Corporate

Bankingand Investment

Capital Markets SymposiumHosted By: MOGA Senior Debt & Second Lien Bank Financing

May 18, 2006

Doug Liftman

Managing Director

BNP Paribas

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1. E&P Bank Lending Overview

2. Second Lien Bank Facilities

3. About BNP Paribas

Table of Contents

Corporate

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1. E&P Bank Lending Overview

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Energy Industry Capital Provider Risk & Return Paradigm

Institutional Second Liens &

High Yield Debt

Bank Debt

Bank Overadvances & Second Liens

Mezzanine Capital

Convertible Debt

Private and Public Equity

5-10%

10-15%

20-30%

30% +

Total

Returns

Controlled Risks Uncontrolled Risks

PDP

Reserves

Proven

Reserves

Exploration

Activity

Engineering and

Operations Risks

Geological and

Geophysical Risks

Management Sponsorship

Capitalization Hedging

R/P F&D

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Energy Bank Lending Parameters

Lend against proven reserve value - primarily PDP

Third party reserve estimates - usually risked

Loan value determined by advance rates

Cash flow model validates the analysis

Conservative price deck historically employed relative to strip prices

Full value given to price hedges

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BNP Paribas utilizes the following advance rate guidelines to determine the borrowing base.

PDP Reserves 50-70%

PDNP Reserves 30-50%

PUD Reserves 20-40%

BNP Paribas’ currently uses the following base case commodity price assumptions.

Tristone Capital publishes quarterly a comprehensive review and summary of active oil and gas lender price decks.

Current Engineering Metrics

WTI Crude Price Base Case

2006 46.00$ 2007 42.00$ 2008 and beyond 38.00$

Gas Price Base Case2006 6.75$ 2007 6.25$ 2008 and beyond 5.50$

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Current Bank Market Conditions

Strong commodity prices bolster producer cash flows

Higher cash flows used to pay down debt

“Hot Sector” syndrome - high capital inflows

Significant loan appetite in the market

Default rates non-existent

Bank spreads under pressure - too much capital

Private equity is the new major source of capital formation in E&P today

Significant M&A activity

Second Lien Facilities can optimize equity returns

Corporate

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2. Second Lien Bank Facilities

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BNP Paribas’s Role in Second Lien Term Loan Market

BNP Paribas opened the Second Lien E&P market in 2003 with Quicksilver facility

Have arranged and agented the majority of the subsequent Second Lien Facilities done in the bank market

Most recently – Petrohawk (3rd issue since November 2004) and Energy XXI

Have attracted bank and institutional participants

Established ability to navigate intercreditor issues

True underwriting capacity

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Second Lien Fundamentals

Structure based upon conventional RBL parameters

Engineering Review

Cash Flow Analysis (Bank Price Deck)

Asset Coverage Test (PV/Total Debt)

Financial Covenants

Semi-Annual Redetermination

Transaction Criteria

Management

Reserve Integrity

Hedging

Capitalization

Standardized Documentation

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Two Second Lien Markets

Bank

Debt Enhancement Product

Provided by Banks & Long Term Institutional Holders

Pricing Range: LIBOR + 4 to 5%

Basic Covenant Package

PV/Debt Coverage Covenant

Debt/EBITDA Limitation

Prepayment Flexibility

Institutional

Debt Maximization Objective

Paper is Liquid and Trades with Reasonable Frequency

Premium Pricing for Larger Loan Capacity: LIBOR + 5% (and higher)

Covenant Package Less Onerous

Higher Prepayment Penalty

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Bank Second Lien Advantages

Increased availability versus conventional bank debt

Longer maturity profile than standard overadvance bank facilities

“Relationship Lending” versus Institutional Second Lien or High Yield Options

Ability to enhance equity returns by reducing lower-tiered capital contributions - private equity

Lower issuance costs versus capital market alternatives

Can easily be upsized if needed in the future

Flexible and economic prepayment versus institutional and public market capital issuance

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Basic Bank Second Lien Terms

Amount - $15 - $100 MM

Maturity - 3 to 5 years

Pricing - LIBOR + 4 - 5%

Covenants

Asset Coverage Ratio

Debt Service Coverage

PDP / Proven Ratio

Execution Timing - 2 to 6 weeks

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3. About BNP Paribas

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BNP Paribas

3rd largest bank in the world by total assets - over $1 Trillion

Highly rated with S&P (AA) and Moody’s (Aa2)

Extensive International Network with more than 500 offices in 87 countries

BNP Paribas’ global activities are organized into four core businesses:

Corporate and Investment Banking

Private Equity

Retail Banking

Private Banking and Asset Management

BNP Paribas’ Energy practice consistently ranks as the firm’s single largest industrial sector from a revenue standpoint

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BNP Paribas’ Energy & Commodity Finance Group

BNP Paribas has a global approach to the Energy sector:

Corporate Lending

Commodity Derivative capabilities

Capital Markets activities

Global Team of 500 dedicated energy specialists in Houston, Paris, New York, Geneva, London and Singapore

Senior Bank Debt

Second Lien Facilities

VPP’s

Crude Oil and Gas Price Hedging

Commodity Futures

BNP Paribas provides its Energy-related clients with a full range of products. We are market leaders in the Energy industry for :

We also offer a full compliment of public market debt and equity capabilities globally

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BNP Paribas Houston’s office focuses on the upstream sector

Primarily oriented toward independent producer financings

Approximately $7 Billion portfolio

Over 125 clients

Seamless financing for commodity derivative products

Demonstrated international transaction capabilities

Our commitment to all sectors of the Energy Industry is demonstrated in BNP Paribas’ rankings in the U.S. energy banking league tables

BNP Paribas’ Commitment to the Upstream Sector

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League Table Rankings 2005

Rank Bank Holding Company Lead Arranger Volume# of Deals Rank Bank Holding Company Agent-Only Volume # of Deals1 JP Morgan 38,824,800,000 85 1 JP Morgan 73,850,300,000 1142 Bank of America 23,211,200,000 72 2 Bank of America 52,678,200,000 983 Citigroup 12,651,000,000 25 3 Citigroup 42,042,000,000 454 Wachovia Corp 8,782,500,000 27 4 BNP Paribas 37,575,000,000 685 BNP Paribas 7,284,500,000 28 5 Wachovia Corp 37,090,000,000 576 Lehman Brothers 6,250,000,000 5 6 Royal Bank of Scotland Plc 28,002,937,500 277 Credit Suisse First Boston 3,200,000,000 7 7 Mitsubishi UFJ Financial Group Inc 20,324,000,000 338 Wells Fargo & Co 3,193,500,000 19 8 SunTrust Bank 15,575,000,000 209 Royal Bank of Scotland Plc 3,100,468,750 5 9 Lehman Brothers 15,325,000,000 710 UBS AG 1,660,000,000 5 10 Barclays Bank Plc 13,700,000,000 1311 Mitsubishi UFJ Financial Group Inc 1,360,000,000 7 11 Scotia Capital 12,575,000,000 2112 Barclays Bank Plc 1,287,500,000 5 12 Wells Fargo & Co 12,001,000,000 4013 Merrill Lynch & Co Inc 1,250,000,000 1 13 Harris Nesbitt 11,052,000,000 2414 RBC Capital Markets 1,207,968,750 7 14 RBC Capital Markets 9,695,937,500 1415 Harris Nesbitt 1,145,000,000 6 15 Calyon Corporate & Investment Bank 8,707,500,000 1716 Goldman Sachs & Co 1,075,000,000 3 16 Fortis Bank 8,215,000,000 1717 SunTrust Bank 987,500,000 5 17 Mizuho Financial Group 7,097,000,000 418 Fortis Bank 825,000,000 5 18 Deutsche Bank AG 5,950,000,000 719 Scotia Capital 500,000,000 3 19 Societe Generale 5,942,000,000 1220 Deutsche Bank AG 425,000,000 2 20 Credit Suisse First Boston 5,450,000,000 7

2005 U.S. Oil & Gas Agent Only2005 U.S. Oil & Gas Lead Arranger

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This presentation is only an expression of our interest in connection with the proposed transaction and nothing contained in this presentation should in any way be construed as an offer or a commitment by BNP Paribas to extend or to provide any financing of any type, either on behalf of itself or any other entity.

This presentation has been prepared by BNP PARIBAS for informational purposes only. Although the information in this presentation has been obtained from sources which BNP PARIBAS believes to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This presentation does not constitute a prospectus and is not intended to provide the sole basis for any evaluation of the securities discussed herein. All estimates and opinions included in this presentation constitute our judgement as of the date of the presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein.

BNP PARIBAS or its affiliates may, from time to time, have a position or make a market in the securities mentioned in this presentation, or in derivative instruments based thereon, may solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager or lender) for any company, institution or person referred to in this presentation and may, to the extent permitted by law, have used the information herein contained, or the research or analysis upon which it is based, before its publication. BNP PARIBAS will not be responsible for the consequences of reliance upon any opinion or statement contained herein or for any omission.

This presentation is confidential and is being submitted to selected recipients only. It may not be reproduced (in whole or in part) to any other person without the prior written permission of BNP PARIBAS. Any U.S. person receiving this presentation and wishing to effect a transaction in any security discussed herein, must do so through a U.S. registered broker dealer. BNP Paribas Securities Corp. is a U.S. registered broker/dealer.

© 2005 BNP PARIBAS. All rights reserved.