Louisiana Haynesville Shale Report May, 2011

Louisiana Haynesville ShaleR E P O R T

S u m m e r , 2 0 1 1

S P O N S O R E D B Y C A D D O M I N E R A L S I N C . - C A D D O M I N E R A L S . C O M

2

Well Activity

Louisiana Haynesville Shale Report

Benton

Shreveport

MansfieldCoushatta

Wells Currently Producing Wells Not Yet Producing Wells Permitted

3096261,072

Permits for New Haynesville Shale Wells300

250

200

150

100

50

0Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011E

Haynesville Shale“Core”

3

What Landowners Should Expect for 2011

“As a mineral owner, what should I expect in 2011?”

Low Natural Gas Prices Abundant natural gas supplies, caused by development of new shale plays, will continue to depress U.S. natural gas prices.

Louisiana Haynesville Shale Report

Drilling in the Haynesville Shale is expected to decrease in 2011 due to continued low natural gas prices and competition from more

pro�table oil plays. A�er 2 years of steady growth, permits for new Haynesville Shale wells peaked in September, 2010 and then fell

by 21% in early 2011. Well operators are now only drilling wells that are required to hold their leases. They will not drill development

wells until natural gas prices see a substantial increase. Additionally, many leases will expire un-drilled, and will not be re-leased because

the Haynesville Shale Core is shrinking.

Year

Pric

e of

Nat

ural

Gas

($)

2007 2008 2009 2010 2011

Natural Gas Prices (U.S.)14

12

10

8

6

4

2

0

After 6 Months

1 2 3 4 5 6 7 8 9 10 11 12

Months of Production

69% Decline

Haynesville Shale Decline Curve

After 3 Months51% Decline

20,000

10,000

15,000

5,000

0Pr

oduc

tion

Rate

MCF

/Day

82% DeclineAfter 12 Months

Declining Production RatesThe production from Haynesville Shale wells will decline dramatically during the 1st year. The average well declines 69% over the 1st

6 months, and 82% over the 1st year.

Only 1 Well per Section Haynesville Shale wells are not pro�table at current natural gas prices. Until well economics justify drilling new wells, operators will

only drill 1 well per section in order to hold the leases.

Lease Expirations Many leases outside of the Core will be allowed to expire, and may not be re-leased because of poor well economics.

Smaller Royalty Checks Royalty owners will see smaller royalty checks as the 1st well in the section declines, and no additional wells are drilled.

Lower Lease Bonuses Landowners with land located outside of the “Core” should not expect to be re-leased. Lease bonuses inside of the Core will be much

smaller than during the leasing boom of 2008-2009.

4

Landowner Risks

Hidden Risks of owning minerals in the Haynesville Shale

Louisiana Haynesville Shale Report

Competition from other Shale plays

Chattanooga

Eagle Ford

Rio GrandeEmbayment

Texas-Louisiana-Mississippi Salt Basin

Uinta Basin

Devonian (Ohio)Marcellus

Utica

Appalachian Basin

Antrim

Barnett

Bend

New Albany

Woodford

Barnett-Woodford

Lewis

Hilliard- Baxter-

Mancos

Excello-Mulky

Fayetteville

Floyd-Neal

GammonCody

Haynesville-Bossier

HermosaMancos

Pierre

Conasauga

Pearsall-Eagle Ford

MichiganBasin

Ft. Worth Basin

Palo DuroBasin

PermianBasin

IllinoisBasin

AnadarkoBasin

Greater Green River Basin

Cherokee Platform

San JuanBasin

WillistonBasin

Black WarriorBasin

Ardmore Basin

Paradox Basin

RatonBasin

Maverick Sub-Basin

Montana Thrust

Belt

Marfa Basin

Valley and Ridge Province

Arkoma Basin

Forest City Basin

PiceanceBasin

0 200 400100 300

Miles

±Stacked Plays

Shale Gas Plays Basins

Deepest / Oldest

Shallowest / Youngest

Major US Shale Plays

The oil and gas business is inherently risky, and mineral owners in the Haynesville Shale are not immune to the risks that may impact the value of their minerals, including…

If new, emerging shale plays are more pro�table than the Haynesville, then well operators will choose to drill in those plays rather than in the Haynesville. (see map above)

Low Natural Gas PricesLow natural gas prices will continue to suppress the value of Haynesville Shale minerals (see chart on page 3).

RegulationsTighter regulations on hydraulic well fracturing, spurred on by concerns about protecting drinking water, could be devastating for the Haynesville Shale by driving up the cost of the wells, and reducing their productivity.

Well OperatorsWell operators are in total control of the well, including how it is drilled and produced. A poor operator can greatly diminish the value of the minerals.

Shrinking CoreThe Haynesville Shale “Core”, which is the area of better production, has shrunk as operators drill more wells. Acreage outside of the Core is in danger of not being drilled, and leases may be allowed to expire.

5

Maximizing Value

“I feel good about my Mineral Ownership, but I’d also like to better understand my options.”

Louisiana Haynesville Shale Report

Minerals are a valuable, but risky, investment. Landowners can protect the value of their minerals, and enhance their personal

situation, by converting their minerals into cash, and by using the proceeds to...

Buy stocks and bonds

Fund retirement

Pay for education

Diversification

more value in their minerals than is prudent, and they should consider

re-balancing their portfolio by converting some of their minerals into

other investments.

Fixed Income(Bonds/Pension)

Domestic Equities(Stocks)

Foreign Equities

Cash

(Minerals/Land)

Diversified Portfolio

Taking Control

Landowners can take control of their minerals by asking themselves, "Do I have plenty of cash with no immediate

If "Yes", then the mineral owner can feel good about retaining their minerals.

If "No", then the mineral owner should consider selling all, or a portion, of their minerals, and diversifying their portfolio.

Should I Sell my Mineral Rights? You should consider selling your mineral rights if it makes good �nancial

sense for you to do so. Get more information on selling your mineral rights at

CaddoMinerals.com. You can also learn about selling royalties and get tips on

leasing your land.

6

Keys to Success

Louisiana Haynesville Shale Report

Keys to a Successful Mineral TransactionA successful mineral sale requires that both the Buyer and Seller are happy with the result.

Fair PriceAgreeing on a fair price is a critical aspect of a successful mineral transaction. Buyers are typically more knowledgeable and objective about the real value of the minerals, while Sellers o�en react to their emotions and to local hearsay about valuation. Good communication is required to bridge the information gap to allow a transaction to occur.

TitleEstablishing that the seller has good title is key to a mineral sale. The Buyer will research the real property and probate public records to establish “record title”. If record title cannot be established, then other steps may be necessary in order to verify ownership and close the transaction.

E�cient ClosingOnce a sales price has been agreed to, the Buyer should move quickly to complete the title review process and close the transaction.The payment should be in the form of a bank wire or check. Bank dra�s o�en take longer.

Good Faith DealingIt is imperative that both Buyer and Seller deal in good faith in order to complete a successful transaction.

How Caddo Minerals Can Help YouMinerals and Royalty BuyerCaddo Minerals is an active buyer of minerals and royalties, focusing on the Haynesville Shale.

LeasingCaddo Minerals can assist landowners in getting their land leased.

Knowledge and ExpertiseOur professionals are experts and knowledgeable about oil and gas minerals and royalties in the Haynesville Shale. Because of our deep knowledge about the minerals market, we are able to pay top dollar.

Customer ServiceWe are committed to serving our customers with the professionalism and respect that they deserve. We move quickly, and we “go the extra mile” for our customers.

CADDO MINERALSa leader in Louisiana’s

Haynesville Shale

Cash for Minerals & Royalty

No-Hassle Quote

Phone - Local - 318-490-0427

Email - info@caddominerals.com

Online - www.CaddoMinerals.com

Toll Free - 877-620-7717

Leasing Assistance

7

Questions & Answers

Common Questions about Minerals & RoyaltyWhat are minerals? Minerals are everything below the surface of the land, including oil, gas, and other hard minerals. Minerals do not include subsurface well water.

What is royalty? Royalty is the share of revenue that comes to the landowner from the sale of oil and gas produced from under their land or Unit. The royalty percentage is set out in the oil and gas lease.

Can minerals and royalty be separated from the land? Yes, a landowner can sell their minerals or royalty while retaining the surface of the land.

Can a portion of the minerals or royalty be sold? Yes, a landowner can sell any portion (eg ¼ or ½) of their minerals or royalty, and retain what they do not sell.

Louisiana Haynesville Shale Report

What about inherited property that is shared with other family members? This is very common, and any family member can sell their minerals or royalty without having any e�ect on the other family members.

What is a Net Mineral Acre? The formula for Net Mineral Acre is ownership interest times tract size. For example, if 2 brothers each own a 1/2 interest in a 2 Acre tract, then each brother would own 1 Net Mineral Acre.

What about Un-leased Land? Minerals and royalty have value, and can be sold, whether the land is leased or un-leased.

What is a Haynesville Shale Unit? In Louisiana, Haynesville Shale wells are assigned to a 640 Acre Unit, and revenue is allocated to each landowner based on their ownership in the Unit and their royalty percentage.

Talk to Caddo Minerals

Have you considered the benefits of Monetizing your Minerals?

Fast Closing

Lump Sum Payment

Local and Trustworthy

(318) 490-0427 info@CaddoMinerals.com

Contact Us

www.CaddoMinerals.com

Assistance in LeasingThe leasing boom is over in the Haynesville Shale, and oil companies are going to allow many leases to expire over the coming year. Having an active lease is essential for the Landowner to maximize value from his minerals. Identifying the best oil company to pick up the open lease, and negotiating favorable terms for the lease, requires extensive expertise and market knowledge.

We Can Help Caddo Minerals can help you get your minerals leased. We haveyears of experience dealing with Oil and Gas companies, and havebeen successful in getting the best deal for our clients.

Answers If you decide to go at it alone, Caddo is more than happy to sharea friendly conversation and lend you advice on leasing yourproperty. We’re all in this together!