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Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor

Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor AAPG Annual Convention DPA Luncheon Speaker April 2006. Why use outside capital? Speedier growth Flexibility Better deal flow/more contacts Access to other $ sources Outsourced CFO

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Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor

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  1. Perfecting the Search for Drilling Capital Leslie Haines Editor-in-chief Oil and Gas Investor AAPG Annual Convention DPA Luncheon Speaker April 2006

  2. Why use outside capital? • Speedier growth • Flexibility • Better deal flow/more contacts • Access to other $ sources • Outsourced CFO • Identify strategies-- Sounding board • Negotiation • Tax advantages if LP or LLC • Credibility

  3. Perfecting the Search 4 Themes: • How much is available? • Where do you find it? • What structures are possible? • E&P Success stories

  4. $ Makes the World Go Around Between Private Equity, Mezzanine Funds & Hedge funds, $8.5 Billion raised in last 2 years!

  5. New Capital

  6. New Capital

  7. New Capital Source: Oil and Gas Investor This Week

  8. The Capital Pyramid Tier 1: Institutional Aggregators General/Specific Tier 2: Institutional Investors Pensions, Endowments, Ins. Cos. Financial Corp. Industry Corp. Tier 3: Individual Aggregators Mutual Funds, Hedge Funds, Family Offices Tier 4: Individual Investors High Net Worth “Angels” Source: COSCO Capital Management LLC

  9. Financing Alternatives • for Early Stage or Private Company • For Leasing/Seismic/Drilling: • Affluent individuals/Angels • Industry partners • Prospect brokers • For Acquisition & Follow-on Drilling: • Volumetric Production Payments (VPP) • Bank Debt • Mezzanine Debt • Private Equity • Joint Ventures

  10. Alternatives for Growth Stage • (Private or Public) • Private placements • Bank Debt • Notes/Debentures • 144A Equity or Debt • IPO • Sale of Company

  11. Sell and restart: Laredo Energy & Chesapeake

  12. Where/How do you find it? • Oil and Gas Investor • Oil and Gas Investor This Week • Oil and Gas Finance Sourcebook • Financial Intermediaries

  13. What do investors want? • Strong management team — technical, financial, operational • Track Record: Drilling success & financial value creation • Competitive Advantages: Geographic focus, land position ortechnical niche • Skin in the game

  14. What do investors want? • Drill-bit growth • Acquire and exploit • Management reputation

  15. Path to Success John Doe Partners 1995-97 $2 MM Principals’ sweat equity, angels, industry partners 1998 $1 MM VPP 1998 $5 MM Commercial bank debt 1999 $8 MM Property-level JV w/ a fund 2000 $12 MM Private equity from a fund 2001 $15 MM Project debt from fund 2003 $38 MM Sale to public E&P 2004 $10 MM Start over!

  16. Some Recent Investments

  17. Some Recent Investments

  18. Some Recent Investments Source: Oil and Gas Investor This Week

  19. Capital Providers are eager to hear your story • Execution is more important than strategy • Return is more important than growth • Dollars are better than barrels

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