All about investment

by John Bougearel

Monday December 10 2007 John Bougearel www.successfultradingtips.com

New Frontier Energy - Summary The company is accelerating shareholder value primarily by rapidly building its proven and probable reserves, rapidly increasing production. The foundation for rapid future growth for many years to come is now in place and set to commence in 2008.

NFEI Profile NFEI is an oil and gas exploration company out of Denver with interests in three properties, 34,500 acres in the Slater Dome Field, 4,000 acres in the Flattops Prospect, and 29,000 in the Focus Ranch Federal Unit. All are located near the Colorado and Wyoming border in the Sand Wash Basin. NFEI is focusing on expanding their CBM gas production at Slater Dome. NFEI is the operator of the Slater Dome field with a 66% working interest. To date, as of November 2, 2007, there are 17 wells that have been drilled, with two more to be completed by the end of 2007. The company also owns a majority interest in an 18 mile gas gathering line that delivers gas from Slater Dome to the Questar transportation hub.

NFEI Management Management has extensive O&G experience, a successful track record cultivating institutional shareholders, and raising $28 million to fund development. Raising capital has not proved to be an obstacle for the company.

Proven Reserve Report at Slater Dome Field �" Feb 2007 1. 12 BCF �" estimated total proved reserves net to NFEI with 47 locations 2. 17 BCF �" estimated probable resources net to NFEI with 53 locations 3. 301 BCF estimated possible resources net to NFEI with 531 locations 4. 330 BCF �" total proved, probably and possible resources net to NFEI with 631 locations

Project Potential at Slater Dome Could Exceed 600+ Wells in 15 Yrs The company believes there is a large drilling inventory of 600 + wells at Slater dome over 15 years @ 15-20 wells per year. The gathering line has excess capacity already in place.

Corporate Milestones 1. Developed Slater Dome from prospect into a core producing asset with 12 BCF proven reserves to NFEI’s interest as of Feb 28, 2007 2. Constructed an 18 mile gathering line from Slater Dome Field to the Questar tap in Baggs WY in June 2005. 3. Became Operator of Slater Dome Field in 06 and doubled their working interest to 66%. 4. Achieved a 400% increase from 250,000 cubic feet per day in 2006 to over 1,000,000 or 1 mcf per day in 2007 in the Slater Dome Field’s gas production after completing the 2007 workover program in the first half of 2007. The company expects to achieve another 300% increase to 3 mcf per day in production from these existing wells when a permit granting additional compression is received in Feb 2008. 5. The 2007 drilling program includes 8 new wells, four of which will be connected to the pipeline by year end 2007. Initial production from these new wells is expected to begin in January 2008. 6. Doubled proved reserves every year since establishing production in 2005. With the eight new wells drilled in 2007, the company believes total proven reserves will double again to 24 BCF by Feb 2008.

Summary of Capital Structure 1. 9.78m shares of common stock outstanding 2. 24.92 million shares of Series B&C convertible preferred stock 3. 34.7 million shares total outstanding fully diluted after effect of preferred equity conversion. 4. Fully diluted, shareholder equity based on the recent $1.19 closing price in early November 2007 gives NFEI a $41.3 million market capitalization

NFEI’s Intrinsic Value based on the Industry’s Valuation Calculation shows its Current Stock Price around $1.20 to be significantly undervalued 1. 2007-08 24 BCF Proven Reserves in the ground at $2.50 MCF = $60 million 2. Gathering line and system $5 million 3. Acreage position = $40 million 4. Total = $105 million 5. Fully Diluted common shares before warrants $34.7 million. 6. Pro Forma Value per common share before warrants = $3.02

Other Company Facts 1. Long Term Life Expectancy of producing wells range 20-25 years 2. Current producing wells in the Slater Dome Field are producing 1 mcf per day at Slater Dome, and NFEI expects to be triple or quadruple that to 3 to 4 million cubic feet per day by February 2008 when the permit is granted for additional compression. 3. The Rockies Express 1st phase pipeline from Wamsutter WY to Mexico MO is expected to be completed in January 2008 4. The Rockies Express 2nd phase pipeline from Mexico MO to Clarington OH is expected to be completed in January 2009

Balance Sheet as of Aug 31 2007 Cash stood at $7.4 million. Total current assets stood at $9,069,857. Total Current Liabilities were $2,540,113 Total Current Assets to Total Current Liabilities = 3.56

Revenues minus Operating Expenses for Six Months Ending August 31 Total operation revenues 290,384 Total operating expenses 3.321 m Loss from operations (3.03m)

6 Months Revenues in First Six Months of FY Feb 2008 Ending Aug 31 2007 Revenues for the six months ended August 31, 2007 were $290,384 compared with $129,376 for the six months ended August 31, 2006, an increase of $161,008 or 124.45%.

Estimated Production Increases for the first six months of FY Feb 2009 NFEI is producing 1 mcf/day in the Slater Dome field from its existing 6 producing wells. Production from those six wells is expected to increase 300% or 400% to 3 mcf or 4 mcf by February 2008 when the permit for additional compression is granted according to CEO Paul Laird. Investors should recognize that this increase in production resulting from permit granting additional compression is a forward looking estimate based on assumptions that the company believes are reasonable (see company’s Nov 8 2007 powerpoint presentation.)

CEO Paul Laird suggests actual daily production figures in the first half of the new fiscal year could surprise on the upside based on the new production that will be coming online from 6 new wells derived from the 2007 drilling programs. But, since “we just don’t know” until we get the gas actually into the pipeline from the 2007 drilling program what additional production might be realized, Paul is refraining from making any forward looking production estimates resulting from the 2007 drilling program.

Extrapolating Six Month Revenue Projections for first half of the New FY Ending Feb 09 Extrapolating forward what role this increase in production resulting from the additional compression will have on revenues in the first 6 months of the new FY ending in Feb 09 can be done using a conservative estimate of the average forward price/mcf that NFEI will receive each day from the Questar Hub.

But first a little background on the lack of infrastructure that has been up until now suppressing Rocky Mountain natural gas prices and the new “Rockies Express Pipeline” (REX) coming on line in January 2008 that will allow natural gas prices recognized by nat gas producers in the Rockies to rise.

The New Rockies Express (REX) Presently there is no natural gas pipeline going further East from the Rockies beyond Cheyenne Wyoming. This lack of infrastructure has been the primary problem in the Rockies suppressing natural gas prices in 2007 well below that of the nationally recognized Henry Hub prices. Therefore, revenues recognized by Rocky Mountain natural gas producers (including NFEI) in 2007 have been adversely affected by this situation.

That all changes in January 2008, when the new Rockies Express pipeline (REX) begins delivering natural gas from Wamsutter WY East all the way to Mexico MO. The following year in 2009, the Rockies Express Pipeline (REX) will extend as far as Clarington Ohio. This event will move Rocky Mountain natural gas pricing closer to the higher Henry Hub pricing in 2008 and so NFEI expects to realize a higher price per mcf in the first half of the upcoming FY than in the previous year. Kinder Morgan, Conoco Phillops and Sempra Pipelines have all teamed up to

“build one of the largest natural gas pipelines ever constructed in North America. The 1,678-mile Rockies Express (REX) project will provide valuable infrastructure allowing producers in the Rocky Mountain region to realize full value for their commodity by giving them the ability to deliver natural gas to attractive markets in the Midwest and eastern parts of the country.

The initial 136-mile segment of the pipeline from the Meeker Hub in Rio Blanco County, Colo., to the Wamsutter Hub in Sweetwater County WY, [was] completed for service in February 2006. Construction on the 191-mile portion from Wamsutter to the Cheyenne Hub in Weld County, CO., began in July 2006 and placed in service on February 14, 2007. The 713-mile REX-West segment of the pipeline, which runs from the Cheyenne Hub to Audrain County, MO., was authorized by FERC April 19, 2007 and is projected to be in service by January 2008" �" Kinder Morgan

The REX PIPELINE

Rocky Mountain Infrastructure and Natural Gas Pricing - 2007 vs 2008

On November 2 2007, the 12 month average forward price indication on Natural Gas prices at the Questar Hub (where their company’s Slater Dome Gathering line delivers to) was $6.85 based on figures abstracted from the Questar Pricing Index.

To calculate potential revenues recognized in 2008, rather than using the 12 month forward $6.85/mcf average price for the Questar Hub, again CEO Paul Laird suggests using a more conservative $5.50/mcf to estimate forward revenues in the first half of their new FY ending Feb 2009.

Assuming the conservative production estimate of 3mcf/day is recognized at an average $5.50/mcf. 1 mcf/day at $5.50 = $5500/day x 3mcf = $16,500/day x 182 days (one half year) = $3,003,000 divided by their 53.3% net working interest in the Slater Dome field = $1,600,599. Total six month revenues in the first half of their new fiscal year could increase 550% from the first 6 month revenues in the previous fiscal year.

This potential increase in revenues to $1.6 million will go a long way towards eliminating the $3.03 million loss from operations in the first half of FY 2008 ending August 31st 2007. And, as pointed out above, revenue surprises could be to the upside from possible further increases in natural gas production. With a current market cap of $11 million priced at $1.15, NFEI’s trailing Price to Sales multiple is approximately 37 undiluted. NFEI’s estimated forward P/S multiple fully diluted is close to 10 at the current stock price.

Business Plan for Upcoming FY ending Feb 2009 NFEI’s plan of operations for the twelve months call for them to drill up to 4 more wells at Slater Dome Field and to drill two wells at the Flattops Prospect in the summer/fall of 2008.

NFEI also plans to test the Niobrara and Frontier formations in the Focus Ranch Federal 12-1 well in the Unit. Also, they intend to acquire acreage in the Denver Julesberg Basin and attempt to obtain a promoted or carried working interest as well as a prospect fee. Additionally, they plan to evaluate opportunities to acquire interests in other oil and gas properties.

NFEI believes that the plan of operations for the next twelve months will require capital of approximately $2,000,000. To the extent that additional opportunities present themselves to the Company, the Company may require additional sources of capital to participate in these opportunities. We expect that working capital requirements will be funded through a combination of our existing funds, cash flow from operations and issuance of equity and debt securities. Liquidity and Capital Resources NFEI’s working capital requirements are expected to increase in line with the growth of the business. The company believes their capital requirements will continue to be met with additional issuance of equity or debt securities as well as traditional bank financing

Advantages Investors Seek in Unconventional Resource Plays 1. Repeatable low risk development drilling 2. Low development costs - $0.29 to $.60/MCF 3. High probability of success = 95% 4. Long term productive wells 20 - 25 years 5. Predictable annual production & reserve growth 6. Field size typically grows over time - 10’s Bcf to Tcf’s

Technical Outlook

Technical Outlook on Stock Price

* bearish price trend since peaking at $3.25 in Sept 05 * Bearish price momentum indicator bottomed in October 2006 * Price momentum indicator almost turned bullish a year later in October 2007 * Volume accumulation indicator turned positive since June 2007

Technical Summary Bearish price momentum bottomed in October 2006. Price bottomed 4 months later in Feb 2007. Since Feb 2007, price has been range bound and compressed. Price compression will at some point lead to a price breakout. Volume precedes price and is a leading indicator. Volume characteristics turned positive in 2H 2007. Presumably price will turn positive in 1H 2008.

Forward looking statements pertaining to revenue projections for the first six months of the new fiscal year ending August 31 2008 are my own and not that of the company. Those projections are based solely on the new infrastructure that REX will provide natural gas producers in the Rockies and on the permit granting additional compression for the existing producing wells. Other contributing factors may cause actual revenues to fall short of or exceed this projection.

Follow up reports on this company will be done when the Feb 2008 Reserves Statement is released in March and again after the 10-Q reports for the three months ending May 31 2008 and six months ending August 31st 2008 are filed in July and October respectively.

I own shares in this company.

Sources:

CEO Paul Laird

10-Q Filing October 9 2007

http://nfeinc.com/

http://nfeinc.com/pdf/NFEI_inv_presentation11-08-07.pdf

http://www.kindermorgan.com/business/gas_pipelines/rockies_express/