November 3, 2010 To: Retirement Board M

CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER INTRADEPARTMENTAL CORRESPONDENCE

Date: November 3, 2010

To: Retirement Board Members

From~ Sangeeta Bhatia, Retirement Plan Manager

Subject: Board Agenda Item NO.7: Discussion of Investment Opportunity in EnCap Energy Capital Fund VIII, L.P., and Possible Action (November 10, 2010, Regular Retirement Board Meeting)

Representatives from Pension Consulting Alliance, Inc. (PCA) recommend that the Board of Administration (Board) of the Water and Power Employees' Retirement Plan (Plan) consider investing $25 million from the Retirement Fund (RF) and $5 million from the Retiree Health Benefits Fund (RHBF) in the EnCap Energy Capital Fund VIII, L.P. (EnCap VIII). PCA performed its due diligence review of the private equity firm and found EnCap VIII to be a possible opportunity for the Plan to invest in the upstream sector of the oil and gas industry that has generated strong performance results over the long-term while minimizing losses.

In January 2008, the Board approved a five percent allocation (previously four percent) of the Plan's total portfolio to the private equity asset class for both the RF and the RHBF (Resolution No. 08-49). In May 2008, the Board adopted PCA's recommendation to include direct partnerships in the Plans' private equity program, which previously consisted of only primary and secondary market fund-of-funds (Resolution No. 08-89).

As of September 30, 2010, the Plan's total capital commitment to the private equity asset class was $176 million from the RF and $12.5 million from the RHBF across seven partnerships. The Plan's commitments are allocated as follows: 68% to secondary market fund-of-funds; 23% to primary market fund-of-funds; and 9% to direct partnership investments. The market value of the Plan's contributed capital to date is $78 million which represents approximately 1% of the Plan's total portfolio.

Firm Overview: EnCap Energy Capital (EnCap), founded in 1988, is a leading provider of private equity capital to the independent sector of the oil and gas industry in North America. The . partnership is primarily focused on providing growth capital, (typically investments of $50 million to $200 million per transaction) to management teams whose main objective is value creation through the acquisition and exploitation of oil and gas reserves, the development of low-risk drilling opportunities in the United States and Canada, application of advanced drilling and completion technologies to both conventional and unconventional reservoirs, and implementation of operational enhancement to underlying portfolio companies. EnCap VIII's objective is to generate an overall annualized gross internal rate of return (IRR) of at least 25% and an approximate return of twice the invested capital (ROIC).

7.1 Investment Team: EnCap is controlled and managed by four founding members: David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich (the Principals) who collectively have over 140 years of oil and gas investment experience and have worked together for more than 30 years. In addition to the Principals, EnCap has a team of 15 oil and gas investment professionals, including three petroleum engineers. EnCap maintains offices in Houston and Dallas, Texas.

Investment Strategy: EnCap remains focused on its economic-driven, value-oriented investment approach, with an emphasis on assisting the firm's portfolio companies in managing the risk. EnCap's investment strategies and core strengths, as represented in their private placement memorandum, include the following:

• Balancing capital preservation and value creation; • Partnering with seasoned management teams that possess demonstrable track records of success and solid value creation strategies; • Structurally aligning the interests of management and Fund VIII; • Funding capital commitments over a four-year to five-year period to· reduce exposure to anyone economic or hydrocarbon price cycle; • Controlling the boards of a large majority of its portfolio companies; • Employing modest levels of leverage at the portfolio company level; • Monitoring investments closely and managing risk proactively; • Adapting its investment approach to exploit market and industry inefficiencies; and • Exiting opportunistically.

In addition, EnCap has effectively established a risk-controlled investment approach in addressing strategic issues regarding capital employment, capital structure, hedging policies, and exit alternatives.

Performance: Since inception, the firm has raised 14 institutional oil and gas investment funds totaling over $7 billion of capital commitments which include three reserve acquisition funds, three mezzanine debt funds, and seven upstream private equity growth capital funds. To date, EnCap has invested over $4.5 billion in 169 different companies and has successfully managed 14 institutional funds across hydrocarbon cycles, generating an IRR of 52.8% and an ROIC of 2.4 times the invested capital.

Key Terms: EnCap VIII is seeking capital commitments of $2.5 billion with a hard cap of $3.5 billion. The Fund held its first close on October 7, 2010, and raised $1.25 billion in capital commitments, and will hold its rolling closings thereafter with a final closing in the spring of 2011. The fund's term is ten years from the initial closing, subject to two consecutive one-year extensions approved by the Fund's General Partner with approval of 66 2/3% of the Fund's Limited Partners. The management fees during the investment period (five years from the final closing) will equal 1.5% per annum of the aggregate commitments. Upon expiration of the investment period, the management fees will be 1.5% of funded commitments per annum.

7.2 Conclusion: According to PCA, EnCap has received strong support from large institutions such as the California Teachers Retirement System and the Texas Teachers Retirement System, among others. PCA believes EnCap VIII, with its stable team of experienced professionals and the firm's historically strong performance results, represents an opportunity to invest in a proven private equity investment firm in the oil and gas industry.

The following documents are attached:

• Resolution No. 11-37 • PCA Memo • Resolution No. 08-49 (approved 1-16-08) • Resolution No. 08-89 (approved 5-22-08)

yWolfson Investment Officer

SB:JW:SV:GA

7.3 RESOLUTION NO. 11-37

RESOLUTION TO COMMIT $25 MILLION FROM THE RETIREMENT FUND AND $5 MILLION FROM THE RETIREE HEALTH BENEFITS FUND TO ENCAP ENERGY CAPITAL FUND VIII, L.P.

WHEREAS, at the regular Board meeting held on January 16, 2008, the Board adopted a 5% allocation to the private equity asset class for both the Retirement Fund and the Retiree Health Benefits Fund (Resolution No. 08-49); and

WHEREAS, EnCap Energy Capital Fund VIII, L.P. (EnCap VIII) is a private equity partnership in the oil and gas industry that has generated strong performance results over the long term while minimizing losses; and

WHEREAS, EnCap VIII focuses primarily on providing growth capital to proven management teams whose principal objective is value creation through the acquisition and exploitation of oil and gas reserves and the development of low-risk drilling opportunities; and

WHEREAS, Encap VIII is currently raising funds for the partnership with targeted capital of $2.5 billion in capital commitments; and

WHEREAS, EnCap VIII held its initial close on October 7, 2010, raising $1.25 billion in capital commitments, and will hold its final closing in the spring of 2011 ; and

WHEREAS, Pension Consulting Alliance, Inc. (PCA) performed its due diligence review of the firm and found EnCap VIII to be an attractive opportunity for the Plan; and

WHEREAS, PCA recommends the Board commit $25 million of the Retirement Fund and $5 million to the Retiree Health Benefits Fund in EnCap VIII as part of the continued funding of the Board-approved allocation to the private equity asset class.

NOW, THEREFORE, BE IT RESOLVED, the Retirement Plan Manager is hereby authorized to prepare and submit subscription documents for EnCap Energy Capital Funs VIII, L.P., pending legal review, and if the subscription is accepted by EnCap, to proceed with the implementation of funding the $25 million commitment of the Retirement Fund and $5 million commitment of the Retiree Health Benefits Fund to EnCap VIII in accordance with the capital call notices received.

I HEREBY CERTIFY, the foregoing is a full, true, and correct copy of a Resolution adopted by the Retirement Board of Administration [created by Section 1102 (b) of the Los Angeles City Charter] at its regular meeting held on November 10, 2010.

Sangeeta Bhatia Retirement Plan Manager

7.4 DATE: October 18, 2010 TO: Los Angeles Water & Power Employees' Retirement Plans (WPERP) . FROM: Pension Consulting Alliance, Inc. (PCA) PARTNERSHIP: EnCap Energy Capital Fund VIII, L.P. (EnCap VIII or the Fund) SECTOR: Growth Capital (oil and gas industry)

RECOMMENDATION & SUMMARy1

PCA believes that EnCap VII' represents an excellent opportunity to invest with a proven firm implementing an attractive investment strategy in the oil and gas industry. Given the combination of advantages and concerns summarized below, PCA recommends that the Los Angeles Water & Power Employees' Retirement, Disability and Death Benefits Plan commit $25.0 million and the Water and Power Employees' Retiree Health Benefits Fund commit $5.0 million to EnCap Energy Capital Fund VIII, L.P.

The Fund will primarily focus on providing growth EnCap VIII.is a sector-focused fund targeting the capital to proven management teams whose oil and gas industry. The markets for oil and principal objective is value creation through the natural gas have historically been volatile and acquisition and exploitation of oil and gas reserves are likely to continue to be volatile into the future. and/or the development of low-risk drilling This volatility impacts the entry and exit opportunities. EnCap employs an approach of environments for the Fund. However, EnCap committing capital to portfolio companies over a has successfully implemented their investment two- to three-year period and funding these capital strategy throughout cycles while minimizing the commitments over a four- to five-year period, thus . impact of commodity price movements and reducing exposure to anyone energy pricing -cycle generating consistent results. and specific hydrocarbon price risk. EnCap has consistently generated strong Although EnCap's founders continue to be highly performance results· across investment cycles. involved in the business of the firm, three of four Since 1994, EnCap has invested $4.5 billion of are over the age of 60. A formal succession plan capital generating $804 billion in total value does not currently exist and steps will need to representing a 37.9% since inception internal rate begin for a smoother long-term generational of return ("IRR") and a 1.9x investment multiple as transition. of June 30,2010. EnCap has exhibited strong organizational stability with minimal turnover of professionals. The team is led by the four founding members of the firm.

I While PCA reviewed the terms of this partnership and other accompanying financial information on predecessor partnerships, this desk review does not constitute a formal legal review of the partnership terms and other legal documents pertaining to this partnership. PCA recommends that its clients retain separate legal counsel to review the legal aspects and risks of investing in this vehicle.

7.5 TABLE OF CONTENTS2

RECOMMENDATION & SUMMARY 1

KEY FINDINGS 3

FIRM OVERVIEW 4

INVESTMENT STRATEGY 5

INVESTMENT TEAM 9

PERFORMANCE TRACK RECORD 11

TERMS OF ENCAP ENERGY CAPITAL FUND VIII 14

ALIGNMENT OF INTERESTS 17

APPENDICES APPENDIX 1: BIOGRAPHIES 18 APPENDIX 2: ENCAP ENERGY CAPITAL FUND VIII L.P. ADDITIONAL TERMS 233

2 Information presented in this report was gathered from documents provided by EnCap Investments L.P., including but not limited to, the private placement memorandum and related updates, due diligence responses, marketing presentation, limited partnership agreement and other supplemental materials. Analysis of information was performed by PCA.

7.6 KEY FINDINGS

PCA's key findings in its review of EnCap VIII are:

Fund Raising Status. EnCap VIII is targeting $2.5 billion in capital commitments with a hard cap of $3.5 billion. The Fund held a first close on October 7, 2010, raising $1.25 billion in commitments. The Fund has received strong support from large institutions, such as California Teachers' Retirement System, State of Minnesota, Texas Teacher's Retirement, among others. EnCap VIII will hold rolling closings thereafter with a final slated for the March/April 2011 time frame. EnCap VIII expects to make its first commitments to underlying management teams within 60 days from the initial closing.

Attractive Investment Strategy. EnCap VIII's investment strategy focuses on providing growth capital, typically making investments of $50 million to $200 million per transaction on a paced and incremental basis. The EnCap investment team looks to provide growth capital to proven management teams who focus on creating value through opportunities in the United States and Canada by: acquiring and exploiting oil and gas reserves, developing low risk drilling opportunities in areas that are known to be producing and using advanced drilling and 3 4 completion technologies to both conventional and non-conventional reservoirs ; and implementing operational enhancement to underlying portfolio companies. The management team will not invest in situations that are speculative or that are based on inflated commodity price assumptions in order to generate returns. EnCap deploys capital slowly and incrementally over four-to-five year periods, and only as progress occurs; this approach helps to mitigate cyclical concentration and reduce hydrocarbon risk. Another tool that the management team utilizes, in order to mitigate the effects of hydrocarbon volatility risk, is to maintain substantial levels of unfunded capital and low levels of leverage so that portfolios can weather unfavorable market conditions. Their capital infusion strategy allows the management team to assess certain performance metrics before deploying more capital. In order to assure the portfolio companies are guided in the right direction, EnCap seeks to attain board control for all of its portfolio companies. While considering similar opportunities in the marketplace, PCA found EnCap's investment strategy to be appropriate for the WPERP portfolio given its private equity approach to the oil and gas industry that has generated strong performaoce results over the long-term while minimizing losses.

Stable Team of Experienced Investment Professionals. EnCap has exhibited strong organizational stability with minimal turnover of its investment professionals. The firm is managed by David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich (the "Principals"), who have had a professional association that spans over 30 years (21 years together at EnCap). EnCap maintains offices in both Houston and Dallas, Texas, with a team of 15 additional oil and gas investment professionals. In general, the team has expertise in the oil and gas industry with a finance/banking background. This emphasis is believed to support the firm's risk-controlled investment approach and allow the investment team to focus on the investment strategy, areas for attractive investment, budgeting and exit for portfolio investments.

3 A highly porous and permeable formation containing an accumulation of oil and/or natural gas that is confined by impermeable rock or water barriers. Conventional reservoirs do not need fracture stimulation as they will produce naturally from a vertical wellbore. 4 A formation consisting of low porosity and low permeability rock that is rich in organic content and stores large volumes of oil and gas, but requires hydraulic fracture stimulation in a horizontal wellbore to enable economic recovery of the hydrocarbons.

7.7 Key Terms. The term for EnCap VIII is ten years from the initial closing, subject to extension of . up to two additional one-year periods by the Fund's general partner ("General Partner") with approval of 80% of the Fund's limited partners ("Limited Partners"). During the investment period (which spans for up to five years from the final closing), the management fee will equal 1.5% of commitments. Upon the expiration of the investment period, management fees will be 1.5% of invested capital. The management fee will be offset by 100% of: transaction fees, director's fees, break-up fees earned in excess of broken deal expenses and fees for monitoring, advisory and investment banking services. The General Partner will receive 20% of all distributions only after investors have received a return of aggregate funded commitments (including management fees, organizational expenses, and other expenses) plus an 8% preferred return. The "distribution waterfall" includes a General Partner catch-up whereby the General Partner will receive 80% of distributions (after limited partners have received their preferred return) until achievement of a 20% carried interest distribution. Thereafter, 80% of distributions will be made to the Limited Partners and 20% to the General Partner. The clawback clause is within industry norms and will be secured by a several guarantee of the Principals of the General Partner. The Limited Partners have adequate governance rights that are in-line with industry standards. The limited partnership agreement ("Partnership Agreement") includes provisions allowing for "key person" suspension of the investment period, "no fault" termination of the investment period with 66 2/3% in Limited Partner interest, and removal of the General Partner ("no fault" with 75% in Limited Partner interest and "for cause" with 66 2/3% in Limited Partner interest). The General Partner will commit (in cash as opposed to management fee waiver) the sum of 3.0% of aggregate capital commitments. These terms and conditions represent several improvements from prior versions, including but not limited to:

• The management fee reduced to 1.5%, down from initial offering of 1.75% • Management fee offsets increased to 100%, improved from previous 50/50 split • General Partner commitment increased to 3.0% from 2.0% in Fund VII • Inclusion of a "no fault" removal of the General Partner • Clawback includes all Partners, previously included just the Managing Partners

FIRM OVERVIEW

Founded in 1988, EnCap has focused solely on oil and gas investments over its 22-year history. Since its inception, EnCap has raised 14 institutional oil and gas investment funds totaling over $6.6 billion of capital commitments. The first six funds, raised between ,1988 and 1993, comprised three reserve acquisition funds and three mezzanine debt funds. In 1994, the firm transitioned to a private equity investment platform, believing that it offered a more attractive risk/return equation and better alignment of interest with the management teams of EnCap's portfolio compan'ies. The last seven upstream funds have concentrated on providing equity growth capital to small to mid-sized independents and represent over 96% of total capital commitments. The firm closed on an energy infrastructure fund focusing on midstream investments in April 2010 with $791 million in capital commitments. The investment team responsible for the infrastructure fund is separate from that of EnCap VIII.

EnCap is controlled and managed by the Principals, who collectively have over 140 years of oil and gas investment experience and have worked together for more than 30 years. In addition to the Principals, EnCap has a team of 15 oil and gas investment professionals, including three

7.8 petroleum engineers, with the 13 most senior professionals having an average of 15 years of related experience. INVESTMENT STRATEGY

There are long-term supply and demand fundamentals for oil and gas that are expected to continue to support hydrocarbon prices. The credit-led global recession has impacted the global supply/demand imbalance, and is believed to have created an attractive buying opportunity. Although oil and natural gas spot prices are down significantly from highs in July of 2008, many expect oil and gas prices to rebound over the next several years as global demand increases.

The macro drivers supporting oil prices are believed to be as follows: • Projected incremental demand growth, driven primarily by Asian economies (especially China and India); • Supply challenges - fewer major projects, execution delays and steeper decline rates; and • No replacement for the primary transportation fuel worldwide.

The macro drivers supporting natural gas prices are believed to be as follows: • Entire North American production base remains on its steepest decline ever, self correcting any supply overhang when drilling slows; • Escalating cost structure for drilling and completing wells; • Competitive advantage of natural gas over other energy sources - its relative price, abundance as a North American resource, and lower carbon/noxious emission characteristics are expected to broaden its use and demand; • Represents a critical source of electricity generation and home heating for North America; and • Liquefied natural gas import potential and economic resource potential will likely combine to keep the higher end for natural gas pricing.

The upstream sector of the oil and gas industry, also referred to as the Exploration and Production ("E&P") sector, involves the exploration for and production of oil and natural gas reserves. E&P companies conduct geological and geophysical analyses, acquire acreage, and drill oil and natural gas wells in an effort to find economic quantities of hydrocarbons. In addition to drilling, a significant component of many E&P companies' strategies includes growth through the acquisition and subsequent exploitation of other entities and properties. E&P companies are essential to the overall energy process chain as they locate and extract hydrocarbons, which are ultimately processed into various derivative products with numerous applications.

Targeted Industry Focus The Fund will primarily focus on providing growth capital, typically making investments of $50 million to $200 million per transaction, to proven management teams whose principal objective is value creation through the acquisition and exploitation of oil and gas reserves and/or the development of low-risk drilling opportunities in known producing regions in the United States and Canada.

1-7.9 A number of these opportunities may be created through the application of advanced horizontal drilling5 and multi-stage fracture technologies6 to conventional and unconventional reservoirs. While horizontal drilling and fracture stimulation have been successfully utilized by the industry for many years, the recent evolution to longer laterals and multiple fracture stages has materially improved recoveries and economics in many reservoir types. EnCap believes the unconventional reservoirs (resource plays), which involve the application of these technologies, create compelling investment opportunities for the Fund due to the following factors: (i) their extensive resource base; (ii) low breakeven prices needed to generate targeted rates of return; (iii) less geological risk and lower operating costs than vertical drilling; (iv) the potential for significant organic growth; (v) technology upside and transferability; and (vi) premium valuations from public markets. Equally important is the fact that the most likely candidates to acquire EnCap portfolio companies, the mid- to large-cap public exploration and production companies, are believed to continue to have significant appetite for such assets, affording the Fund ongoing exit opportunities to generate attractive returns. Over recent funds, EnCap funds have been diversified with approximately two-thirds of invested capital in unconventional resource plays and one-third in conventional resource plays.

Regardless of the nature of the opportunity, EnCap remains focused on its economic-driven, value-oriented investment approach, with a particular emphasis on assisting the firm's portfolio companies in managing risk. The following are examples of broad strategies that EnCap VIII is expected to employ:

• Acquisition and Exploitation. This strategy involves purchasing proven reserves in economic areas 'with a focus on exploiting the undeveloped reserves and operational enhancements. This may involve improving performance on acquired production through better operations or utilizing enhanced techniques, such as secondary recovery and tertiary recovery to extract bypassed reserves. As a result of these enhancements, the property set becomes more valuable, making it marketable for potential buyers. Many EnCap companies have found a niche in acquiring non-core assets from larger oil and gas companies and paying closer attention to the properties in order to implement this strategy.

• Low-Risk Drilling in Known Producing Regions. Companies employing this strategy will typically concentrate on establishing leasehold positions in low geologic risk areas and will focus on generating a production base that can be expanded through repeatable drilling opportunities. This strategy is currently broadly pursued in unconventional reservoirs (resource plays) where hydrocarbons are known to be present in large quantities. Advanced drilling and completion technologies have unlocked oil and gas reserves previously not deemed to be economically recoverable. Companies effective at executing this strategy prove the economic viability of a project area by drilling wells and creating a sizeable inventory of low-risk drilling locations, which are highly attractive to large, public energy company buyers. These buyers have a continual need to grow production and replace declining reserves, and in many instances will pay premium prices for assets of this nature. EnCap has been successfully backing companies

5 A drilling technique that permits the operator to contact and intersect a larger portion of the producing reservoir than conventional vertical drilling techniques and can result in both increased production rates and greater ultimate recoveries of hydrocarbons. e This is technique used by engineers to create a crack or fracture in the rock that contains oil or gas. This crack is then fil/ed with sand or an artificial propel/ant to allow the free flow of oil or gas from the rock to the weI/bore.

7.10 pursuing low-risk drilling strategies in the resource or repeatable drilling plays for over a decade. Quality Management Team Identification and Deal Sourcing Instrumental to EnCap's investment strategy is the firm's ability to identify and attract high quality management teams. EnCap expects to continue to develop new relationships with such management teams and benefit from substantial proprietary deal flow due to its investment professionals extensive contacts and relationships within the oil and gas industry and energy related financial community. EnCap also believes it will continue to have the opportunity to maintain relationships with management teams it has supported successfully. in previous funds, with those investments representing a meaningful portion of the EnCap VIII portfolio. Currently, approximately 50% of EnCap Energy Capital Fund VII, L.P.'s total capital commitments are allocated to repeat management teams, a percentage that has increased with each successive upstream fund.

Prospective management teams are rigorously evaluated against a number of criteria: • Demonstrable track record of value creation; • High level of technical and operational competency; • Compelling business plan and value creation strategy consistent with their past experience; • Strong industry contacts and the ability to generate/identify and capture new opportunities; • Managerial and leadership skills, strategic vision and adaptability; • Shared view of risk management; and • Receptiveness to a "partnership" relationship.

Value-Added Investment Approach In investing EnCap VIII, EnCap intends to adhere to the same core tenets, including:

Balancing capital preservation and value creation. EnCap is dedicated to pursuing its proven, lower-risk investment strategy, investing in opportunities where engineerable reserves support the basic investment economics. Utilizing this investment strategy, EnCap has capitalized on such opportunities..in the industry, investing successfully across mUltiple ·hyerocarbon cycles since 1988. EnCap will -not invest in speculative situations that are dependent on inflated hydrocarbon price assumptions or high-risk exploration success to achieve its return objectives. EnCap's long-standing philosophy of committing capital to portfolio companies over a two- to three-year period and funding these capital commitments over a subsequent four- to five-year period helps to: (i) prevent overexposure to anyone cycle; and (ii) reduce hydrocarbon price risk. EnCap's capital is typically advanced incrementally, and whether the opportunity is centered on a reserve acquisition or a drilling project, the firm is heavily focused on managing risk to ensure capital preservation.

Partnering with seasoned management teams possessing solid value creation strategies. As noted above, EnCap seeks to invest in partnerships with proven management teams with demonstrable track records of successfully creating value, the ability to manage complex companies during periods of rapid growth, and a desire to work closely with a "value-added" partner. As with its prior funds, EnCap also believes it will continue to have the opportunity to maintain relationships with management teams it has supported successfully in previous funds, with these investments representing a meaningful portion of the EnCap V 1.1 I portfolio. The firm will enter into partnership agreements with each

7.' , of these management teams utilizing deal terms and conditions that will ensure alignment of interests of the teams and EnCap.

Structurally aligning the interests of management and EnCap VIII. EnCap seeks to structure portfolio investments such that the interests of management and the Fund are aligned. Importantly, EnCap will require management to make a meaningful personal investment alongside EnCap VIII, generally on the same terms and conditions as, or subordinate to, the Fund investors, to ensure an alignment of interests. In virtually all cases, a portfolio company will be structured such that Encap VIII will recoup its invested capital and achieve a baseline rate of return before management participates in any carried interest. When making investments, EnCap seeks to implement capital structures appropriate to facilitate the company's continued growth, including providing sufficient equity to ensure access to capital for acquisitions, development projects and execution of the company's business plan.

Committing capital over a two- to three-year period and funding capital commitments over a four- to five-year period. EnCap's investment approach strongly supports the premise that: (i) quality opportunities present themselves selectively throughout the cycles, including during periods of both higher and lower oil and gas prices; and (ii) the money making proposition for EnCap is influenced by many factors and is not dependent on hydrocarbon price appreciation. EnCap will "stage in" capital as growth opportunities arise and engineerable reserve value is created within a portfolio company and will not look to make "big bets" dependent on anyone economic or hydrocarbon price cycle. EnCap consistently bases investment decisions on a conservative forecast of future oil and gas prices that are typically below New York Mercantile Exchange ("NYMEX") prices. Furthermore, internal economic modeling that is done at the time an investment is being contemplated' customarily encompasses a suite of sensitivities. This sensitivity analysis incorporates a wide range of future oil and gas price assumptions and reserve risk factors. EnCap's portfolio companies will typically enter into commodity price hedges in conjunction with major acquisitions or as a production base is established through successful drilling. EnCap utilizes commodity price hedging only on established, producing reserves as a method to stabilize cash flows and not as a tool for speculate/adding value.

Employing modest-lev.els of leverage at the portfolio company level. EnCap has board. control in substantially all of its investments and thus has the ability to approve debt incurrence, among other things. In general, EnCap supports the use of conventional bank debt that represents the first and only lien against the underlying assets. EnCap does not support the use of "Term 8," mezzanine, high yield or similar debt instruments in a portfolio company's capital structure. The debt level of a portfolio company at any given time will depend largely on the value of its "proved developed producing," reserves, which are a function of the company's business strategy and stage of maturity. Therefore, EnCap companies will only layer on debt over time as warranted by successful drilling activity or acquisitions, as opposed to speculative growth prospects. Currently, the debt-to-investment ratio portfolio-wide is approximately 15%. There is not a restriction on the use of debt, but EnCap has historically utilized conservative levels of leverage and has stated that it does not foresee increasing future debt levels above this ratio for the Fund.

7.12 Monitoring investments closely and managing risk proactively. EnCap will maintain its proactive approach to structuring, managing and opportunistically exiting investments. EnCap adds value to its portfolio companies by working closely with management on a regular basis on such items as: (i) setting corporate strategy; (ii) evaluating new opportunities; (iii) analyzing performance of existing projects; (iv) developing capital budgets; (v) constructing the balance sheet and securing bank financing; (vi) identifying joint venture partners to share in the risk of certain projects and (vii) positioning the company for a successful exit. As stated above, the firm has board control in virtually all of its investments, which is a fundamental tenet of EnCap's investment philosophy and one of the main drivers of its track record and minimal loss history. Closely monitoring investments positions EnCap to identify underperforming projects early. Board control gives the firm the ability to re-direct a portfolio company's efforts toward more attractive projects from a risk/return standpoint and, if necessary, implement managerial changes.

Exiting opportunistically. EnCap's portfolio companies build opportunity sets that represent strategic acquisitions for larger publicly-traded E&P companies, and sales to these entities have been the source of most of EnCap's realizations. In select cases, the public market provides an attractive exit alternative as well. Although EnCap's preferred holding period is four to five years, EnCap believes that opportunistic exits are critical to maximizing investment returns and continuously re-evaluates whether eXiting an investment is appropriate at any particular time. EnCap is experienced at executing a wide range of transactions designed to realize value from the companies in which it invests, including corporate or asset-sales to larger independents-or via public offerings.

INVESTMENT TEAM

EnCap is controlled and managed by the Principals, who have had a professional association .that spans over 30 years. EnCap maintains offices in both Houston and Dallas, Texas, with a highly-qualified team of 15 additional oil and gas investment professionals, including three petroleum engineers, two senior investor relations professionals, anda fund administration staff of five certified public accountants. The team has expertise in the oil and gas industry with an emphasis on a finance/banking background. This emphasis is believed to support the firm's risk-controlled investment approach and allow the investment team to focus on the investment strategy, areas for attractive investment, budgeting and exit for portfolio investments.

7.13 EnCap Investment Professionals Years at Name Title Age EnCap Yrs. Exp.

Kyle M. ~§£c>tt gjff.Srll~t~o· . ,.,!i9§J:.r~~L~~rif ,',. "" ..;.;...... ~. '...... ,:,:.il Matthew J. Crystal Associate F;;BrookS:~¢: Despof~:~;:~~l};i '~·',·.':'Anafyst "investment committee member

The four Managing Partners comprise the Investment Committee and are expected to be fully involved in EnCap VIII activities. When asked about'iuture succession, the Principals stated a desire to gradually add Partner level professionals to the investment committee and evolve responsibilities as appropriate. Currently, the four Managing. Partners hold board seats on the largest and most significant portfolio investments, but are usually supported by a junior Partner. PCA does not expect that EnCap wiJJ face succession issues during the investment period of the Fund, but the firm has acknowledged the need to begin implementing a process for a longer term transition. In addition, Fund documents include governance rights for Limited Partners in the event that the Principals fail to devote a substantiaJ majority- of their business time to the operations of the Fund?

Investment Process. Following the initial work of identifying and investigating a potential new management team, an internal team from EnCap, typically consisting of one Managing Partl1er and one or two other investment professionals, will prepare a preliminary report recommending that the investment be pursued. Such a report encompasses a review of the prospective management team's background, experience and track record; business plan and strategy for value creation; asset/reserve evaluation (if applicable); feedback from third party technical consultants who have specific expertise in the areas that are central to the business plan; and a summary of initial discussions regarding terms. As the process evolves, and prior to closing, the due diligence effort incorporates thorough reference checks, further scrutiny of the business

7 If two or more Principals cease to be involved in the day-to-day operations of the Fund due to retirement, termination, death, disability or other reason or fail to devote the requisite amount of business time, or in the aggregate, the Principals cease to own at least 75% of the equity and voting interests in the General Partner, then the investment period is suspended. Without 50% of Limited Partner approval, the Fund shall not make or purchase any investment (other than one that was under contract at the time, or a follow-on to an existing investment).

.1 10 7.14 plan, and a more detailed asset/reserve evaluation (if applicable) to include· third-party engineering, environmental assessment and title review.

Once the due diligence process is complete, the investment team will present the prospective commitment to the Investment Committee. Entering into a commitment requires unanimous approval of the Investment Committee. Once a commitment is approved, EnCap will typically control the board of the portfolio company, with its investment professionals essentially working in partnership with the management team in addressing strategic issues regarding capital employment, capital allocation, hedging policies and exit alternatives.

Throughout the investment process, EnCap and the management team continually work together with an exit in mind to ensure the investment is positioned as an attractive opportunity for potential buyers. Once the management team has built an established production base with upside opportunities, EnCap and the management team will proactively look to position the investment as a strategic target for a large public company. This process typically involves a detailed understanding of comparable sales transactions within the focus area and will generally include engaging an investment bank to conduct the marketing process. EnCap will ultimately look to monetize each investment based on its targeted return threshold, and if market conditions are unfavorable, will continue to build the asset base.

Departures. EnCap has exhibited attractive organizational stability with minimal turnover of senior investment professionals. Over the last five years, only one senior investment professional has left EnCap. This departure was primarily related to performance issues, culminating in the investment professional being asked to leave the firm.

PERFORMANCE TRACK RECORD

Since its inception, EnCap has raised 14 institutional oil and gas investment funds totaling over $6.6 billion of capital commitments. The first six funds, raised between 1988 and 1993, comprised three reserve acquisition funds (i.e. purchasing producing properties) and three mezzanine debt funds and represented $0.2 billion of commitments. In 1994, the firm transitioned to a private equity based platform on the belief that it offered a more attractive risk/return equation and better alignment of intel'est with the management teams of -EnGap's portfolio companies. The last seven upstream funds have concentrated on prOViding equity growth capital to small to mid-sized independents and represent over 96% of total capital commitments that the firm has made since 1988. In 2008, EnCap raised a fund (EnCap Energy Infrastructure Fund, or EEIF) targeting midstream opportunities to pursue investment opportunities in:

• natural gas gathering, treating, compression, processing and storage operations • oil gathering and transportation • natural gas liquid fractionation, storage and transportation • produced water handling and disposal • C02 gathering, transportation and sequestration

The Principals of EnCap participate on the Board of Managers of EEIF, but the day-to-day activities are managed by an entirely separate investment team. Fund VIII may from time to &1'11

7.15 time participate in midstream opportunities as a co-investor with EEIF (limited to' 10% of commitments).

In aggregate since 1994, EnCap has invested $4.5 billion across 140 investments implementing the proposed investment strategy. These transactions have generated $8.4 billion in total value resulting in an attractive 37.9% gross IRR and 1.9x investment multiple as of June 30, 2010. Of note, the first two funds implementing the private equity approach to the oil and gas sector were more "project oriented," with capital invested in specific asset transactions. After lower absolute results for its second private equity fund, EnCap shifted its investment strategy, focusing more on management team quality as opposed to assets. The last five funds are the most representative of the current approach proposed for EnCap VIII.

Fund IV $573 $570.4 $1,468.1 $38.7 2.6x 98.7% 11.0% (2001)

Total $6,404 $4,508.2 $5,487.8 $2,954.9 1.9x 37.9% "Venture Economics All Private Equity Universe as of March 31, 2010 Source: EnCap, VentureXpert

Six of EnCap's prior seven partnerships have placed in the top-quartile among their respective vintage year in the Venture Economics All Private Equity Universe, on a 9fOSSOf fee basis. This comparison is made against the All Private Equity Universe due to an inadequate universe of oil and gas opportunities to compare to. Therefore, this measurement is better viewed as an opportunity cost comparison to other private equity opportunities. In aggregate, results have been strong on an IRR and investment multiple basis. Individual partnership results have ranged from a low of a 6.9% IRR (1.2x investment multiple) to a -high of 98.7% IRR (2.6x investment multiple). Fund II, the lone underperformer, was a relatively concentrated portfolio constructed of four asset specific (rather than management team-oriented) projects that was negatively affected by the downturn in 1998. Subsequent funds implemented the current investment strategy of backing strong, experienced management teams, rather than specific assets.

EnCap has generated consistent results implementing its investment strategy. Across all 140 realized and unrealized transactions, 76 (54%) have posted investment results between 1.0x and 1.9x generating $3.3 billion in total value. An additional $3.4 billion in total value has been generated by 31 transactions that have posted investment multiples between 2.0x and 3.9x. As a result, 79% of EnCap's total value has been generated by transactions returning between 1.0x and 3.9x, representing a consistent return profile.

_1 12

7.16 Investment Multiples: all portfolio companies

4,000 80

3,500 70

3,000 60

2,500 c.. SO .2 ~ c 2,000 40 ic ~ I'D {:. ~ 1,500 30 0 -:tl:

1,000 20

500 10

0 <: LOx 1.0x·1.9x 2.0x - 3.9x 4.0x+ - Amount Invested (millions) I 736.30 2,298.50 1,240.70 232.70 _ Market Value (millions) I 552.2 3,292.5 3,351.6 1,246.40 ,_.:.- Number of Investments 23 76 31 10

Source: EnCap, PCA analysis

Only $736 million of invested capital (across 23 transactions) have a total investment value below cost as of June 30, 2010. EnCap's investment strategy of "leaking" capital into transactions as milestones are met minimizes losses, with EnCap ceasing funding of opportunities that are not progressing to plan. Only four of these transactions are realized, representing $38 million of invested capital and only $13 million in losses.

EnCap's realized (or substantially realized) investments have generated an attractive investment multiple of 2.5x capital across 88 investments, and represent 54% of invested capital. EnCap's 52 unrealized transactions are held at 1.2x of investment cost, in aggregate, as of June 30,2010. .

Performance: realized vs. unrealized Status Investments Invested Total Value Investment Capital (M) (M) Multiple ~~liii:f£!i.~:l:'i.8~JalWi15$£~49l&B111[$]rQ~~.m~~;:?_t91:li~ Unrealized 52 $2,041 $2,349 1.2x R'::;fO'~::t~:S~~P!0~;f,f4'eBiil!i!!!:~$fl:5J:rs.~$8,54-:7~~2:~iiR9~ Source: EnCap, PCA analysis

EnCap has consistently generated attractive investment results implementing their investment strategy throughout investment cycles. The chart below represents the investment multiple on realized transactions grouped by year of investment. On an annual basis, the investment multiple for realized transactions have ranged from a low of 1.1 x (for transactions made in 1997) to a high of 4.9x (for transactions made in 2001). The size of the bubble represents the amount of invested capital for the realized transactions for each year. The significant activity in the 2004 to 2007 period is reasonable, as EnCap has raised larger funds, subsequently invested more capital and sufficient investment maturity to generate material realizations. .1 13 7.17 Realized Investment Multiples: by year of investment 6.Ox

III 5.Ox ---e----- ~ 0 ~ 4.0x +------::iii~-----____: :::Iii 1: 3.0x +------'1 I,Ox .....-.

1.Ox +---~------===------:

O. Ox +-..,---,---r--r--.--.--,---,-----,---r---r----r----;----,-...--.--i ~~~~~~~~~~~~~~A~~~ ,,'l) ,,'l) ,,'l) ,,~- ,,'l) ,,OJ ,,~- 'l9 'l9 '],'3 'l9 'l9 '],\S '],'3 ~- 'l9 'l9 '],<;)

Source: EnCap, PCA analysis

EnCap has consistently generated attractive performance results implementing the proposed investment strategy. Although targeting the oil and gas sector, performance results have not been simply driven by rising hydrocarbon prices as evidenced by strong results posted throughout pricing cycles.

TERMS OF -ENCAP VIII

Additional EnCap VIII terms not discussed below are highlighted in the partnership summary in Appendix 2 to this memo.

Management Fee Structure

During the investment period, the management fee will equal 1.5% of commitments. Upon the expiration of the investment period, management fees will be reduced to 1.5% of invested capital. The management fee will be offset by 100% of: transaction fees, director's fees, break op fees earned in excess of broken deal expenses and fees for monitoring, advisory and investment banking services.

The ILPA principles' recommend that management fees be based on reasonable expenses, not excessive and step down significantly at the end of the investment period. According to the Dow Jones Private Equitv Partnership Terms and Conditions. 2009 Edition, approximately 80% of buyout funds targeting more than $1 billion in commitments proposed a management fee of 1.5% or greater. Per PCA's database, buyout funds currently in the marketplace are offering, on average, a '1.95% management fee. Those funds targeting $1 billion in commitments or more are proposing a slightly lower management fee, on average, at 1.84%. Of note, a universe of buyout funds is not directly comparable to EnCap's strategy and approach but we feel it is reasonable to compare fee levels of similarly sized fund offerings. We believe the Fund's 1.50% management fee is in-line with the industry average and consistent with the ILPA principles. The ILPA principles additionally recommend that monitoring, directory, advisory and exit fees be offset 100% to the benefit of the fund; which the Fund documents include.

_1 14

7.18 Distributions Any cash shall be distributed to all partners not less than quarterly, and within 30 days after an investment disposition. Net proceeds attributable to the disposition of investments in portfolio companies, as well as distributions of securities in kind, together with any dividends or interest income received from portfolio companies, will be distributed in the following order of priority:

(a) first, 100% to all partners in proportion to funded commitments until the cumulative amount distributed equals the aggregate commitments drawn down to finance all portfolio investments, organizational expenses, net management fees, working capital, and other expenses paid to date by the Fund and a preferred return equal to an 8% . internal rate of return, compounded annually. (b) second, 80% to the General Partner and 20% to all partners in proportion to funded commitments until such time as the General Partner has received, as an incentive distribution (the "Carried Interest"), 20% of the sum of the distributed preferred return and distributions made pursuant to this paragraph. (c) thereafter, 80% to all partners in proportion to funded commitments and 20% to the General Partner as Carried Interest.

The ILPA principles suggest a standard "all contributions plus preferred return back first" model and a preferred return rate calculated from the day of capital contribution to the point of distribution, which is utilized here by the Fund. PCA deems the distribution waterfall to be in line with ILPA principles and above industry norm, and therefore acceptable.

Clawback Obligation Upon the termination of the Fund, if either (a) the preferred return on investments with respect to a limited Partner is less than 8% or (b) the General Partner has received carried interest (post tax) in excess of 20%, the General Partner will be required to promptly return to the Fund (for distribution to the Limited Partners) the lesser of the excess amount received by the General Partner and the amount of carried interest (post tax) actually received. The General Partner clawback will be secured by a several guarantee of the principals of the General Partner.

The ILPA principles suggest clawback liabilities be determined and clearly disclosed to the limited partners as of the end of every reporting period, to be determined gross of taxes and with the use of joint and several guarantees. The Fund clawback terms are inconsistent with these principles, with clawback amounts determined only upon final liquidation and net of taxes. The Fund does utilize a several guarantee, but not joint. Although these clawback terms do not conform with the ILPA principles, PCA believes that the obligation is in line with industry practice and finds these terms to be acceptable. In addition, the structure of the distribution waterfall mitigates the risk of incurring a clawback situation as 100% of funded commitments are returned plus a preferred return before the General Partner participates in the carried interest.

_1 15

7.19 Term Limits The Fund's term will be ten years from the date of the Partnership Agreement (initial closing), subject to extension of up to two additional one-year periods by the General Partner with approval of 80% of the Limited Partners. The investment period will expire five years from the final closing, unless terminated earlier due to cumulative commitments having been spent or committed for expenditure, or upon the removal of the General Partner by vote of the Limited Partners or agreement in writing of such Limited Partners to terminate the investment period.

The partnership term and investment period are in line with the typical offering, which usually ranges between eight to ten years in length for the term and five years for the investment period. The ILPA principles further suggest that fund extensions be permitted in one year increments only. In our opinion, the Fund's term limits are acceptable.

Governance Rights Termination and General Partner Removal Limited Partners have the right, at any time, to (a) terminate either the investment period or the Fund with the approval of 66 2/3% of the Limited Partners in interest and (b) remove the General Partner with the approval of 66 2/3% of the Limited Partners in interest "with cause." The General Partner may be removed with the election of 75% of Limited Partner interest "without cause".

The ILPA principles recommend a supermajority in interest of the limited partners have the ability to elect to dissolve the fund or remove the general partner without cause, and a majority in interest of the limited partners to effectuate an early termination or suspension of the investment period without cause. peA deems tbe proposed levels of limited partner interest to be in-line with current industry nonns and finds them acceptable.

Key Person Suspension Event The Principals (David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich) shall each devote substantially all of their business time to the business and operations of the Fund and associated parallel investment vehicles. A "suspension event" is triggered in the event that two or more- Principals cease to be involved in the day-to-day operations of the Fund due to retirement, termination, death, disability or other reason or fail to devote the requisite amount of business time, or in the aggregate, the Principals cease to own at least 75% of the equity and voting interests in the General Partner. If a "key person event" is triggered, the Fund shall not make or purchase any investment (other than one that was under contract at the time, or a follow-on to an existing investment) without 50% of Limited Partner approval.

The ILPA principles recommend that key persons should devote substantially all their business time to the fund and its parallel vehicles, with an automatic suspension of the investment period which becomes permanent unless two-thirds of limited partners in interest vote to reinstate it within 180 days. The Fund is consistent with these recommendations, as the Principals are each required to spend substantially all oftheir business time on activities of the Fund.

_1 16

7.20 ALIGNMENT OF INTERESTS

The key terms of EnCap VIII discussed below determine the primary alignment of interests.

General Partner's Capital Commitment The General Partner will commit 3.0% of aggregate capital commitments of all partners. This represents a General Partner commitment of $75 million for a fund size of $2.5 billion (target fund size) and up to $105 million (for the maximum fund size of $3.5 billion). The General Partner's capital commitment will be paid in cash.

PCA believes, at a minimum, fund sponsors should commit 1% of committed capital, and the ILPA principles reason that a general partner should have a substantial equity interest in the fund to maintain a strong alignment of interest with the limited partners. This capital commitment should further be paid in cash, and not satisfied via waiver of management fees. In our opinion, the General Partner capital commitment to the Fund supports a strong alignment of interests.

Subsequent Funds The General Partner will not close on any similar investment fund with objectives and an investment focus substantially similar to those of the partnership until the earlier of (a) 75% of the capital commitments have been invested or (b) the end of the investment period, unless 66 2/3% of the Limited Partners in interest consent as to otherwise.

The ILPA principles' standard for multiple product firms, such as EnCap, require that the General Partner may not close on a fund with substantially equivalent investment objectives and policies until after the investment period ends or the fund is invested, expended, committed or reserved for investments and commitments. It is our opinion that the Fund's terms are satisfactory, being substantially consistent with these principles and in line with industry standards.

Carriedlilterest Allocation and Vesting Schedule The percentage of carried interest allocated to investment professionals, excluding the Principals, is anticipated to be 45% for the Fund. This allocation has grown from 25% in Fund III to 39% in Fund VII. The Principals will retain the remaining 55%. The vesting schedule for the investment professionals occurs over five years as follows:

Year 1 10% Year 2 20% Year 3 20% Year4 20% Year 5 30%

The ILPA principles suggest that carried interest generated by the general partner of a fund be directed predominantly to the professional staff related to the success of that fund. The vesting schedule is aligned with the investment period (i. e. five years), and we believe that the proposed vesting schedule is satisfactory for alignment of interest.

&1'17 7.21 APPENDIX 1: BIOGRAPHIES

EnCap Principals David B. Miller (60) is a Managing Partner and co-founder of EnCap Investments L.P. From 1988 to 1996, Mr. Miller served as President of PMC Reserve Acquisition Company, a partnership jointly-owned by EnCap and Pitts Energy Group. Prior to the establishment of EnCap, he served as Co-Chief Executive Officer of MAZE Exploration Inc., a Denver-based oil and gas company he co-founded in 1981. Mr. Miller began his professional career with Republic National Bank of Dallas, ultimately serving as Vice President and Manager of the bank's wholly owned subsidiary, Republic Energy Finance Corporation. Mr. Miller currently serves on the board of directors of several EnCap portfolio companies, including Cordillera Energy Partners III, Eagle Oil & Gas Partners, Cornerstone Natural Resources, Talon Oil & Gas and Unconventional Resources.

In 2004, Mr. Miller was appointed to the National Petroleum Council, an advisory body to the Secretary of Energy, and he is a member of the Board of Advisors of the Maguire Energy Institute. Additionally, he is a member of the Independent Petroleum Association of America, the Texas Independent Producers and Royalty Owners Association, the Independent Petroleum Association of Mountain States and the Dallas Wildcat Committee.

Mr. Miller is a graduate of Southern Methodist University, having received Bachelors and Masters Degrees in Business Administration in 1972 and 1973, respectively. He serves on the Board of Trustees at Southern Methodist University and also is a member of the Executive Board of the Edwin L. Cox School of Business. Mr. Miller was named a Distinguished Alumnus of SMU's Cox School in 2000.

Gary R. Petersen (63) is a Managing Partner and co-founder of EnCap Investments L.P. Prior to the formation of EnCap in 1988, Mr. Petersen was a Senior Vice President and Manager of the Corporate Finance Division of the Energy Banking Group for Republic Bank from 1985 to 1988. His duties and responsibilities included mergers and acquisitions, financial advisory services and institutional fund raising activities for the energy industry. Prior to his position at Republic Bank, Mr. Petersen was an Executive Vice President and a member of the board of directors of Nicklos Oil &Gas-Company in Houston--from 1979 to 1984. Previously, Mr. Petersen was a Group Vice President in the Petroleum aAd Minerals Division of Republic Bank. He served from 1970 to 1971 in the U.S. Army in Washington D.C. as a First Lieutenant in the Finance Corps and as an Army Officer in the Army Security Agency..

Mr. Petersen holds M.B.A. and B.B.A. degrees in Finance from Texas Tech University and is a Distinguished Alumnus of. Texas Tech. Mr. Petersen also has done post-graduate work at American University and the Stonier Graduate School of Banking at Rutgers University. He serves on the board of directors of several EnCap portfolio companies, inclUding Escondido Resources II, Laredo Energy IV, Legado Resources, Manti Exploration and Mediterranean Resources. Mr. Petersen is also a member of the board of Plains All American, Inc. (NYSE: PAA) and EV Energy Partners (Nasdaq: EVEP). He is a member of the Independent Petroleum Association of America and the Houston Producers' Forum.

_1 18 7.22 D. Martin Phillips (56) is a Managing Partner of EnCap Investments L.P. Prior to joining EnCap in 1989, Mr. Phillips served as a Senior Vice President in the Energy Banking Group of NationsBank in Dallas, Texas. In his capacity as Manager of the U.S.llnternational Division from 1987 to 1989, he had responsibility for credit commitments totaling approximately $1.0 billion to a broad spectrum of energy related companies. Mr. Phillips began his career in 1978 with Republic Bank and served in various senior energy banking positions, including Vice President and Manager of Republic Bank's energy loan production office in Denver, from 1980 to 1985, and Senior Vice President and Division Manager in Republic Bank's Houston office, from 1986 to 1987.

Mr. Phillips holds M.B.A. and B.S. degrees from louisiana State University. He is a member of the lSU College of Business Hall of Distinction. Mr. Phillips also attended the Stonier Graduate School of Banking at Rutgers University. Mr. Phillips serves on the board of directors of several EnCap portfolio companies, including Enduring Resources, laramie Energy II, OGX Holdings II and Plantation Petroleum Holdings IV. He is a member of the Independent Petroleum Association of America, the American Petroleum Institute and the Houston Producers' Forum.

Mr. Zorich received his B.A. in Economics from-the University of California at Santa Barbara in 1971. He also received a Masters Degree in International Management (with distinction) in 1974 from the American Graduate School of rnternational Management in Phoenix, Arizona. He serves on the board of directors Of several EnCap portfolio compantes, including Common Resources, Empresa Energy II, Force 5 Energy, Marquette Exploration and Oasis Petroleum. Mr. Zorich is also a member of the board of directors of Enerplus Resources Fund (NYSE: ERF). He is a member of the Independent Petroleum Association of America, the Houston Producers' Forum and Texas Independent Producers and Royalty Owners Association.

EnCap Investment Professionals Jason M. Delorenzo (39) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. Delorenzo spent four years at ING Barings in New York working in Corporate Finance specializing in the energy industry. Previously, he was an Associate in the Energy Group at Wells Fargo Bank based in Houston from 1993 to 1995. Mr. Delorenzo received a B.B.A. from The University of Texas at Austin. He is a member of the Independent Petroleum Association of America, the Houston Producers' Forum, and serves on the board of directors of Destiny Oil & Gas, Enduring Resources, laramie Energy II, legado Resources, Limestone Exploration, Marquette Exploration, Mediterranean Resources, Plantation Petroleum Holdings IV and Tracker Resource Development, all EnCap portfolio companies. _'19 7.23 ------

E. Murphy Markham IV (52) is a Partner of EnCap Investments L.P. Prior to joining EnCap in July 2006, he was the Managing Director and Group Head of JPMorganChase's Oil & Gas Finance Group. Prior to the merger between JPMorgan and Bank One, Mr. Markham ran Bank One's Oil & Gas Group. Mr. Markham started his banking career with Republic Bank in 1981 and remained with the bank and itsultimate successor, Bank of America, for 22 years, serving as a Managing Director in its Energy Banking Group. Mr. Markham has a B.B.A. in Finance from Texas Tech University and an M.B.A. in Accounting from the University of Houston. He serves on the board of directors of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States and the Dallas Petroleum Club Wildcat Committee. Mr. Markham is an active member of the Dallas and Fort Worth Wildcatters and ADAM Energy Forum, and serves on the board of directors of Cornerstone Natural Resources, Eagle Oil & Gas, Foothills Energy, Lone Star Land & Energy and Talon Oil & Gas, all EnCap portfolio companies.

R. Jason McMahon (36) is a Partner of EnCap Inve~tments L.P. Prior to joining EnCap in 2003, Mr. McMahon served for three years as the Vice President of Corporate Development for ProsoftTraining. Previously, he was an Associate in the Energy and Corporate Finance Group of Prudential Capital Group from 1996 to 2000. He received an M.B.A. from The University of Texas at Austin and a B.B.A. from Southern Methodist University. Mr. McMahon serves on the board of directors of Cardinal Midstream, Cordillera Energy Partners III, Fossil Creek Resources, Grenadier Energy Partners, Protege Energy II, PetroEdge Resources Partners II and Stag horn Energy, all EnCap portfolio companies. He is a member of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States, the Dallas Energy Finance Discussion Group and the ADAM Energy Forum, and is a CFA charterholder.

M. Sean Smith (49) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1-990, Mr. Smith was a Vice President with the Corporate Banking Group of NCNB Texas Bank. Previously, he was a Senior Petroleum Engineer with Tenneco Oil Company for five years. Mr. Smith received an M.B.A. in Finance from the University of Houston and holds a B.S. in Petroleum Engineering from Texas A&M University. He is a member of the Independent Petroleum Association of America, the Houston Producers' Forum, and the Society of Petroleum Engineers, and serves on the board of directors of Empresa Energy II, Navidad Resources, OGX Holdings II, Phillips Energy Partners, Renaissance Petroleum and HVL Energy, all EnCap portfolio companies.

Wynne M. Snoots, Jr. (49) is a Partner of EnCap Investments L.P. Prior to joining EnCap in January 2001, Mr. Snoots was one of three partners of Paradigm Development & Trade, Inc., a private company focused on generating and monetizing exploration prospects located along the Gulf Coast of Louisiana. For the two years prior to his involvement in Paradigm, Mr. Snoots served as President of Magellan Exploration, LLC, a private portfolio company. He previously spent seven years with Enron Capital & Trade Resources in the Producer Finance Group, most recently as a Vice President. Mr. Snoots began his career as a petroleum engineer with Texas Oil and Gas Corporation. He received an M.B.A. from The University of Texas at Austin and holds a B.S. in Petroleum Engineering from the University of Oklahoma. Mr. Snoots is a member of the Independent Petroleum Association of America and the Houston Producers' Forum, and serves on the board of directors of Ark-La-Tex Energy, Bold Energy II, Destiny Oil &

.1 20 7.24 Gas, Force 5 Energy, Ovation Energy II, Peregrine Oil & Gas and Tempest Energy Resources, all EnCap portfolio companies.

Douglas E. Swanson, Jr. (38) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. Swanson served as a corporate lender at Frost National Bank and spent one year as a financial analyst at Southwest Bank of Texas. He received a B.A. in Economics and an M.B.A. from The University of Texas at Austin. Mr. Swanson serves on the board of directors of Core Minerals Holdings, Empresa Energy II, Escondido Resources II, GulfTex Energy, Laredo Energy IV, Manti Exploration, Oasis Petroleum, Paladar Petroleum, Paloma Barnett, Red Arrow Energy and RiverStone Energy, all EnCap portfolio companies. He is also on the board of the Houston Producers' Forum, is a member of the Independent Petroleum Association of America and the Texas Independent Producers and Royalty Owners Association.

Mitchell D. Hovendick (53) is a Director of EnCap Investments L.P. Prior to joining EnCap in 1997, Mr. Hovendick spent 15 years as a Petroleum Engineer with Phillips Petroleum Company, where he worked primarily as a reservoir engineer in almost all major basins of the U.S. Mr. Hovendick received an M.B.A. in Finance from Rice University and holds a B.S. in Chemical Engineering from Texas A&M University. He is a registered professional petroleum engineer, and is a member (and author) of the Society of Petroleum Engineers, Houston Producers' Forum and Independent Petroleum Association of America.

Brad A. Thielemann (33) is a Director of EnCap Investments L.P. Prior to rejoining EnCap in September 2006, Mr. Thielemann worked in the Investor Relations and Strategic' Planning Groups at Plains All American Pipeline, L.P. Previously, he was an Associate at EnCap from 2000 to 2003 and a Treasury Analyst at Dynegy. Mr. Thielemann received an M.B.A. from Duke University and a B.B.A. from The University of Texas at Austin. Mr. Thielemann serves on the board of directors of Common Resources, Core Minerals Holdings, Limestone Exploration, GulfTex Energy, Piedra Energy and Plantation Petroleum Holdings IV, all EnCap portfolio companies. He is a member of the Houston Producers' Forum and the Independent Petroleum Association of America.

Mark A. Welsh IV (31) is a Director of EnCap Investments L.P. Prior to joining EnCap-in April. 2006, Mr. Welsh spent four years as a Vice President of The Adam Corpsration, a private investment firm with $1.0 billion of capital under management. Previously, Mr. Welsh was a financial analyst with The Blackstone Group L.P. in New York. Prior to Blackstone, he was in the Student Trainee Program of the Central Intelligence Agency in Langley, Virginia. Mr. Welsh received a B.B.A. in Finance from Texas A&M University, where he was recognized by the University as the outstanding graduate in his class. He is a member of the Independent Petroleum Association of America and serves on the board of directors for Cornerstone Natural Resources, Eagle Oil & Gas Partners, Foothills Energy, Fossil Creek Resources, Lone Star Land & Energy and Unconventional Resources, all EnCap portfolio companies.

Mark E. Burroughs, Jr. (34) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in March 2007, Mr. Burroughs spent four years working in UBS Investment Bank's Global Energy Group. Prior to joining UBS Investment Bank, Mr. Burroughs spent three years at Sanders Morris Harris, Inc., an investment banking firm in Houston, Texas. Mr. Burroughs received an M.B.A. from Rice University and a B.A. in Economics from The University of Texas at Austin. Mr. Burroughs serves on the board of directors of Force 5 Energy, HVL Energy and Paladar Petroleum, all EnCap portfolio companies. He is also a member of the Houston

_1 21

7.25 Producers' Forum, the Independent Petroleum Association of America and Young Professionals in Energy.

Ryan P. Devlin (30) is a Vice President of EnCap Investments, L.P. Prior to joining EnCap in August 2005, Mr. Devlin spent two years at Amegy Bank of Texas where he ended as a Banking Officer for its commercial banking department. Mr. Devlin received an AB. in Business Economics from Brown University. Mr. Devlin serves on the board of directors of several EnCap portfolio companies and is a member of the Houston Producers' Forum, the Independent Petroleum Association of America and Young Professionals in Energy.

Kyle M. Kafka (29) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in July 2006, Mr. Kafka spent two years at First Albany Capital where he worked in the Energy Investment Banking Group. Previously, Mr. Kafka spent a year at Amegy Bank of Texas where he worked in the commercial banking department. Mr. Kafka received a B.B.A in Finance from The University of Texas at Austin. Mr. Kafka serves on the board of directors of several EnCap portfolio companies and is a member of the American Petroleum Institute, the Houston Producers' Forum, the Independent Petroleum Association of America and Young Professionals .in Energy.

Scott R. Smetko (27) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in February 2007, Mr. Smetko was an Analyst in Citigroup's Investment Banking Division, where he focused on corporate finance and mergers and acquisitions in a wide range of industries. After attending the University of Virginia for two years, Mr. Smetko graduated summa cum laude from Southern Methodist University's B.B.A Honors Program with a B.B.A degree in Finance. He is a member of Young Professionals in Energy and the ADAM Energy Forum.

Matthew J. Crystal (34) is an Associate of EnCap Investments L.P. Prior to joining EnCap in January 2008, Mr. Crystal served as a Vice President in the commercial lending department at Amegy Bank of Texas, focusing on real estate-related development companies. For one year after his six years at Amegy, Mr. Crystal worked in the not-for-profit sector. Mr. Crystal holds an M.B.A in Finance from Rice University and a B.A in Government from The University of Texas at Austin. Mr. Crystal is a member of the Houston Producers' Forum, the Independent Petroleum Association of America and Young Professionals in Energy. In addition, Mr. Crystal serves on the board of Hope for Youth, an inner city, teenage development organization in Houston.

Brooks C. Despot (24) is an Analyst of EnCap Investments L.P. Mr. Despot joined EnCap in August 2009 upon receiving his M.B.A in Corporate Finance from Vanderbilt University's Owen Graduate School of Management. He also holds a B.A in Management from Louisiana State University, where he graduated Cum Laude. Prior to joining EnCap, Mr. Despot interned with Morgan Keegan in their Investment Banking group. He is a member of Young Professionals in Energy, the Houston Producers' Forum and the Independent Petroleum Association of America.

22 • 1

7.26 APPENDIX 2: ENCAP ENERGY CAPITAL FUND VIII L.P. ADDITIONAL TERMS EnCap Energy Capital Fund VIII, L.P. is a Texas limited partnership.

The Fund's objective is a blended compound annual internal rate of return of at least 25% and a return on invested capital of approximately 2.0x. The Fund must adhere to the following investment restrictions:

• Diversification. No more than 15% of aggregate committed capital may be invested in a single investment.

• Purpose and Geographic Limitations. Without prior approval of the advisory committee, no more than 15% of aggregate committed capital may be invested in portfolio companies whose primary purpose is other than the ownership of oil and gas assets generally considered to be "upstream" or "midstream" in nature, or whose assets are principally located outside the United States and Canada.

• Public Common Stock Investments. Purchases of publicly traded securities are only permitted if are made in connection with a contemplated transaction. In no event will any open market purchases exceed 20% of aggregate capital commitments at any time.

• Co-Investment with EEIF. The General Partner shall not invest more than 10% of the Total Commitments in co-investments with the Infrastructure Fund, without having received the prior approval of the Advisory Board.

• Hostile Transactions. No business acquisition will be pursued where it is opposed by a majority of such business' board of directors or stockholders possessing a majority of the voting power of such business' outstanding securities; however, this excludes a business acquisition in connection with a bankruptcy or similar restructuring.

• Related Investments. No investment shall be permitted in any issuer where the General Partner (or an affiliate) owns securities. The foregoing shall not apply to (i) publicly tr.aded investments with a value of less than $250,000 (with Advisory Board approval)" (ii) investments in non-publicly traded securities with the prior approval of 80% of the Limited Partners in interest or (iii) an investment in an existing portfolio com an of the Fund with the rior a roval of the adviso committee. EnCap Equity Fund VIII GP, L.P., a Texas limited partnership, will be the sole general partner of the Fund.

EnCap Investments L.P., a Delaware limited partnership, will be the sole general partner of the General Partner. David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich are the partners and owners of EnCap.

Limited Partnership An advisory board consisting of at least three individuals representing the Limited Partners and feeder fund investors will be established to (i) review potential conflicts of interest, (ii) advise the General Partner on other matters, including investment strategy, (iii) review with the General Partner the annual operating bUdgets of the Fund, (iv) approve market values of Fund assets and (v) approve other matters and functions as provided.

_1 23

7.27 Minimum capital commitments will be $10 million; however, the General Partner has the sole discretion to accept lesser capital commitments.

The General Partner may offer Limited Partners (and other third parties) the opportunity to co-invest in investments on terms identical or substantially similar to those offered to the Fund. The terms are silent as to the allocation of co-investment opportunities.

Limited Partners will be required to pay, pro rata, their share of third-party and out-of pocket expenses incurred by the General Partner in connection with the organization of the Fund or any applicable parallel investment vehicles. Organizational expenses for either the Fund or each parallel investment vehicle shall not exceed $1,000,000, plus interest at the Prime Plus Rate.

EnCap Investments L.P. has a Placement Agent Policy stating that no cost will be borne by their investors with respect to any placement fees or other compensation paid by EnCap to placement agents or any other third-party marketers. The Partnership Agreement is silent as to the treatment of any placement fees incurred by the Fund with respect to a Limited Partner. EnCap is utilizing Park Hill as the placement agent for Fund VIII. EnCap may from time to time be involved in litigation and claims incidental to the conduct of its business. Various EnCap fund portfolio companies may also be named as a defendant, from time to time, in litigation relating to their normal business operations. EnCap has stated that it is not currently aware of any litigation, pending or threatened, that is reasonably possible to have a materially adverse effect on the financial position or results of operations of EnCap, its affiliates or its portfolio companies.

Quarterly. Within 45 days after the end of each quarter of the fiscal year, each Limited Partner will receive an unaudited report providing summary of the Fund's investments information and a statement for each partner of its capital account.

Annual. Within 90 days after the end of each fiscal year, each Limited Partner will receive (i) a report discussing each portfolio investment and related performance for such year, (ii) audited .financial statements prepared in accordance with United States generally accepted accounting principles, (iii) a statement of the capital of the Fund for such fiscal yea[, (iv) a statement for each partner of the adjustments to its capital account for the fiscal year and balance and (v) a report of independent certified public accountants indicating the status of the preferred return and General Partner catch-Up.

The Partnership Agreement may be amended by the General Partner generally with the consent of 66 2/3% of the Limited Partners in interest. The foregoing does not apply to amendments that (i) are of an inconsequential nature and do not adversely affect any Limited Partner, (ii) are necessary to comply with applicable law or government regulation, (iii) are necessary in the opinion of counsel to the Fund to ensure that the Fund will not be treated as an association taxable as a corporation for U.S. Federal income tax purposes or (iv) pertain to provisions with' a specified alternate level of required limited.partner consent in the Fund Agreement.

.1 24 7.28 ------_.. _._------,

There may be occasions where the Fund and its affiliates may encounter conflicts of interest in connection with the Fund's activities. These include conflicts resulting from the existence of EnCap's infrastructure investment funds, leading to issues around:

• allocation of personnel between the Fund and other EnCap investment funds, • conflicting fiduciary duties to other EnCap investment funds, allocation of investment o ortunities to other EnCa funds.

_1 25 7.29 RESOLUTION NO. 08-49

RESOLUTION TO RATIFY THE BOARD'S ACTION IN CONNECTION WITH THE ADOPTION OF A NEW ASSET ALLOCATION STRUCTURE

i. WHEREAS, the Water and Power Employees Retirement Plan's (WPERP) Statement of Investment Objectives Goals and Guidelines indicate that the Plan's asset allocation policy may be sUbject to periodic review and revisions as fund conditions change and as investment conditions warrant; and

WHEREAS, WPERP's current strategic asset allocation policy was adopted by the Board on September 18, 2002 in accordance with Board Resolution 03-09; and

WHEREAS, at the regular Board meeting held on April 18, 2007, the Board approved the one-time asset/liability study project proposed by Pension Consulting Alliance (PCA) and EFI Actuaries, Inc. (EFI), for the Retirement Fund and the Retiree Health Benefit Fund (RHBF) (Board Resolution 07-67); and

WHEREAS, PCAIEFI conducted the asset/liability study to determine the Retirement Board's risk tolerance by allowing the Board to vote on a set of 5 risk factors which resulted in new asset class allocation targets for both the Retirement Fund and the RHBF; and

WHEREAS, PCA recommends that the Board adopt the same strategic investment policy for both the Retirement Fund and the RHBF because the expected returns and risk make the optimal allocations to these Funds virtually equivalent; and

WHEREAS, optimal investment targets in each asset class for both the·Retirement Fund and the RHBF were identified as follows; and

Asset Class USE uit Non US Equity Real Estate . Private E uit Real Return FiKed Income Selected 34.0% 24.0% 5.0% 5.0% 7.0% 25.0% 100% Current 4O.0Y. 1S.oY. 4.0% 5.0% 0.0% 36.oy. iOOY.

WHEREAS, considering the significant changes to the asset allocation targets, PCAIEFI proposed a 4-year window of implementing these newly adopted targets as follows; and

Cash 1 1 1 1 1 Fixed Income 32 30 28 26 24 Real Return 1 3 4 6 7 Real Estate 1 2 3 4 5 Domestic E uit 45 39 38 35 34 International Equity 20 24 24 24 24 Private E ui 0 1 2 4 5 "Real Return allocation is WPERP's current Hedge Fund segment allocation -To align with fiscal year reporting fllE COpy

7.30 RESOLUTION NO. 08-49

WHEREAS, at its regular meeting of December 19, 2007, the Board moved to adopt the PCAIEFI recommendations of the completed WPERP Asset Liability Study; .

NOW, THEREFORE, BE IT RESOLVED, the Retirement Plan Manager is authorized to proceed with the implementation of the new asset allocation structure in accordance .with the implementation schedul.e recommended by PCAIEFI.

I HEREBY CERTIFY, the foregoing is a full, true, and correct copy of a Resolution adopted by the Board of Administration (Retirement Board), created by Section 1102 (b) of the City Charter of the City of Los Angeles, at its regular meeting held January 16, 2008.

,.."...~~ eJ:: /f¥&zkLJ ff ~taBhatia Secretary

f\L£ COP~

7.31 RESOLUTION NO. 08-89

RESOLUTION TO RATIFY THE BOARD'S AC"nON TO MODIFY THE PRIVATE EQUITY INVESTMENT POLICY TO INCLUDE DIRECT PARTNERSHIP COMMITMENTS AND INCLUDE THE RETIREE HEALTH BENEFIT FUND

WHEREAS, on December 7,2005, Pension Consulting Alliance (PCA) proposed the Private Equity Investment strategy which was approved by the Board of Administration (Board) for the Water and Power Employees' Retirement Plan (WPERP); and

WHEREAS, the Board adopted the private equity investment policy specifying the use of only primary and secondary fund-of-funds; and

WHEREAS, on December 21, 2005, the Board approved PCA's recommendation of a 4% allocation to Private Equity; and

WHEREAS, WPERP committed $30 million each to Lexington Capital Partners VI and Landmark I;quity Partners XIII in June 2006 and August 2006 respectively, both diversified portfolios of private equity partnerships purchased on the secondary market (Resolutions 06-74 and 07-12); and

WHEREAS, on January 16, 2008, the private equity asset allocation was increased to 5% based on PCA's asset/liability study (Resolution 08-49); and _

WHEREAS, on March 5, 2008, the Board approved a $40 million commitment to two new fund-of-funds in the primary market, HRJ Special Opportunities Fund II, L.P. and Fisher Lynch Venture Partnership II, L.P., focusing on special situations and venture capital respectively (Resolutions 08-71 and 08-74); and

WHEREAS, at the regular meeting of February 20, 2008, PCA presented the _ annual review of the private equity markets and the private equity strategic plan, and recommended a commitment target of $80 million for 2008 in response to the new asset class allocation for private equity; and

WHEREAS, PCA further recommended easing the investment policy restriction on investing in direct partnerships to allow for greater customization and cost efficiencies; and

WHEREAS, PCA indicated that direct partnerships should improve WPERP's overall potential for above-median returns, preferably in the top-quartile, while still emphasizing fund-of-funds as the primary approach to portfolio construction; and

f\lE COP'I

7.32 ------_._--

WHEREAS, Staff discussed their concerns with PCA regarding the criteria ..... , necessary for selecting direct partnerships, the associated risks and the level of expertise and time expected of staff; and

WHEREAS, PCA further indicated that minimal staff time will be needed to track investments as a result of the changes, at least initially; and

WHEREAS, at the regular Board meeting on May 22, 2008, the Board adopted the recommended changes proposed by PCA for the inclusion of direct partnership in the Private Equity investment program, along with PCA's proposed changes to the investment policy which outlines the new specific direct partnership selection criteria; and

NOW, THEREFORE, BE IT RESOLVED, the action previously taken by the Board is hereby ratified and the Retirement Plan Manager is hereby authorized to proceed with the adoption of the changes suggested by PCA to the Private Equity Investment policy.

I HEREBY CERTIFY, the foregoing is a full, true, and corrected copy of a Resolution adopted by the Board of Administration (Retirement Board), created by Section 1102 (b) of the City Charter of the Los Angeles, at its regular meeting held May 22, 2008.

-~~ Sangeeta Bhatia Retirement Plan Manager

FILE CO~~

7.33

PARTNERSHIP REVIEW

DATE: November 1, 2010 TO: Los Angeles Water & Power Employees’ Retirement Plans (WPERP) FROM: Pension Consulting Alliance, Inc. (PCA) PARTNERSHIP: EnCap Energy Capital Fund VIII, L.P. (EnCap VIII or the Fund) SECTOR: Growth Capital (oil and gas industry)

RECOMMENDATION & SUMMARY1

PCA believes that EnCap VIII represents an excellent opportunity to invest with a proven firm implementing an attractive investment strategy in the oil and gas industry. Given the combination of advantages and concerns summarized below, PCA recommends that the Los Angeles Water & Power Employees’ Retirement, Disability and Death Benefits Plan commit $25.0 million and the Water and Power Employees’ Retiree Health Benefits Fund commit $5.0 million to EnCap Energy Capital Fund VIII, L.P.

Advantages/Benefits Concerns/Risks The Fund will primarily focus on providing growth EnCap VIII is a sector-focused fund targeting the capital to proven management teams whose oil and gas industry. The markets for oil and principal objective is value creation through the natural gas have historically been volatile and acquisition and exploitation of oil and gas reserves are likely to continue to be volatile into the future. and/or the development of low-risk drilling This volatility impacts the entry and exit opportunities. EnCap employs an approach of environments for the Fund. However, EnCap committing capital to portfolio companies over a has successfully implemented their investment two- to three-year period and funding these capital strategy throughout cycles while minimizing the commitments over a four- to five-year period, thus impact of commodity price movements and reducing exposure to any one energy pricing cycle generating consistent results. and specific hydrocarbon price risk. EnCap has consistently generated strong Although EnCap has historically exhibited strong performance results across investment cycles. organizational stability and the Founders Since 1994, EnCap has invested $4.5 billion of continue to be highly involved in the business of capital generating $8.4 billion in total value the firm, three of four Founders are over the age representing a 37.9% gross since inception internal of 60. A formal succession plan does not rate of return (“IRR”) and a 1.9x investment currently exist and steps will need to be initiated multiple as of June 30, 2010. for a smoother long-term generational transition. EnCap has exhibited strong organizational stability with minimal turnover of professionals. The team is led by the four founding members of the firm.

1 While PCA reviewed the terms of this partnership and other accompanying financial information on predecessor partnerships, this desk review does not constitute a formal legal review of the partnership terms and other legal documents pertaining to this partnership. PCA recommends that its clients retain separate legal counsel to review the legal aspects and risks of investing in this vehicle.

TABLE OF CONTENTS2

RECOMMENDATION & SUMMARY 1

KEY FINDINGS 3

FIRM OVERVIEW 4

INVESTMENT STRATEGY 5

INVESTMENT TEAM 9

PERFORMANCE TRACK RECORD 11

TERMS OF ENCAP ENERGY CAPITAL FUND VIII 14

ALIGNMENT OF INTERESTS 17

APPENDICES APPENDIX 1: BIOGRAPHIES 18 APPENDIX 2: ENCAP ENERGY CAPITAL FUND VIII L.P. ADDITIONAL TERMS 23

KEY FINDINGS

PCA’s key findings in its review of EnCap VIII are:

Fund Raising Status. EnCap VIII is targeting $2.5 billion in capital commitments with a hard cap of $3.5 billion. The Fund held a first close on October 7, 2010, raising $1.25 billion in commitments. The Fund has received strong support from large institutions, such as California Teachers’ Retirement System, State of Minnesota, National Railroad Investment Trust, among others. EnCap VIII will hold rolling closings thereafter with a final slated for the March/April 2011 time frame. EnCap VIII expects to make its first commitments to underlying management teams within 60 days from the initial closing.

Attractive Investment Strategy. EnCap VIII’s investment strategy focuses on providing growth capital, typically making investments of $50 million to $200 million per transaction, on a paced and incremental basis. The EnCap investment team looks to provide growth capital to proven management teams who focus on creating value through opportunities in the United States and Canada by: acquiring and exploiting oil and gas reserves, developing low risk drilling opportunities in areas that are known to be producing and using advanced drilling and completion technologies to both conventional3 and non-conventional reservoirs4; and implementing operational enhancement to underlying portfolio companies. The management team will not invest in situations that are speculative or that are based on inflated commodity price assumptions in order to generate returns. In addition, the Fund is not expected to participate in any deep-water, offshore opportunities. EnCap deploys capital slowly and incrementally over four-to-five year periods, and only as progress occurs; this approach helps to mitigate cyclical concentration and reduce hydrocarbon risk. Another tool that the management team utilizes, in order to mitigate the effects of hydrocarbon volatility risk, is to maintain substantial levels of unfunded capital and low levels of leverage so that portfolios can weather unfavorable market conditions. Their capital infusion strategy allows the management team to assess certain performance metrics before deploying more capital. In order to assure the portfolio companies are guided in the right direction, EnCap seeks to attain board control for all of its portfolio companies. While considering similar opportunities in the marketplace, PCA found EnCap’s investment strategy to be appropriate for the WPERP portfolio given its private equity approach to the oil and gas industry that has consistently generated strong performance results over the long-term while minimizing losses.

Stable Team of Experienced Investment Professionals. EnCap has exhibited strong organizational stability with minimal turnover of its investment professionals. The firm is managed by David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich (the “Principals”), who have had a professional association that spans over 30 years (21 years together at EnCap). EnCap maintains offices in both Houston and Dallas, Texas, with a team of 15 additional oil and gas investment professionals. In general, the team has expertise in the oil and gas industry with a finance/banking background. This emphasis is believed to support the firm’s risk-controlled investment approach and allow the investment team to focus on the investment strategy, areas for attractive investment, budgeting and exit for portfolio investments.

Key Terms. The term for EnCap VIII is ten years from the initial closing, subject to extension of up to two additional one-year periods by the Fund’s general partner (“General Partner”) with approval of 80% of the Fund’s limited partners (“Limited Partners”). During the investment period (which spans for up to five years from the final closing), the management fee will equal 1.5% of commitments. Upon the expiration of the investment period, management fees will be 1.5% of invested capital. The management fee will be offset by 100% of: transaction fees, director’s fees, break-up fees earned in excess of broken deal expenses and fees for monitoring, advisory and investment banking services. The General Partner will receive 20% of all distributions only after investors have received a return of aggregate funded commitments (including management fees, organizational expenses, and other expenses) plus an 8% preferred return. The “distribution waterfall” includes a General Partner catch-up whereby the General Partner will receive 80% of distributions (after limited partners have received their preferred return) until achievement of a 20% carried interest distribution. Thereafter, 80% of distributions will be made to the Limited Partners and 20% to the General Partner. The clawback clause is within industry norms and will be secured by a several guarantee of the Principals of the General Partner. The Limited Partners have adequate governance rights that are in-line with industry standards. The limited partnership agreement (“Partnership Agreement”) includes provisions allowing for “key person” suspension of the investment period and “no fault” termination of the investment period with 66 2/3% in Limited Partner interest, and removal of the General Partner (“no fault” with 75% in Limited Partner interest and “for cause” with 66 2/3% in Limited Partner interest). The General Partner will commit (in cash as opposed to management fee waiver) the sum of 3.0% of aggregate capital commitments. These terms and conditions represent several improvements from prior versions, including but not limited to:

 The management fee reduced to 1.5%, down from initial offering of 1.75%  Management fee offsets increased to 100%, improved from previous 50/50 split  General Partner commitment increased to 3.0% from 2.0% in Fund VII  Inclusion of a “no fault” removal of the General Partner  Clawback includes all Partners, previously included just the Managing Partners

FIRM OVERVIEW

Founded in 1988, EnCap has focused solely on oil and gas investments over its 22-year history. Since its inception, EnCap has raised 14 institutional oil and gas investment funds totaling over $6.6 billion of capital commitments. The first six funds, raised between 1988 and 1993, comprised three reserve acquisition funds and three mezzanine debt funds. In 1994, the firm transitioned to a private equity investment platform, believing that it offered a more attractive risk/return profile and better alignment of interest with the management teams of EnCap’s portfolio companies. The last seven upstream funds have concentrated on providing equity growth capital to small to mid-sized independents and represent over 96% of total capital commitments. The firm closed on an energy infrastructure fund focusing on midstream investments in April 2010 with $791 million in capital commitments. The investment team responsible for the infrastructure fund is separate from that of EnCap VIII.

INVESTMENT STRATEGY

The macro drivers supporting oil prices are believed to be as follows:  Projected incremental demand growth, driven primarily by Asian economies (especially China and India);  Supply challenges – fewer major projects, execution delays and steeper decline rates; and  No replacement for the primary transportation fuel worldwide.

The macro drivers supporting natural gas prices are believed to be as follows:  Entire North American production base remains on its steepest decline ever;  Escalating cost structure for drilling and completing wells;  Competitive advantage of natural gas over other energy sources – its relative price, abundance as a North American resource, and lower carbon/noxious emission characteristics are expected to broaden its use and demand;  Represents a critical source of electricity generation and home heating for North America; and  Liquefied natural gas import potential and economic resource potential will likely combine to keep the higher end for natural gas pricing.

The upstream sector of the oil and gas industry, also referred to as the Exploration and Production (“E&P”) sector, involves the exploration for and production of oil and natural gas reserves. E&P companies conduct geological and geophysical analyses, acquire acreage, and drill oil and natural gas wells in an effort to find economic quantities of hydrocarbons. In addition to drilling, a significant component of many E&P companies’ strategies includes growth through the acquisition and subsequent exploitation of other entities and properties. E&P companies are essential to the overall energy process chain as they locate and extract hydrocarbons, which are ultimately processed into various derivative products with numerous applications.

A number of opportunities are expected to be created through the application of advanced horizontal drilling5 and multi-stage fracture technologies6 to conventional and unconventional reservoirs. While horizontal drilling and fracture stimulation have been successfully utilized by the industry for many years, the recent evolution to longer laterals and multiple fracture stages has materially improved recoveries and economics in many reservoir types. EnCap believes the unconventional reservoirs (resource plays), which involve the application of these technologies, create compelling investment opportunities for the Fund due to the following factors: (i) their extensive resource base; (ii) low breakeven prices needed to generate targeted rates of return; (iii) less geological risk and lower operating costs than vertical drilling; (iv) the potential for significant organic growth; (v) technology upside and transferability; and (vi) premium valuations from public markets. Equally important is the fact that the most likely candidates to acquire EnCap portfolio companies, the mid- to large-cap public exploration and production companies, are believed to continue to have significant appetite for such assets, affording the Fund ongoing exit opportunities to generate attractive returns. Over recent funds, EnCap funds have been diversified with approximately two-thirds of invested capital in unconventional resource plays and one-third in conventional resource plays.

Regardless of the nature of the opportunity, EnCap remains focused on its economic-driven, value-oriented investment approach, with a particular emphasis on assisting the firm’s portfolio companies in managing risk. The following are examples of broad strategies that EnCap VIII is expected to employ:

 Acquisition and Exploitation. This strategy involves purchasing proven reserves in economic areas with a focus on exploiting the undeveloped reserves and operational enhancements. This may involve improving performance on acquired production through better operations or utilizing enhanced techniques, such as secondary recovery and tertiary recovery to extract bypassed reserves. As a result of these enhancements, the property set becomes more valuable, making it marketable for potential buyers. Many EnCap companies have found a niche in acquiring non-core assets from larger oil and gas companies and paying closer attention to the properties in order to implement this strategy.

 Low-Risk Drilling in Known Producing Regions. Companies employing this strategy will typically concentrate on establishing leasehold positions in low geologic risk areas and will focus on generating a production base that can be expanded through repeatable drilling opportunities. This strategy is currently broadly pursued in unconventional reservoirs (resource plays) where hydrocarbons are known to be present in large quantities. Advanced drilling and completion technologies have unlocked oil and gas reserves previously not deemed to be economically recoverable. Companies effective at executing this strategy prove the economic viability of a project area by drilling wells and creating a sizeable inventory of low-risk drilling locations, which are highly attractive to large, public energy company buyers. These buyers have a continual need to grow production and replace declining reserves, and in many instances will pay premium prices for assets of this nature. EnCap has been successfully backing companies pursuing low-risk drilling strategies in the resource or repeatable drilling plays for over a decade.

5 A drilling technique that permits the operator to contact and intersect a larger portion of the producing reservoir than conventional vertical drilling techniques and can result in both increased production rates and greater ultimate recoveries of hydrocarbons. 6 This is technique used by engineers to create a crack or fracture in the rock that contains oil or gas. This crack is then filled with sand or an artificial propellant to allow the free flow of oil or gas from the rock to the wellbore.

Quality Management Team Identification and Deal Sourcing Instrumental to EnCap’s investment strategy is the firm’s ability to identify and attract high- quality management teams. EnCap expects to continue to develop new relationships with such management teams and benefit from substantial proprietary deal flow due to its investment professionals extensive contacts and relationships within the oil and gas industry and energy- related financial community. EnCap also believes it will continue to have the opportunity to maintain relationships with management teams it has supported successfully in previous funds, with those investments representing a meaningful portion of the EnCap VIII portfolio. Currently, approximately 50% of EnCap Energy Capital Fund VII, L.P.’s total capital commitments are allocated to repeat management teams, a percentage that has increased with each successive upstream fund.

Prospective management teams are rigorously evaluated against a number of criteria:  Demonstrable track record of value creation;  High level of technical and operational competency;  Compelling business plan and value creation strategy consistent with their past experience;  Strong industry contacts and the ability to generate/identify and capture new opportunities;  Managerial and leadership skills, strategic vision and adaptability;  Shared view of risk management; and  Receptiveness to a “partnership” relationship.

Value-Added Investment Approach In investing EnCap VIII, EnCap intends to adhere to the same core tenets, including:

Balancing capital preservation and value creation. EnCap is dedicated to pursuing its proven, lower-risk investment strategy, investing in opportunities where engineerable reserves support the basic investment economics. Utilizing this investment strategy, EnCap has capitalized on such opportunities in the industry, investing successfully across multiple hydrocarbon cycles since 1988. EnCap will not invest in speculative situations that are dependent on inflated hydrocarbon price assumptions or high-risk exploration success to achieve its return objectives. EnCap’s long-standing philosophy of committing capital to portfolio companies over a two- to three-year period and funding these capital commitments over a subsequent four- to five-year period helps to: (i) prevent overexposure to any one cycle; and (ii) reduce hydrocarbon price risk. EnCap’s capital is typically advanced incrementally, and whether the opportunity is centered on a reserve acquisition or a drilling project, the firm is heavily focused on managing risk to ensure capital preservation.

Partnering with seasoned management teams possessing solid value creation strategies. As noted above, EnCap seeks to invest in partnerships with proven management teams with demonstrable track records of successfully creating value, the ability to manage complex companies during periods of rapid growth, and a desire to work closely with a “value-added” partner. As with its prior funds, EnCap also believes it will continue to have the opportunity to maintain relationships with management teams it has supported successfully in previous funds, with these investments representing a meaningful portion of the EnCap VIII portfolio. The firm will enter into partnership agreements with each of these management teams utilizing deal terms and conditions that will ensure alignment of interests of the teams and EnCap.

Structurally aligning the interests of management and EnCap VIII. EnCap seeks to structure portfolio investments such that the interests of management and the Fund are aligned. Importantly, EnCap will require management to make a meaningful personal investment alongside EnCap VIII, generally on the same terms and conditions as, or subordinate to, the Fund investors, to ensure an alignment of interests. In virtually all cases, a portfolio company will be structured such that Encap VIII will recoup its invested capital and achieve a baseline rate of return before management participates in any carried interest. When making investments, EnCap seeks to implement capital structures appropriate to facilitate the company’s continued growth, including providing sufficient equity to ensure access to capital for acquisitions, development projects and execution of the company’s business plan.

Committing capital over a two- to three-year period and funding capital commitments over a four- to five-year period. EnCap’s investment approach strongly supports the premise that: (i) quality opportunities present themselves selectively throughout the cycles, including during periods of both higher and lower oil and gas prices; and (ii) the money- making proposition for EnCap is influenced by many factors and is not dependent on hydrocarbon price appreciation. EnCap will “stage in” capital as growth opportunities arise and engineerable reserve value is created within a portfolio company and will not look to make “big bets” dependent on any one economic or hydrocarbon price cycle. EnCap consistently bases investment decisions on a conservative forecast of future oil and gas prices that are typically below New York Mercantile Exchange (“NYMEX”) prices. Furthermore, internal economic modeling that is done at the time an investment is being contemplated customarily encompasses a suite of sensitivities. This sensitivity analysis incorporates a wide range of future oil and gas price assumptions and reserve risk factors. EnCap’s portfolio companies will typically enter into commodity price hedges in conjunction with major acquisitions or as a production base is established through successful drilling. EnCap utilizes commodity price hedging only on established, producing reserves as a method to stabilize cash flows and not as a tool for speculate/adding value.

Employing modest levels of leverage at the portfolio company level. EnCap has board control in substantially all of its investments and thus has the ability to approve debt incurrence, among other things. In general, EnCap supports the use of conventional bank debt that represents the first and only lien against the underlying assets. EnCap does not support the use of “Term B,” mezzanine, high yield or similar debt instruments in a portfolio company’s capital structure. The debt level of a portfolio company at any given time will depend largely on the value of its “proved developed producing,” reserves, which are a function of the company’s business strategy and stage of maturity. Therefore, EnCap companies will only layer on debt over time as warranted by successful drilling activity or acquisitions, as opposed to speculative growth prospects. Currently, the debt-to-investment ratio portfolio-wide is approximately 20%. There is not a restriction on the use of debt, but EnCap has historically utilized conservative levels of leverage and has stated that it does not foresee increasing future debt levels above this ratio for the Fund.

Monitoring investments closely and managing risk proactively. EnCap will maintain its proactive approach to structuring, managing and opportunistically exiting investments. EnCap adds value to its portfolio companies by working closely with management on a regular basis on such items as: (i) setting corporate strategy; (ii) evaluating new opportunities; (iii) analyzing performance of existing projects; (iv) developing capital budgets; (v) constructing the balance sheet and securing bank financing; (vi) identifying joint venture partners to share in the risk of certain projects and (vii) positioning the company for a successful exit. As stated above, the firm has board control in virtually all of its investments, which is a fundamental tenet of EnCap’s investment philosophy and one of the main drivers of its track record and minimal loss history. Closely monitoring investments positions EnCap to identify underperforming projects early. Board control gives the firm the ability to re-direct a portfolio company’s efforts toward more attractive projects from a risk/return standpoint and, if necessary, implement managerial changes.

Exiting opportunistically. EnCap’s portfolio companies build opportunity sets that represent strategic acquisitions for larger publicly-traded E&P companies, and sales to these entities have been the source of most of EnCap’s realizations. In select cases, the public market provides an attractive exit alternative as well. Although EnCap’s preferred holding period is four to five years, EnCap believes that opportunistic exits are critical to maximizing investment returns and continuously re-evaluates whether exiting an investment is appropriate at any particular time. EnCap is experienced at executing a wide range of transactions designed to realize value from the companies in which it invests, including corporate or asset sales to larger independents or via public offerings.

INVESTMENT TEAM

EnCap is controlled and managed by the Principals, who have had a professional association that spans over 30 years. EnCap maintains offices in both Houston and Dallas, Texas, with a highly-qualified team of 15 additional oil and gas investment professionals, including three petroleum engineers, two senior investor relations professionals, and a fund administration staff of five certified public accountants. The team has expertise in the oil and gas industry with an emphasis on a finance/banking background. This emphasis is believed to support the firm’s risk-controlled investment approach and allow the investment team to focus on the investment strategy, areas for attractive investment, budgeting and exit for portfolio investments.

EnCap Investment Professionals Years at Name Title Age EnCap Yrs. Exp. David B. Miller* Managing Partner 60 22 37 Gary R. Petersen* Managing Partner 63 22 38 D. Martin Phillips* Managing Partner 56 21 32 Robert L. Zorich* Managing Partner 60 22 36 Jason M. DeLorenzo Partner 39 11 15 E. Murphy Markham IV Partner 52 4 30 R. Jason McMahon Partner 36 7 12 M. Sean Smith Partner 49 20 25 Wynne M. Snoots, Jr. Partner 49 9 27 Douglas E. Swanson, Jr. Partner 38 11 14 Mitchell D. Hovendick Director 53 13 29 Brad A Thielemann Director 33 6 8 Mark A. Welsh IV Director 31 4 9 Mark E. Burroughs, Jr. Vice President 34 3 7 Ryan P. Devlin Vice President 30 5 5 Kyle M. Kafka Vice President 29 4 6 Scott R. Smetko Vice President 27 3 4 Matthew J. Crystal Associate 34 2 2 Brooks C. Despot Analyst 24 1 1 *investment committee member

The four Managing Partners/Founders comprise the Investment Committee and are expected to be fully involved in EnCap VIII activities. When asked about future succession, the Principals stated a desire to gradually add Partner level professionals to the investment committee and evolve responsibilities as appropriate. Currently, the four Managing Partners hold board seats on the largest and most significant portfolio investments, but are usually supported by a junior Partner. PCA does not expect that EnCap will face succession issues during the investment period of the Fund, but the firm has acknowledged the need to begin implementing a process for a longer-term transition. In addition, Fund documents include governance rights for Limited Partners in the event that the Principals fail to devote a substantial majority of their business time to the operations of the Fund7.

Investment Process. Following the initial work of identifying and investigating a potential new management team, an internal team from EnCap, typically consisting of one Managing Partner and one or two other investment professionals, will prepare a preliminary report recommending that the investment be pursued. Such a report encompasses a review of the prospective management team’s background, experience and track record; business plan and strategy for value creation; asset/reserve evaluation (if applicable); feedback from third party technical consultants who have specific expertise in the areas that are central to the business plan; and a summary of initial discussions regarding terms. As the process evolves, and prior to closing, the due diligence effort incorporates thorough reference checks, further scrutiny of the business plan, and a more detailed asset/reserve evaluation (if applicable) to include third-party engineering, environmental assessment and title review.

PERFORMANCE TRACK RECORD

Since its inception, EnCap has raised 14 institutional oil and gas investment funds totaling over $6.6 billion of capital commitments. The first six funds, raised between 1988 and 1993, comprised three reserve acquisition funds (i.e. purchasing producing properties) and three mezzanine debt funds and represented $0.2 billion of commitments. In 1994, the firm transitioned to a private equity based platform on the belief that it offered a more attractive risk/return profile and better alignment of interest with the management teams of EnCap’s portfolio companies. The last seven upstream funds have concentrated on providing equity growth capital to small to mid-sized independents and represent over 96% of total capital commitments that the firm has made since 1988. In 2008, EnCap raised a fund (EnCap Energy Infrastructure Fund, or EEIF) targeting midstream opportunities to pursue investment opportunities in:

 natural gas gathering, treating, compression, processing and storage operations  oil gathering and transportation  natural gas liquid fractionation, storage and transportation  produced water handling and disposal  CO2 gathering, transportation and sequestration

The Principals of EnCap participate on the Board of Managers of EEIF, but the day-to-day activities are managed by an entirely separate investment team. Fund VIII may from time to time participate in midstream opportunities as a co-investor with EEIF (limited to 10% of commitments).

In aggregate since 1994, EnCap has invested $4.5 billion across 140 investments implementing the proposed investment strategy. These transactions have generated $8.4 billion in total value resulting in an attractive 37.9% gross IRR and 1.9x investment multiple as of June 30, 2010. Of note, the first two funds implementing the private equity approach to the oil and gas sector were more “project oriented,” with capital invested in specific asset transactions. After lower absolute results for its second private equity fund, EnCap shifted its investment strategy, focusing more on management team quality as opposed to specific asset transactions. The last five funds are the most representative of the current approach proposed for EnCap VIII.

EnCap’s Private Equity Track Record as of June 30, 2010 Fund Commitment Invested Realized Unrealized Investment Gross Peer Top- (vintage) (M) (M) Value (M) Value (M) Multiple IRR Quartile* Fund I $104 $104.1 $196.0 --- 1.9x 31.5% 28.5% (1994) Fund II $116 $114.6 $142.0 --- 1.2x 6.9% 41.8% (1996) Fund III $468 $468.6 $1,305.1 --- 2.8x 30.3% 24.7% (1997) Fund IV $573 $570.4 $1,468.1 $38.7 2.6x 98.7% 11.0% (2001) Fund V $931 $923.8 $1,426.4 $469.9 2.1x 39.8% 8.1% (2004) Fund VI $1,661 $1,254.1 $691.8 $1,331.2 1.6x 29.8% 1.7% (2006) Fund VII $2,551 $1,072.6 $257.7 $1,115.1 1.3x 20.6% 6.1% (2007) Total $6,404 $4,508.2 $5,487.8 $2,954.9 1.9x 37.9% --- *Venture Economics All Private Equity Universe as of March 31, 2010 Source: EnCap, VentureXpert

Six of EnCap’s prior seven partnerships have placed in the top-quartile among their respective vintage year in the Venture Economics All Private Equity Universe, on a gross of fee basis. This comparison is made against the All Private Equity Universe due to an inadequate universe of oil and gas opportunities to compare to. Therefore, this measurement is better viewed as an opportunity cost comparison to other private equity opportunities. In aggregate, results have been strong on an IRR and investment multiple basis. Individual partnership results have ranged from a low of a 6.9% IRR (1.2x investment multiple) to a high of 98.7% IRR (2.6x investment multiple). Fund II, the lone underperformer, was a relatively concentrated portfolio constructed of four asset specific (rather than management team-oriented) projects that was negatively affected by the downturn in 1998. Subsequent funds implemented the current investment strategy of backing strong, experienced management teams.

EnCap has generated consistent results implementing its investment strategy. Across all 140 realized and unrealized transactions, 76 (54%) have posted investment results between 1.0x and 1.9x generating $3.3 billion in total value. An additional $3.4 billion in total value has been generated by 31 transactions that have posted investment multiples between 2.0x and 3.9x. As a result, 79% of EnCap’s total value has been generated by transactions returning between 1.0x and 3.9x, representing a consistent return profile.

Investment Multiples: all portfolio companies

4,000 76 80

3,500 70

3,000 60

2,500 50 ($)

2,000 40 Transactions

Million of 1,500 31 30 # 23 1,000 10 20

500 10

‐ 0 < 1.0x 1.0x ‐ 1.9x 2.0x ‐ 3.9x 4.0x + Amount Invested (millions) 736.30 2,298.50 1,240.70 232.70 Market Value (millions) 552.2 3,292.5 3,351.6 1,246.40 Number of Investments 23 76 31 10

Source: EnCap, PCA analysis

Only $736 million of invested capital (across 23 transactions) have a total investment value below cost as of June 30, 2010. EnCap’s investment strategy of “leaking” capital into transactions as milestones are met minimizes losses, with EnCap ceasing funding of opportunities that are not progressing to plan. Only four of these transactions are realized, representing $38 million of invested capital and only $13 million in losses.

EnCap’s realized (or substantially realized) investments have generated an attractive investment multiple of 2.5x capital across 88 investments, and represent 54% of invested capital. EnCap’s 52 unrealized transactions are held at 1.2x of investment cost, in aggregate, as of June 30, 2010.

Performance: realized vs. unrealized Invested Total Value Investment Status Investments Capital (M) (M) Multiple Realized 88 $2,467 $6,094 2.5x Unrealized 52 $2,041 $2,349 1.2x Total 140 $4,508 $8,547 1.9x Source: EnCap, PCA analysis

EnCap has consistently generated attractive investment results implementing their investment strategy throughout investment cycles. The chart below represents the investment multiple on realized transactions grouped by year of investment. On an annual basis, the investment multiple for realized transactions have ranged from a low of 1.1x (for transactions made in 1997) to a high of 4.9x (for transactions made in 2001). The size of the bubble represents the amount of invested capital for the realized transactions for each year. The significant activity in the 2004 to 2007 period is reasonable, as EnCap has raised larger funds, subsequently invested more capital and sufficient investment maturity to generate material realizations.

Realized Investment Multiples: by year of investment 6.0x

5.0x

4.0x

3.0x

2.0x Investment Multiple 1.0x

0.0x

Source: EnCap, PCA analysis

TERMS OF ENCAP VIII

Additional EnCap VIII terms not discussed below are highlighted in the partnership summary in Appendix 2 to this memo.

Management Fee Structure During the investment period, the management fee will equal 1.5% of commitments. Upon the expiration of the investment period, management fees will be reduced to 1.5% of invested capital. The management fee will be offset by 100% of: transaction fees, director’s fees, break- up fees earned in excess of broken deal expenses and fees for monitoring, advisory and investment banking services.

The ILPA principles’ recommend that management fees be based on reasonable expenses and step down significantly at the end of the investment period. According to the Dow Jones Private Equity Partnership Terms and Conditions, 2009 Edition, approximately 80% of buyout funds targeting more than $1 billion in commitments proposed a management fee of 1.5% or greater. Per PCA’s database, buyout funds currently in the marketplace are offering, on average, a 1.95% management fee. Those funds targeting $1 billion in commitments or more are proposing a slightly lower management fee, on average, at 1.84%. Of note, a universe of buyout funds is not directly comparable to EnCap’s strategy and approach but we feel it is reasonable to compare fee levels of similarly sized fund offerings. We believe the Fund’s 1.50% management fee is in-line with the industry average and consistent with the ILPA principles. The ILPA principles additionally recommend that monitoring, directory, advisory and exit fees be offset 100% to the benefit of the fund; which the Fund documents include.

Distributions Any cash shall be distributed to all partners not less than quarterly, and within 30 days after an investment disposition. Net proceeds attributable to the disposition of investments in portfolio companies, as well as distributions of securities in kind, together with any dividends or interest income received from portfolio companies, will be distributed in the following order of priority:

(a) First, 100% to all partners in proportion to funded commitments until the cumulative amount distributed equals the aggregate commitments drawn down to finance all portfolio investments, organizational expenses, net management fees, working capital, and other expenses paid to date by the Fund and a preferred return equal to an 8% internal rate of return, compounded annually. (b) Second, 80% to the General Partner and 20% to all partners in proportion to funded commitments until such time as the General Partner has received, as an incentive distribution (the “Carried Interest”), 20% of the sum of the distributed preferred return and distributions made pursuant to this paragraph. (c) Thereafter, 80% to all partners in proportion to funded commitments and 20% to the General Partner as Carried Interest.

The ILPA principles suggest a standard “all contributions plus preferred return back first” model and a preferred return rate calculated from the day of capital contribution to the point of distribution, which is utilized here by the Fund. PCA deems the distribution waterfall to be in- line with ILPA principles and above industry norm, and therefore acceptable.

Clawback Obligation Upon the termination of the Fund, if either (a) the preferred return on investments with respect to a Limited Partner is less than 8% or (b) the General Partner has received carried interest (post tax) in excess of 20%, the General Partner will be required to promptly return to the Fund (for distribution to the Limited Partners) the lesser of the excess amount received by the General Partner and the amount of carried interest (post tax) actually received. The General Partner clawback will be secured by a several guarantee of the Principals of the General Partner.

Term Limits The Fund's term will be ten years from the date of the Partnership Agreement (initial closing), subject to extension of up to two additional one-year periods by the General Partner with approval of 80% of the Limited Partners. The investment period will expire five years from the final closing, unless terminated earlier due to cumulative commitments having been spent or committed for expenditure, or upon the removal of the General Partner by vote of the Limited Partners or agreement in writing of such Limited Partners to terminate the investment period.

Governance Rights Termination and General Partner Removal Limited Partners have the right, at any time, to (a) terminate either the investment period or the Fund with the approval of 66 2/3% of the Limited Partners in interest and (b) remove the General Partner with the approval of 66 2/3% of the Limited Partners in interest “with cause.” The General Partner may be removed with the election of 75% of Limited Partner interest “without cause”.

The ILPA principles recommend a supermajority in interest of the limited partners have the ability to elect to dissolve the fund or remove the general partner without cause, and a majority in interest of the limited partners to effectuate an early termination or suspension of the investment period without cause. PCA deems the proposed levels of limited partner interest to be in-line with current industry norms and finds them acceptable.

Key Person Suspension Event The Principals (David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich) shall each devote substantially all of their business time to the business and operations of the Fund and associated parallel investment vehicles. A “suspension event” is triggered in the event that two or more Principals cease to be involved in the day-to-day operations of the Fund due to retirement, termination, death, disability or other reason or fail to devote the requisite amount of business time, or in the aggregate, the Principals cease to own at least 75% of the equity and voting interests in the General Partner. If a “key person event” is triggered, the Fund shall not make or purchase any investment (other than one that was under contract at the time, or a follow-on to an existing investment) without 50% of Limited Partner approval.

ALIGNMENT OF INTERESTS

The key terms of EnCap VIII discussed below determine the primary alignment of interests.

General Partner’s Capital Commitment The General Partner will commit 3.0% of aggregate capital commitments of all partners. This represents a General Partner commitment of $75 million for a fund size of $2.5 billion (target fund size) and up to $105 million (for the maximum fund size of $3.5 billion). The General Partner’s capital commitment will be paid in cash.

Subsequent Funds The General Partner will not close on any similar investment fund with objectives and an investment focus substantially similar to those of the partnership until the earlier of (a) 75% of the capital commitments have been invested (or committed for investment), or (b) the end of the investment period, unless 66 2/3% of the Limited Partners in interest consent as to otherwise.

The ILPA principles’ suggest that the General Partner may not close on a fund with substantially equivalent investment objectives and policies until after the investment period ends or the fund is invested, expended, committed or reserved for investments and commitments. It is our opinion that the Fund’s terms are satisfactory, being substantially consistent with these principles and in line with industry standards.

Carried Interest Allocation and Vesting Schedule The percentage of carried interest allocated to investment professionals, excluding the Principals, is anticipated to be 45% for the Fund. This allocation has grown from 25% in Fund III to 39% in Fund VII. The Principals will retain the remaining 55%. The vesting schedule for the investment professionals occurs over five years as follows:

Year 1 10% Year 2 20% Year 3 20% Year 4 20% Year 5 30%

The ILPA principles suggest that carried interest generated by the general partner of a fund be directed predominantly to the professional staff related to the success of that fund. The vesting schedule is aligned with the investment period (i.e. five years), and we believe that the proposed vesting schedule is satisfactory for alignment of interest.

APPENDIX 1: BIOGRAPHIES

EnCap Principals David B. Miller (60) is a Managing Partner and co-founder of EnCap Investments L.P. From 1988 to 1996, Mr. Miller served as President of PMC Reserve Acquisition Company, a partnership jointly-owned by EnCap and Pitts Energy Group. Prior to the establishment of EnCap, he served as Co-Chief Executive Officer of MAZE Exploration Inc., a Denver-based oil and gas company he co-founded in 1981. Mr. Miller began his professional career with Republic National Bank of Dallas, ultimately serving as Vice President and Manager of the bank’s wholly- owned subsidiary, Republic Energy Finance Corporation. Mr. Miller currently serves on the board of directors of several EnCap portfolio companies, including Cordillera Energy Partners III, Eagle Oil & Gas Partners, Cornerstone Natural Resources, Talon Oil & Gas and Unconventional Resources.

Gary R. Petersen (63) is a Managing Partner and co-founder of EnCap Investments L.P. Prior to the formation of EnCap in 1988, Mr. Petersen was a Senior Vice President and Manager of the Corporate Finance Division of the Energy Banking Group for Republic Bank from 1985 to 1988. His duties and responsibilities included mergers and acquisitions, financial advisory services and institutional fund raising activities for the energy industry. Prior to his position at Republic Bank, Mr. Petersen was an Executive Vice President and a member of the board of directors of Nicklos Oil & Gas Company in Houston from 1979 to 1984. Previously, Mr. Petersen was a Group Vice President in the Petroleum and Minerals Division of Republic Bank. He served from 1970 to 1971 in the U.S. Army in Washington D.C. as a First Lieutenant in the Finance Corps and as an Army Officer in the Army Security Agency.

Mr. Petersen holds M.B.A. and B.B.A. degrees in Finance from Texas Tech University and is a Distinguished Alumnus of Texas Tech. Mr. Petersen also has done post-graduate work at American University and the Stonier Graduate School of Banking at Rutgers University. He serves on the board of directors of several EnCap portfolio companies, including Escondido Resources II, Laredo Energy IV, Legado Resources, Manti Exploration and Mediterranean Resources. Mr. Petersen is also a member of the board of Plains All American, Inc. (NYSE: PAA) and EV Energy Partners (Nasdaq: EVEP). He is a member of the Independent Petroleum Association of America and the Houston Producers’ Forum.

Mr. Phillips holds M.B.A. and B.S. degrees from Louisiana State University. He is a member of the LSU College of Business Hall of Distinction. Mr. Phillips also attended the Stonier Graduate School of Banking at Rutgers University. Mr. Phillips serves on the board of directors of several EnCap portfolio companies, including Enduring Resources, Laramie Energy II, OGX Holdings II and Plantation Petroleum Holdings IV. He is a member of the Independent Petroleum Association of America, the American Petroleum Institute and the Houston Producers’ Forum.

Mr. Zorich received his B.A. in Economics from the University of California at Santa Barbara in 1971. He also received a Masters Degree in International Management (with distinction) in 1974 from the American Graduate School of International Management in Phoenix, Arizona. He serves on the board of directors of several EnCap portfolio companies, including Common Resources, Empresa Energy II, Force 5 Energy, Marquette Exploration and Oasis Petroleum. Mr. Zorich is also a member of the board of directors of Enerplus Resources Fund (NYSE: ERF). He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum and Texas Independent Producers and Royalty Owners Association.

EnCap Investment Professionals Jason M. DeLorenzo (39) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. DeLorenzo spent four years at ING Barings in New York working in Corporate Finance specializing in the energy industry. Previously, he was an Associate in the Energy Group at Wells Fargo Bank based in Houston from 1993 to 1995. Mr. DeLorenzo received a B.B.A. from The University of Texas at Austin. He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum, and serves on the board of directors of Destiny Oil & Gas, Enduring Resources, Laramie Energy II, Legado Resources, Limestone Exploration, Marquette Exploration, Mediterranean Resources, Plantation Petroleum Holdings IV and Tracker Resource Development, all EnCap portfolio companies.

E. Murphy Markham IV (52) is a Partner of EnCap Investments L.P. Prior to joining EnCap in July 2006, he was the Managing Director and Group Head of JPMorganChase’s Oil & Gas Finance Group. Prior to the merger between JPMorgan and Bank One, Mr. Markham ran Bank One’s Oil & Gas Group. Mr. Markham started his banking career with Republic Bank in 1981 and remained with the bank and itsultimate successor, Bank of America, for 22 years, serving as a Managing Director in its Energy Banking Group. Mr. Markham has a B.B.A. in Finance from Texas Tech University and an M.B.A. in Accounting from the University of Houston. He serves on the board of directors of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States and the Dallas Petroleum Club Wildcat Committee. Mr. Markham is an active member of the Dallas and Fort Worth Wildcatters and ADAM Energy Forum, and serves on the board of directors of Cornerstone Natural Resources, Eagle Oil & Gas, Foothills Energy, Lone Star Land & Energy and Talon Oil & Gas, all EnCap portfolio companies.

R. Jason McMahon (36) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 2003, Mr. McMahon served for three years as the Vice President of Corporate Development for ProsoftTraining. Previously, he was an Associate in the Energy and Corporate Finance Group of Prudential Capital Group from 1996 to 2000. He received an M.B.A. from The University of Texas at Austin and a B.B.A. from Southern Methodist University. Mr. McMahon serves on the board of directors of Cardinal Midstream, Cordillera Energy Partners III, Fossil Creek Resources, Grenadier Energy Partners, Protégé Energy II, PetroEdge Resources Partners II and Staghorn Energy, all EnCap portfolio companies. He is a member of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States, the Dallas Energy Finance Discussion Group and the ADAM Energy Forum, and is a CFA charterholder.

M. Sean Smith (49) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1990, Mr. Smith was a Vice President with the Corporate Banking Group of NCNB Texas Bank. Previously, he was a Senior Petroleum Engineer with Tenneco Oil Company for five years. Mr. Smith received an M.B.A. in Finance from the University of Houston and holds a B.S. in Petroleum Engineering from Texas A&M University. He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum, and the Society of Petroleum Engineers, and serves on the board of directors of Empresa Energy II, Navidad Resources, OGX Holdings II, Phillips Energy Partners, Renaissance Petroleum and HVL Energy, all EnCap portfolio companies.

Wynne M. Snoots, Jr. (49) is a Partner of EnCap Investments L.P. Prior to joining EnCap in January 2001, Mr. Snoots was one of three partners of Paradigm Development & Trade, Inc., a private company focused on generating and monetizing exploration prospects located along the Gulf Coast of Louisiana. For the two years prior to his involvement in Paradigm, Mr. Snoots served as President of Magellan Exploration, LLC, a private portfolio company. He previously spent seven years with Enron Capital & Trade Resources in the Producer Finance Group, most recently as a Vice President. Mr. Snoots began his career as a petroleum engineer with Texas Oil and Gas Corporation. He received an M.B.A. from The University of Texas at Austin and holds a B.S. in Petroleum Engineering from the University of Oklahoma. Mr. Snoots is a member of the Independent Petroleum Association of America and the Houston Producers’ Forum, and serves on the board of directors of Ark-La-Tex Energy, Bold Energy II, Destiny Oil & Gas, Force 5 Energy, Ovation Energy II, Peregrine Oil & Gas and Tempest Energy Resources, all EnCap portfolio companies.

Douglas E. Swanson, Jr. (38) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. Swanson served as a corporate lender at Frost National Bank and spent one year as a financial analyst at Southwest Bank of Texas. He received a B.A. in Economics and an M.B.A. from The University of Texas at Austin. Mr. Swanson serves on the board of directors of Core Minerals Holdings, Empresa Energy II, Escondido Resources II, GulfTex Energy, Laredo Energy IV, Manti Exploration, Oasis Petroleum, Paladar Petroleum, Paloma Barnett, Red Arrow Energy and RiverStone Energy, all EnCap portfolio companies. He is also on the board of the Houston Producers’ Forum, is a member of the Independent Petroleum Association of America and the Texas Independent Producers and Royalty Owners Association.

Mitchell D. Hovendick (53) is a Director of EnCap Investments L.P. Prior to joining EnCap in 1997, Mr. Hovendick spent 15 years as a Petroleum Engineer with Phillips Petroleum Company, where he worked primarily as a reservoir engineer in almost all major basins of the U.S. Mr. Hovendick received an M.B.A. in Finance from Rice University and holds a B.S. in Chemical Engineering from Texas A&M University. He is a registered professional petroleum engineer, and is a member (and author) of the Society of Petroleum Engineers, Houston Producers’ Forum and Independent Petroleum Association of America.

Brad A. Thielemann (33) is a Director of EnCap Investments L.P. Prior to rejoining EnCap in September 2006, Mr. Thielemann worked in the Investor Relations and Strategic Planning Groups at Plains All American Pipeline, L.P. Previously, he was an Associate at EnCap from 2000 to 2003 and a Treasury Analyst at Dynegy. Mr. Thielemann received an M.B.A. from Duke University and a B.B.A. from The University of Texas at Austin. Mr. Thielemann serves on the board of directors of Common Resources, Core Minerals Holdings, Limestone Exploration, GulfTex Energy, Piedra Energy and Plantation Petroleum Holdings IV, all EnCap portfolio companies. He is a member of the Houston Producers’ Forum and the Independent Petroleum Association of America.

Mark A. Welsh IV (31) is a Director of EnCap Investments L.P. Prior to joining EnCap in April 2006, Mr. Welsh spent four years as a Vice President of The Adam Corporation, a private investment firm with $1.0 billion of capital under management. Previously, Mr. Welsh was a financial analyst with The Blackstone Group L.P. in New York. Prior to Blackstone, he was in the Student Trainee Program of the Central Intelligence Agency in Langley, Virginia. Mr. Welsh received a B.B.A. in Finance from Texas A&M University, where he was recognized by the University as the outstanding graduate in his class. He is a member of the Independent Petroleum Association of America and serves on the board of directors for Cornerstone Natural Resources, Eagle Oil & Gas Partners, Foothills Energy, Fossil Creek Resources, Lone Star Land & Energy and Unconventional Resources, all EnCap portfolio companies.

Mark E. Burroughs, Jr. (34) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in March 2007, Mr. Burroughs spent four years working in UBS Investment Bank’s Global Energy Group. Prior to joining UBS Investment Bank, Mr. Burroughs spent three years at Sanders Morris Harris, Inc., an investment banking firm in Houston, Texas. Mr. Burroughs received an M.B.A. from Rice University and a B.A. in Economics from The University of Texas at Austin. Mr. Burroughs serves on the board of directors of Force 5 Energy, HVL Energy and Paladar Petroleum, all EnCap portfolio companies. He is also a member of the Houston Producers’ Forum, the Independent Petroleum Association of America and Young Professionals in Energy.

Ryan P. Devlin (30) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in August 2005, Mr. Devlin spent two years at Amegy Bank of Texas where he ended as a Banking Officer for its commercial banking department. Mr. Devlin received an A.B. in Business Economics from Brown University. Mr. Devlin serves on the board of directors of several EnCap portfolio companies and is a member of the Houston Producers’ Forum, the Independent Petroleum Association of America and Young Professionals in Energy.

Kyle M. Kafka (29) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in July 2006, Mr. Kafka spent two years at First Albany Capital where he worked in the Energy Investment Banking Group. Previously, Mr. Kafka spent a year at Amegy Bank of Texas where he worked in the commercial banking department. Mr. Kafka received a B.B.A. in Finance from The University of Texas at Austin. Mr. Kafka serves on the board of directors of several EnCap portfolio companies and is a member of the American Petroleum Institute, the Houston Producers’ Forum, the Independent Petroleum Association of America and Young Professionals in Energy.

Scott R. Smetko (27) is a Vice President of EnCap Investments L.P. Prior to joining EnCap in February 2007, Mr. Smetko was an Analyst in Citigroup’s Investment Banking Division, where he focused on corporate finance and mergers and acquisitions in a wide range of industries. After attending the University of Virginia for two years, Mr. Smetko graduated summa cum laude from Southern Methodist University’s B.B.A. Honors Program with a B.B.A. degree in Finance. He is a member of Young Professionals in Energy and the ADAM Energy Forum.

Matthew J. Crystal (34) is an Associate of EnCap Investments L.P. Prior to joining EnCap in January 2008, Mr. Crystal served as a Vice President in the commercial lending department at Amegy Bank of Texas, focusing on real estate-related development companies. For one year after his six years at Amegy, Mr. Crystal worked in the not-for-profit sector. Mr. Crystal holds an M.B.A. in Finance from Rice University and a B.A. in Government from The University of Texas at Austin. Mr. Crystal is a member of the Houston Producers’ Forum, the Independent Petroleum Association of America and Young Professionals in Energy. In addition, Mr. Crystal serves on the board of Hope for Youth, an inner city, teenage development organization in Houston.

Brooks C. Despot (24) is an Analyst of EnCap Investments L.P. Mr. Despot joined EnCap in August 2009 upon receiving his M.B.A. in Corporate Finance from Vanderbilt University’s Owen Graduate School of Management. He also holds a B.A. in Management from Louisiana State University, where he graduated Cum Laude. Prior to joining EnCap, Mr. Despot interned with Morgan Keegan in their Investment Banking group. He is a member of Young Professionals in Energy, the Houston Producers’ Forum and the Independent Petroleum Association of America.

APPENDIX 2: ENCAP ENERGY CAPITAL FUND VIII, L.P. ADDITIONAL TERMS Entity EnCap Energy Capital Fund VIII, L.P. is a Texas limited partnership.

The Fund’s objective is a blended compound annual internal rate of return of at least Objective 25% and a return on invested capital of approximately 2.0x.

The Fund must adhere to the following investment restrictions:

 Diversification. No more than 15% of aggregate committed capital may be invested in a single investment.

 Purpose and Geographic Limitations. Without prior approval of the advisory committee, no more than 15% of aggregate committed capital may be invested in portfolio companies whose primary purpose is other than the ownership of oil and gas assets generally considered to be “upstream” or “midstream” in nature, or whose assets are principally located outside the United States and Canada.

 Public Common Stock Investments. Purchases of publicly traded securities are only permitted if are made in connection with a contemplated transaction. In no event will any open market purchases exceed 20% of aggregate capital commitments at any Diversification and time.

Investment Restrictions  Co-Investment with EEIF. The General Partner shall not invest more than 10% of the Total Commitments in co-investments with the Infrastructure Fund, without having received the prior approval of the Advisory Board.

 Hostile Transactions. No business acquisition will be pursued where it is opposed by a majority of such business’ board of directors or stockholders possessing a majority of the voting power of such business’ outstanding securities; however, this excludes a business acquisition in connection with a bankruptcy or similar restructuring.

 Related Investments. No investment shall be permitted in any issuer where the General Partner (or an affiliate) owns securities. The foregoing shall not apply to (i) publicly traded investments with a value of less than $250,000 (with Advisory Board approval), (ii) investments in non-publicly traded securities with the prior approval of 80% of the Limited Partners in interest or (iii) an investment in an existing portfolio company of the Fund with the prior approval of the advisory committee.

EnCap Equity Fund VIII GP, L.P., a Texas limited partnership, will be the sole general partner of the Fund. General Partner Structure EnCap Investments L.P., a Delaware limited partnership, will be the sole general partner of the General Partner. David B. Miller, Gary R. Petersen, D. Martin Phillips and Robert L. Zorich are the partners and owners of EnCap.

Investor Structure Limited Partnership

An advisory board consisting of at least three individuals representing the Limited Limited Partner Partners and feeder fund investors will be established to (i) review potential conflicts of interest, (ii) advise the General Partner on other matters, including investment strategy, Advisory Board (iii) review with the General Partner the annual operating budgets of the Fund, (iv) approve market values of Fund assets and (v) approve other matters and functions as provided.

Minimum capital commitments will be $10 million; however, the General Partner has the Capital Commitments sole discretion to accept lesser capital commitments.

The General Partner may offer Limited Partners (and other third parties) the opportunity Co-investment Policy to co-invest in investments on terms identical or substantially similar to those offered to the Fund. The terms are silent as to the allocation of co-investment opportunities.

Limited Partners will be required to pay, pro rata, their share of third-party and out-of- pocket expenses incurred by the General Partner in connection with the organization of the Fund or any applicable parallel investment vehicles. Organizational expenses for either the Fund or each parallel investment vehicle shall not exceed $1,000,000, plus interest at the Prime Plus Rate.

Additional Expenses EnCap Investments L.P. has a Placement Agent Policy stating that no cost will be borne by their investors with respect to any placement fees or other compensation paid by EnCap to placement agents or any other third-party marketers. The Partnership Agreement is silent as to the treatment of any placement fees incurred by the Fund with respect to a Limited Partner. EnCap is utilizing Park Hill as the placement agent for Fund VIII.

EnCap may from time to time be involved in litigation and claims incidental to the conduct of its business. Various EnCap fund portfolio companies may also be named as a defendant, from time to time, in litigation relating to their normal business operations. EnCap has stated that it is not currently aware of any litigation, pending or threatened, that is reasonably possible to have a materially adverse effect on the financial position or results of operations of EnCap, its affiliates or its portfolio companies.

EnCap has recently been mentioned in media articles regarding allegations of political Litigation/Investigations pressures at the Texas Teachers Retirement System (TRS) influencing the placement of assets. These allegations were initially made in the spring of 2009 and since then TRS hired former U.S. Securities and Exchange Commissioner Roel Campos to investigate. Mr. Campos found no wrong doing and referred the allegations and his report to the Texas State Auditor, which were subsequently provided to the Attorney General and the Travis County District Attorney’s Office. It has been stated that the Travis County District Attorney’s Office invested these allegations and closed the case because no criminal violations were discovered.

Quarterly. Within 45 days after the end of each quarter of the fiscal year, each Limited Partner will receive an unaudited report providing summary of the Fund’s investments information and a statement for each partner of its capital account.

Annual. Within 90 days after the end of each fiscal year, each Limited Partner will Reports to Limited receive (i) a report discussing each portfolio investment and related performance for Partners such year, (ii) audited financial statements prepared in accordance with United States generally accepted accounting principles, (iii) a statement of the capital of the Fund for such fiscal year, (iv) a statement for each partner of the adjustments to its capital account for the fiscal year and balance and (v) a report of independent certified public accountants indicating the status of the preferred return and General Partner catch-up.

The Partnership Agreement may be amended by the General Partner generally with the consent of 66 2/3% of the Limited Partners in interest. The foregoing does not apply to amendments that (i) are of an inconsequential nature and do not adversely affect any Limited Partner, (ii) are necessary to comply with applicable law or government Amendments regulation, (iii) are necessary in the opinion of counsel to the Fund to ensure that the Fund will not be treated as an association taxable as a corporation for U.S. Federal income tax purposes or (iv) pertain to provisions with a specified alternate level of required limited partner consent in the Fund Agreement.

There may be occasions where the Fund and its affiliates may encounter conflicts of interest in connection with the Fund’s activities. These include conflicts resulting from the existence of EnCap’s infrastructure investment funds, leading to issues around: Conflicts of Interest  allocation of personnel between the Fund and other EnCap investment funds,  conflicting fiduciary duties to other EnCap investment funds,  allocation of investment opportunities to other EnCap funds.

EnCap Energy Capital Fund VIII, L.P.

Presentation to Los Angeles Department of Water & Power

November 10, 2010 EnCap Investments L.P. OiOverview Founded in 1988, EnCap is a leading provider of growth capital to the independent sector of the U.S. oil and gas industry Exceptilional track record d2Od%: 2.5x ROI and 57% IRR on 12 12lidi5 realized investments wi ihth a very limited loss experience Historically has managed aggregate capital commitments of $7 billion across 14 funds Depth, continuity and experience of investment staff is unparalleled Investment strategy revolves around partnering with oil and gas executives with demonstrable track records to identify and create strategic acquisition opportunities for ultimate buyers Investment philosophy calls for equal emphasis on capital preservation and value creation; does not rely heavily on leverage Consistent approach and results over the last two decades substantially differentiate EnCap from other fund managers Currently marketing 15th institutional fund, EnCap Energy Capital Fund VIII, targeting $2.5 billion

2 EnCap Investments L.P. PfPerformance Hi story Long history of helping companies grow and create shareholder value

Provided growth capital to 174 oil and gas companies

125 realized investments

Hallmark of investment track record is consistency of returns across multiple hydrocarbon price cycles

Fourteen EnCap Institutional Funds (As of September 30, 2010; $ in millions) Unrealized Value Total Realized Total Capital Realized and Future Net and Unrealized Gross Invested Proceeds PV10 Revenues Proceeds ROI IRR Realized or Substantially Realized Investments$ 2,549.7 $ 5,789.6 $ 570.0 $ 6,359.6 2.5x 56.6%

Unrealized Investments 2,455.1 232.2 2,822.1 3,054.3 n/a n/a

Total Portfolio Investments $ 5,004.8 $ 6,021.8 $ 3,392.1 $ 9,413.9 n/a n/a

3 EnCap Investments L.P.

TkRdTrack Record EnCap Investments L.P. Private Equity Track Record As of September 30, 2010; $ in millions

Reserve Mezz. Project Acq. Debt Equity I - III I - III I & II Fund III Fund IV Fund V Fund VI Fund VII

VintageVin t ag e Year '88 -'94 '89 -'93 '94 -'96 1997 2001 2004 2006 2007 Fund Size $146.8 $127.8 $218.7 $450.0 $528.1 $825.0 $1,524.0 $2,551.0

Realized or Substantially Realized Investments Capital Invested $99.7 $127.8 $218.7 $468.6 $475.3 $523.3 $445.2 $191.1 Value of Realized Investments (1) 199.6 175.0 338.0 1,305.8 1,457.0 1,272.0 1,034.0 $578.2

Realized ROI 2.0x 1.4x 1.5x 2.8x 3.1x 2.4x 2.3x 3.0x

Realized Gross IRR (2) 31% 16% 19% 30% 104% 54% 51% 109%

Unrealized and Partially Realized Investments Capital Invested - - - - $95.1 $401.7 $839.9 $1,049.9

Value of Unrealized Investments (3) (4) - - - - $45.0 $701.9 $1,100.4 $1,136.5

Total Investments Total Capital Invested $99.7 $127.8 $218.7 $468.6 $570.4 $925.0 $1,285.1 $1,241.0 (1) (3) (4) Total Value $199.6 $175.0 $338.0 $1,305.8 $1,502.0 $1,973.9 $2,134.4 $1,714.7 Total ROI 2.0x 1.4x 1.5x 2.8x 2.6x 2.1x 1.7x 1.4x

Total Gross IRR (2) 31% 16% 19% 30% 99% 40% 30% NM Unrealized portfolio expected to generate returns consistent with historical performance Funds III and IV are essentially fully realized and on track for >2.6x ROI. Fund V has reached rate of return payout and is on target for >2.0x ROI Funds VI and VII comprise larger commitments to high-quality management teams well-positioned in some of the most attractive resource plays Fund VII has significant capital remaining to invest, but is over 90% committed

See footnotes on page 65. 4 EnCap Investments L.P. ECEnCap Perf ormance V ersus O Ohther Investment Opt ions

(1) Annualized performance of various asset classes through December ‘09

40.0%

26.5% 28. 2% 22.7% 18.6% 19.7% 20.0% 13.8% 13.8% 9.7% 10.2% 5.8% 2.6% 1.1% 0.4% 0.0% -0.1% -5.6%

-20.0% All LBOs Hedge Funds S&P 500 S&P 500 Energy Index EnCap

1-year 3-year 5-year

Top quartile U.S. private equity performance by vintage year (net IRRs) (2)

EnCap Fund IV 67% 70% EnCap EnCap Fund III Fund V 50% 40% 28% 28% 30% 23% 22% 18% 21% 13% 14% 12% 7% 10%

-10%

-30% 1997 1998 1999 2000 2001 2002 2003 2004 2005

Top Quartile PE EnCap

(1) Cambridge Associates, Credit Suisse/Tremont, Standard & Poor’s Total Return Index; EnCap results based on internal calculations for all funds. (2) Cambridge Associates U.S. PE Benchmarks Q4 2009. Represents pooled net IRR to limited partners by vintage years. EnCap results based on internal calculations.

5 EnCap Investments L.P. ECEnCap Inves tmen tPft Professi onal s

Name Title # Years at EnCap # Years Rel. Experience Investor Relations David Miller Managing Partner 22 37 Name Title Chuck Bauer Managing Director Gary Petersen Managing Partner 22 38 Hallie Kim Managing Director Mar ty Philli ps MiPtManaging Partner 21 32 Fund Administration Bob Zorich Managing Partner 22 36 Name Title Jason DeLorenzo Partner 11 15 Bobby Haier CFO Murphy Markham Partner 4 30 Melissa Standley Tax Manager Donna Wright Controller Jason McMahon Partner 7 12 Audrey White Senior Accountant Sean Smith Partner 20 25 John Stricker Senior Accountant Wynne Snoots Partner 9 27 Katherine Jenkins Coordinator Doug Swanson Partner 11 14 Midstream Fund Investment Staff Mitch Hovendick Director 13 29 Name Title Brad Thielemann Director 6 8 Dennis Jaggi Partner Billy Lemmons Partner Mark Welsh Director 4 9 Bill Waldrip Partner Mark Burroughs Vice President 3 7 Dennis McCanless Managing Director Ryan Devlin Vice President 5 5 Bryan Danmier Vice President Kyle Kafka Vice President 4 6 MiHtMorriss Hurt Vice Pres ident Cat McMindes Engineer Scott Smetko Vice President 3 4 Pam Jauer Engineer Analyst Luke Brandenberg Associate 1 3 Tommy Waldrip Analyst Matt Crystal Associate 2 2 Jana Jonas Analyst Shane Hannabury Associate 1 3 Brooks Despot Analyst 1 1

6 EnCap Investments L.P. Un ique Blend of Ch aracteri sti cs V ersus O th er P ri vate E qui ty F und M anagers

Distinguishing Characteristic Impact on EnCap Portfolio

CittRtConsistent Returns Generated consistent returns across multiple cycles since 1988 Realized losses totaling <$15 million over 22-year history Consistent Liquidity Pattern Continued to distribute capital during economic downturn ~$2.7 billion returned to investors since 2008 Consistent Strategy & Focus 22-year track record in upstream / midstream oil and gas investing Value-oriented investment approach Prudent Use of Leverage 20% debt to investment portfolio-wide All eqqyuity available for growth o pportunities Board Control EnCap controls the boards of most of its portfolio investments Able to guide pace of capital spending and debt incurrence "Staged" Invested Capital Prevents overexposure to any one cycle Mitigates hydrocarbon price risk Back Repeat Management Teams Represent high-quality proprietary opportunities 60% of capital in Fund VII with repeat management teams Proactive Management Style Ensured portfolio company strategies fit economic environment Takes advantage of market and industry inefficiencies

7 EnCap Investments L.P. PtfliCPortfolio Company Lif LifCle Cycle

Management EnCap Team

• Capital • Experience / Track record • Strategic guidance • Assets / Opportunities • Risk management • Capital

NEWCO Growth Stage Mature Stage / Exit

Provide growth capital to proven oil Build oil and gas companies, focusing Position as strategic acquisition and gas management teams on lower-risk projects predominantly target for large public independents in the U.S. Typically commit $50-$200 million Monetize during up-cycle and Heavy EnCap influence on risk continue t o b uild i n d own-cycle Alignment of interest with management, capital allocation, management teams capital structure and hedging policies Exit proceeds split between EnCap EnCap is lead investor and maintains and management based on value Capital “staged” in as growth board control creation parameters opportunities arise and hard value is creatdted Target over 2. 0x ROI / 25% IRR

Build production base and upside Re-back management team in opportunity set NEWCO II

Portf oli o C ompany Lif e C ycl e (3 - 5Y5 Year Average Lif)Life)

8 EnCap Investments L.P. Fund VIII Opportun it ies Consistent with our 22-year track record, Fund VIII will invest in growth strategies focused on engineerable assets in the most economic areas

(i) Acquisition & Exploitation

Purchasing proved reserves in economic areas with a focus on exploiting undeveloped reserves and operational enhancement

(ii) Low-Risk Drilling in Known Producing Regions

Establishing positions in low geologic risk areas (resource plays) and proving economic viability of drilling wells

(()iii) Applied Technology

Application of advanced drilling and completion technologies to conventional and unconventional reservoirs

9 Resource Plays Fund VIII Cap ita l Will B e D epl oyed i n E conomi call y Ad vantaged R esource Pl ays

Bakken Shale Extensive resource base

Marcellus Shale Compelling economics Utica Shale Niobrara Shale Lower breakeven prices

Cleveland / Tonkawa Woodford Shale

Fayetteville Shale Granite Wash Less geological risk

Wolfberry Haynesville Shale Barnett Shale Lower operating costs Bone Spring/Avalon Shale

Eagle Ford Shale Oil & Liquids Play Gas Play Organic growth opportunities

12-Month (1) $8.00 NYMEX Core Breakeven Drilling Economics $7.45 Technology upside and $7.00 Strip ($4.55) $6.57 IRR) $5.70 %% $5.39 $5.60 $6.00 $4.49 $4.69 $5.18 transferability $5.00 $3.74 $3.88 $3.90 $4.00 $3.00 Premium valuation from $2.00 $1.00 public markets

$/Mmbtu (assuming 10 $/Mmbtu (assuming $0.00 Marcellus Eagle Ford Bakken Haynesville Fayetteville Barnett Gulf Coast GOM S. Texas Appalachia Cotton Valley

Unconventional Conventional 12-mo NYMEX Strip

(1) Ross Smith Energy Group / Simmons & Company 10 EnCap Investments L.P. Sha le Gas Versus Convent iona l G as

Source: www.seekingalpha.com 11 EnCap Investments L.P. Barnett Sh a le Case Stu dy (Dots Represent Dr illing Act ivi ty) 2000 2010

• 170 MMcfd • 4, 700 MMcfd (est . peak 7 ,000 MMcfd) • 550 Producing Wells • > 10,000 Producing Wells

Similar story is currently repeating itself in multiple resource plays

12 Portfolio Realizations from Resource Plays

(As of September 30, 2010; $ in millions) Realized Investment Portfolio From Resource Plays (1) Total Realized Primary Date of PV10 Proceeds & ECEnCap Focus ECEnCap IiilInitial DfDate of TlCilTotal Capital RlidRealized UlidUnrealized PV10 Unrea lize d Company Area Buyer Fund(s) Investment Realization Invested Proceeds Value Value ROI IRR

Dallas Production Barnett Shale Burlington Resources III Nov-00 Aug-02$ 22.3 $ 37.3 $ - $ 37.3 1.7x 60.5% Stroud Barnett Shale 144A / Range Resources IV Jan-04 Sep-05 27.0 83.9 - 83.9 3.1x 98.4% Laramie Piceance Basin Plains E&P IV & V May-04 May-07 87.5 300.7 - 300.7 3.4x 95.6% Cordillera II Granite Wash Forest Oil (2) V Dec-04 Sep-08 99.5 193.2 - 193.2 1.9x 30.4% Empresa Haynesville Shale Chesapeake V Dec-04 Jun-08 86.2 337.5 - 337.5 3.9x 97.9% RiverStone Haynesville Shale Chesapeake / Petrohawk V & VII Jun-06 Aug-08 64.4 105.5 2.7 108.2 1.7x 109.1% PetroEdge Marcellus Shale Quest V Aug-06 Jul-08 39.4 64.0 - 64.0 1.6x 37.5% Destiny (3) Haynesville Shale Chesapeake V Jun-06 Jul-08 2.7 12.4 - 12.4 4.6x 109.0% Paloma Barnett Barnett Shale Chesapeake VI Feb-07 Feb-08 69.4 145.1 - 145.1 2.1x 198.3% Staghorn Wolfberry Devon VI May-07 Nov-08 9.5 14.4 7.0 21.4 2.3x 51.0% Lone Star Bakken Shale Enerplus VI Jun-07 Nov-09 19.2 71.5 4.8 76.3 4.0x 80.0% Common Resources Haynesville / Eagle Ford BG/EXCO & Talisman VI & VII Sep-07 May-10 86.2 228.9 28.5 257.4 3.0x 119.3% Marquette Marcellus / Utica Chesapeake VI & VII Sep-06 Jun-10 73.8 51.0 38.9 89.9 1.2x 9.8% Oasis Petroleum Bakken Shale IPO VI & VII Mar-07 Jun-10 178.5 175.3 413.9 589.2 3.3x 71.3% Empresa II Eagle Ford Shale Chesapeake VII Jul-09 Jun-10 20.4 48.0 40.6 88.6 4.3x 536.0% Limestone (4) Wolfberry Energen VII Apr- 08 Sep-10 36.1 130.3 2.1 132.4 3.7x 101.9%

Total - Realized Portfolio $ 922.1 $ 1,999.0 $ 538.5 $ 2,537.5 2.8x 94.1%

(1) Includes portfolio companies where a substantial portion of sales proceeds were related to assets located in resource plays (2) Certain assets also sold to Merit Energy and Devon Energy (3) Currently classified as a partially realized investment; capital investment figures represent only the portion of capital allocated toward the realized assets (4) Distributions received on 10/4/10

13 EnCap Investments L.P. Compelli ng Mar ket Factors Con firm Signifi cance of R esource Pl ays Numerous large JV transactions and acquisitions reinforce the desire of the Majors and Internationals to gain exposure to resource plays Deal Net Value Deal Acres Year Buyer Seller ($MM) Structure Play (000's) $/Acre 2008 Plains E&P Chesapeake $3,300 Joint Venture Haynesville 110 $30,000 2008 BP Chesapeake $1,900 Joint Venture Fayetteville 135 $14,074 2008 StatOil Chesapeake $3,375 Joint Venture Marcellus 585 $5,769 2009 BG Exco Resources $1,055 Acquisition Haynesville 42 $25,119 (1) 2009 Exxon XTO Energy $41,000 Acquisition Numerous 1,647 N/A 2010 Total Chesapeake $2,250 Joint Venture Barnett 68 $33,333 2010 Mitsui Anadarko $1,400 Joint Venture Marcellus 100 $14,000 2010 Reliance Atlas Energy $1,700 Joint Venture Marcellus 120 $14,166 2010 BG Exco Resources $950 Joint Venture Marcellus 93 $10,200 2010 Shell East Resources $$,4,700 Acquisition Marcellus 650 $$,7,231 2010 Shell Private $1,000 Acquisition Eagle Ford 100 $10,000 Public markets placing a premium on companies with significant exposure to resource plays Unconventional players trading at an average of ~10x 2010 EBITDA compared to ~5x for conventional players (2) Resource plays are commanding a premium in private markets Conventional assets are trading largely at PDP values while unconventional assets are trading at multiples of PDP value with substantial value attributed to acreage and resource potential It is esti mated th at th e U .S . oil and gas i nd ustry will requi re annual capital of $20 - $30 billion to finance the development of shale assets (3)

(1) Includes Marcellus, Bakken, Barnett, Fayetteville, Woodford and Haynesville acreage (2) Unconventional companies include SWN, HK, BEXP, RRC, CRZO, CLR; Conventional 14 companies include NFX, BRY, SD, SFY, AREX, PQ (3) Ross Smith / Jefferies & Company research EnCap Investments L.P. Fund VIII Summary Terms

Fund Size: $2.5 billion target

Focus: Upstream opportuniiities i n th e oil and gas i nd ustry

General Partner Commitment: 3.0%

CidIttCarried Interest: 20% aft er 8% pref erred ret urn, GP cat ch -up

Commitment Period: 5 years from final closing

Term: 10 years, su bject t o 2 consecuti ve one-year extitensions

Management Fee: 1.5% on commitments during commitment period; thereafter, 1.5% on net invested capital

Fee Sharing: 100% to LPs, will be offset against management fees

First Closing: October 2010

15 EnCap Investments L.P.

Existing Funds Overview

16 EnCap Energy Capital Fund V (2004) IOiInvestment Overview Fund V (As of September 30, 2010; $ in millions) Total Realized Date of Total PV10 Proceeds & Initial Capital Realized Unrealized PV10 Unrealized Gross Company Investment Commitment Invested Proceeds Value Value ROI IRR Realized or Substantially Realized Investments EdidIEscondido I D04Dec-04 $ 53. 7 $ 53. 7 $ 131. 7 $ - $ 131. 7 252.5x 50. 0% Cordillera II Dec-04 99.5 99.5 193.2 - 193.2 1.9 30.4 Empresa Dec-04 86.2 86.2 337.5 - 337.5 3.9 97.9 Bold Mar-05 22.8 22.8 54.9 - 54.9 2.4 39.9 Crimson Jun-05 27.3 27.3 35.3 - 35.3 1.3 11.7 Savant Jul-05 4.2 4.2 4.3 3.2 7.5 1.8 294.9 Plantation III Jul-05 6.6 6.6 13.4 - 13.4 2.0 44.2 NCX II Jul-05 8.9 8.9 3.3 - 3.3 0.4 - PAA Au g-05 15.9 15.9 78.8 - 78.8 5.0 65.6 GFI (SMDR)* Sep-05 6.0 6.0 16.7 - 16.7 2.8 34.8 OGX Jan-06 32.2 32.2 90.5 - 90.5 2.8 92.0 Riverbend M ar-06 7.5 7.5 20.7 0.2 20.9 2.8 100.1 EV Energy May-06 19.3 19.3 30.4 10.1 40.5 2.1 44.5 RiverStone Jun-06 52.3 47.0 74.5 1.8 76.3 1.6 78.3 O'BENCO II Jul-06 35.1 35.1 69.8 - 69.8 2.0 35.5 Phillips Royalty Aug-06 1.5 1.5 2.5 - 2.5 1.7 45.0 PetroEdge Aug-06 39.4 39.4 64.0 - 64.0 1.6 37.5 Laramie Sep-06 10.2 10.2 35.2 - 35.2 3.5 721.9 528.6 523.3 1,256.7 15.3 1,272.0 2.4x 54.1% Total Unrealized Investments: Partially Realized Investments Enduring Dec-04 162.2 162.2 142.6 228.1 370.7 2.3 Destiny Jun-06 19.4 19.4 12.7 15.3 28.0 1.4 181.6 181.6 155.3 243.4 398.7 2.2x Unrealized Investments OtiIIOvation II N04Nov-04 979.7 909.0 020.2 222.2 242.4 030.3 Shona Feb-05 10.0 9.9 - 13.0 13.0 1.3 JOG Jul-05 21.9 21.9 12.2 12.3 24.5 1.1 M editerranean Dec-05 42.7 42.7 10.1 70.6 80.7 1.9 Cornerstone Dec-05 29.2 29.2 0.6 35.0 35.6 1.2 Tracker M ay-06 50.3 50.3 1.0 79.0 80.0 1.6 Laredo IV Aug-06 57.1 57.1 1.1 65.9 67.0 1.2 220.9 220.1 25.2 278.0 303.2 1.4x Total Unrealized InvestmentsInvestments 402. 5 401. 7 180. 5 521. 4 701. 9 17x1.7x $ 931.1 $ 925.0 $ 1,437.2 $ 536.7 $ 1,973.9 2.1x 40.4%

Highlighted rows represent management teams that have retained an advisor to commence a potential sales process. These companies represent 50% of the unrealized invested capital (1).

* Shown net of temporary bridge loan (1) Represents only the portion of Fund V’s capital allocated toward the unrealized assets 17 Fund V – Unrealized and Partially Realized RiiCilIdPiiliRRemaining Capital Invested Primarily in Resource Pl ays

Enduring, Tracker and Laredo IV are most significant remaining investments Represent $236 million (66%) of $356 million of current invested capital Significant exposure remaining to exciting resource plays Potential for realizations substantially in excess of current valuations

EnCap Commitment Focus Capital % of Total Capital Invested Company Category Date Area Inves ted ($ MM) Remaining (% of $356 Million Total) Enduring (1) Resource Dec-04 Eagle Ford / S TX$ 128.7 36.2% Laredo IV Resource Aug-06 Eagle Ford / S TX 57.1 16.0% Tracker Resource May-06 Bakken 50.3 14.1% Conventional Cornerstone Resource Dec-05 Williston Basi n / Bakk en 29.2 8.2% 25% Sub-Total Resource$ 265.3 74.6%

Mediterranean (2) Conventional Dec-05 International$ 33.0 9.3% JOG Conventional Jul-05 Canada 21.9 6.2% Destiny (1) Conventional Jun-06 East Texas 16.7 4.7% Ovation II Conventional Nov-04 Eas t Texas 9.0 2.5% Shona Conventional Feb-05 International 9.9 2.8% Sub-Total Conventional$ 90.5 25.4% Resource 75% Total Remaining Fund V Investments$ 355.8 100.0%

(1) Capital invested figure represents only the portion of Fund V's capital allocated toward the unrealized assets 18 (2) Excludes portion of capital invested in bridge loan facility that has been already repaid EnCap Energy Capital Fund VI (2006) IOiInvestment Overview Fund VI (As o f S e pte m be r 30, 2010; $ in m illio ns ) Total Realized Date of Total PV10 Proceeds & Initial Capital Realized Unrealized PV10 Unrealized Gross Company Investment Commitment Invested Proceeds Value Value ROI IRR Realized or Substantially Realized Investments Core Aug-06$ 27.6 $ 27.6 $ 28.7 $ 7.5$ 36.2 1.3x 9.0% Lobos Sep-06 51.7 51.7 86.7 - 86.7 1.7 20.9 Marquette Sep-06 50.0 50.0 35.7 27.3 63.0 1.3 9.5 GFI Nov-06 12.0 12.0 21.1 - 21.1 1.8 27.9 Paloma Barnett Feb-07 69.4 69.4 145.1 - 145.1 2.1 198.3 Oasis (1) Mar-07 117.0 117.0 114.9 271.3 386.2 3.3 68.9 Crimson III Apr-07 3.9 3.9 0.5 - 0.5 0.1 - Staghorn M ay -07 9.5 9.5 14.4 7.0 21.4 2.3 51.0 Phillips Energy May-07 30.6 30.6 25.0 10.5 35.5 1.2 8.2 Lone Star Jun-07 19.2 19.2 71.5 4.8 76.3 4.0 80.0 Common Sep-07 54.3 54.3 144.1 17.9 162.0 3.0 119.3 445.2 445.2 687.7 346.3 1,034.0 2.3x 50.6% Unrealized Investments GulfTex Sep-06 40.0 25.7 0.5 25.7 26.2 1.0 Manti Nov-06 91.8 44.7 0.9 56.1 57.0 1.3 Foothills Nov-06 28.5 26.1 0.5 25.7 26.2 1.0 Talon Jan-07 193.8 165.4 3.3 327.9 331.2 2.0 Unconventional Res. Feb-07 48.5 42.0 0.8 40.3 41.1 1.0 Mediterranean Apr-07 15.3 8.9 0.2 12.5 12.7 1.4 Eagle Apr-07 89.2 75.5 1.5 68.2 69.7 0.9 Grenadier Apr-07 59.1 17.6 0.4 17.3 17.7 1.0 Peregrine II May-07 50.0 40.7 0.8 29.6 30.4 0.7 Cordillera III May-07 150.0 97.0 2.0 137.3 139.3 1.4 Laramie II Jun-07 122.0 81.1 1.6 74.2 75.8 0.9 Legado Jul-07 80.1 51.2 1.0 64.2 65.2 1.3 Renaissance Aug-07 76.5 60.9 1.2 87.8 89.0 1.5 Red Arrow Aug-07 40.8 26.3 0.5 39.2 39.7 1.5 Navidad Aug-07 50.0 40.8 0.8 33.5 34.3 0.8 Plantation IV Aug-07 45.0 36.0 0.7 44.2 44.9 1.2 1,180.6 839.9 16.7 1,083.7 1,100.4 1.3x $ 1,625.8 $ 1,285.1 $ 704.4 $ 1,430.0 $ 2,134.4 1.7x 29.9%

Highlighted rows represent management teams that have retained an advisor to commence a potential sales process. These companies represent 23% of the unrealized invested capital.

(1) Oasis unrealized value consists of OAS stock valued at a 10% discount to the 9/30/10 closing price of $19.37 per share 19 EnCap Energy Capital Fund VI Signifi cant Exposure Rema in ing to High Qua lity A ssets and T eams

Significant value already established in highly economic areas Five largest unrealized commitments represent $638 million (54%) of total $1 .18 billion remaining unrealized commitments All five investments represent high quality management teams with compelling assets Significant remaining capital to invest in these teams

EnCap Focus Total Capital Remaining Company Category Area Commitment ($MM) Inves ted Commitment Comment Talon Oil & Gas Resource Barnett $ 193.8 $ 165.4 $ 28.4 Compelling Barnett shale acquisition with upside Cordillera III Resource Granite Wash 150.0 97.0 53.0 Large Granite Wash footprint; promising horizontal oil play Laramie II Resource Piceance 122.0 81.1 40.9 Large Rockies position with previously successful Management team Resource Subtotal$ 465.8 $ 343.5 $ 122.3

Manti Exploration Conventional Gulf Coast$ 91.8 $ 44.7 $ 47.1 Proved reserve coverage with top-tier gulf coast team Legado Conventional Permian / Mid-Con 80.1 51.2 28.9 Exciting horizontal oil play in OK; initiated first CO2 pilot Conventi onal lSbttl Subtotal $ 171.9 $ 95.9 $ 76 .0

Total $ 637.7 $ 439.4 $ 198.3

20 EnCap Energy Capital Fund VI Accounti ng V al ue (FAS 157) vs. Rea lized or P otenti al V al ue U pon S al e

Accounting value is based on risk adjusted reserve values plus average historical land values As economic resource is proven up , the undeveloped land value accretes substantially based on the perception of developable resources in place (not necessarily “proven reserves”) When these facts exist, portfolio companies are sold for significant premiums to accounting value

Fund VI Examples of Value Accretion (As of September 30, 2010; $ in millions) Uplift vs. Current Accounting Accounting Realized / 9/30/09 Invested Value Value Potential Accounting Company Focus Area Capital @ 9/30/09 @ 3/31/10 Value (1) Value

Common Resources (2) Haynesville, Eagle Ford$ 54.3 $ 60.1 $ 124.2 $ 162.0 $ 101.9

Oasis Petroleum (2) Bakken 117.0 100.0 240.0 386.2 286.2

Lone Star (2) Bakken 19.2 36.0 42.9 76.3 40.3 Talon Oil & Gas Barnett 165.4 187.7 288.1 430.0 242.3 Total $ 355.9 $ 383.8 $ 695.2 $ 1,054.5 $ 670.7

(1) Net to Fund VI after debt and other equity and post waterfall distribution; value for Common, Oasis and Lone Star include realized proceeds and unrealized value 21 (2) Realized Investment EnCap Energy Capital Fund VI CRCommon Resources S Slale - RPlFGPiVlResource Play Focus Generates Premium Value Overview Closed the sale of Eagle Ford assets to Talisman Energy for $359 million and Haynesville Shale assets to BG/EXCO for $446 million Combined purchase price of $805 million will generate a 3. 0x ROI and 120% IRR on EnCap ’s combined $86 .2 million investment Net proceeds of $162.0 million to Fund VI and $95.4 million to Fund VII (1) Common Resources Focus Areas Strategy/Execution To build positions in emerging areas within known producing regions at low entry costs and drill wells to establish a production base and demonstrate resource potential Eagle Ford - Early identification and ground floor leasing efforts allowed Common Haynesville Shale Focus Area to compile 37,000 net acre position in Hawkville Field at cost well below market value Haynesville – Compiled a 29,000 net acre position in Shelby Trough through a farm- in agreement with large industry player Eagle Ford Shale Focus Area Drilled 14 wells with compelling and consistent results and established the economic viability of both areas such that they became the target of industry buyers looking for resource potential with running room

Premium Valuation As a result of resource play focus, assets demanded a premium in the market in spite of soft natural gas prices

¾ Will re-back Common II Management Team in Funds VII & VIII

(1) Subject to a 12-month cash holdback provision (12.5% on Eagle Ford assets and 10% on Haynesville assets) 22 EnCap Energy Capital Fund VI OiPtlOasis Petroleum IPO – Su bs tanti al M ark et A ppetit e D ue t o Si gnifi cant R esource U psid e

Company Strategy & Execution Oasis Acreage Former senior asset management and acquisition executives with Burlington Resources; East Nesson partnered with EnCap in March 2007 to focus on using their industry experience and expertise to acquire and exploit unconventional oil and natural gas resources In June 2007, purchased large Williston Basin asset package covering 175,000 net acres

and producing 1,000 net Boe/d, which provided a sizable footprint in the basin with Sanish significant resource upside Entered into three additional Williston acquisitions/farm -in arrangements, increasing the West Williston Williston Basin company’s total land position to 292,000 net acres divided between three project areas Drilled numerous wells utilizing long laterals and improved completion techniques which significantly improved the productivity and economic viability of the Bakken and

Three Forks formations and demonstrated significant resource potential on their acreage West Williston East Nesson Sanish Proved Reserves 50MMBoe5.0 MMBoe 3.9 MMBoe 4.3 MMBoe EnCap and Management recognized a significant arbitrage between public and private (55% Developed) (36% Developed) (32% Developed) market valuations and filed form S-1 in March 2010 Avg. Daily Production (1Q '10) 1,106 Boe/d 1,016 Boe/d 792 Boe/d Net Acreage 159,491 124,004 8,747 Williston Basin IPO Overview Identified Drilling Locations 268 gross (106.5 net) 113 gross (57 net) 88 gross (9.6 net) Source: S-1 Registration Statement Successfully priced IPO on June 16th at $14/share (NYSE: OAS) IPO price implies a ~$960 million enterprise value for the company (pre-offering) vs. total capitalization of $292 million ($237 million in equity & $55 million in debt) At IPO, EnCap received $172 million of cash proceeds and ~$340 million of OAS stock (1); equates to a 2.9x ROI net to Fund’s VI & VII Cash proceeds at IPO equate to a 0.98x ROI on EnCap’s $175 million investment Company proceeds of ~$400 million from offering will be used to fund exploitation and development of the resource base

(1) Estimated value of EnCap shares owned post waterfall distribution, assuming a $14 share price. EnCap restricted to sell shares for 180 day period post IPO date. 23 Note: Please see oasispetroleum.com for the most recent investor information on the company. EnCap Energy Capital Fund VI

TlTalon Oil Oil&G & Gas P otenti ilVlal Value Talon - Equity Commitment Overview ($MM) Inves tor % of Total Commitment Inves ted Barnett Shale Assets Fund VI 69%$ 193.8 $ 165.4 Privately negotiated acquisition of Denbury’s Barnett Other Investors 29% 79.9 68.2 Shale assets for $480 million gives Talon meaningful Management 2% 5.2 4.4 position in the play: Total 100%$ 278.9 $ 238.0 19,617 net acres Implied Valuation 72.5 MMcfe/d Talon’s predominantly Barnett Shale asset base is similar to the assets 900 Bcfe (net) 3P reserves (57% proved) acquired in the recent Chesapeake/Total deal announced on 1/4/10 $1.3 billion 3P PV10 value (72% proved) Application of recent comparable transaction metrics result in total implied equity value of $830 million or $430 million net to Fund VI

Talon Oil & Gas Value Potential ($MM) Davenport Area CHK/TOT Talon - Barnett Assets Statistic Transaction Comp Implied Value Net Production 72.5 MMcfepd $12,858 / Mcfepd $932 TRWD/Reed Area Net Acreage 19,617 acres $33,333 / acre $654 Proved Reserves 510 Bcfe $3.00 / Mcfe $1,530

Barnett Assets Average Value $1,039

Dean Area Brown Area Talon - Other Assets Statistic Implied Metrics Implied Value Net Production 6.5 MMcfepd $10,000 / Mcfepd $65 Proved Reserves 74 Bcfe $2.00 / Mcfe $148 Winston Area McFarland Area Other Assets Average Value $107

Total Talon Average Asset Value $1,145 Less Debt $315 Talon Implied Equity Value $830 EnCap Fund VI Proceeds (Post Waterfall) $430

24 EnCap Energy Capital Fund VII (2007) IOiInvestment Overview Fund VII

(As o f S e pte m be r 30, 2010; $ in m illio ns ) Total Realized Date of Total PV10 Proceeds & Initial Capital Realized Unrealized PV10 Unrealized Gross Company Investment Commitment Invested Proceeds Value Value ROI IRR Realized or Substantially Realized Investments Common Sep-07$ 31.9 $ 31.9 $ 84.8 $ 10.6 $ 95.4 3.0x 119.8% Oasis (1) Oct-07 61.5 61.5 60.4 142.6 203.0 3.3 77.0% Limestone (2) Apr-08 49.5 36.1 130.3 2.1 132.4 3.7 101.9% RiverStone May-08 20.0 17.4 31.0 0.9 31.9 1.8 4607.0% Marquette Dec-08 50.0 23.8 15.3 11.6 26.9 1.1 11.5% Empresa II (3) Jul-09 20.4 20.4 48.0 40.6 88.6 4.3 536.0% 233.3 191.1 369.8 208.4 578.2 3.0x 108.6% Unrealized Investments Cordillera III Sep-07 75.0 48.5 1.0 68.7 69.7 1.4 Legado Sep-07 75.0 47.9 1.0 60.1 61.1 1.3 Red Arrow Sep-07 40.8 26.3 0.5 39.2 39.7 1.5 Plantation IV Sep-07 45.0 36.0 0.7 44.2 44.9 1.2 Fossil Creek Sep-07 48.5 28.5 0.5 16.1 16.6 0.6 Piedra Nov-07 75.0 37.1 0.7 49.8 50.5 1.4 Escondido II Dec-07 198.5 155.1 3.1 201.0 204.1 1.3 Paladar Mar-08 51.0 48.6 1.0 15.4 16.4 0.3 Force 5 Mar-08 100.0 25.4 0.5 14.0 14.5 0.6 OGX II May-08 91.8 72.3 1.4 56.1 57.5 0.8 Bold II May-08 44.5 38.9 0.8 35.0 35.8 0.9 Laredo IVIV Jun- 08 98. 7 98. 7 202.0 98. 4 100. 4 101.0 PetroEdge II Jul-08 98.0 30.7 0.6 31.0 31.6 1.0 Royal Jul-08 122.5 47.3 0.9 30.5 31.4 0.7 ArkLaTex Aug-08 51.0 13.8 0.3 11.8 12.1 0.9 Protégé II Sep-08 97.0 29.9 0.6 25.2 25.8 0.9 Cardinal Sep-08 24.3 8.9 0.1 8.9 9.0 1.0 Unconventional Res. Nov-08 50.0 24.5 0.5 23.5 24.0 1.0 HVL Energy Nov-08 61.2 26.4 0.5 32.3 32.8 1.2 Cornerstone Apr-09 98.0 28.2 0.6 25.1 25.7 0.9 Tracker Jun- 09 50. 3 12. 6 030.3 25. 3 25. 6 202.0 Paloma II Nov-09 153.1 68.4 1.4 68.4 69.8 1.0 Enduring Mar-10 154.7 41.7 0.8 81.8 82.6 2.0 Phillips II M ar-10 50.0 18.6 0.4 18.6 19.0 1.0 Common II May-10 200.0 5.0 0.1 5.0 5.1 1.0 Caiman Jul-10 100.0 24.5 0.1 24.5 24.6 1.0 Lone Star II Aug-10 100.0 4.7 0.1 4.7 4.8 1.0 Empresa III Sep-10 46.3 1.4 - 1.4 1.4 1.0 2,400.2 1,049.9 20.5 1,116.0 1,136.5 1.1x $ 2,633.5 $ 1,241.0 $ 390.3 $ 1,324.4 $ 1,714.7 1.4x

Highlighted rows represent management teams that have retained an advisor to commence a potential sales process. These companies represent 22% of the unrealized invested capital.

(1) Oasis unrealized value consists of OAS stock valued at a 10% discount to the 9/30/10 closing price of $19.37 per share 25 (2) Distributions received on 10/4/10 (3) Fully realized investment with final distributions expected on 10/15/10 EnCap Energy Capital Fund VII SbSubstanti ilCal Capi tal lR Remai iining to I nvest

EnCap Commitment Focus Capital % of Total Fund VII Capital Concentration Company Category Date Area Inves ted ($ MM) Fund % of $2.5 Billion Total Fund Laredo IV Resource Jun-08 Eagle Ford / S TX$ 98.7 4.0% Escondido II Resource Dec-07 Eagle Ford / S TX 155.1 6.3% Unconventional Res. Resource Nov-08 Montney / Eagle Ford 24.5 1.0% Commo n II Res ource May-10 Eagle Ford / Haynesville 505.0 02%0.2% Enduring Resource Aug-09 Eagle Ford / S TX 41.7 1.7% Paloma II Resource Nov-09 Haynesville / Eagle Ford 68.4 2.8% Phillips II Resource Mar-10 Haynesville 18.6 0.8% OGX II Resource May-08 Permian Basin 72.3 2.9% Resource Bold II Resource May-08 Permian Basin 38.9 1.6% 31% Piedra Resource Nov-07 Wolfberry Permian 37.1 1.5% Red Arrow Resource Sep-07 Bakken 26.3 1.1% Tracker Res ource Jun- 09 Bakken 12. 6 05%0.5% Caiman Resource Jul-10 Midstream 24.5 1.0% Cardinal Resource Sep-08 Midstream 8.9 0.4% Cordillera III Resource Sep-07 Granite Wash 48.5 2.0% Lone Star II Resource Jul-10 Niobrara 4.7 0.2% Ava ilable Fossil Creek Resource Sep-07 Rockies / Mid-Con 28.5 1.2% 50% PetroEdge II Resource Jul-08 Marcellus 30.7 1.2% Empresa III Resource Sep-10 Brown Dense 1.4 0.1% Cornerstone Res ource Apr-09 Williston Basin / Bakken 28.2 1.1% Conventional Sub-Total Resource$ 774.6 31.3% 11%

Legado Conventional Sep-07 Permian / Mid-Con 47.9 1.9% Realized Paladar Conventional Mar-08 Lobo / S TX 48.6 2.0% 8% Royal Conventional Jul-08 GOM 47.3 1.9% Plantation IV Conventional Sep-07 Permian / East TX 36.0 1.5% Protégé II Conventional Aug-08 Mid-Con 29.9 1.2% Force 5 Conventional Mar-08 Gulf Coast 25.4 1.0% ArkLaTex Conventional Aug- 08 Eas t Texas 13. 8 06%0.6% HVL Energy Conventional Nov-08 Permian Basin 26.4 1.1% Sub-Total Conventional$ 275.3 11.1%

Fund VII Unrealized Inves tments $ 1,049.9 42.5%

Realized Investments $ 191.1 7.7% CitlRiitICapital Remaining to Invest t(1) (1) 123041,230.4 49. 8% Fund S ize $ 2,471.4 100.0%

(1) Capital remaining to invest incorporates both expenses and recallable commitments 26 EnCap Investments L.P.

2008 Response

27 EnCap Investments L.P. MiiPMonetizations Post-EiDDEconomic Downturn Demonstrate ShfPfliStrength of Portfolio EnCap has distributed ~$2.7 billion to investors since 2008

Sale Portfolio Monetization Amount Sale Portfolio Monetization Amount (1) (1) Date Company Event Fund(s) ($MM) ROI Date Company Event Fund(s) ($MM) ROI 3Q 10 Limestone(2) Asset Sale VII 130.3 3.7x 3Q 09 Empresa* Asset Sale V 319.9 3.9x 3Q 10 Various(3) Various Various 21.1 n/a 3Q 09 Cordillera II* Asset Sale V 190.4 1.9x 2Q 10 Empresa II Asset Sale VII 47.6 4.3x 3Q 08 Protégé Asset Sale IV 62.4 2.2x 2Q 10 Lone Star Asset Sale VI 49.3 4.0x 3Q 08 O'BENCO Asset Sale V 46.5 2.0x 2Q 10 Oasis IPO VI & VII 171.6 3.3x 3Q 08 PetroEdge Company Sale V 61.6 1.6x 2Q 10 Marquette(4) Partial Asset Sale VI & VII 49.5 5.2x 2Q 08 Riverstone Asset Sale V & VII 91.9 1.7x 2Q 10 Common Asset Sale VI & VII 227.1 3.0x 2Q 08 Enduring(4) Partial Asset Sale V 139.4 4.2x 2Q 10 PAA(5) Unit Sale III & V 18.8 7.9x 2Q 08 Bold* Asset Sale V 54.4 2.4x 2Q 10 Core Asset Sale VI 28. 1 13x1.3x 1Q 08 Paloma Barnett* Asset Sale VI 142. 9 21x2.1x 1Q 10 Various(6) Various V 22.2 n/a 1Q 08 OGX* Asset Sale V 89.9 2.8x 4Q 09 PAA(5) Unit Sale III & V 259.8 7.9x 1Q 08 PAA(5) Unit Sale III & V 108.6 5.8x 4Q 09 Lobos Company Sale VI 85.6 1.7x Other Various Various 209.2 n/a 4Q 09 Various(7) Various Various 71.1 n/a Total 2,699.2 2.5x Additional Near Term (From Recent Sales) (8) 490.5 Total Including Pending 3,189.7 2.9x

* Distributions received over more than one time period (1) Includes realized proceeds and unrealized value (2) Proceeds distributed on 10/4/10 (3) Includes Lone Star and Empresa (4) ROI based on the portion of invested capital related to the partial sale event (5) ROI is the weighted average total deal ROI as of the particular monetization event (6) Includes O’Benco & JOG (7) Includes Phillips Energy, EVEP, GFI and Lone Star (8) Reflects cash holdbacks for Common, Core, Empresa II and unrealized value related to Oasis IPO (OAS stock at $19.37 per share less a 10% discount)

28 EnCap Investments L.P. ECEnCap Strategy an dPhild Philosoph y Prepared dP Portf flifolio for W eath eri ng D ownturn

Very low leverage (<20% of total capitalization) and continued access to additional eqqypuity prevented bank issues and allowed our com panies to remain patient

Focus on economics positioned our companies in the most advantaged areas (resource plays)

Commodity price hedges softened the impact of low prices

Companies employed risk management strategies and avoided:

Participating in the land grab and acquiring assets at bubble prices Making long-term rig commitments (EnCap’s operated rig count decreased from 55 at the peak to less than 10 during the downturn) Spending too much capital on any one project prior to proof of concept

Proven management teams had prior experience operating through down cycles

29 EnCap Investments L.P. CldPiUfRikMControl and Proactive Use of Risk Management T TlPools Post-Downturn Terminated all capital spending that failed to pass new economic standards

High-graded assets and consolidated companies’ positions in more economic areas

Maintained patient capital and took advantage of cycle to acquire assets at attractive valuations

Wait ed until M&A mar ke t re turne d pr ior to exiti ng cert ai n positi ons, all owi ng portf oli o companies to generate targeted rates of return

ECEnCap i nvestment staff ffi raised dh the b ar f or new i nvestment d eci iisions

30 EnCap Investments L.P. So lid A sset V al ue C overage P ost-Downturn Disciplined approach preceding the challenging market conditions of 2008 preserved asset coverage on invested capital

EnCap Portfolio Coverage Snapshot as of 12/31/08

EnCap Fund Fund V Fund VI Fund VII

Equity Invested ($MM) (1) $ 475 $ 771 $ 483 (2) Debt Outstanding ($MM) 68 182 45 Capitalization ($MM)$ 543 $ 953 $ 528

Total Proved PV10 ($MM) (3) $ 641 $ 921 $ 216 Total Proved Coverage 1.2x 1.0x 0.4x

Total Proved + Resource Potential ($MM) (3,4) $ 881 $ 1,394 $ 619 Total Proved + Resource Potential Coverage 1.6x 1.5x 1.2x

(1) Reflects EnCap's investment only; amount does not reflect equity invested by management or third parties (2) Includes % of debt allocated to EnCap according to its ownership position (3) Unrisked PV10 values based on NYMEX strip pricing as of 12/31/08; all valuations include working capital and hedge positions based on EnCap's ownership % of the deal (4) "Resource Potential" includes unrisked 3P reserve value working capital hedge position acreage value

31 EnCap Investments L.P.

Global Energy Outlook

32 EnCap Investments L.P. Energy Growth Projections to 2035 Future energy needs will be met with a variety of sources; however, oil and natural gas will remain indispensable Oil and gas currently provide 58% of the world’s daily energy requirements and are projected to provide 52% in 2035

World Marketed Energy Use by Fuel Type 800 HISTORY PROJECTIONS 700

600 Year rr 500

400 313 billion cubic 432 billion cubic 300 feet per day feet per day rillion Btu pe Btu rillion 201 billion cubic dd 200 feet per day

Qua 82 million barrels 106 million 100 64 million barrels per day barrels per day per day 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Liquids Natural Gas Coal Nuclear Renewables Sources: The Energy Information Administration - International Energy Outlook 2010 and International Energy Agency - World Energy Outlook 2009 33 EnCap Investments L.P. Massive Investment in Oil and Gas Needed to Meet Projected Demand

It is estimated that capital investment of >$500 billion per year is required to meet projected oil and gas demand through 2030 (($11~$11 trillion in total) (1)

World Marketed Energy Use by Fuel Type 800

700

600

500 Btu Per Year

400

300 Required New Oil & Quadrillion Quadrillion Gas Additions 200 Existing Oil & Gas 100 Production Decline

0 2007 2010 2013 2016 2019 2022 2025 2028

Oil & Gas- Existing Decline Oil & Gas - Additions Coal Nuclear Renewables

(1) International Energy Agency - World Energy Outlook 2009; capital estimates are in 2008 dollars 34 Natural Gas

35 EnCap Investments L.P. NlGPiNatural Gas Prices Prices dropped from 2008 highs due to economy-related decrease in demand and oversupply of domestic production Demand has started to rebound from 2008 lows, but continued drilling in the unconventional resource plays has prolonged the oversupply situation EnCap is prepared to operate in a $4-5 gas price environment for an extended period of time if necessary Long term, the marginal cost of supply along with increasing demand is expected to bring prices into the $5-7 range

$14.00 )) $12.00 $3.86/MMbtu at 9/30/10 $10.00 $8.00

rice ($/MMbtu rice $6.00 PP $4.00 $2.00 $0.00

Natural Gas Gas Natural Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Gas Spot Gas Strip

36 EnCap Investments L.P. NlGAiiHRbddFRLNatural Gas Activity Has Rebounded From Recent Lows Onshore natural gas directed rig activity has increased 44% from monthly low of 661 rigs running in June 2009 to 954 rigs running today Recent rig count increase predominately due to increased horizontal drilling for shale gas Increased productivity from horizontal drilling has kept gas production relatively constant despite overall rig count decline

U.S. Onshore Natural Gas Directed Rig Activity (1) 1,800 70 Gas Rig Count 1,600 65 Horizontal Gas Rigs 1,400 60 Gas Production 1,200 55

1,000 50 Count

800 45 BCFPD Rig

600 40

400 35

200 30

0 25

(1) Baker Hughes; Smith Bits Data; Energy Information Administration 37 EnCap Investments L.P. NlGSl/DdPiiIiNatural Gas Supply / Demand Picture is Improving Supply is expected to outpace demand through 2010; however, the imbalance is beginning to narrow

Most analysts predict a modest slowing of supply growth coupled with a steady rebound of demand driven by the industrial sector

70.0 Year End U.S. Natural Gas Supply & Demand (1)

68.0

et per day per et 66.0 ee Supply/Demand imbalance expected to decrease to 1.8 Bcf/d 64.0 Supply outpaced by year end 2010 demand by avg of

illion Cubic F ~2.4 Bcf/d in 2009

BB 62. 0

60.0 2005 2006 2007 2008 2009 2010E

Total US Demand Total US Supply Estimated US Demand Estimated US Supply

(1) Energy Information Administration and Simmons & Company estimates 38 EnCap Investments L.P. NlGOliSlfNatural Gas Oversupply is Self-CiCorrecting

25 - 35% natural gas base decline rate causes supply / demand imbalance to come into eqqgyuilibrium when drilling activity decreases

Historical Lower 48 Natural Gas Production by Vintage Year (1)

(1) Ross Smith Energy Group 39 EnCap Investments L.P. USU.S. Pro duct ion O ut look Shale gas will be increasingly significant contributor to domestic natural gas production – some analysts predict will comprise +40% of overall U.S. production base by 2030 It is esti mated th at $20 - $30 billion i n annual capi tal expendi tures will b e requi red to generate this shale production increase (1)

(2) +70 Bcf/d 80 U.S. Natural Gas Lower 48 Production 67 Bcf/d 70 57 Bcf/d 28Bcf/d 60 28 Bcf/d

50 25 Bcf/d 18 Bcf/d 40

Bcfd 18 Bcf/d 30 24 Bcf/d 20

10 8 Bcf/d (14%) 21 Bcf/d (31%) 30 Bcf/d 0 (40%) 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Shale Conventional Tight Gas & CBM

(1) Ross Smith / Jefferies & Company estimates (2) Wood Mackenzie estimates 40 EnCap Investments L.P. NtNatural lG Gas E xpect tdtPled to Play an I ncreasi ngl y I mport ant tRlD Role Domesti tillcally Advancements in technology continue to expand natural gas resources that were not previously economic to recover

A 40% increase to total U.S. gas supply since 2006 due to the inclusion of shale- gas plays (1) Cleaner burningg( (less carbon-intensive) fuel than oil and coal Significantly less expensive than alternative energy sources

On average 30% less expensive than solar, biomass, geothermal and wind (2) Remains a key source of energy in the industrial sector and for electricity generation and home heating Considerable incentives exist to increase use of natural gas domestically

Abundant supply source – approximately 2,000 TCF of reserves (1)

Less dependence on foreign oil - America uses 22% of the world’s oil but only has 5%%pp of the population and 2% of world’s oil reserves (3)

(1) Potential Gas Committee (Colorado School of Mines) (2) Lazard estimates as of November 2009; Based on the average levelized cost of energy per $/MWh 41 (3) Energy Information Administration Oil

42 EnCap Investments L.P. Oil P ri ces After historic highs in mid-2008, oil prices followed economic activity down in the second half of the year Prices rebounded in early 2009 due to the weakness of the dollar, OPEC inventory cuts, and inflationary concerns Expectations over the longer term are for prices to settle in the $70 - $90/Bbl range; however, potential weakening of global economy could result in downward price movement

$160.00 )

ll $79.97/Bbl at $140. 00 9/30/10 $120.00 $100.00 $80.00 il Price($/Bb $60.00 OO $40.00 $20.00 Crude Crude $0.00 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Oil Spot Oil Strip

43 EnCap Investments L.P. CdOilOlkCrude Oil Outlook World petroleum demand is estimated to rebound from 2009 downturn and reach new highs in 2011 CddffllbliCurrent demand forecasts reflect a global economic recovery Consistent with higher futures pricing (+$80/Bbl)

Worldwide Petroleum Demand

80 BPD

75 Million

Source: Energy Information Administration 44 EnCap Investments L.P. Cru de Oil is a Glo ba l Commo dity Demand recovery is most evident in only the developing or Non-OECD (Organization for Economic Co-operation and Development) countries Demand has decreased in the developed economies and is projected to remain relatively flat through 2011

OECD and Non-OECD Petroleum Demand 55 Historical Projection 50

45 OECD

BPD 40 Non‐OECD 35 Million 30

Source: Energy Information Administration; Raymond James 45 EnCap Investments L.P. Oil P ri ces C onti nue to I nversel y C orrel ate to th e V al ue of th e U .S . D oll ar

$$$gUSD Crude Price Correlation to $USD Exchange Rate (1)

$150.00 0.90

$125.00 0.85 e) tt Ra $100.00 0.80 Bbl)

/ $75.00 0.75 €(Exchange

ro ($USD uu E

$50.00 0.70 $

USD $25.00 0.65

$0.00 0.60 Oct‐06 Jan‐07 Apr‐07 Jul‐07 Oct‐07 Jan‐08 Apr‐08 Jul‐08 Oct‐08 Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 Oct‐10

$USD / bbl Dollar to Euro Exchange Rate

(1) Energy Information Administration, xe.com 46 EnCap Investments L.P. SbSubstant ilRbial Rebound diUSOilDi in U.S. Oil Directed dAii Activity

U.S. Onshore Oil Directed Rig Activity (1)

Current (Sep ‘10) Oil/Gas Price Ratio: 18.29X 49% Horiz 51% Vert Peak (Oct ‘08) 600 Oil/Gas Price Ratio: 13.26X 31% Horiz 69% Vert Jan ’07 Jan ’08 500 Oil/Gas Price Ratio: 11.23X Oil/Gas Price Ratio: 12.73X 24% Horiz 27% Horiz 76% Vert 73% Vert Trough (May ‘09) 400 Oil/Gas Price Ratio: 15.81X 28% Horiz 72% Vert

Count 300

ig RR 200

100

Horizontal Oil Rigs Vertical Oil Rigs

(1) Baker Hughes; Smith Bits Data 47 EnCap Investments L.P.

Oil and Gas Mix

48 EnCap Investments L.P. ECEnCap Fun dVVI&VIIds V, VI & VII - Oil and G as Mi x (1)

Fund V Fund VI

37.0% 43.0% Gas Gas Oil Oil 57.0% 63.0%

Fund VII

57.0%

43. 0% Gas Oil

(1) Based on risked proved reserves volumes for the unrealized portfolio at a 10:1 MCF/BO ratio 49 EnCap Investments L.P.

EEIF

50 EnCap Energy Infrastructure Fund (EEIF) SOiSummary Overview In April 2008, EnCap made decision to separate the focus and origination of midstream opportunities into EEIF

Hired midstream investment staff with unparalleled expertise, contact base, technical skills, along with project development and deal sourcing capabilities

Closed fu nd in early 2010; aggregate commitments totaling $791 .6 million (1)

Have committed $281 million to five high-quality management teams

EEIF (As o f S e pte mbe r 30, 2010; $ in millio ns ) Total Realized Date of Total PV10 Proceeds & Initial Capital Realized Unrealized PV10 Unrealized Company Investment Commitment Invested Proceeds Value Value UlidIUnrealized Investments Cardinal M idstream Jan-09$ 48.5 $ 17.7 $ 0.2 $ 17.7 $ 17.9 Caiman Energy Feb-09 119.5 30.7 1.5 30.7 32.2 Meritage Midstream Nov-09 29.7 17.0 0.3 17.0 17.3 Rangeland Energy Nov-09 49.0 2.0 - 2.0 2.0 Caballo Energy May-10 34.3 1.1 - 1.1 1.1 $ 281.0 $ 68.5 $ 2.0 $ 68.5 $ 70.5

(1) Includes EEIF-dedicated co-investment vehicles and GP commitment 51 EnCap Investments L.P.

Biographies

52 EnCap Investments L.P.

David B. Miller (60) is a Managing Partner and co-founder of EnCap Investments L.P. From 1988 to 1996, Mr. Miller served as President of PMC Reserve Acquisition Company, a partnership jointly owned by EnCap and Pitts Energy Group. Prior to the establishment of EnCap, he served as Co-Chief Executive Officer of MAZE Exploration Inc., a Denver-based oil and gas company he co-founded in 1981. Mr. Miller began his professional career with Republic National Bank of Dallas, ultimately serving as Vice President and Manager of the bank’s wholly-owned subsidiary, Republic Energy Finance Corporation. Mr. Miller currently serves on the board of directors of several EnCap portfolio companies, including Cordillera Energy Partners, Eagle Oil & Gas Partners, Cornerstone Natural Resources, Talon Oil & Gas and Unconventional Resources. In 2004, Mr. Miller was appointed to the National Petroleum Council, an advisory body to the Secretary of Energy, and he is a member of the Board of Advisors of the Maguire Energy Institute. Additionally, he is a member of the Independent Petroleum Association of America, the Texas Independent Producers and Royyyalty Owners Association, the Independent Petroleum Association of Mountain States and the Dallas Wildcat Committee. Mr. Miller is a graduate of Southern Methodist University, having received Bachelors and Masters Degrees in Business Administration in 1972 and 1973, respectively. He serves on the Board of Trustees at Southern Methodist University and also is a member of the Executive Board of the Edwin L. Cox School of Business. Mr. Miller was named a Distinguished Alumnus of SMU’s Cox School in 2000.

Gary R. PtPetersen (63) isaMiManaging PtPartner and co-fdfounder of ECEnCap IttInvestments L.P. PiPrior to the ftiformation of ECEnCap in 1988, MMr. PtPetersen was a Senior Vice President and Manager of the Corporate Finance Division of the Energy Banking Group for Republic Bank Corporation from 1985 to 1988. His duties and responsibilities included mergers and acquisitions, financial advisory services and institutional fund raising activities for the energy industry. Prior to his position at Republic Bank, Mr. Petersen was an Executive Vice President and a member of the board of directors of Nicklos Oil & Gas Company in Houston from 1979 to 1984. Previously, Mr. Petersen was a Group Vice President in the Petroleum and Minerals Division of Republic Bank Dallas. He served from 1970 to 1971 in the U.S. Army in Washington D.C. as a First Lieutenant in the Finance Corps and as an Army Officer in the National Security Agency. Mr. Petersen holds M.B.A. and B.B.A. degrees in Finance from Texas Tech University and is a Distinguished Alumnus of Texas Tech. Mr. Petersen also has done post-graduate work at American University and the Stonier Graduate School of Banking at Rutgers University. He serves on the board of directors of several EnCap portfolio companies, including Escondido Resources II, Laredo Energy, Legado Resources, Manti Exploration and Mediterranean Resources. Mr. Petersen is also a member of the board of Plains All American, Inc. (NYSE: PAA) and EV Energy Partners (Nasdaq: EVEP). He is a member of the Independent Petroleum Association of America and the Houston Producers’ Forum.

53 EnCap Investments L.P.

D. Martin Phillips (56) is a Managing Partner of EnCap Investments L.P. Prior to joining EnCap in 1989, Mr. Phillips served as a Senior Vice President in the Energy Banking Group of NationsBank in Dallas, Texas. In his capacity as Manager of the U.S. / International Division from 1987 to 1989, he had responsibility for credit commitments totaling approximately $1 billion to a broad spectrum of energy-related companies. Mr. Phillips began his career in 1978 with RepublicBank Dallas (NationsBank Texas’s predecessor organization) and served in various senior energy banking positions, including Vice President and Manager of RepublicBank’s energy loan production office in Denver, from 1980 to 1985, and Senior Vice President and Division Manager in RepublicBank’s Houston office, from 1986 to 1987. Mr. Phillips holds M.B.A. and B.S. degrees from Louisiana State University. He is a member of the LSU College of Business Hall of Distinction. Mr. Phillips also attended the Stonier Graduate School of Banking at Rutgers University. Mr. Phillips serves on the board of directors of several EnCap portfolio companies, including Enduring Resources, Laramie Energy, O’BENCO II, OGX Holdings and Plantation Petroleum Holdings. He is a member of the Independent Petroleum Association of America, the American Petroleum Institute and the Houston Producers’ Forum.

Robert L. Zorich (60) is a Managing Partner and co-founder of EnCap Investments L.P. Prior to the formation of EnCap, Mr. Zorich was a Senior Vice President in charge of the Houston office of Trust Company of the West, a large, privately-held pension fund manager. Prior to joining Trust Company of the West, Mr. Zorich co-founded MAZE Exploration, Inc., serving as its Co-Chief Executive Officer. MAZE, headquartered in Denver, was actively involved in oil and gas exploration, development and reserve acquisitions. During the first seven years of MMr. Zih’Zorich’s career, hewasempldloyed by RbliRepublic NtiNational BkBank of DllDallas as a Vice PidtPresident and Div isi on Manager in the Energy DttDepartment. Approximately half of his tenure with Republic was spent managing the Bank’s energy office in London, where he assembled a number of major project financings for development in the North Sea. Mr. Zorich received his B.A. in Economics from the University of California at Santa Barbara in 1971. He also received a Masters Degree in International Management (with distinction) in 1974 from the American Graduate School of International Management in Phoenix, Arizona. He serves on the board of directors of several EnCap portfolio compp,anies, including Common Resources, Empresa Energy, Force 5 Energy, Marquette Exploration and Oasis Petroleum. Mr. Zorich is also a member of the board of directors of Enerplus Resources Fund (NYSE: ERF). He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum and Texas Independent Producers and Royalty Owners Association.

54 EnCap Investments L.P.

Jason M. DeLorenzo (39) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. DeLorenzo spent four years at ING Barings in New York working in Corporate Finance specializing in the energy industry. Previously, he was an Associate in the Energy Group at Wells Fargo Bank based in Houston from 1993 to 1995. Mr. DeLorenzo received a B.B.A. from The University of Texas at Austin. He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum, and serves on the board of directors of Destiny Oil & Gas, Enduring Resources, Laramie Energy, Legado Resources, Limestone Exploration, Marquette Exploration, Mediterranean Resources, O’BENCO II, Plantation Petroleum Holdings and Tracker Resource Development, all EnCap portfolio companies.

E. Murphy Markham IV (51) is a Partner of EnCap Investments L.P. Prior to joining EnCap in July 2006, he was the Managing Director and Group Head of JPMorganChase’s Oil & Gas Finance Group. Prior to the merger between JPMorgan and Bank One, Mr. Markham ran Bank One’s Oil & Gas Group.Mr. Markham started his banking career with RepublicBankin1981andremainedwiththebank and its ultimate successor Bank of America for 22 years, serving as a Managing Director in its Energy Banking Group. Mr. Markham has a B.B.A. in Finance from Texas Tech and an M.B.A. in Accounting from the University of Houston. He serves on the board of directors of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States and the Dallas Petroleum Club Wildcat Committee. He is an active member of the ADAM Energy Forum, the Dallas and Fort Worth Wildcatters, and serves on the board of directors of Cornerstone Natural Resources, Eagle Oil & Gas, Foothills Energy, Lobos Energy Partners, Lone Star Land & Energy and Talon Oil & Gas, all EnCap portfolio companies.

R. Jason McMahon, CFA (36) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 2003, Mr. McMahon served for three years as the Vice President of Corporate Development for ProsoftTraining. Previously he was an associate in the Energy and Corporate Finance group of Prudential Capital Group from 1996 to 2000. He received an M.B.A. from The University of Texas at Austin and a B.B.A. from Southern Methodist University.Mr. McMahon serves on the board of directors of Cordillera Energy Partners, Fossil Creek Resources, Grenadier Energy Partners, Protégé Energy, PetroEdge Resources Partners and Staghorn Energy, all EnCap portfolio companies. He is a member of the Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States, the Dallas Energy Finance Discussion Group and the ADAM Energy Forum, and is a CFA charterholder.

55 EnCap Investments L.P.

M. Sean Smith (49) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1990, Mr. Smith was a Vice President with the Corporate Banking Group of NCNB Texas Bank. Previously, he was a Senior Petroleum Engineer with Tenneco Oil Company. Mr. Smith received an M.B.A. in Finance from the University of Houston and holds a B.S. in Petroleum Engineering from Texas A&M University. He is a member of the Independent Petroleum Association of America, the Houston Producers’ Forum, and the Society of Petroleum Engineers, and serves on the board of directors of Empresa Energy, Navidad Resources, NCX Company, OGX Holdings, Phillips Energy Partners and Renaissance Petroleum, all EnCap portfolio companies.

Wynne M. Snoots, Jr. (49) is a Partner of EnCap Investments L.P. For the six months prior to joining EnCap in January 2001, Mr. Snoots was one of three partners of Paradigm Development & Trade, Inc., a private company focused on generating and monetizing exploration prospects located along the Gulf Coast of Louisiana. For the two years prior to his involvement in Paradigg,m, Mr. Snoots served as President of Magellan Exploration, LLC, a private portfolio company. He previously spent seven years with Enron Capital & Trade Resources in the Producer Finance Group, most recently as a Vice President. Mr. Snoots began his career as a petroleum engineer with Texas Oil and Gas Corporation. He received an M.B.A. from The University of Texas at Austin and holds a B.S. in Petroleum Engineering from the University of Oklahoma. Mr. Snoots is a member of the Independent Petroleum Association of America and the Houston Producers’ Forum, and serves on the board of directors of Bold Energy II, CornerStone Natural Resources, Crimson Energy Partners, Destiny Oil & Gas, Force 5 Energy, Ovation Energy, Peregrine Oil & Gas and Tempest Energy Resources, all EnCap portfolio companies.

Douglas E. Swanson, Jr. (38) is a Partner of EnCap Investments L.P. Prior to joining EnCap in 1999, Mr. Swanson served as a corporate lender at Frost National Bank and spent one year as a financial analyst at Southwest Bank of Texas. He received a B.A. in Economics and an M.B.A. from The University of Texas at Austin. Mr. Swanson serves on the board of directors of Core Minerals Holdings, Empresa Energy, Escondido Resources II, GulfTex Energy, Laredo Energy IV, Manti Expp,loration, Oasis Petroleum, Paladar Petroleum, Paloma Barnett, Red Arrow Energy and RiverStone Energy, all EnCap portfolio companies. He is also a member of the Houston Producers’ Forum, the Independent Petroleum Association of America and the Texas Independent Producers and Royalty Owners Association.

56 EnCap Investments L.P.

Miscellaneous Slides

57 Progression of Unconventional Resource Plays Acreage Values Increase as Repeatability of Strong Economics are Demonstrated

Acreage Trading Based on Development Plan Repeatable Development Model ($30,000+/acre) Shift to “Manufacturing” Process (Lower F&D) Total/CHK: 68,000 acres @ $33,333/acre (Barnett)

PdTCProved Type Curve Ext ensi ve H ori zont al D rilli ng BG/EXCO: Defined “Core” Areas 42,000 acres @ Enhanced IP’s & EUR’s / Strong $25,119/acre Operational Enhancements Drive Economics (Haynesville) Economics Mitsui/APC: 100,000 acres @ $14 ,000/acre (Marcellus) Firm Concept Established Horizontal Drilling Established Strong Initial Production Rates BP/Lewis: Early Well Results / Strong 40,000 acres @ Continued Learning Curve on Drilling & Completion Economic Framework $4,500/acre Techniques (Eagle Ford)

Williams/Rex: 22,000 acres @ $1,500/acre Play Analysis Geological Interpretation (Marcellus) Economic Estimates Core Analysis & Vertical Well Testing Reservoir Simulation – Understanding of “Resource in Place” Acreage Trading at Low Values ($250/acre)

58 Progression of Unconventional Resource Plays Operational Enhancements Drive Improved Well Performance & Economics Brigham Exploration’s Williston Basin drilling results indicative of improved well performance and economics in unconventional resource plays

(1) Utilizing well estimates as of March 2010 (2) BEXP internal estimate

Source: Brigham Exploration March 2010 Company Presentation Results demonstrate improved Bakken / Three Forks well progression 59 EnCap Investments L.P. Fdd%fCFunded % of Commi tment O utstandi ng

EnCap Equity Funds III ‐ VII Funded % of Commitment Outstanding 100%

75% Fund V Fund VI Fund VII Fund III 50% Fund IV

25%

0% Outstanding ‐25% nt ee ‐50%

‐75% Commitm

% ‐100%

‐125%

‐150%

‐175% (1) AlActual numbers thhhrough 8‐10, projijections thfhereafter bdbased on pldlanned sales and histor ic averages, wihith all numbers net of fees and carries

60 EnCap Investments L.P. SfPiFdTifFdiiStage of Prior Funds at Time of Fundraising Existing Fund VI realizations outpace Fund V realizations during Fund VII capital raise Current Fund VII invested capital ahead of Fund VI invested capital during Fund VII raise

Realized Investments at the Time of Fundraising 250% 247% 221% Fund II 200% 178% 169% l / Size Fund 151% Fund III aa 150% 114% Fund IV 100% Fund V

50% Fund VI 27% 21%

Realized Capit Realized 9% 1% 0% 2% Fund VII 0% Fund V Fund VI Fund VII Fund VIII Fundraising Kickoff Date March 2004 March 2006 May 2007 Jan. 2010 Invested Capital at the Time of Fundraising 120% 110% 104% 99%103% 103% 100% Fund II 88% und Size

FF 78% 77% 80% FdIIIFund III

60% Fund IV 43% Fund V 40% 32% 26% Fund VI 20% 11% vested Capital / Fund VII nn

I 0% Fund V Fund VI Fund VII Fund VIII Fundraising Kickoff Date March 2004 March 2006 May 2007 Jan. 2010

61 EnCap Investments L.P. Track Record – Investment Returns Across Multiple Price Cycles

Realized Investment Returns versus Oil and Gas Prices

Laredo III Paloma Barnett Laredo II Petrohawk Empresa II Common LdILaredo I Plantation II Medicine $100 Bow Riverbend 100% Returns plotted at Initial Stroud Empresa Investment Date $90 OGX 90% Laramie RiverStone $80 80%

Sawtooth Sierra NCX $70 PAA 70% Plantation I San Juan Ovation I Dallas Production Oasis Lone Star $60 NGL 60% Staghorn BOE EdidIEscondido I IRR

$/ $50 50% Matrix Cordillera I Phillips Royalty

and PetroQuest Plantation III Copano EV Energy $40 40% Bold PetroEdge

$/BO CERES Bargo First Permian Protege GFI O’Benco $30 Cheniere PAA 30% Plains Resources Cordillera II American Coastal Benz Nautilus Lobos $20 Marquette 20% Sharpe 3 TEC Crimson Breitburn Core $10 10%

Harken Crimson III $0 0% Jan‐97 Jan‐98 Jan‐99 Jan‐00 Jan‐01 Jan‐02 Jan‐03 Jan‐04 Jan‐05 Jan‐06 Jan‐07 Jan‐08 Jan‐09 Jan‐10

62 EnCap Investments L.P. CifDlTComparison of Deal Terms

Weighted Average EnCap Returns by Commitment Year - 4 Year Exit

5.0x

4.5x

4.0x

353.5x Range bars show most favorable and least favorable deal terms for EnCap during each period. 3.0x

2.5x nCap ROI nCap EE 2.0x 4.07 4.05 3.85 3.83 3.86 3.89

3.34 3.36 3.24 3.19 3.25 3.23 1.5x 2.65 2.61 2.59 2.54 2.60 2.57 1.0x 1.86 1.91 1.89 1.84 1.86 1.87

0.5x 0.99 1.07 1.05 1.00 1.00 1.00

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x Total Deal ROI

Note: Assumes capital is invested in ten equal amounts, quarterly, over two and a half years. '04 Wtd. Avg '05 Wtd. Avg '06 Wtd. Avg '07 Wtd. Avg '08 Wtd. Avg '09 Wtd. Avg

* Some deal terms are not included in the chart above due to the atypical nature of these transactions; however, excluding these deals has a negligible impact on the chart 63 EnCap Investments L.P. En Cap Fun d IRR s vs. Energy In dex IRR

EnCap Funds III, IV and V have substantially outperformed the S&P 500 Energy Index over the life of the funds All three funds have generated >2x return vs. the Energy Index

EnCap Fund IRRs vs. Energy Index IRR as of 6/30/2010

EnCap EnCap Energy EnCap Gross Net Index Multiple Over Fund IRR IRR IRR(1) Index Fund III 30.3% 23.5% 8.5% 2.8x Fund IV 98.7% 67.3% 28.6% 2.3x Fund V 39.8% 28.4% 9.6% 2.9x

(1) Assumes purchase and sale of the S&P Energy Index along side Fund investments and realizations

64 EnCap Investments L.P. Footnotes 1. Represents the sum of net proceeds generated from dispositions and distributions of cash, dividends and interest. 2. IRRs are calculated on the basis of the actual timing of investment inflows and outflows, aggregated monthly, and the return is annualized. IRRs are based on cash flows before deduction for management fees, carried interest and other fees or expenses, where applicable. 3. EnCap employs a valuation methodology that is consistent with industry standards for valuing oil and gas-related investments and consistent with SFAS No. 157, “Fair Value Measurements.” Significantly, all investments are classified as Level 3 as defined by SFAS 157. For provedoilandgas properties, the aggregate of all future cash flows attributable to EnCap’s ownership in proved oil and gas reserves, as estimated by an independent, third- party engineering firm, are discounted at a weighted average cost of capital of 10% to yield a present value (PV10), assuming oil and gas prices based on the September 30, 2010 NYMEX quoted strip. Oil and gas prices are subject to a ceiling equal to 120% and a floor equal to 80% of the trailing five-year average NYMEX. Prior to discounting the future cash flows at 10%, PDNP (Proved Developed Non-Producing) cash flows are generally risked 20% and PUD (Proved Undeveloped cash) flows are generally risked 40%. Probable and possible oil and gas reserves considered by market participants are generally risked 80% and 90%, respectively. Unevaluated oil and gas leaseholds and other operating assets, such as gathering systems and processing plants, are valued in consideration of the original acquisition price and more recent public or private transactions in similar assets. 4. Publicly quoted securities, restricted securities and subordinated securities are valued based on a 0%, 10% and 20% discount, respectively, to the quoted closing price at September 30, 2010.

65 EnCap Investments L.P. Certain Risks / Disclosures This confidential presentation (this “Presentation”) is qualified in its entirety by reference to the Confidential Private Placement Memorandum of EnCap Energy Capital Fund VIII, L.P. (together with its affiliated funds, the “Fund”) (as modified or supplemented from time to time, the “Memorandum”), the agreement of limited partnership of the Fund, as may be amended and/or modified from time to time, and the subscription agreement related thereto, each of which should be reviewed carefully before purchasing a limited partner interest in the Fund (the “Interest”). Statements in this Presentation are made as of the date on the cover page hereof unless stated otherwise, and neither the delivery of this Presentation at any time nor any sale of the Interest shall under any circumstances create an implication that the information contained herein is correct as of any time after such date. This Presentation is not intended to be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete. The contents herein are not to be construed as legal, business, or tax advice,and each prospective investor should consult its own attorney, business advisor, and tax advisor as to such advice. In considering any performance information contained herein, prospective investors should bear in mind that past or projected performance is not necessarily indicative of future results, and there can be no assurance that the Fund will achieve comparable results or that target returns, if any, will be met. Any investment in the Fund is subject to various risks and a description of certain risks involved with an investment in the Fund can be found in the Memorandum; such risks should becarefully considered byy ppprospective investors before they make any investment decision. Such risks may include, without limitation, the following: Lack of Liquidity of Investments – The Fund’s investment portfolio will consist primarily of securities issued by privately held companies. Generally, there will be no readily available market for a substantial number of the Fund’s investments. Finance and Business Risk – An investment in the Fund involves a high degree of business and financial risk that can result in substantial losses. There can be no guarantee or representation that any of the Fund’s objectives will be achieved. Limited Transferability of Interests in the Fund – There will be no public market for the Interests, and none is expected to develop. There are substantial restrictions upon the transferability of the Interests under the governing agreements of the Fund and applicable securities laws. Dependence on General Partner – Investors generally have no right or power to take part in the management of the Fund, and as a result, the investment performance of the Fund will depend entirely on the actions of the General Partner. Leverage – The use of leverage by the Fund or its portfolio companies may increase the exposure of the Fund (and investors) to adverse factors such as significantly rising interest rates, downturns in the economy or deterioration in the condition of any given portfolio company. This Presentation does not constitute an offer or solicitation in any state or other jurisdiction to subscribe for or purchase any EnCap Investments L.P. (“EnCap”) and its affiliates reserve the right to modify any of the terms of the offering and the Interest. Recipients of this Presentation agree that EnCap, its affiliates and their respective partners, members, employees, officers, directors, agents, and representatives shall have no liability for any misstatement or omission of fact or any opinion expressed herein. Each recipient further agrees that it will (i) not copy, reproduce, or distribute this Presentation, in whole or in part, to any person or party (including any employee of the recipient other than an employee directly involved in evaluating an investment in the Fund) without the prior written consent of EnCap; (ii) keep permanently confidential all information contained herein that is not already public; and (iii) use this Presentation solely for the purpose set forth in the first paragraph above. Park Hill Group LLC makes no representation or warranty,express or implied, as to the accuracy or completeness of the information contained herein. Nor do they have any obligation to update the information contained herein. Nor should anything contained herein be relied upon as a promise or representation as to past or future performance.