IPAA Private Capital Conference
Stroud Energy, Inc.
Patrick J. Noyes
January 2007
Early History
 Formed in 1985 with the purchase of the Stroud Prue Sand Unit in
Oklahoma. In 1995, purchased the Apache Canyon field (coal bed
methane) in Raton Basin of Colorado.
 In 2000, relocated company to Ft. Worth, hired new management team
and refocused efforts on horizontal drilling program in Austin Chalk
 Entered into a $50MM mezzanine facility with Mirant (subsequently
increased to $100MM) to finance Austin Chalk development
 During 2002, Board decided to replace management team in order to
take the company in a new direction
 Mr. Noyes joined as President and CEO in February 2003 with a two
point strategy for growth:
– Restructure the capital
– Diversify the asset base
1
New Management Team
 At 2002YE Stroud had:
– Total Proved Reserves – 72.9 Bcfe (99+% Austin Chalk)
– Daily Production – 12.5 MMcfe per day (net to Stroud)
– $64MM of Mezzanine Debt
 Management developed a new strategy to help diversify and grow the company:
– Continue successful drilling in Austin Chalk
– Diversify into new areas where management has expertise (Barnett Shale and East Texas)
through reserve and acreage acquisitions
– Apply advanced drilling and completions technology
– Generate large inventory of drilling locations
 In June 2003, Stroud purchased the mezzanine facility from Hydrocarbon
Capital, largely financed by a Wells Fargo credit facility
 Stroud was fully drawn on our two facilities with Wells Fargo – no “dry powder”
 In order to fund growth capital for expansion into new areas, the Board decided
to bring in a major private equity partner
2
Private Capital Provider (EnCap Investments)
 In January 2004, EnCap Energy Capital Fund IV invested $27 million in
the form of redeemable preferred stock
 EnCap’s equity facilitated the expansion into new areas and accelerated
the drilling program
 Stroud chose EnCap Investments for several reasons:
– Capacity to pursue large acquisitions
– High-level strategic/corporate guidance
– Risk management
– Source of opportunities / deal flow
 Ultimately partnership with EnCap allowed management to achieve its
objectives
 The EnCap/Stroud Partnership was helpful from a risk management
standpoint but supportive of management recommendations on drilling
and acquisitions
3
Stroud Picture (2002)
($000s)
Total Proved PV10%
TP Reserves (MMcfe)
Production (MMcfe/d)
Cash
2002 YE
$129,404
72,893
12.5
$1,198
Total Debt
$64,276
Total (Book) Equity
$(2,890)
Net Asset Value
$66,326
 Highly leveraged with Mirant mezzanine facility
 Board decided to replace the management team and move in a new direction
4
Stroud Picture (2002-2003)
($000s)
Total Proved PV10%
2002 YE
2003 YE
$129,404
$204,727
72,893
83,171
12.5
21.6
$1,198
$6,904
Total Debt
$64,276
$35,624
Total (Book) Equity
$(2,890)
$39,842
Net Asset Value
$66,326
$176,007
TP Reserves (MMcfe)
Production (MMcfe/d)
Cash
 In 2003, Stroud experienced downward revisions to reserves in the Austin
Chalk, specifically Washington, Burleson and Fayette Counties
 As a result, management redirected capital resources to Grimes County (Austin
Chalk) and East Texas
5
Stroud Picture (2002-2004)
($000s)
Total Proved PV10%
2002 YE
2003 YE
2004 YE
$129,404
$204,727
$210,465
72,893
83,171
117,578
12.5
21.6
26.9
$1,198
$6,904
$2,721
Total Debt
$64,276
$35,624
$21,800
Total (Book) Equity
$(2,890)
$39,842
$49,373
Net Asset Value
$66,326
$176,007
$191,386
TP Reserves (MMcfe)
Production (MMcfe/d)
Cash
 In 2004, Stroud drilled some of the most productive Austin Chalk wells in
company history
 The 2004 values include a $35MM acquisition of Barnett Shale properties with
23.5 Bcfe of proved reserves (the transaction closed in early 2005)
6
Stroud Picture (2002-2005)
($000s)
Total Proved PV10%
2002 YE
2003 YE
2004 YE
2005 YE
$129,404
$204,727
$210,465
$479,097
72,893
83,171
117,600
159,383
12.5
21.6
26.9
29.7
$1,198
$6,904
$2,721
$569
Total Debt
$64,276
$35,624
$21,800
$71,821
Total (Book) Equity
$(2,890)
$39,842
$49,373
$155,368
Net Asset Value
$66,326
$176,007
$191,386
$407,845
TP Reserves (MMcfe)
Production (MMcfe/d)
Cash
 In 2005, Stroud raised $173MM through a 144A private placement
– Proceeds were used to pay down bank debt, give liquidity to shareholders and
general corporate needs
 The 2005 values include a $61MM acquisition of Barnett Shale properties with
27.9 Bcfe of proved reserves (the transaction closed in early 2006)
7
Core Areas Of Operations
Ft. Worth Basin/Barnett Shale
(70 Bcfe)
East Texas (16 Bcfe)
Harrison, Panola and Rusk Counties
Denton, Johnson, Parker and Tarrant
Counties
Pro Forma As of 12/31/05:
Total Proved Reserves:
Natural Gas:
Pre-tax PV-10:
R/P Index: (1)
Operated:
159 Bcfe
96%
$479 MM
14.7
99%
Central Gulf Coast (72 Bcfe)
Core Areas (Pro forma as of
Gross Developed Acres:
Gross Undeveloped Acres:
Drilling Locations:
12/31/05):
41,059 (34,981 net)
37,446 (29,065 net)
204 (65 PUDs)
Brazos, Burleson, Fayette, Grimes,
Lee and Washington Counties
1) Stroud statistic calculated as total proved reserves of 159.4 Bcfe / 2005 production of 10.8 Bcfe.
8
Core Operations – Central Gulf Coast
Austin Chalk Properties
Key Statistics
 Production is in the Giddings Field from the Austin
Chalk formation
Brazos
Burleso
Grimes
Lee n
Washington
Fayette
 Interest in 50 gross wells (41.6 net), with average
working interest of 83%
 41 total drilling locations (25 proved undeveloped
drilling locations)
 ~2.4 Bcfe average reserves per completion –
Grimes County
 Average drilling & completion cost of $3.9MM –
Grimes County
Reserves (72.4 Bcfe)
 Developed acres: 30,162 gross (26,365 net)
 Undeveloped acres: 13,400 gross (11,253 net)
13%
53%
34%
PDP
PDNP
PUD
9
Core Operations – Ft. Worth Basin
Barnett Shale Properties
Denton
Parker
Tarrant
Johnson
Reserves (70.3 Bcfe)
Key Statistics
 Largest natural gas field in Texas
 Advanced drilling and completion techniques
resulted in increases in productivity and reserves
 Interest in 50 gross wells (41.1 net), with average
working interest of 82%
 84 total drilling locations (24 proved undeveloped
drilling locations)
 ~2.2 Bcfe average reserves per horizontal
completion
 Avg. horizontal drilling & completion cost of
$2.5MM
 Developed acres: 5,561 gross (4,788 net)
 Undeveloped acres: 14,405 gross (11,618 net)
67%
33%
PDP
PUD
10
Core Operations – East Texas
East Texas Properties
Key Statistics
 Cotton Valley Sand formation was primary target in
East Texas Basin
Harrison
 Interest in 20 gross wells (13.5 net), with average
working interest of 68%
Rusk Panola
 79 total drilling locations (16 proved undeveloped
drilling locations)
 ~1.3 Bcfe average reserves per completion
 Average drilling & completion cost of $1.4MM
 Developed acres: 4,694 gross (3,640 net)
Reserves (16.4 Bcfe)
 Undeveloped acres: 2,290 gross (1,837 net)
79%
2%
19%
PDP
PDNP
PUD
11
Reserve Base Overview
Total Proved Reserves (Bcfe)
Reserves by Area
45%
180
160
140
120
100
80
60
159.4
45%
117.6
72.9
Gulf Coast
83.2
Ft. Worth
10%
East Texas
Reserve Breakdown
40
20
-
11%
2002
2003
2004
2005
46%
PDP
43%
PDNP
PUD
96%
4%
Gas
Oil
12
Production Profile
Total Production (MMcfe/d) (1)
38.6
40.0
30.0
26.9
29.7
21.6
20.0
12.5
10.0
2002
2003
2004
2005
2006E
1) Estimate was management projection.
13
Operational Performance
 Stroud’s accomplishments under new management:
– Drilled 51 out of 51 successful wells (through December 31, 2005)
– Production increased 140% from 12.5 MMcfe/d in 2002 to 29.7
MMcfe/d in 2005
– Reserves grew 120% from 72.9 Bcfe in 2002 to 159.4 Bcfe in 2005
– Developed 204 drilling locations and 65 PUDs on properties
– Acquired over 51 Bcfe of proved reserves and $104MM of PV10% value
in the Barnett Shale
14
144A Offering (Results)
Issuer:
Stroud Energy, Inc.
Offering Type:
144A/Reg D Private Placement Offering
Shares Offered:
Shares Sold
Offering Size:
Actual Size:
Offering Price:
Actual Price:
Pro Forma Market Capitalization:
Actual PF Market Capitalization:
Book Running Placement Agent:
4.7 MM primary, 2.7 MM secondary
6.3 MM primary, 4.6 MM secondary
$111,000,000
$173,000,000
$14.00 - $16.00
$16.00
$220 million (mid-range)
$260 million (top of range)
Raymond James
Co-Placement Agents:
A.G. Edwards, Petrie Parkman
15
Range Resources Merger
 After the closing of the 144A offering, but prior to the initial
public offering, Range approached Stroud regarding a potential
merger
 Range’s offer (cash and/or stock) valued Stroud’s stock at
$350MM (~$20.50/share)
– Stroud’s 144A shareholders, who purchased stock for $16.00 per share 9
months earlier, realized a 28% holding period return on their investment
 Stroud’s Barnett Shale assets were a strategic fit for Range,
increasing its Barnett Shale acreage to approximately 46,000 acres
(gross) and adding 182 drilling locations
– With Stroud’s additional leasehold, Range planned to add 3 more rigs in
the Barnett Shale
16
Equity Returns
 When EnCap entered the picture in January 2004, the common
equity of the Stroud shareholders was valued at $35MM
 At the 144A offering in September 2005, these shareholders
received $68MM from the sale of secondary shares and retained
5.4 million shares of common stock
 Coincident with the Range merger, the original Stroud
shareholders exchanged their 5.4 million shares for cash and/or
stock worth $111MM
January 2004 Valuation
$35MM
144A Proceeds
$68MM
Range Merger Proceeds
$111MM
Common Equity ROI
5.1x
17
Summary
 Successfully implemented initial strategy
– 100% drilling success rate in all areas
– Built meaningful positions in three attractive core areas of operation
– Enhanced reserve recoveries by implementing advanced technologies
– Created large inventory of drilling prospects with demonstrable success
 EnCap investment facilitated expansion into Barnett Shale and East
Texas and accelerated drilling program
– Risk management and capital markets expertise invaluable to growth and
ultimate exit
 Increased value and improved liquidity for shareholders through 144A
offering
 Exited in opportune market, creating significant value for shareholders
and management
18
IPAA Private Capital Conference
Stroud Energy, Inc.
Patrick J. Noyes
January 2007