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CMM Project Templeton

May 14, 2014

CBM Project Services Overview

Logo

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CBM Project ExampleCoal Bed Methane Operating Company, LLC

Tom Hite – an unrivaled record of Illinois Basin CBM achievement

1. Over four decades Illinois Basin CBM experience 2. Recognized CBM authority – US DOE CBM representative to UN 3. 1st commercial production of CBM in the Illinois Basin 4. 1st utility to generate electricity from their own renewable mineral assets 5. Extensive oil & gas industry experience as business leader

Achieving consistent success through:

Efficient project management & reporting

Alignment with clear mission priorities

1. Safety

2. Environment

3. Production

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CBM Project ExampleOwnership & Corporate Structure

Hite Coalbed Methane LLCMembershipThomas M. Hite

51%

Templeton Coal Company Inc.49%

Pulse Energy LLC50% equity and

Operator of JerichoMembership

Other Members55%

Hite Coalbed Methane LLC45%

Majority in Interest60%

Jericho ProjectIn operations since

1999.Sold 9 Billion Cubic Feet (bcf) of natural gas and we expect another 9 bcf out of

a single coal seam.

Current production 1.3 Million Cubic

Feet per Day

Investco50% equity partner in

Jericho Project

Coalbed Methane Operating Company LLC

Hite Coalbed Methane LLC80%

Others20%

Hoosier EnergyOsprey Point

RFP Contract AwardedDrilling and Stimulation 4/1/13

O & M 5/17/13 Current engines four (4)

GE-620 Jenbacher

Note: 100 year oldCoal Company

partner

Note: 100 year oldCoal Company

partner

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Gas VS Coal Generation

•Political & Public Opinion• Our opinion is that gas can not replace the base load for electricity.

• Our partners opinion is that coal is the most reliable source of energy for generating electricity. They have seen Political and Public opinions sway back and forth over the

past 100 years.• CBM coming from coal is seen as the most predictable and reliable source of gas.

• CBM is seen by our partners as a bridge between current Political and Public opinions not in favor of coal to when either rolling balckouts occur or technology allows Political

and Public opinion to return to coal.

•Economical• Current experience show we are delivering 90 KW/hr./net mineral acre from one coal

seam @ 8,300 BTU/KW/HR.

3.3 MW/day One J620 Jenbacker 0.363Aux. load/hr. 11%2.937Net MW/day

70.488Net MW/day One J620 Jenbacher

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Economics of CBM• Current experience show we are delivering 90 KW/hr./net mineral acre from one coal

seam @ 8,300 BTU/KW/HR

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CBM Project ExampleCBMO Services

1. Project Suitability Evaluation a. Determine if CBM-to-Power project is a good fit

b. Include assessment of geological, cost, regulatory, etc. aspects

2. Project Planning a. Full spectrum cost, schedule and technical

3. Project Implementation

a. Integrate all activities in coordination with your team

4. Project Operation a. Ongoing management and reporting

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CBM Project ExampleJericho Project & HE Merom Station Locations

Hoosier EnergyMerom Generating Station

Contract AwardedDrilling and Stimulation 4/1/13

O & M 5/17/13 Current engines four (4) GE Jenbacher 620

Jericho ProjectIn operations since

1999.Sold 9 Billion Cubic Feet (bcf) of natural gas and we expect another 9 bcf out of

a single coal seam.

Current production 1.3 Million Cubic

Feet per Day

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CBM Project Example

• One of the 18 stimulated vertical wells

Stimulated Well

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CBM Project ExampleProcessing Facility

• Separation / Compression / Dehydration

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CBM Project ExamplePower Generation

• 4 Jenbacher J620 Gas Generator Sets.

• Control Room

• Power produced is sold to grid

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CBM Project ExampleSAFETY - the Top Priority

CBMO Mission priority Number One: SAFETY

Highlights of our Behavior Based Safety (BBS) Program: • ZERO RECORDABLES since inception (TRIR: 0.0) • All employees participate in weekly focused safety meetings • All employees and subcontractors participate in documented job safety

meetings at shift changes & before commencing each job • Current employees & all sub-contractors have been through customer

safety program before being allowed on customer property • PPE: Hard hats, hearing & eye protection, steel toed boots required • Uniforms are all fire retardant • Current employees have been through 10-hour OHSA training • All employees are background checked before employment • All employees must pass drug test before being employed and subject

to random drug tests • CBMO currently has $25 Million dollar liability Insurance • All Subs of CBMO are required to have proof of insurance

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CBM Project ExampleSAFETY - Culture

CBMO Mission priority Number One: SAFETY

Situational AwarenessLOTO

Discipline

Proper PPE

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CBM Project ExampleDedication to ENVIRONMENTAL Protection

CBMO – a responsible steward of our natural resources• ZERO ENVIRONMENTAL ISSUES since inception • Strong partnership with environmental regulatory authorities • Have acquired the only NPDES issued by IDEM for CBM production • Have secured Air Quality Permit from IDEM • Worked and complied with DNR (Oil and Gas) for Permits • Worked with and complied with IURC gathering and transport

regulations • Worked successfully with customer’s environmental group to meet or

exceed their requirements • MISSION: ZERO - Developed procedures to eliminate as much as

humanly possible the escape of methane and water during development and operations

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CBM Project ExampleENVIRONMENT – a Proactive Approach

CBMO – a responsible steward of our natural resources

Saltwater Disposal System

HAZMAT Control

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CBM Project ExamplePRODUCTION – Maximizing Results

CBMO – works in partnership to exceed expectations

RESULTS

• Jericho - exceeded Estimated Ultimate Recovery (EUR) by 65%

• HE Osprey Point - power plant generator productive up time more than doubled; running 24/7 operations

• HE Osprey Point - reduced CH4 cost well below market• HE Osprey Point - well pump infrastructure function

improved to allow effective well production on previously non-productive wells

• HE Osprey Point - utilized Maximo to optimize project inventory and work over management

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CBM Project ExamplePRODUCTION – Staying Ahead of the Game

Processing & Production Facilities

• Increased Output • Reduced Commodity Cost • Improved Reliability

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CBM Project ExampleKeys to CBMO Success

Coal Bed Methane Operating Company, LLC (CBMO)

• Keys to Success– Detailed and comprehensive analysis & planning up front

– Geological and historical analogs compared – Detailed and extensive knowledge of local coal formations

• Management approach– Proactive – Open / Partnership– Detailed

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CBM Project ExampleCBMO Project Reporting

Coal Bed Methane Operating Company, LLC (CBMO)• Cost, Schedule & Technical reporting

– Clear • Fosters effective communication

– Forward Looking • Allows proactive risk management

– Accurate • Reliable information reinforced by quantifiable data

– Timely • Provided to effectively support project activities

– Customized • To meet your unique reporting and review requirements

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CBM Project ExampleManagement & Reporting - Cost

• CBMO provides results & tailored reporting– Quick reference to determine performance – Deeper visibility into costs – Proactive risk management

CPI

Cost Performance

Index

Cost Performance

Index

Planned vs.Actual Cost

Performance

Planned vs.Actual Cost

Performance

CommentaryCommentary

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CBM Project Example

Schedule Report Period EndingWell Drilling Density Log Cementing Set Stim Tanks Completing Total

# Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Complete12L 4/1 4/2 -1 4/2 4/3 -1 4/2 4/5 -3 4/8 4/7 1 4/22 4/22 0 25.0%15L 4/1 4/2 -1 4/2 4/3 -1 4/2 4/3 -1 4/8 4/8 0 4/22 4/22 0 90.0%14L 4/3 4/10 -7 4/5 4/10 -5 4/5 4/10 -5 4/8 4/8 0 5/1 5/2 -1 90.0%17L 4/3 4/8 -5 4/5 4/8 -3 4/5 4/8 -3 4/8 4/9 -1 4/26 5/7 -11 90.0%19L 4/8 4/4 4 4/9 4/5 4 4/9 4/6 3 4/10 4/8 2 5/6 5/7 -1 100.0%11L 4/8 4/12 -4 4/9 4/12 -3 4/9 4/16 -7 4/10 4/10 0 5/8 5/8 0 100.0%8L 4/10 4/9 1 4/12 4/11 1 4/12 4/11 1 4/18 4/17 1 5/14 5/14 0 79.0%3L 4/10 4/10 0 4/12 4/10 2 4/12 4/11 1 4/19 4/9 10 5/17 5/10 7 100.0%1L 4/15 4/16 -1 4/16 4/16 0 4/16 4/16 0 4/18 4/21 -3 5/22 5/22 0 54.0%2L 4/15 4/15 0 4/16 4/18 -2 4/16 4/18 -2 3 4/18 4/18 0 5/27 5/27 0 90.0%

20L 4/17 4/17 0 4/19 4/20 -1 2 4/19 4/20 -1 2 4/25 4/24 1 2 5/30 5/30 0 54.0%22L 4/17 4/16 1 4/19 4/16 3 4/19 4/17 2 4/25 4/24 1 6/4 6/4 0 90.0%21L 4/22 4/18 4 4/23 4/18 5 4/23 4/23 0 4/25 4/24 1 6/7 6/7 0 90.0%23L* 4/22 4/12 10 4/23 4/12 11 4/23 4/16 7 4/26 5/2 -6 6/12 6/12 0 54.0%26L* 4/24 4/22 2 4/26 4/23 3 4/26 4/24 2 4/26 4/24 2 6/17 6/17 0 89.0%28L* 4/24 4/16 8 4/26 4/16 10 4/26 4/17 9 4/30 5/2 -2 6/20 6/20 0 64.0%24L* 4/29 4/22 7 4/30 4/23 7 4/30 4/24 6 4/30 5/2 -2 6/25 6/25 0 64.0%

6L 5/1 5/1 0 1 5/6 5/6 0 5/11 5/11 0 5/16 5/16 0 6/5 6/5 0 0.0%Allocation 25.0% 5.0% 23.0% 1.0% 10.0% Total Allocated 100.0%Progress 23.6% 4.4% 20.4% 0.9% 1.7% Total Progress 73.5%

KeyPhase Status Schedule Performance Miscellaneous"Actual" column colors indicate phase status Perf (d) = Performance in days * Road Posted: 10 ton limit

Planned (not yet started) More than 3 days prior to planIn progress Up to 3 days prior to planCompleted Up to 3 days after planCancelled More than 3 days after plan

May 2, 2013Schedule Report Period EndingWell Drilling Density Log Cementing Set Stim Tanks Completing Total

# Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Plan Actual Perf (d) Notes Complete12L 4/1 4/2 -1 4/2 4/3 -1 4/2 4/5 -3 4/8 4/7 1 4/22 4/22 0 25.0%15L 4/1 4/2 -1 4/2 4/3 -1 4/2 4/3 -1 4/8 4/8 0 4/22 4/22 0 90.0%14L 4/3 4/10 -7 4/5 4/10 -5 4/5 4/10 -5 4/8 4/8 0 5/1 5/2 -1 90.0%17L 4/3 4/8 -5 4/5 4/8 -3 4/5 4/8 -3 4/8 4/9 -1 4/26 5/7 -11 90.0%19L 4/8 4/4 4 4/9 4/5 4 4/9 4/6 3 4/10 4/8 2 5/6 5/7 -1 100.0%11L 4/8 4/12 -4 4/9 4/12 -3 4/9 4/16 -7 4/10 4/10 0 5/8 5/8 0 100.0%8L 4/10 4/9 1 4/12 4/11 1 4/12 4/11 1 4/18 4/17 1 5/14 5/14 0 79.0%3L 4/10 4/10 0 4/12 4/10 2 4/12 4/11 1 4/19 4/9 10 5/17 5/10 7 100.0%1L 4/15 4/16 -1 4/16 4/16 0 4/16 4/16 0 4/18 4/21 -3 5/22 5/22 0 54.0%2L 4/15 4/15 0 4/16 4/18 -2 4/16 4/18 -2 3 4/18 4/18 0 5/27 5/27 0 90.0%

20L 4/17 4/17 0 4/19 4/20 -1 2 4/19 4/20 -1 2 4/25 4/24 1 2 5/30 5/30 0 54.0%22L 4/17 4/16 1 4/19 4/16 3 4/19 4/17 2 4/25 4/24 1 6/4 6/4 0 90.0%21L 4/22 4/18 4 4/23 4/18 5 4/23 4/23 0 4/25 4/24 1 6/7 6/7 0 90.0%23L* 4/22 4/12 10 4/23 4/12 11 4/23 4/16 7 4/26 5/2 -6 6/12 6/12 0 54.0%26L* 4/24 4/22 2 4/26 4/23 3 4/26 4/24 2 4/26 4/24 2 6/17 6/17 0 89.0%28L* 4/24 4/16 8 4/26 4/16 10 4/26 4/17 9 4/30 5/2 -2 6/20 6/20 0 64.0%24L* 4/29 4/22 7 4/30 4/23 7 4/30 4/24 6 4/30 5/2 -2 6/25 6/25 0 64.0%

6L 5/1 5/1 0 1 5/6 5/6 0 5/11 5/11 0 5/16 5/16 0 6/5 6/5 0 0.0%Allocation 25.0% 5.0% 23.0% 1.0% 10.0% Total Allocated 100.0%Progress 23.6% 4.4% 20.4% 0.9% 1.7% Total Progress 73.5%

KeyPhase Status Schedule Performance Miscellaneous"Actual" column colors indicate phase status Perf (d) = Performance in days * Road Posted: 10 ton limit

Planned (not yet started) More than 3 days prior to planIn progress Up to 3 days prior to planCompleted Up to 3 days after planCancelled More than 3 days after plan

May 2, 2013

Management & Reporting - Schedule

• CBMO provides results & tailored reporting– Convenient and easy to read references– Deeper visibility into progress towards milestones– Proactive risk identification and management

Project PhasesProject Phases

Schedule Performance

Schedule Performance

PercentComplete

PercentComplete

Project ScheduleProject

Schedule

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CBM Project ExampleManagement & Reporting - Technical

• CBMO provides results & tailored reporting– Quick performance reference– Deeper technical visibility – Proactive risk management

Detailed Well

Status Diagrams

Detailed Well

Status DiagramsClear Key

Performance Indicator Reference

Charts

Clear Key Performance

Indicator Reference

ChartsCasing Pressure

& Slurry Rate Plots

Casing Pressure & Slurry Rate

Plots

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CBM Project Example

- Provides gas throughout generation project life- Utilizes local renewable resource

- Leverages proven technology

- Provides gas throughout generation project life- Utilizes local renewable resource

- Leverages proven technology

CBM-to-Power Project Concept

WellsWells Processing PlantProcessing PlantGathering LinesGathering Lines Transport LineTransport Line

Seam A

Seam B

Wells remove ~75% of CH4 and ~50% of H2OWells remove ~75% of CH4 and ~50% of H2O

GeneratorsGenerators

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CBM Project ExampleCBM-to-Power - Benefits to Power Company

1. Ability to idle power plant instead of shutting it down • Avoid full shutdown costs and community impacts • Buy time while technological & political environment evolves

1. Revenue stream • Defray plant idling costs

1. Reduced Cost of Generation • Use own (or nearby partner) natural mineral resources

– No (or minimal) royalty & transportation costs – Reduced Commodity Price Risk

• Methane sourced in house/locally; not subject to open market – Reduced Commodity Availability Risk

• No reliance on outside gas providers who are subject to Force Majeure, etc.• Winter ‘13/14: Gas storage fields w/in 5% of empty – TGT declared Force Majeure

– Reduced Project & Operations Risk • CBMO is an established CBM project planning and implementation expert • Leverage CBMO as experienced onsite gas operator

1. Possible Renewable Resource Status • Many states classify coalbed methane as renewable resource

1. Water Availability 1. Water from coal seams can be utilized (water quality dependent)

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CBM Project ExampleCBM-to-Power Project - Potential Organization

Structure & approach used successfully on Analogous Projects

CBMO , LLCEPC & Ops Mgr

Ops MgrDrilling Provider

Pumpers

Crew

Coal Bed Methane Operating Company, LLC

Legal

Gas Offtaker

EPC & Ops Contract

ProcessingSystem Builder

Crew Mgr

Power Company Project Manager and Project Coordinator

Offtake Agmt

Project Mgmt Agmt

Accounting & Billing

GatheringSystem Builder

Crew MgrCrew Mgr

Subcontracts

Crew Mgr

CBMO:Geological Analysis & Gas Production

Consultants

Service AgmtsService Agmts

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CBM Project ExampleCBMO – the right Gas-to-Power partner

CBMO – Ready to bridge the gap until coal’s return

1. Proven track record of natural gas-to-power success 2. Focused - CBM is a core competency 3. Demonstrated history of dedication to Safety, the

Environment, Compliance and Productivity 4. Industry knowledge - Coal and Power5. Network of top tier subcontractors 6. Relationships with regulatory entities 7. Efficient & effective project management team

The proof that our model works: A Coal Company is our Partner