MICHAEL PETROLEUM EXECUTIVES
PARTNER WITH ENCAP INVESTMENTS TO FORM LAREDO ENERGY

R. Graham Whaling and Jim R. Smith also make significant investments in energy company.

HOUSTON (January 16, 2002) — EnCap Investments, LLC, R. Graham Whaling, Jim R. Smith and certain members of the former senior management team of Michael Petroleum Corporation have formed a partnership, called Laredo Energy, to acquire and develop natural gas reserves in South Texas. The company has offices in Houston and Laredo.

“When EnCap and Graham Whaling, former Michael Petroleum chairman and managing director of Global Energy Partners, approached the Michael Petroleum senior management team about starting a new energy company, the decision to go forward was unanimous,” said Glenn Hart, president of Laredo Energy and former CEO of Michael Petroleum. “We feel very fortunate to have EnCap, Graham Whaling and Jim Smith as partners.”

EnCap was the largest shareholder of independently held Michael Petroleum, which was sold to Calpine Natural Gas in August 2001.

“EnCap is very excited to make another investment with a proven and experienced management team that has one of the best track records in South Texas,” said Bob Zorich, managing director of EnCap. “We look forward to a long and profitable relationship with them.”

At the time of its sale to Calpine, Michael Petroleum had part or full interest in more than 115,000 acres and over 400 wells in Webb and Zapata Counties, and proven natural gas
reserves of 218 BCFE. Specializing in the acquisition and development of natural gas properties in the Lobo Trend of South Texas, the 19-year-old company was also the third largest gas producer and sixth largest taxpayer in Webb County.

EnCap, a wholly owned subsidiary of El Paso Corporation, is an energy industry institutional funds manager which finances independent oil and gas producers. EnCap is currently investing its tenth investment fund and has in excess of $1 billion under management.

A former Michael Petroleum shareholder, Smith is a seasoned oil and gas investor and one of the largest real estate developers in Houston.

Whaling serves as Laredo Energy’s chairman and CEO. Other members of the company’s senior management team include:

• Douglas R. Fogle, vice president – engineering
• Jerry F. Holditch, vice president – geology
• Robert L. Swanson, vice president – finance and accounting
• Scott G. Stevenson, vice president – acquisitions
• Mark R. Lange, vice president – land
• Steven B. Jaques, vice president – technology

Additionally, Mario Gonzales, former superintendent of operations for Michael Petroleum, has been named superintendent of operations for Laredo Energy. Gonzales is based in Laredo.

For more information about Laredo Energy, headquartered at 13101 Northwest Freeway, Suite 320, Houston, TX 77040, contact Glenn Hart at 713.895.0225, extension 17, or via e-mail: ghart@laredoenergy.com.

Laredo Energy is a privately held energy company engaged in the acquisition and development of natural gas reserves in South Texas. The company has offices in Houston and Laredo. For more information about Laredo Energy, call 713.895.0225.