Dan Steffens, PresidentEnergy-Prospectus

GroupFebruary 10, 2011

Presentation to

Unocal Gulf Coast Alumni Club

Energy-Prospectus Group

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Energy-Prospectus Group

Formed in 2001EPG Mission: The overriding goal is to help our members make wise investment choices that have the potential for market beating results.

Sweet 16 up over 72% in 2010• Up 8.4% year to date

Energy-Prospectus Group

Formed in 2001

EPG has 218 members Our goal is to top 250 members

by April 30th 80 live in the Houston area (Texas = 116) Members in 31 states Belgium, Canada, Germany, Japan,

Cayman Islands and Puerto Rico

Predictions for 20111. Oil Prices are going higher: I’m expecting NYMEX oil

futures contracts to close above $100/bbl within the next six months.

2. Global demand for oil will remain strong and the markets will notice that OPEC spare capacity is tightening. By the end of 2011 the media will be buzzing about “Peak Oil” again. In January, the IEA raised its 2011 global crude oil demand forecast for a 4th month in a row. They are now forecasting that year-over-year oil consumption will rise by 1.4 million bbls a day to 89.1 million bbls per day. < 1.6% year-over-year increase

Who really controls Oil Prices?World’s Largest Oil and Gas Companies:

Saudi Arabian Oil CompanyNational Iranian Oil CompanyQatar General Petroleum Corp.Iraq National Oil CompanyPetroleos de VenezuelaAbu Dhabi National Oil Company Kuwait Petroleum Corp.Nigerian National Petroleum Corp.NOTE: Exxon Mobil Corp is #16

Predictions for 2011From recent BP report on the future of energy: World energy use is projected to grow an average of

1.7%/yr, or about 40% over the next 20 years. Fossil fuels will still make up approximately two-thirds of

global energy demand 20 years from now. China is now the largest source of oil

consumption growth — forecast to grow by 8 million barrels per day to a total of 17.5 million barrels per day by 2030.

Electric vehicles, plug-in hybrids, and the use of compressed natural gas as a transportation fuel is likely to grow, but without making a material contribution to the total percentage of transportation fuels before 2030.

Growth in ChinaShanghai in 1990

Shanghai TodayIt takes a lot of energy & resources to fuel growth like

this

Shanghai in 1990

Predictions for 20113. Investors will move more capital into the energy sector

stocks, bidding up the price of more speculative oil stocks. Multiples will expand for those with the most growth potential. (BEXP is a good example)

4. BP’s Macondo oil spill will fade from memory and the Gulf of Mexico will be “open for business’ during the second half of the year. The GOM is just too important to be shut down for long.

Commodity Prices Feb ’10 Feb ’11 Crude Oil $73/bbl $87/bbl Natural Gas $5.41/mcf$4.07/mcf

Natural gas now at ~21:1 ratio to crude oil

Active Rig Count (U.S. + Canada) Onshore 1,892 2,365* Gulf of Mexico 70 62**

* Onshore rigs drilling HZ wells is up ~51% **Many GOM rigs are idle waiting on permits

Energy Sector Fundamentals

Commodity Advantage Favors Oil Oil Prices vs 6:1 Equivalent Natural Gas Prices

Predictions for 20115. The “Shale Revolution” will intensify. In addition to the

Bakken Shale these resource plays will get a lot more headlines:> Eagle Ford Shale > Granite Wash> Niobrara Shale > Woodford Cana> Marcellus Shale > Lower Bossier Shale> Alberta Basin Bakken / Three Forks (W. Montana)

6. An increasing number of horizontal wells means a good year for the onshore drillers and a great year for the oilfield service companies (PTEN, HAL, SLB, WFT)

Oil Resource Plays in U.S. generating strong returnsHigh Value Oil Enhances Margins Relative to Natural Gas

Bakken Shale Potential

Continental Resources (CLR) now believes there is the potential to recover up to 24 billion barrels of oil from the Bakken Shale. This is five times the 2008 USGS estimate.The industry is now adding 1,800 wells per year in the Bakken.

Predictions for 20117. The Canadian Oil Sands projects will get a lot more

attention from Wall Street.> Petrobank Energy (PBG.TO / PBEGF.PK)> Gulfport Energy (GPOR)> Canadian Natural Resources (CNQ)

8. North America’s natural gas glut will continue, keeping the price down and driving a lot of alternative energy companies out of business. Alternative energy companies (wind, solar and geothermal) with poor fundamentals will continue to flame out.

Predictions for 20119. The natural gas fundamentals will begin to improve in

2012 – more of a “hope” than a prediction:> Reduced drilling in the dry gas shale plays > Increased use of gas for power generation> Increased industrial demand> Increased use of natural gas as a transportation fuel> Colder winters are coming> U.S. will begin exporting natural gas

Predictions for 201110. The Federal government will increase the deficit by at

least $1 Trillion. We are killing the Golden Goose.

11. California and/or Illinois will go bankrupt in 2011. The Feds can’t afford to bail them out (but that fact may not stop them from doing it).

12. The situation in Iran / Korean gets more serious. Even Obama realizes we cannot let these guys get nukes. If a shooting war starts with Iran, the price of crude oil will quickly spike over $200/bbl.

Energy-Prospectus GroupOur Focus

EPG is searching for high quality small and mid-cap companies in the energy sector. Our primary focus is on the E&P and Oilfield Services sub-sectors

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Energy-Prospectus GroupOur Focus

Sticking with the Fundamentals Solid Business Plan: Near-term production and

reserve growth locked in Strong Balance Sheet and access to the capital

necessary to execute their business plan Strong Management and Technical Teams Exploration and Development upside within the

properties currently held by the company Having an information edge is how you beat the

market on a consistent basis

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