

1 11/11/2008: Chesapeake/ StatoilHydro, $5,769 7 5/10/2010: Exco/ BG, $5,914

2 8/19/2009: Chief/ Enerplus, $3,500 8 5/25/2010: Alta/ Williams, $14,000

3 12/21/2009: NCL/ Ultra, $5,000 9 5/28/2010: East/ Shell, $7,230

4 2/1/2010: Anadarko/ Mitsui, $14,000 10 8/5/2010: Carrizo/ Reliance, $6,262

5 3/15/2010: Dominion/ Consol, $4,000 11 8/31/2010: Sumitomo/ Rex, $9,000

8
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

9
Evaluation Points for a Marcellus Transaction

Topic Comments
 Location of acreage in relation to other publicly announced results
Asset Quality  Contiguous nature of acreage position, royalty rates, percentage of acreage held by
production (HBP), expiration schedule of leases
 Number of horizontal wells across acreage position
Asset Maturation  Time-span of production data
 Need for development and expansion of gathering infrastructure
 Transaction size, resource potential and play attractiveness drawing large, well-
capitalized new entrant buyers
M&A Demand
 New entrant buyer pool shrinking as deals occur; likely to see several transactions in
the next 6-12 months

 Key buyer relationships, strong technical and commercial presentation and a highly
Transaction Valuation
competitive process are critical to achieving top-tier results

 Capital markets extremely supportive of shale development; debt and equity markets
Capital Availability
are open and available to fund acquisitions and JVs

 Currently depressed gas prices should persist over the near-term

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

Competitive Threat  Steady flow of deals in the market

of Other Assets  Number of companies currently pursuing JVs
10
Detailed Technical and Commercial Presentations Are Critical to
Achieve 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 poor
process results in a 25% - 50% discount to fair value

11
Notable Recent Marcellus Shale Transactions

Energy May 2010 Energy April 2010 Energy May 2010

$1,700,000,000 $584,000,000
$4,700,000,000
has agreed to enter into a Sold certain Marcellus Shale
Sale to Marcellus Shale Joint Venture with assets to
Royal Dutch Shell Plc Reliance Industries. Williams
Sole Financial Advisor Lead Financial Advisor Financial Advisor to the seller

 Largest Marcellus Shale  High watermark Marcellus  Sale of premium Marcellus

transaction to date by value valuation acreage
 Entrance of a Super-major  Entrance of a foreign O&G  Little technical data / few
into the Marcellus company into U.S. gas wells drilled at time of
shales transaction

12