IPAA’s 12th Annual Private Capital Conference

Exit Strategies – LLCs, MLPs Royalty Trusts

Rick Brice – Director, Energy Investment Banking

January 19, 2006

2

Exit Strategies – LLCs, MLPs and Royalty Trusts

Linn Energy, LLC IPO Overview

Pros and Cons of a Public Structure

Evolution of the Structure

US Royalty Trusts

Canadian Oil & Gas Trusts

MLPs

LLC Structural Advantages

Approaches to Valuation

Keys to Success

RBC Commercial

E&P Yield Vehicle Discussion Topics

3

Linn Energy, LLC IPO Overview

Initial Public Offering

$246,750,000Linn Energy, LLC

Joint Book-Running Managers

RBC Capital Markets Lehman Brothers

A.G. Edwards

UBS Investment Bank

KeyBanc Capital Markets

Raymond James

Initial Public Offering

$246,750,000Linn Energy, LLC

Joint Book-Running Managers

RBC Capital Markets Lehman Brothers

A.G. Edwards

UBS Investment Bank

KeyBanc Capital Markets

Raymond James

First E&P LLC, and IPO of 2006

Full size deal priced at the top of the range (11,750,000 units at $21.00 / unit)

Valuation

• 10.4x EV / 2006E EBITDA

• $3.85 EV / Proved Reserves (Mcfe)

Over one year from conception to pricing

8-day roadshow

• 9 cities

– 13 retail stops

– 35 one-on-ones

• 70% Retail / 30% Institutional

– Many times oversubscribed on both fronts

4

Pros & Cons of a Public Vehicle

Strong valuation and cost of capital advantage

Acquisition currency

Greater market awareness of acquisition appetite and capability

Financing flexibility

Direct incentive for management and employees and strong management retention tool

Enhanced liquidity options for sponsors

Public company requirements and cost

SEC IPO process and ongoing filing requirements

Sarbanes-Oxley compliance

Continuous communication with investment community

Increased overhead

K-1 filing issue

ProsPros ConsCons

5

U.S. Appetite for Energy Income Securities

The average foreign ownership of the six Canadian Trusts listed on U.S. exchanges is approximately 60%

Canadian only exchange listed trusts average approximately 28% foreign ownership

15%

49%

72%74%75%

85%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Provident PrimeWest Petrofund Enerplus Pengrowth Harvest

$2,481

$2,847

$2,317

$6,658

$4,032

Market Cap (C$)

$3,585

Source: Scotia research “Oil & Gas Royalty Trust” from October, and internal RBC estimates.

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Linn EV $740 mil., with strong growth characteristics

Linn RLI of 29 years with payout ratio of 74%

6+ years of organic drilling growth + ability to make acquisitions

94% hedged to protect initial distribution, future volumes hedged to protect downside and participate in upside

Growth through leverage, less equity dilution

Growth capex – 29% organic growth + ability to make acquisitions

Acquisitions below radar of other suitors

First mover advantage

Linn Energy, LLC

Average RLI for the group (34) 8.1 years (12.9-4.1) with payout ratio of 68% (98%-32%)

Trusts have historically relied on acquisitions to sustain and grow acquisitions

Canadian acquisition market expensive and scarce

Tax withholding for US investors

Canadian Oil & Gas Trusts

Largest trust EV $2.2 billion, median of group $300 million, smallest $60 million, no growth structure

Average reserve life of 11 years

No ability to make acquisitions

No hedging

No debt

No growth capex

Last trust formed in 1999, starting to see conversions

US Royalty Trusts

LLC vs. US and Canadian Oil & Gas Trusts

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(1) Source: RBC CM. Includes Apache, Anadarko, Burlington, Chesapeake, Devon, EOG, XTO, Denbury, Quicksilver, Pioneer, Southwestern, Vintage, Brigham, Encore, Penn Virginia, W&T, St. Mary, Stone, Remington, Petroquest, Meridian, Houston Exploration, Newfield, Forest, Cimarex and Whiting.

(2) Source: RBC CM. Includes San Juan Basin, Hugoton, Permian Basin, Sabine, Dominion Resources Black Warrior, Cross Timbers, Santa Fe, Williams Coal Seam Gas, Eastern American Natural Gas, Mesa, Marine Petroleum, LL&E and Torch.

(3) Source: RBC CM. Includes Enerplus, Penn West, ARC, StarPoint, Harvest, Bonavista, Pengrowth, PrimeWest, Provident, Peyto, Petrofund, Vermilion, Shiningbank, Trilogy, Paramount, Baytex, Advantage, Progress, NAL, Crescent Point, Enterra, Esprit Energy, Focus, Fairborne, Freehold, Daylight, Ketch, True, Sequoia, Thunder, Zargon, Vault, Bonterra and NAV.

(4) Source: John S. Herold. Includes Advantage, ARC, Enerplus, Enterra, Freehold, NAL, Pengrowth, Penn West, Petrofund, PrimeWest, Progress, Shiningbank, True, Viking and Zargon.

Reserve LifeReserve Life

2004 Drill Bit Reserve Replacement2004 Drill Bit Reserve Replacement

30%53%

157%

411%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

LINE E&P Companies(1) Canadian Oil & GasTrusts(4)

U.S. Royalty Trusts(2)

8x11x11x

29x

0x

5x

10x

15x

20x

25x

30x

LINE E&P Companies(1) U.S. Royalty Trusts(2) Canadian Oil & GasTrusts(3)

Linn Energy vs.Other E&P Yield Securities

Linn Energy vs.Other E&P Yield Securities

Growth yield vs. shrinking yield

High reserve life = lower decline

Return on capital vs. return of capital

LLC vs. US and Canadian Oil & Gas Trusts

8

MLP Comparison – What is Linn Most Like?

Linn Energy is the first E&P company to utilize the LLC structure - there are no direct comps Linn Energy’s distribution stability and growth prospects are most comparable to small cap MLPs Linn Energy’s structure is exactly the same as Copano

Note: Market data as of 1/17/06. Source: RBC Capital Markets .(1) General Partners of Crosstex, Enterprise, Kinder Morgan and Inergy.(2) Alliance, Natural Resource, Penn Virginia.(3) Atlas, Boardwalk, Buckeye, Copano, Crosstex, DCP, Genesis, Global, Hiland, Holly, MarkWest, Martin, Pacific, Sunoco, TC, Transmontaigne, Williams.(4) Enbridge, Energy Transfer, Enterprise, Kinder Morgan, Magellan, Northern Border, Plains, TEPPCO, Valero. (5) Average of Coal, Small Cap Pipeline / Midstream, and Large Cap Pipeline / Midstream names.

7.2%

2.8%

4.7%5.1%

6.3% 6.4%6.8%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Linn Public GPs(1) Coal(2) Copano MLPAverage(5)

Small CapPipeline /

Midsteam(3)

Large CapPipeline /

Midsteam(4)

Comparative Yields

9

MLP vs. LLC Side-by-Side Structural Comparison

Characteristic MLP Structure LLC Structure

Non–Taxable Entity Yes Yes

Tax Shield on Distributions Yes Yes

Tax Reporting Form K-1 Form K-1

Percent of Units Subordinated 40 - 50% None

Subordination Period 3 - 5 Years None

Early Conversion Option (Subordination Period) Yes NA

General Partner Yes No

Incentive Distribution Rights Yes; up to 50% No

Voting Rights No Yes

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The LLC Structural Alternative

Superior structure – all investors participate in all cash flow growth.

New investors are equal partners with management / sponsors.

Unity of Interest Among All Investors

Unity of Interest Among All Investors

Facilitates faster distribution growth as a wider range of acquisitions are accretive, and an LLC is never required to address IDR Problem.

Investors entitled to vote on election of board and certain other matters.

Eliminates conflicts of interest, confusion surrounding multiple public entitles.

With significant ownership, management and sponsors are strongly motivated to increase distributions.

Enhanced GovernanceEnhanced

Governance

Same Tax Benefits

Same Tax Benefits

Faster Distribution

Growth

Faster Distribution

Growth

Strong Management Motivation

Strong Management Motivation

Tax characteristics same as MLP – tax shield, Form K-1.

Management / sponsor liquidity does not require a second public vehicle (i.e. General Partner entity), and no subordination provisions, significantly improve management / sponsor liquidity.

Liquidity for All Equity InterestsLiquidity for All Equity Interests

Current demand for E&P yield has driven valuations to very attractive levels.Attractive IPO

ValuationAttractive IPO

Valuation

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Factors Affecting Valuation

Factors Affecting Valuation

Val

uat

ion

Val

uat

ion

Comparable Yield ProductsComparable

Yield Products

Valuation Methodology

Valuation Methodology

Market will assess value primarily based on the trading of comparable yield products (Canadian E&P Trusts, Conventional U.S. Royalty Trusts, MLPs, etc.)

Key benchmarks are current indicated yield and projected 1 year forward yield

Primary methodology employed by market is cash-on-cash yield

EV/EBITDA and IRR may be used as secondary measures, particularly by institutional investors

Stability and sustainability of cash flows (Long RLI preferred) Market capitalization and liquidity “Name” recognition/sponsorship Structural aspects, i.e. subordination, hedging, etc. Growth potential in distributable cash flow per unit Composition of distributions – taxable vs. tax-deferred Management track record Corporate governance structure

E&P Yield Vehicle - Approach to Valuation

Primary valuation metric for the asset class remains cash-on-cash yield. The yield required by investors will be significantly influenced by the perceived stability of the underlying cash flows.Primary valuation metric for the asset class remains cash-on-cash yield. The yield required by investors will be significantly influenced by the perceived stability of the underlying cash flows.

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Long reserve life

Organic growth

Strong acquisition story

Proven track record

Management credibility

Sustainability – through market cycles

Incentive to raise distribution

Hedging program, margin protection

Keys To Success For Linn Energy / Investor Inquiries

Low risk, low cost drilling

Operating control

Control prices and costs

Borrowing, short cycle time etc

Tax Shield 90%+

Diversification

Premium pricing

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What are the benefits of an LLC structure as opposed to a C-Corp or MLP structure for an IPO?

The LLC model creates a “yield supported” higher valuation vs. a C-Corp., and removes a layer of taxation.

The LLC Model vs. the MLP model eliminates need for general partner and makes a marketing distinction from general partner Incentive Distribution Rights, which are typical for MLPs. Cash flows are shared by all owners equally and each unit counts as one vote.

How is cost of capital cheaper?

No hidden GP “Load” – making acquisitions more accretive to unit holders long-term versus a MLP IDR structure

The yield supports a premium valuation.

What is it about today’s environment that makes it right for a yield oriented E&P structure?

Low interest rates combined with strong commodity prices.

RBC (which has expertise in the Canadian trust market) has seen an increase in the U.S. ownership in Canadian trusts, signaling that a market exists.

What are the primary hurdles to an E&P LLC?

Registration and marketing.

Asset profile: the entity should have relatively long lived reserves, stable cash flows and low capex requirements.

Which is preferred to the keep cash flows constant with a declining reserve base, growth through acquisitions or exploitation?

Either is a viable method to maintain/grow the reserve base and production level, however, acquisitions will be used to grow more rapidly.

Q&A: Preliminary Issues Addressed

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How do cash distributions flow to the partners (tax vs. return of capital)?

Cash is paid quarterly while the K-1 is distributed once per annum.

E&P cash flow is “MLP qualified income.” Therefore, any distributions in excess of net income are treated as a return of capital

What is the appropriate hedging strategy?

An aggressive hedging policy should be maintained to mitigate effects in near-term commodity price fluctuation. Collars and puts that protect the downside and allow participation in the upside should be considered. 3-4 years hedging on PDP volumes should be considered.

How will perceived increased commodity price exposure be perceived by the market?

The market seems to make little adjustment based on distribution risk. Absolute distributions and growth track record are much more correlated to resulting yield. Gathering and processing MLPs are among the lowest yielding MLPs, as the market has chosen to focus more on their aggressive growth than their commodity price exposure (POP, POL, Make-whole contracts).

Does the LLC mode work outside the Appalachia Basin

Yes, basins with long-lived reserves, predictable production profile, and low capital expenditure requirements are excellent candidates for a tax efficient E&P vehicle.

Q&A: Preliminary Issues Addressed

15

RBC Commercial

Patrick "Rick" Brice, Director, has over eleven years of experience with Exploration & Production companies and Master Limited Partnerships, having joined the Corporate Finance Department of RBC Capital Markets in Houston in June 1994. Mr. Brice graduated magna cum laude from Southern Methodist University with a B.S. in economics and a B.B.A. in finance.

Patrick "Rick" Brice, Director, has over eleven years of experience with Exploration & Production companies and Master Limited Partnerships, having joined the Corporate Finance Department of RBC Capital Markets in Houston in June 1994. Mr. Brice graduated magna cum laude from Southern Methodist University with a B.S. in economics and a B.B.A. in finance.

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Rick BriceEnergy GroupDirector

Phone: (713) 403-5642Email: rick.brice@rbccm.com

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$191,000,000

Penn VirginiaResource Partners, L.P.

has acquired assets ofCantera Resources Holdings LLC

RBC Capital Markets acted as exclusive financial advisor to Penn Virginia

Resource Partners, L.P.

March 2005

$191,000,000

Penn VirginiaResource Partners, L.P.

has acquired assets ofCantera Resources Holdings LLC

RBC Capital Markets acted as exclusive financial advisor to Penn Virginia

Resource Partners, L.P.

March 2005

BRIGHAMExploration Company

Co-Lead ManagerNovember 2005

$103,500,000

Follow-On OfferingCommon Shares

BRIGHAMExploration Company

Co-Lead ManagerNovember 2005

$103,500,000

Follow-On OfferingCommon Shares

Lead Book-Running ManagerJanuary 2006

Initial Public Offering

$246,750,000

Linn Energy, LLC

Lead Book-Running ManagerJanuary 2006

Initial Public Offering

$246,750,000

Linn Energy, LLC

Lead Book-Running ManagerJanuary 2006

Initial Public Offering

$246,750,000

Linn Energy, LLC

Sole Book-Running ManagerOctober 2005

Initial Public Offering

$115,000,000

Tortoise North American Energy Corporation

Sole Book-Running ManagerOctober 2005

Initial Public Offering

$115,000,000

Tortoise North American Energy Corporation

16

Final Thought

In the 90s everyone wanted to be like Mike…. Now in 2006, everyone wants to be like Mike…