broome county vestal leasehold title screen. llama horizontal drilling technologies, inc. 307 west 7...

BroomeCounty

Vestal Leasehold

Title Screen

LLAMA HORIZONTAL DRILLING TECHNOLOGIES, INC.307 West 7th Street, Suite 1250

Fort Worth, Texas 76102 Marcellus Shale Joint Venture

Broome County, New YorkTerms of Proposal

Introduction:

LLAMAHDT controls Oil and Gas Leases covering approximately 12,000 acres in a concentrated block of leasehold (the “Prospect”) in Broome County, New York, which is highly prospective for the Marcellus Shale Gas play. LLAMAHDT continues to aggressively negotiate with Landowner Groups in the

area to acquire more leasehold in the Prospect, and we are seeking a partner to participate with us in the acquisition, drilling and development of natural gas production from the Marcellus Shale as well as other prospective formations in our prospect area.

Industry wide results in the area have shown initial production figures of up to 10,000 mmcfpd for horizontal completions with many wells still flowing 91%

of IP rates after 60 days. The natural gas in this area has shown to be dry and ready to flow directly into pipelines where it receives a premium price due to it’s location near the major markets. Current estimates reflect the Estimated Ultimately Recoverable Reserves at approximately 5.2 BCF (billion

cubic feet) per 80 acre well. This estimate seems to being going up as decline curves are reflecting less of a decline than expected. Within a 30 mile radius of our prospect there are over 100 approved Marcellus locations that have been permitted by the likes of Range Resources, Chief, Cabot, Southwest, Chesapeake, Fortuna, Anadarko and East Resources. Exxon, Marathon and Hess have all recently acquired leasehold in the area and

competition for leases is increasing at a rapid pace. Most recently lease bonuses have increased to $5,500 per acre on the low side to areas directly to our south now bringing $6,900 per acre with 21% royalties. On December 31st of this year, the public review period for New York State’s

Supplemental Generic Environmental Impact Statement will terminate and the DEC has indicated that it will be issueing horizontal drilling and fracing permits in the first quarter of 2010. Everyone believes the competition in Broome County, New York will increase dramatically at that time.

LLAMAHDT has maintained a presence in Broome County for the last 24 months and has gained proprietory geological information reflecting key areas for

development and have acquired leasehold in these areas and are in negotiations to increase our lease position in “Core Areas” of the Marcellus Shale in both New York and Pennsylvania. We have focused our leasing efforts to areas where all existing data reflects the highest possibility for long term

recoverable reserves thus leading to the highest rates of returns per investment dollar.

Marcellus Shale Joint Venture

LLAMAHDT Proprietory Marcellus Data:Net Pay 200+ feetAverage Depth 5,000 feetVitrinite Reflectance 2.0 to 2.5TOC 4.0 – 7.0%Est. UR per 80ac. unit 4.0-6.0 BCF and estimates are now increasing. TERMS: LLAMAHDT is seeking to assign its interest in approximately 12,000 acres that it presently has under lease. LEASEHOLD ACQUISITION: Within a specified Area of Mutual Interest, LLAMAHDT will continue to act as acquisition agent to fill in lease blocks and acquire

as much additional acreage as requested by the assignee. POTENTIAL FOR EXPANSION: Although we have constructed this brief business model based on know available acreage at prices know to be current market

values, additional investment opportunities do exist in the “Core Areas” of the Marcellus Shale. Years of a poor economy followed by last years severe crash has led to many peoples of the area needing money just to survive in the present economic climate. Many landowners were caught off guard when the Marcellus was first discovered and received nominal lease bonuses for their acreage (much of which was gone rather quickly) and are in desperate need of money. We have been told of several of these landowners seeking to sell out portions of their mineral rights while awaiting development and royalties. Although our focus is targeted at development of reserves in the area, it is important to remember that once purchased, mineral rights are yours forever. It is estimated that each royalty acre (based on a 12.5% royalty) in the “Marcellus Core Area” could eventually pay out $46,875. Many people in the area would welcome offers of $2,000 to $3,000 per acre. We are continuing to build a data base of names of landowners leased to other companies.

I hope you find this Executive Summary of our presentation for opportunity in the Marcellus, although brief in nature, to be informative and fairly

complete. If however you have any additional questions or concerns, please don’t hesitate to call us. Respectfully, Dean LowryPresidentLLAMAHDT(817)773-2692

Marcellus Shale Joint Venture

LLAMA HORIZONTAL DRILLING TECHNOLOGIES INC

Industry Marcellus Shale Activiy

COG’s Marcellus Wells


LLAMAHDTVestal

Leasehold

LLAMAHDTPhase II

Acquisition

Fortuna5MM

Atlas2.2MM

RRCIP

6.3MM2.3MM

CNX4.1MM

CHKIP 7 MM

Competitor Activity


Reported Flow Rates


COG’s Marcellus Wells

Date Announced Developer Partner

TV($MM)

NetAcres Location

AmountPurchased Description

8/19/2009 Chief Enerplus $406 116,000 Marcellus 30% -$1,400/acre cash-$2,100/acre carry

6/30/2009 EXCO BG $798* 42,000* Haynesville 50% -$11,780/acre cash-$7,220/acre carry

6/22/2009 Rex Energy Williams $33 22,000 Marcellus 50% -$1,500/acre carry

6/9/2009 East Resources KKR $350 NA Marcellus NA Substantial minority; est. at$2,000-$2,500/acre

6/2/2009 Triana Morgan Stanley

NA NA Marcellus NA -$1,000-$1,500/acre

5/18/2009 Quicksilver Eni $280 3,575 Barnett 27.50% -$2.13/Mcfe; $16,500/Mcfe/Day

5/14/2009 Denbury Talon $270 11,640 Barnett 60% -$1.00/Mcfe; $5,900/Mcfe/Day

11/11/2008 Chesapeake Statoil $3,375 585,000 Marcellus 32.50% -$2,136/acre cash-$3,632/acre carry

11/4/2008 Carrizo Avista $150 775,000 Marcellus 50% -$1,000-$1,500/acre

9/2/2008 Chesapeake BP $1,900 135,000 Fayetteville 25% -$8,150/acre cash-$5,925/acre carry

7/1/2008 Chesapeake Plains E&P $2,500 110,000 Haynesville 20% -$15,000/acre cash-$15,000/acre carry

6/16/2008 Goodrich Chesapeake $173 10,250 Haynesville 50% -16,878/acre cash

Recent Upstream Joint Ventures

Gas Shale Comparison


GAS SHALE BASIN BARNETT (CORE) FAYETTEVILLE HAYNESVILLE MARCELLUS WOODFORD

EST. BASIN AREA SQ/ MILES 5,000 9,000 9,000 95,000 11,000

DEPTH, FEET 6,500-8,500 1,500-7,000 10,500 - 13,000 3,000 - 8,500 6,000 - 11,000

NET THICKNESS, FEET 250 - 600 40 - 200 200 - 300 50 - 250 120 - 220

GIP, BCF/SQ MILE AVERAGE 150 50 200 150 80

TOTAL ORGANIC CONTENT (wt%) 4 5 3 6 4

POROSITY 4 5 9 8 6

RECOVERY FACTOR (%/SPACING) 20/60 30/80 25/80 30/80 20/160

RESERVES/ HORIZONTAL WELL 2.75 BCF 2.0 BCF 6.5 BCF 4.2 BCF 4.0 BCF

INITIAL PROD. RATES (MMCFD) 2.5 1.75 10 4 3.5

WELL COSTS, $MILLION 2.8 2.75 7.5 3.6 4.5

AVERAGE ROYALTY 25 22 25 20 25

BASIS DIFFERENTIAL TO NYMEX, $ -1.05 -0.55 -0.30 +0.20 -1.25

FINDING COST, $/MCF 1.36 1.76 1.54 1.18 1.52

AVAILABLE ACREAGE IN CORE VERY LITTLE VERY LITTLE SOME YES VERY LITTLE

LEASING PRICES/ ACRE, $ 3,000 1,500 5,000 5,500+ 1,000

Source: Chesapeake, Deutsche Bank, DOE, Fairway Internal Estimates

Gas Shale Comparison

Top Fayetteville Shale

Base Fayetteville Shale

SEECO, Thomas #1-9

Top of Effective Pay Top of Effective Pay

Base Marcellus Shale

Top Marcellus Shale

Quaker State, Kark #1

4100

4500

4200

Marcellus in northern Broome County is as thick and slightly deeper than the Fayetteville Shale in the core.

Cross-Section and Comparison


Cross-Section and Comparison


LLAMAHDTLEASEHOLD

Isopach


LLAMAHDTLEASEHOLD

Vitrinite Reflectance


LLAMAHDTLEASEHOLD

Depth to Drill


LLAMA HDT Leasehold


LLAMAHDTLease-in-Hand

Phase I

LLAMAHDTLetters of

IntentPhase II LLAMAHDT

Letters of IntentPhase II

LLAMAHDTIn Negotiations

Phase III

LLAMA HDT Leasehold Schedule


Aqua Terre14 Laterals

Possible 14 Lateral Unit


LLAMAHDTLEASEHOLD

LLAMAHDTSouth Maine

LLAMAHDTKirkwood

LLAMAHDTWindsor-Colesville

Broome & Susquehanna Pipelines


XTO – Contango 2/0620,000 acres @$11,800/acreFayetteville

BP – CHK 9/08135, 000/acres @

$14,074/acreFayetteville

CHK – Residents 3/082,000 acres @$22,000/acre

Barnett

XTO – undisco 7/0812,900 acres

@ 62, 015/acreBarnett

XTO - Multiple 2/0876,000 acres @

$6,184/acreWoodford,

Fayetteville, Bakken

XTO – SWN 4/0855. 631 acres

@ $9,340/acreFayetteville

BP – CHK 8/0890,000 acres @$19,444/acre

WoodfordWilliams – Aspeot

7/0810,000 acres

@ $16,600/acreBarnett

CHK – STATOIL11/08 585,000@ $5,768/acre

Marcellus

Value

Firm Concept PDP Established Development Model VerifiedAsset Risk Decreases

Unconventional Resource Value Progression


Transactions

Acquirer Seller Date Transaction Type

Tier Effective Cost per Acre ($)

Net Acres

Current Net Prod (mmcfd)

Estimated Reserves

(bcf)

Other Terms

XTO Linn 6/1/08 Sale 2,3,4,5 152,000 25145

proved

$600 million purchase of producing properties, acreage and infrastructure (infrastructure valued at $50 million). Approx 132,000 acres are HBP.

Antero Dominion 9/24/08Sale of Marcellus Rights

3,4,5 $3,037 114,259

$347 million purchase of mostly HBP Marcellus rights, Dominion to retainan 87.5% ORRI.

StatoilHydro Chesapeake 11/25/08Joint Venture

all $5,625 600,000 15,000-18,000

$3.38 billion total deal value - $1.25 billion up front, rest paid through drill to earn structure (Statoil to pay 83.125% of D&C during carry period to earn 32.5% interest). Statoil must fund the deal by the end of 2012.

Burnett 6/1/09Partial Sale of Marcellus Rights

mostly 4,5

$2,759 6,760 Sale of 20% interest non-op interest in acreage

Market Indicators


Transactions

Acquirer Seller Date Transaction Type

Tier Effective Cost per Acre ($)

Net Acres

Current Net Prod (mmcfd)

Estimated Reserves

(bcf)

Other Terms

Williams Rex 6/22/09 Joint Venture 4,5 $1,664 22,000

$36.6 million deal value - $3.6MM up front, rest paid through drill to earn structure (Williams to pay 90% of D&C costs during carry period to earn 50% interest). Williams must fund the deal by the end of 2011 with carry or cash. Williams to operate.

Newfield Exploration

Hess Oil8/14/09 Joint Venture 3,4 140,000

Newfield to operate the 50/50 joint venture in Susquehanna and Wayne Counties PA.

E nerplus Chief 9/1/09 Joint Venture all $3,540 116,000 1,400

$411 million deal value - $164.4MM up front, rest paid through drill to earn structure (Enerplus to pay 60.75% of D&C costs during carry period to earn 21.5% interest). Enerplus to fund deal over four year period.

Market Indicator


Field: AppalachiaReservoir: MarcellusLease: Broome County

County ,St: Broome, NYWorking Interest: 1.00000000

GAS Eur: 4,986.64 mmcfGAS Init Decl: 98%IROR: 95.26%

GAS Init Qi: 180,000 mmcf/monDisc Value: 5,425.79 m $

Present Worth VS Gas Price

Rate of Return VS Gas Price

ECONOMIC BEFORE TAX PROJECTIONDate : 11/6/2009

Project Name : LLAMAHDT As Of Date 3/1/2011 Case : Broome County

Partner : Discount Rate (%) :

10.000

Case Type : LEASE CASE

Working Interest

100% Field : Appalachia

GAS price $6 FlatRevenue Interst

75% Operator : UNKOWN

Payout (yrs)

0.94 Marcellus

EUR Cum Gas (mmcf): 5 BCF Co., State : Broome, NY

D&C cost $4.2 million including $600k in lease cost

PW (10%) $4,065,241

Gross Gross Net Net Oil Gas Oil Gas Misc. Total Year Oil Gas Oil Gas Price Price Revenue Revenue Revenue Revenue

(MBBL) (MMCF) (MBBL) (MMCF) ($/BBL) ($/MCF) (M$) (M$) (M$) (M$)

2010 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2011 0.00 928.23 0.00 696.17 0.00 6.00 0.00 4,177.04 0.00 4,177.04 2012 0.00 555.60 0.00 416.70 0.00 6.00 0.00 2,500.21 0.00 2,500.21 2013 0.00 394.43 0.00 295.82 0.00 6.00 0.00 1,774.91 0.00 1,774.91 2014 0.00 316.81 0.00 237.61 0.00 6.00 0.00 1,425.67 0.00 1,425.67 2015 0.00 269.23 0.00 201.92 0.00 6.00 0.00 1,211.53 0.00 1,211.53 2016 0.00 237.10 0.00 177.82 0.00 6.00 0.00 1,066.94 0.00 1,066.94 2017 0.00 212.25 0.00 159.19 0.00 6.00 0.00 955.14 0.00 955.14 2018 0.00 194.04 0.00 145.53 0.00 6.00 0.00 873.19 0.00 873.19 2019 0.00 177.88 0.00 133.41 0.00 6.00 0.00 800.48 0.00 800.48

Rem 0.00 1,714.42 0.00 1,285.82 0.00 6.00 0.00 7,714.90 0.00 7,714.90 Total 0.00 5,000.00 0.00 3,750.00 0.00 6.00 0.00 22,500.00 0.00 22,500.00

Ult 0.00 5,000.00

Economic Before Tax Projection

Net Net Net Net Net Net Net Annual Cum Disc.

Severance AdValorem Expenses Investment Depreciation Depletion Fed. Inc. Tax Cash Flow Cash Flow

YEAR (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$)

2010 0.00 0.00 0.00 2,500.00 0.00 0.00 0.00 -2,500.00 -1,445.62

2011 313.28 42.50 101.83 1,700.00 0.00 0.00 0.00 2,019.43 -368.44

2012 187.52 25.44 61.07 0.00 0.00 0.00 0.00 2,226.19 743.83

2013 133.12 18.06 60.60 0.00 0.00 0.00 0.00 1,563.13 1,449.64

2014 106.92 14.51 60.39 0.00 0.00 0.00 0.00 1,243.85 1,957.72

2015 90.86 12.33 60.22 0.00 0.00 0.00 0.00 1,048.11 2,345.14

2016 77.88 10.88 60.00 0.00 0.00 0.00 0.00 918.18 2,652.22

2017 47.76 9.98 60.00 0.00 0.00 0.00 0.00 837.40 2,905.69

2018 43.66 9.12 60.00 0.00 0.00 0.00 0.00 760.41 3,114.00

2019 40.02 8.37 60.00 0.00 0.00 0.00 0.00 692.09 3,285.63

Rem. 477.71 79.61 1,308.63 0.00 0.00 0.00 0.00 5,848.94 779.61

Total 1,518.73 230.79 1,892.74 4,200.00 0.00 0.00 0.00 14,657.73 4,065.24

Present Worth Profile (M$)

Major Phase : GAS Working Int : 1.00000000

Perfs : 0 - 0 Revenue Int : 0.75000000 PW 5.00% : 7,428.28

Initial Rate : 180,000.00 mcf/month Disc. Initial Invest. (m$) : 2,412.685 PW 8.00% : 5,137.04

Abandonment : 2,301.71 mcf/month Internal ROR (%) : 69.86 PW 10.00% : 4,065.24

Initial Decline : 97.30 % year b =1.550 ROInvestment (disc/undisc) :

2.68 / 4.49 PW 12.00% : 3,241.54

Beg Ratio : 0.00 bbl/mcf Years to Payout : 1.41 PW 15.00% : 2,334.30

End Ratio : 0.00 bbl/mcf Abandonment Date : 10/25/2041 PW 20.00% : 1,379.82

ECONOMIC BEFORE TAX PROJECTION

Economic Before Tax Projection

• Advantages of the Marcellus Shale play– World class basin size

• Spans 15 million acres; 5x the Haynesville and 10x the Barnett– Close to U.S. population centers and best natural gas markets– Over-pressured reservoir– Significant portions of play are geologically stable – structurally

uncomplicated– Largely located in rural areas

• LLAMAHDT advantages– Substantial leasehold position in-hand, gaining new acreage daily– Our company has formed partnerships with existing coalitions and established

contact points with both county and municipality governments– Experience gained from other shale plays allows us to quickly identify the best

areas– Geological and Engineering expertise– LLAMAHDT has several years of experience in the northeastern portion of the

Marcellus Shale and has earned a reputation of fair and honest dealings with landowners and coalitions who often seek our advice prior to negotiating with any other companies.


Marcellus Shale Advantages

• Major surface water resources in the Marcellus area– Susquehanna River– Delaware River– Chenango River– Chemung River– Ohio River

• Groundwater resources– 95% of all groundwater comes from shallow

aquifers– Average depth less than 200 feet– Easy to isolate and protect

• Wastewater treatment facilities– Large volumes available


Water Sources- Marcellus Shale

• Marcellus Shale is likely to become the largest natural gas field in the U.S.

• LLAMAHDT has acquired approximately 15,000 acres to date and is currently in negotiations for an additional 110,000 acres in Broome County alone.

• Our targeted 125,000 acre total lease block represents over 7 TCF net reserve potential for our prospective partners.

• The Marcellus Shale has the highest rate of return of any shale play in the U.S.


Conclusion

broome county vestal leasehold title screen. llama horizontal drilling technologies, inc. 307 west 7...

Documents

prospect area

marcellus shale gas

leasehold acquisition

approved marcellus locations

gas leases

core areas

llamahdt controls oil

specified area of mutual