TCW Energy Group

TCW Asset Management Company

MOGA Capital Markets Update

Patrick HickeySenior Vice PresidentMay 2006

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TCW Energy Group

Table of Contents

• Market Perspectives

• Mezzanine Market Overview

• TCW Overview

• Conclusions

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TCW Energy Group

Energy Product Prices

$-

$12

$24

$36

$48

$60

$72

$84

$96

Sep-02 Sep-03 Sep-04 Sep-05

$/B

bl

$-

$2

$4

$6

$8

$10

$12

$14

$16

$/M

MB

tu

Nymex Crude - Monthly Nymex Gas - Monthly

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TCW Energy Group

Energy Capital Markets

0%

50%

100%

150%

200%

250%

300%

Jan-03 Jan-04 Jan-05 Jan-06

B+/B- Spread Over LIBOR 10-Yr TreasuryS&P Energy Equity Index High Yield Energy Index (%)

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TCW Energy Group

Trends in the E&P Markets

• After a period of debt reduction and share buybacks, E&P companies are spending more of free cash flow on drilling

• Public and private valuations are up

• Volumetric Production Payments are back

• Substantial private capital flowing into industry

• Public venture markets are active: AIM, Canadian Jrs.

• Seller’s expectations are forcing buyers to bid aggressively for assets

• “Land rush” in unconventional gas plays

• Equity markets are rewarding predictable and visible reserve and production growth

• Clear winners: “Resource Plays”

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TCW Energy Group

Implications…..

• Market environment has created a windfall for many

• Hedging is necessary to support valuations and acquisition prices

• Value creation going forward likely to be based more on field enhancement/drill bit than market timing/arbitrage

• Companies have been afforded the opportunity to innovate (improved completion methods)

• Access to/Quality of services is key concern

• Large independents re-positioning their asset profile with a focus on long-lived reserves and low risk drilling

• Capital providers forced to be flexible

• Non-traditional financing sources tend to “loosen” market discipline and exit when times get tough

• High commodity prices can mask underlying problems – “point of caution”

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TCW Energy Group

TCW Version of Mezzanine

• Broadly defined: high yield senior to preferred equity

• Flexible: Not tied to a particular structure

• Partner-like, long term orientation

• Current pay plus kicker (royalty, warrants, cash flow participation, PIK)

• Low to mid-teens rate of return: fees, coupon, kicker

• Amortization provides exit; call protection

• Secured by assets and/or shares

• Minimal Covenants: Make bet on management team and assets

• Alternative to equity

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TCW Energy Group

US - E&P Mezzanine Finance Providers

28 Players have entered the E&P Mezzanine market, only 10 remain

MG

1990 1992 19981996 20001994 20021982 198819861984

TCW

RIMCO

ENCAP

Torch

Enron

Cambrian

Beacon

KCS

Stratum

Koch

Wells Fargo

Tenneco/Range

Deutsche Bank

Cargill

Aquila

Mirant

Duke

Shell

Macquarie

Goldman Sachs

Williams

Petrobridge

2004

Source: Wells Fargo

Prudential Black Rock

RBS

Constellation

Laminar

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TCW Energy Group

Oil and Gas Risk/Return Profile

EquityEquity

Pref. EquityPref. Equity

MezzanineMezzanine

VPPVPP

Senior DebtSenior Debt

TCW Sweet Spot

30% +

25%

15%

10%

6%

Risk

Return

PDP PDNP PUD PROB/POSS Exploration Prospects

Engineering Risk Geological/Geophysical Risk

TCW’s focus is on engineering and development risk, not geological and exploration risk

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TCW Energy Group

Mezzanine Debt Applications

• Fills void in capital structure between equity and senior debt

• Small to mid-sized companies that cannot access the public markets

• Isolate assets in a separate non-recourse project financing

• Accelerate development drilling program

• Acquisition, monetization, or recapitalization

• Reduces the amount of equity required, thereby increasing the leverage and ultimately the equity returns

Mezzanine Debt is a viable alternative when designing the optimal capital structure

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TCW Energy Group

Mezzanine Debt Applications

• Use of mezzanine capital can lower capital costs, increase equity returns,

and increase ownership

Equity

Equity

60%

100%

Equity OnlyAll in Capital Cost 14%

Equity & MezzanineAll in Capital Cost 10%

• Lower Capital Costs• Higher Equity Return• Greater Ownership

Equity

30%

100%

80%

60%

Equity30%

Mezzanine15%

Bank Debt6%

Equity30%

Bank Debt6%

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TCW Energy Group

TCW Energy & Infrastructure Group

• Among leading providers of institutional capital for the energy sector in North America

• Niche investor exclusively focused on energy and infrastructure sectors

• 24-year track record; by far the longest in the industry

• 12 funds with more than $6 billion of capital and 175 portfolio investments

• Invested in 16 countries on 5 continents

• 20 professionals (6 engineers)

• Recent funds raised for investment:

– TCW Energy Fund X - $734 million unlevered fund for mezzanine and equity investments in US, W. Europe and Australia

– TCW Global Project Fund II - $700 million leveraged fund for high yield senior investments on a global basis

– TCW Global Project Fund III - $1.5 billion leveraged fund for investment grade senior loans on a global basis

In 2005, the TCW Energy Group invested $894 million in 27 separate transactions in 10 countries.

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TCW Energy Group

EIG Product Platform

Mezzanine and Non-Control Equity

Special Situations

High Yield Senior

Senior Debt GPF III

GPF II

Fund X & Cogen

Client JVs & Separate Accounts

Enhanced Market Penetration Benefiting All Products

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TCW Energy Group

TCW Overview

• Established in 1971

• The TCW Group, Inc. is an indirect subsidiary of Société Générale, S.A.

• Approximately $123 billion committed or under managementas of December 31, 2005

• Over 1,625 institutional and private clients

• Staff of over 600 individuals, including over 355 professionals

• Offices: TCW SG Asset ManagementLos Angeles ParisNew York LondonHouston Tokyo

SingaporeHong Kong

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TCW Energy Group

Conclusions

• Producers have choices when choosing a capital provider

– Stability and partnership orientation are key

• TCW is bullish on prices long term

• New pricing environment, combined with hedging, has created new opportunities

• Consolidation should continue as companies utilize excess cash flow and access private equity

• Market appears to have accepted new higher levels for commodity prices

• Mezzanine capital will continue to be a viable alternative

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TCW Energy Group

TCW E&P Contacts

Kurt Talbot 713-615-7426Managing Director kurt.talbot@tcw.com

Patrick Hickey 713-615-7410Senior Vice President patrick.hickey@tcw.com

Curt Taylor 713-615-7410Senior Vice President curt.taylor@tcw.com

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TCW Energy Group