1. Rick Louden President & CEO
Denali Oil & Gas
Rick Louden
President & CEO

2. Denali Oil & Gas Background
Founded June, 2003 with a $50 million commitment from Quantum Energy Partners, Energy Trust and Walter Oil & Gas. Denali II funding commitment of $50 million in 2006.
Focus on S. Texas tight gas below 12,000’
Drilled 17 exploratory wells, 48 development wells, four small acquisitions.
Sold assets in 2004 and 2006 in multiple asset sales totaling $230 million.
Currently producing 13 Mmcfed.

3. Denali Oil & Gas Fields Currently Producing and Fields Sold
South Bearhead
Creek
Rapture
S. Friar Ranch
Robinson Lake
Hardeman Slough
Destino
Finley Webb
Las Hermanitas
La Perla
S. Escobas
Haynes
Exsun
Shivers Deep
Tierra Blanca
Edinburg South
Arrowhead Ranch

4. Denali Oil & Gas Investor Partners
Bring Value to the Table
Sounding Board and Brainstorming on key decisions and strategy
Financial Expertise and Muscle
Financial Strength and Staying Power

5. Planning Discussion with
Quantum Energy Partners

6. Denali Oil & Gas Business Plan
Primary focus on deep tight gas in South Texas.
Create value through exploration and small acquisitions with significant drilling potential.
Operate the majority of properties and reserves.
Be patient, wait for exceptional opportunities.

7. Denali Oil & Gas Business Plan
Starting Point Conditions Private Equity Funded Company
Target 30%+ IRR and ROI of 3.0+
Don’t bet on rising oil and gas prices.
Minimize risk.
No rank wildcatting.
Prudent level of borrowing.
Conservative Acquisition analysis assumptions.

8. Denali Oil & Gas Strategy
…….How do we generate 30%+ IRR and ROI without rising gas prices and without significant risk?
Basin Characteristics? Wells with high initial rates and steep declines or wells with moderate initial rates and flatter declines? high initial rates generate higher IRR’s despite steeper declines.
Exploration or acquisitions? exploration minimizes upfront capital improving ROI and IRR if success rate is good.

9. Denali Oil & Gas Strategy
Continued………..
Sell discoveries early or fully develop? selling fields early in life after minimum drilling further improves IRR and ROI , but sacrifices a portion of the future present value.

10. Denali Oil & Gas Strategy
…….How do we generate 30%+ IRR & 3.0 ROI?
Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5.
Capital Sale Value ROI
Land & Seismic $
Drill 3 wells $12 $
Drill 7 PUD’s $28 $
Total $41 $

11. Denali Oil & Gas Strategy
…….How do we generate 30%+ IRR & 3.0 ROI?
Example: Ten well field, each well costs $4 million and has a PV10 of $6 million and ROI of 2.5.
Capital Sale Value ROI
Land & Seismic $
Drill 3 wells $12 $
Sell 7 PUD’s $ (at 50% of PV10)
Total $13 $

12. Denali Oil & Gas Business Plan
Starting Point Conditions Private Equity Funded Company
Target 30%+ IRR and ROI of 3.0+
Don’t bet on rising oil and gas prices.
Minimize risk.
No rank wildcatting.
Prudent level of borrowing.
Conservative Acquisition analysis assumptions.

13. Adjusted for Inflation 1985 - 2009
U.S. Gas Prices
Adjusted for Inflation
???

14. Denali Oil & Gas Business Plan
Minimize Risk
Top 10% Technical Team
Wait for exceptional opportunities
No Rank Wildcatting
State of the Art Technologies

15. South Texas Wells less than 10,000’ deep
Total Wells 361,030
309,919 Wells < 10,000’ TD

16. South Texas Wells deeper than 13,000’
13,007 Wells > 13,000’ TD

17. Denali Oil & Gas Business Plan
Minimize Risk
Top 10% Technical Team
Wait for exceptional opportunities
No Rank Wildcatting
State of the Art Technologies

18. Denali Oil & Gas State of the Art Technology

19. Denali Oil & Gas Results
Denali I (2003 – 2006)
Three small acquisitions ($9.1 Million), 4 exploration wells (3 successful and 1 dry hole), 35 development wells.
$44 million of investor capital and $15 million debt.
Sold in multiple transactions totaling $230 million.
IRR = 214%, multiple = 4.5.

20. Rick Louden President & CEO
Denali Oil & Gas
Rick Louden
President & CEO

21. Denali Oil & Gas Results
Denali II (2006 – 2008)
One acquisition, 13 exploration wells (6 successful and 7 dry holes), 13 development wells.
$64 million of investor capital and $24 million debt.
Current proved reserves of 70 Bcfe and probable reserves of 73 Bcfe.
100,000 net undeveloped acres in resource play with acreage going for $ per acre.

22. Rick Louden President & CEO
Denali’s S. Escobas Field
Denali Oil & Gas
Escobas Field
Rick Louden
President & CEO
Fandango field

23. Escobas Field 89 BCF
Fandango Field 429 BCF

24. South Escobas Type Log

25. Type Log Cont.

26. Rick Louden President & CEO
Denali’s S. Escobas Field
Denali Oil & Gas
Escobas Field
Rick Louden
President & CEO
Fandango field

27. Denali Oil & Gas Finding Costs
Year Reserve Adds Finding Cost
Bcfe $0.67/Mcfe
Bcfe $1.06/Mcfe
Bcfe $1.24/Mcfe
Bcfe $1.08/Mcfe
Bcfe $1.00/Mcfe
Bcfe $1.44/Mcfe
Total 172 Bcfe $1.17/Mcfe

28. Denali Oil & Gas Denali III
Same Investor Group.
$140 million commitment. Additional capital available for larger acquisition.
Exploration and acquisitions with increased focus on identifying acquisitions.
Partner with companies who have acreage and prospects in S. Texas, but are reallocating capital to other basins………through farmouts and joint ventures.

29. Experience . . . Focus . . . Innovation . . . Technology . . .