<PAGE>   1

                                                                     EXHIBIT 2.6

Hugh M. Ray
State Bar No. 16611000
J. Van Oliver
State Bar No. 15258700
ANDREWS & KURTH L.L.P.
3700 Bank One Center, 1717 Main Street
Dallas, Texas 75201a
Telephone: (214) 659-4400
Telecopier: (214) 659-4401
ATTORNEYS FOR CREDITORS COMMITTEE

                      IN THE UNITED STATES BANKRUPTCY COURT
                       FOR THE NORTHERN DISTRICT OF TEXAS
                                 DALLAS DIVISION

IN RE:                             )
                                   )
NATIONAL ENERGY GROUP, INC.        )       CASE NO. 98-80258-HCA-11
AND BOOMER MARKETING               )       (JOINTLY ADMINISTERED)
CORPORATION                        )
                                   )       HEARING DATE: APRIL 17, 2000
          DEBTOR.                  )                     9:15 A.M.
                                   )
                                   )



                 JOINT DISCLOSURE STATEMENT UNDER SECTION 1125
                   OF THE BANKRUPTCY CODE WITH RESPECT TO THE
                       PLAN OF REORGANIZATION PROPOSED BY
                  THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS

DATED:    February 28, 2000
          Dallas, Texas



<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<S>        <C>     <C>                                                                                  <C>
  INTRODUCTORY STATEMENT .............................................................................   iv

  I.       INTRODUCTION ..............................................................................    1

  II.      NOTICE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS ..........................................    2

  III.     PLAN OVERVIEW .............................................................................    5

  IV.      SUMMARY OF CLASSIFICATION AND TREATMENT ...................................................    7

  V.       VOTING PROCEDURES AND REQUIREMENTS ........................................................   11

           A.      Ballots and Voting Deadline .......................................................   11
           B.      Holders of Claims Solicited to Vote ...............................................   13
           C.      Definition of Impairment ..........................................................   14
           D.      Vote Required for Class Acceptance ................................................   14

  VI.      CONFIRMATION OF THE PLAN ..................................................................   15

           A.      Confirmation Hearing ..............................................................   15
           B.      Requirements for Confirmation of the Plan .........................................   16
           C.      Cramdown ..........................................................................   18

  VII.     DESCRIPTION OF THE DEBTORS ................................................................   20

           A.      Business ..........................................................................   20

                    1.      General Overview of the Company ..........................................   20
                    2.      Business Prior to Bankruptcy .............................................   20
                            a.       MidContinent Area ...............................................   24
                            b.       Anadarko Basin ..................................................   24
                            c.       East and West Texas Area ........................................   25
                            d.       Gulf Coast Area .................................................   26
                            e.       Greater Bayou Sorrel Area .......................................   26
                    3.      Oil and Natural Gas Reserves .............................................   27
                    4.      Leasehold Acreage ........................................................   28
                    5.      Title to Oil and Natural Gas Properties ..................................   28
                    6.      Control over Production Activities .......................................   28
                    7.      Markets and Customers ....................................................   29
</TABLE>

                                       -i-
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<TABLE>
<S>        <C>      <C>    <C>                                                                          <C>
                    8.     Office Space ............................................................... 30
                    9.     Employees .................................................................. 31
                    10.    Legal Proceedings .......................................................... 31
                    11.    Abandonment Costs .......................................................... 32

           B.       Selected Financial Information .................................................... 33

                    1.      Market Information ........................................................ 33
                            a.       10 3/4% Senior Notes Due 2006 Approximately $165 Million
                                     Outstanding ...................................................... 33
                            b.       Arnos Secured Claims Purchase from Bank Group .................... 34
                            c.       NEG Preferred Stock .............................................. 36

                    2.      Significant Events Occurring During Chapter 11 ............................ 37

                            a.       Granting Petitioning Creditors Relief and
                                     Declaring NEG Insolvent .......................................... 37
                            b.       Cessation of Most Drilling Activities ............................ 38
                            c.       Termination of the Exclusive Right to File a Plan of
                                     Reorganization ................................................... 38
                            d.       Joint Employment of CIBC World Capital Markets ................... 38
                            e.       Proposed Sale to Arnos ........................................... 39
                            f.       EBCO Auction Sale of Nominally Valued Properties ................. 40

                    3.      Liquidity and Cash Resources for Funding Plan ............................. 40
                    4.      Directors and Officers of NEG ............................................. 41
                    5.      Employment Contracts and Termination of Employment and Change
                                   in Control Arrangements ............................................ 43
                    6.      Severance Policy .......................................................... 45
                    7.      Security Ownership of Certain Beneficial Owners ........................... 47
                    8.      Security Ownership of Management .......................................... 51


   VIII.   FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ................................................ 53

           A.       Federal Income Tax Consequences to the Debtors .................................... 53
                    1.      General Discussion ........................................................ 53
                    2.      Cancellation of Indebtedness .............................................. 54
                    3.      NOLs and Future Utilization ............................................... 55
                    4.      Alternative Minimum Tax ................................................... 57
</TABLE>

                                      -ii-
<PAGE>   4


<TABLE>
<S>        <C>      <C>     <C>                                                                         <C>
           B.       Federal Income Tax Consequences to Holders of Claims .............................. 58

                    1.      Realization and Recognition of Gain or Loss in General .................... 58
                    2.      Holders of Claims Whose Allowed Claims Constitute Securities .............. 59
                    3.      Holders of Claims Whose Allowed Claims
                            Do Not Constitute Securities .............................................. 60
                    4.      Character of Gain or Loss ................................................. 60

   IX.     BANKRUPTCY CAUSES OF ACTION ................................................................ 62

           A.       Preferences ....................................................................... 62
           B.       Fraudulent Conveyances ............................................................ 63
           C.       D&O and Related Litigation ........................................................ 63

   X.      ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE
           PLAN ....................................................................................... 63

           A.       Continuation of the Chapter 11 Cases .............................................. 64

           B.       Alternative Plans of Reorganization ............................................... 64

           C.       Chapter 7 Liquidation ............................................................. 64

   XI.     SIGNATURES ................................................................................. 67
</TABLE>



                                     -iii-
<PAGE>   5


                             INTRODUCTORY STATEMENT

         THIS DISCLOSURE STATEMENT UNDER SECTION 1125 OF THE BANKRUPTCY CODE
WITH RESPECT TO THE JOINT PLAN OF REORGANIZATION PROPOSED BY THE CREDITORS
COMMITTEE (THIS "DISCLOSURE STATEMENT") CONTAINS A SUMMARY OF CERTAIN PROVISIONS
OF THE JOINT PLAN OF REORGANIZATION PROPOSED BY THE CREDITORS COMMITTEE (THE
"PLAN"), AND SUMMARIES OF CERTAIN OTHER DOCUMENTS RELATING TO THE CONSUMMATION
OF THE PLAN OR THE TREATMENT OF CERTAIN CLAIMS AND EQUITY INTERESTS OF
PARTIES-IN-INTEREST, AND CERTAIN FINANCIAL INFORMATION RELATING THERETO. WHILE
THE CREDITORS COMMITTEE BELIEVE THAT THESE SUMMARIES PROVIDE ADEQUATE
INFORMATION WITH RESPECT TO THE DOCUMENTS SUMMARIZED, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH
DOCUMENTS. EACH HOLDER OF AN IMPAIRED CLAIM SHOULD REVIEW THE ENTIRE PLAN AND
SEEK THE ADVICE OF ITS OWN COUNSEL BEFORE CASTING A BALLOT.

         NO PARTY IS AUTHORIZED BY THE CREDITORS COMMITTEE TO PROVIDE ANY
INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT CONTAINED IN THIS
DISCLOSURE STATEMENT. THE CREDITORS COMMITTEE HAVE NOT AUTHORIZED ANY
REPRESENTATIONS CONCERNING THE CREDITORS COMMITTEE, THEIR ANTICIPATED FINANCIAL
POSITION OR OPERATIONS AFTER CONFIRMATION OF THE PLAN, OR THE VALUE OF THE
BUSINESS AND PROPERTY OF THE CREDITORS COMMITTEE OTHER THAN AS SET FORTH IN THIS
DISCLOSURE STATEMENT. TO THE EXTENT INFORMATION IN THIS DISCLOSURE STATEMENT
RELATES TO THE CREDITORS COMMITTEE, THE CREDITORS COMMITTEE HAS PROVIDED THE
INFORMATION IN THIS DISCLOSURE STATEMENT.

         NOTHING CONTAINED IN THIS DISCLOSURE STATEMENT, EXPRESS OR IMPLIED, IS
INTENDED TO GIVE RISE TO ANY COMMITMENT OR OBLIGATION OF THE CREDITORS COMMITTEE
OR SHALL CONFER UPON ANY PERSON ANY RIGHTS, BENEFITS OR REMEDIES OF ANY NATURE
WHATSOEVER.

         EXCEPT AS HEREAFTER NOTED, THE INFORMATION CONTAINED HEREIN IS
GENERALLY INTENDED TO DESCRIBE FACTS AND CIRCUMSTANCES ONLY AS OF FEBRUARY 1,
2000, AND NEITHER THE DELIVERY OF THIS DISCLOSURE STATEMENT NOR THE CONFIRMATION
OF THE PLAN WILL CREATE ANY IMPLICATION, UNDER ANY CIRCUMSTANCES, THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME AFTER THE DATE
HEREOF OR THEREOF OR THAT THE CREDITORS COMMITTEE WILL BE UNDER ANY OBLIGATION
TO UPDATE SUCH INFORMATION IN THE FUTURE.



                                      -iv-
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              JOINT DISCLOSURE STATEMENT UNDER SECTION 1125 OF THE
                BANKRUPTCY CODE WITH RESPECT TO THE JOINT PLAN OF
               REORGANIZATION PROPOSED BY THE CREDITORS COMMITTEE


                                       I.

                                  INTRODUCTION

         On December 4, 1998 ("Commencement Date"), certain holders of Notes (as
defined in the Plan) filed an involuntary petition in bankruptcy under Section
303 (11 U.S.C. Section 101 et. seq.) of the Bankruptcy Code against National
Energy Group, Inc. ("NEG" or the "Company"). After a trial on the merits, the
Bankruptcy Court presiding over the case ruled in favor of the petitioning
noteholders and on February 12, 1999 entered an order for relief. Shortly
thereafter, NEG, together with Boomer Marketing, Inc. converted the cases to
voluntary ones under Chapter 11 with the United States Bankruptcy Court for the
Northern District of Texas (the "Bankruptcy Court"). Subsequently, the Chapter
11 cases were administratively consolidated under Case No. 98-80258-HCA-l1.
Since February, 1999, the Debtors have continued to operate their businesses as
debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
On or about February 19, 1999, the Office of the United States Trustee (the
"U.S. Trustee") appointed an Official Committee of Unsecured Creditors (the
"Creditors' Committee") in the Chapter 11 Cases.

         On or about February 14, 2000, the Creditors Committee filed its Plan
of Reorganization (the "Plan") and this Disclosure Statement. The Creditors
Committee submits this Disclosure Statement under Section 1125 of the Bankruptcy
Code with respect to the Plan in connection with the solicitation of votes to
accept or reject the Plan. A copy of the Plan is attached hereto as Exhibit "A".
Capitalized terms used herein, if not defined herein, have the defined meanings
set forth in the Plan.


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<PAGE>   7


                                       II.

                NOTICE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS

         The purpose of this Disclosure Statement is to enable you, as the
holder of a Claim against the Debtors, to make an informed decision with respect
to voting on acceptance or rejection of the Plan.

         All persons receiving this Disclosure Statement and the Plan attached
hereto are urged to review fully the provisions of the Plan and all other
exhibits attached hereto, in addition to reviewing the text of this Disclosure
Statement. This Disclosure Statement is not intended to replace careful review
and analysis of the Plan. Rather, it is submitted as an aid in your review of
the Plan and in an effort to explain the terms and implications of the Plan.
However, to the extent any questions arise, the Creditors Committee urges you to
seek independent legal advice.

         On April 17,2000, after notice and a hearing, the Bankruptcy Court
approved this Disclosure Statement as containing information of a kind and in
sufficient detail, adequate to enable holders of Claims against or Equity
Interests in the Debtors, whose votes on the Plan are being solicited, to make
an informed judgment whether to accept or reject the Plan.

         You should read this Disclosure Statement in its entirety prior to
voting on the Plan. No solicitation of votes on the Plan may be made except
pursuant to this Disclosure Statement and Section 1125 of the Bankruptcy Code,
and no person has been authorized to utilize any information concerning the
Debtors or their businesses other than the information contained in this
Disclosure Statement or in other information approved for dissemination to
holders of Claims by the Bankruptcy Court. You should not rely on any
information relating to the Debtors and their businesses, other than that
contained in this Disclosure Statement, the exhibits attached hereto the


                                      -2-
<PAGE>   8


Plan, the exhibits attached thereto and the Plan Supplement, except as otherwise
approved by the Bankruptcy Court.

         SECTION 1125(b) OF THE BANKRUPTCY CODE PROHIBITS SOLICITATION OF AN
ACCEPTANCE OR REJECTION OF A PLAN OF REORGANIZATION UNLESS A COPY OF THE PLAN OF
REORGANIZATION OR A SUMMARY THEREOF IS ACCOMPANIED OR PRECEDED BY A COPY OF A
DISCLOSURE STATEMENT APPROVED BY THE BANKRUPTCY COURT.

         THE DESCRIPTION HEREIN OF THE PLAN IS A SUMMARY ONLY AND HOLDERS OF
CLAIMS AND EQUITY INTERESTS ARE URGED TO REVIEW THE ENTIRE PLAN WHICH IS
ATTACHED AS EXHIBIT "A" HERETO, AS WELL AS THE PLAN SUPPLEMENT. IN THE EVENT
THAT ANY INCONSISTENCY OR CONFLICT EXISTS BETWEEN THIS DISCLOSURE STATEMENT AND
THE PLAN, THE TERMS OF THE PLAN SHALL CONTROL.

         EXCEPT AS SET FORTH IN THIS DISCLOSURE STATEMENT, THE EXHIBITS AND PLAN
SUPPLEMENT, NO REPRESENTATIONS CONCERNING THE DEBTORS, THEIR ASSETS, PAST OR
FUTURE BUSINESS OPERATIONS, OR THE PLAN ARE AUTHORIZED, NOR ARE ANY SUCH
REPRESENTATIONS TO BE RELIED UPON IN ARRIVING AT A DECISION WITH RESPECT TO THE
PLAN. ANY REPRESENTATIONS MADE TO SECURE ACCEPTANCE OR REJECTION OF THE PLAN
OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT SHOULD BE REPORTED TO
COUNSEL FOR THE DEBTORS.

         THERE HAS BEEN NO INDEPENDENT AUDIT OF THE FINANCIAL INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT AND NO FAIRNESS OPINION HAS BEEN OBTAINED
REGARDING THE VALUE OF THE ASSETS AND THE AMOUNT OF THE LIABILITIES. THE FACTUAL
INFORMATION REGARDING THE DEBTORS AND THEIR ASSETS AND LIABILITIES HAS BEEN
DERIVED FROM THE DEBTORS' SCHEDULES, AVAILABLE PUBLIC RECORDS, PLEADINGS AND
REPORTS ON FILE WITH THE BANKRUPTCY COURT, THE DEBTORS' INTERNAL DOCUMENTS, AND
RELATED DOCUMENTS SPECIFICALLY IDENTIFIED HEREIN. WHILE EVERY EFFORT HAS BEEN
MADE BY THE CREDITORS COMMITTEE TO PROVIDE ACCURATE INFORMATION HEREIN, THE
CREDITORS COMMITTEE AND ITS RESPECTIVE LEGAL AND FINANCIAL ADVISORS, CANNOT AND
DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT IS WITHOUT ANY INACCURACY.

         THE APPROVAL BY THE BANKRUPTCY COURT OF THIS DISCLOSURE STATEMENT DOES
NOT CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR A GUARANTEE
OF THE ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED HEREIN.


                                      -3-
<PAGE>   9
         THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY
STATE, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES
REGULATORY AUTHORITY OF ANY STATE PASSED UPON THE ACCURACY OR ADEQUACY OF THE
STATEMENTS CONTAINED HEREIN.

         EACH HOLDER OF AN IMPAIRED CLAIM OR AN IMPAIRED EQUITY INTEREST SHOULD
REVIEW THE ENTIRE PLAN AND SEEK THE ADVICE OF ITS OWN COUNSEL BEFORE CASTING A
BALLOT.

         After carefully reviewing this Disclosure Statement and all exhibits
attached hereto, the Plan and the Plan Supplement, if you have received a ballot
to vote for or against the Plan, please indicate your acceptance or rejection of
the Plan by voting in favor of or against the Plan on such ballot, in accordance
with the instructions thereon, and return the ballot in the enclosed
self-addressed, return envelope by 5:00 p.m. Central Time on May ___, 2000, to
Van Oliver, Andrews & Kurth L.L.P., Suite 3700, 1717 Main Street, Dallas, Texas
75201. PLEASE NOTE THAT FACSIMILE COPIES OF THE BALLOT WILL BE ACCEPTED BUT A
BALLOT BEARING AN ORIGINAL SIGNATURE MUST ALSO BE FORWARDED TO THE TALLYING
AGENT.

                              ANY BALLOTS RECEIVED
                          AFTER 5:00 P.M. CENTRAL TIME
                      ON MAY __, 2000 WILL NOT BE COUNTED.

         For further information concerning voting, see Section V herein
("Voting Procedures and Requirements").

         On April 17, 2000, the Bankruptcy Court entered an order (i) fixing May
___, 2000 at ____ __.m., Central Time, United States Bankruptcy Court, Northern
District of Texas, United States Courthouse, Earl Cabell Federal Office
Building, 12th Floor, 1100 Commerce, Dallas, Texas 75201, Louisiana 70130, as
the date, time and place for a hearing on confirmation of the Plan, and (ii)
fixing May ___, 2000 at ______ ____.m., Central Time, as the last date for the
filing with the Bankruptcy Court and serving upon counsel for the Creditors
Committee any objections to


                                      -4-
<PAGE>   10


confirmation of the Plan. The hearing on confirmation may be adjourned from
time to time without further written notice.

                                      III.

                                  PLAN OVERVIEW

         The Plan treats all Claims and Equity Interests fairly and equitably.
The following is a brief summary of the Plan's treatment of Claims against and
Equity Interests in the Debtors. This summary is qualified in its entirety by
reference to the provisions of the entire Plan. A copy of the Plan is attached
hereto as Exhibit "A". You are urged to read the Plan in its entirety. To the
extent there is any conflict between this Disclosure Statement and the Plan, the
terms of the Plan control.

         The Plan provides for the possibility of a limited continuation of the
Debtors oil and natural gas business operations. The Plan contemplates the
creation of a Creditors Trust to which will be transferred at confirmation
substantially all the cash and cash equivalents of the Debtors, the funds held
in escrow from the Arnos Corporation purchase of oil and gas assets from the
Debtors and all the Debtors' causes of action for the payment and primary
benefit of allowed claims of administrative, tax, priority, miscellaneous
secured and unsecured trade and note creditors.

         Allowed Administrative Expense Claims, including Allowed Claims of
professionals, Allowed Other Priority Claims and Involuntary Gap Claims of trade
creditors who provided materials, services or goods between December 4, 1998 and
February 12, 1999, will be paid in full, in Cash on the later of the Effective
Date and the date such Claim becomes an Allowed Claim, or as soon thereafter as
is practicable. Allowed Priority Tax Claims will be paid in full, in Cash on the
later of the Effective Date and the date such Priority Tax Claim becomes an
Allowed Priority Tax Claim, or as soon thereafter as is practicable.


                                      -5-
<PAGE>   11


         Other Allowed Secured Claims will either be (a) paid, at the sole
option of the Creditors' Committee, in full, in Cash on the later of the
Effective Date and the date such Secured Claim becomes an Allowed Secured Claim,
or as soon thereafter as is practicable, (b) will retain the Lien (or
replacement Lien) until full and final payment of such Allowed Secured Claim, at
which time such Lien shall be deemed null and void and shall be unenforceable
for all purposes; (c) receive the collateral securing its claim in satisfaction
of its secured claim.

         The remaining portion of the Secured Arnos Claim shall be satisfied by
the payment of remaining interest on its claim for the period December 1, 1999
through December 13, 1999 in Cash on the later of the Effective Date or the date
such Claim becomes an Allowed Claim, or as soon thereafter as is practicable.
Holders of Allowed Class 6 Claims will receive their pro rata share of (i) NEG's
cash, Arnos Corp. sale proceeds and related assets contributed to the Creditors
Trust created for the benefit of holders of Allowed Claims and Classes 1-6 have
been paid or provided for. The Creditors Committee has the right at that point
to sell the remaining assets of the Debtors or sell the rights of Noteholders to
retain in the form of Additional Common Stock the rights to receive between 49%
and 95% of all outstanding stock of the reorganized debtor on a fully diluted
basis to a third party or parties. The Noteholders shall have the right to elect
all members of the board of directors for NEG for a two (2) year term after the
Plan's Effective Date. Acting on behalf of the Class 6 Noteholders, they provide
the Creditors Committee the right to negotiate and sell such 49%-95% of fully
diluted Common Stock (available for distribution as Additional Common Stock) to
a third party or parties at any time before the Confirmation Date and thirty
(30) days following the Plan's Effective Date.


                                      -6-
<PAGE>   12


         Allowed Convenience Claims will receive on the later of the Effective
Date and the date such Convenience Claim becomes an Allowed Convenience Claim,
or as soon thereafter as is practicable, payment in Cash in the full amount of
such Allowed Convenience Claim.

         Allowed Class 5 Trade Claims incurred pre-December 4, 1998 will be
satisfied by distribution made from the Creditors' Trust to the holders of such
Allowed Trade Claims equal to seventy percent (70%) of such Allowed Claim,
provided all such Allowed General Unsecured Trade Claims do not exceed
$1,500,000 ("Trade Cap"). To the extent the aggregate of such Class 5 Allowed
Trade Claims exceeds $1,500,000, they will be treated as Allowed Class 6 Claims.

         Finally, with respect to the Equity Interests in the Debtors, all
existing NEG Equity Interests will remain in existence, except that all NEG
preferred stock will be converted into Common Stock at the conversion price of
$.25 per share. In the event the Creditors Committee elects to maximize the
return to Class 6 Note Claims by causing the Remaining Assets of the Debtors to
be liquidated, the Debtors will also be liquidated and/or wind up their
corporate affairs. The Creditors Trust will receive such liquidation proceeds
and distribute them in accordance with the terms of the Plan.

                                       IV.

                     SUMMARY OF CLASSIFICATION AND TREATMENT

         The Plan designates eight (8) Classes of Claims and Equity Interests
taking into account their differing nature and priority as established under the
Bankruptcy Code. The following is a summary of the Classes, Claims and Equity
Interest types, and the treatment of Allowed Claims and Allowed Equity Interests
under the Plan. The Debtors have prepared the following chart in an effort to
provide holders of Claims and holders of Equity Interests with the Debtors'
estimates of the expected outstanding amounts due owing with respect to each
Class of Claims as of the projected Confirmation Date, November 1, 1999. The
calculations, percentages and amounts set forth below are estimates which shall
not affect the obligations of any party under the Plan.


                                      -7-
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Unclassified. Allowed Administrative Expense Claims

Total estimated amount of unpaid Allowed Administrative Expense Claims,
including trade claims incurred during the Section 303 "Gap Period" between the
involuntary petition date of December 4, 1998 and February 12, 1999, are
estimated at $1,500,000

Payment of ordinary course expenses incurred by the Debtors-in-Possession shall
be made in the ordinary course of business. Other Administrative Expense Claims
shall be paid in full, in Cash on the later of the Effective Date or within ten
(10) days after the date upon which an Administrative Expense Claim is Allowed,
or as soon thereafter as is practicable.

Estimated percentage recovery: 100%

Unclassified. Allowed Professional Compensation and Reimbursement Claims

Total estimated amount of unpaid Allowed Professional Compensation and
Reimbursement Claims: $2,000,000

Payment in full, in Cash (or by setoff against any retainer on hand) on the
later of the Effective Date and within ten (10) days after the date upon which a
Professional Compensation and Reimbursement Claim is Allowed, or as soon
thereafter as is practicable.

Estimated percentage recovery: 100%

Unclassified. Allowed Priority Tax Claims

Total estimated amount of Unpaid Priority Tax Claims: Less than $500,000

At the sole option of the Reorganized Debtors, payment in full, in Cash on the
later of the Effective Date and within ten (10) days after the date upon which a
Priority Tax Claim is Allowed, or as soon thereafter as is practicable.

Estimated percentage recovery: 100%

Class 1. Allowed Other Priority Claims

Total estimated amount of Allowed Other Priority Claims: $___________________

Unimpaired. Payment in full, in Cash on the later of the Effective Date and the
date within ten (10) days after upon which an Other Priority Claim is Allowed by
Final Order, or as soon thereafter as is practicable.

Estimated percentage recovery: 100%

Class 2. Allowed Arnos Secured Claim

Total estimated amount of unpaid Allowed Arnos Secured Claim: $l00,000

Unimpaired. The Arnos Secured Claim shall receive a payment of unpaid accrued
interest due on its claim for the period December 1, 1999 through December 13,
1999.

Estimated percentage recovery: 100%


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<PAGE>   14


Class 3. Allowed Miscellaneous Secured Claims

Total estimated amount of Allowed
Miscellaneous Secured Claims:
Less than $100,000

Impaired. At the sole option of the Reorganized Debtors, either (a) payment in
full, in Cash on the later of the Effective Date and within ten (10) days after
the date upon which an Other Secured Claim becomes an Allowed Other Secured
Claim, or a soon thereafter as is practicable, or (b) satisfied in full by the
tender of all Collateral securing such Allowed Miscellaneous Secured Claim, or
(c) such other agreement as the Creditors Committee and such claimant can reach.

Estimated percentage of recovery: 100%

Class 4. Allowed Convenience Claims of $1,000 or greater amount reduced to
$1,000

Total estimated amount of Allowed Convenience Claims: $500,000

Impaired. Each holder of an Allowed Convenience Claim as of the Record Date
shall receive Cash in an amount equal to 80% of such Allowed Convenience Claim
on the later of the Effective Date and ten (10) days after the date upon which a
Convenience Claim is Allowed, or as soon thereafter as is practicable.

Estimated percentage recovery: 80%

Class 5. Allowed General Unsecured Trade Claims Total estimated amount of
Allowed General Unsecured Trade Claims: $1 ,200.000-$1,500,000

Impaired. Each holder of an Allowed General Unsecured Claim shall receive Cash
in an amount equal to 70% of such Allowed General Unsecured Claim or the latter
of the Effective Date or within ten (10) days after the Date when the Unsecured
Trade Claim has been allowed, or as soon thereafter as practicable.

Estimated percentage recovery: 70%


                                      -9-
<PAGE>   15

--------------------------------------------------------------------------------
Class 6: Allowed Note Claims

Total estimated amount of Allowed Note Claims:

Principal Amount of $165,000,000

Impaired. The Allowed Note Claims shall be the primary beneficiary of the
Creditors Trust. The Creditors Trust shall utilize the Cash, Arnos Escrow Funds
and any Proceeds recovered from prosecution of the Causes of Action ("Litigation
Proceeds"), together with any proceeds received from the liquidation of
miscellaneous Remaining Assets of the Debtor or rights of Noteholders to receive
up to 95% of the fully diluted Common Stock of the Reorganized Debtors, to pay
in the order of their priority, Allowed Administrative Claims, Allowed Priority
Tax Claims, Allowed Priority Non-Tax Claims, Allowed Convenience Claims, Allowed
Miscellaneous Secured Claims and the Allowed Arnos Secured Claim ("Superior
Claims") and Allowed Trade Claims. After establishing a sufficient reserve to
cover Dispute Claims and an administrative reserve to insure the continued
viability and operation of the Trust, the Creditor Trust shall make the Initial
Distribution and any Subsequent and Surplus Distributions to Norwest Bank, N.A.,
the Note Indenture Trustee, which, in turn, shall immediately distribute such
proceeds to the holders of Allowed Class 6 Note Claims on a Pro-Rata basis.

Estimated percentage recovery: 50%-65%

--------------------------------------------------------------------------------
Class 7. Allowed NEG Preferred Stock Interests.

Impaired. As of the Effective Date, each holder of NEG Preferred Stock as of the
Record Date shall be deemed to have converted their holdings of Preferred Stock
into NEG Common Stock on the assumed basis of NEG's Common Stock being traded at
25 cents a share immediately prior to such conversion.

--------------------------------------------------------------------------------
Class 8. Allowed NEG Common Stock

Unimpaired. Each holder of Common Stock as of the Record Date shall retain its
Common Stock in NEG.
--------------------------------------------------------------------------------

                                      -10-
<PAGE>   16


                                       V.

                       VOTING PROCEDURES AND REQUIREMENTS

         A.       BALLOTS AND VOTING DEADLINE.

         ONLY HOLDERS OF IMPAIRED CLAIMS IN CLASSES 3,4, AND 7 UNDER THE
         PLAN ARE BEING SOLICITED TO VOTE TO ACCEPT OR REJECT THE PLAN.

         The Claims classified in Classes 1, 2, 3 and 4 and the Equity Interests
classified in Class 8 are UNIMPAIRED under the Plan. Therefore, no votes on the
Plan are being solicited from the holders of Claims and Equity Interests in such
Classes pursuant to Section 1126(f) of the Bankruptcy Code.

         The Claims classified in Classes 4, 5, 6 and the Preferred Stock
Interests classified in Class 7 are IMPAIRED under the Plan. The holders of
Claims in Classes 4, 5, and 6 are being solicited to vote to accept or reject
the Plan. The holders of NEG Preferred Stock Interests in Class 7 are deemed to
have rejected the Plan and, therefore, are not being solicited to vote to accept
or reject the Plan.

         A ballot to be used for voting to accept or reject the Plan is enclosed
with this Disclosure Statement for those entitled to vote. The holder of a Claim
or Equity Interest, as the case may be, that is entitled to vote must (1)
carefully review the ballot and the instructions thereon, (2) complete and
execute the ballot, and (3) return the ballot to the address indicated thereon
by the deadline to enable the ballot to be considered for voting purposes. Any
ballot received by the Debtors that does not reflect an affirmative vote for
either the acceptance or rejection of the Plan will be deemed a vote for
acceptance of the Plan.


                                      -11-
<PAGE>   17


         The Bankruptcy Court has directed that, in order to be counted for
voting purposes, ballots for the acceptance or rejection of the Plan must be
received no later than_____ __.m., Central Time. on May ___, 2000 at the
following address:

              Van Oliver
              Andrews & Kurth L.L.P.
              Suite 3700, 1717 Main Street
              Dallas, Texas 75201
              (214) 659-4400 (Phone)
              (214) 659-4401 (Facsimile)

         TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED AT THE ABOVE
         ADDRESS BY NO LATER THAN _____ __.M., CENTRAL TIME, ON MAY ____,
         2000.

         YOUR BALLOT WILL NOT BE COUNTED IF IT IS RECEIVED AT THE ABOVE
         ADDRESS AFTER _____ __.M., CENTRAL TIME, ON MAY ___, 2000.

         NOTE: FAXED BALLOTS OR BALLOTS WITHOUT AN ORIGINAL SIGNATURE
         WILL NOT BE COUNTED.

         You may be contacted by representatives of the Creditors Committee with
regard to your vote on the Plan. Votes cast by holders of Claims will be
irrevocable once received by the Creditors' Committee, unless the Bankruptcy
Court, after application, notice and hearing, permits a change of vote. If any
ballot received by the Creditors Committee is not discernible as to the Class of
the Claim or the name of the holder thereof, such ballot will be disregarded and
not counted. If a ballot is damaged or lost, please contact Creditors Committee
counsel. If you have any questions regarding the procedures for voting on the
Plan, please contact your legal counsel for advice.


                                      -12-
<PAGE>   18


         B. HOLDERS OF CLAIMS SOLICITED TO VOTE.

         Any holder whose Claim is within a Class impaired under the Plan and
who is eligible (upon Allowance of such Claim) to receive distributions under
the Plan, is being solicited to vote to accept or reject the Plan if either (i)
its Claim has been scheduled by the Debtors, but such Claim is not scheduled by
the Debtors as disputed, contingent or unliquidated, or (ii) it has filed a
proof of Claim (a) on or before June 21, 1999 (the "Bar Date"), or (b) after the
Bar Date with leave of the Bankruptcy Court pursuant to a Final Order, and as to
which no timely objection has been filed, or if a timely objection has been
filed, to the extent which such Claim is Allowed by a Final Order of the
Bankruptcy Court or temporarily Allowed for purposes of voting only. As of the
filing of this Disclosure Statement, the Creditors Committee are continuing to
review Claims to assess their validity and intend to identify objectionable
Claims and file objections thereto.

         Any Claim as to which an objection has been filed (and such objection
is still pending on the voting date) is not entitled to have its vote counted
unless the Bankruptcy Court temporarily allows the Claim for voting purposes in
an amount which the Bankruptcy Court deems proper upon motion by the holder to
whose Claim has been objected. Such a motion must be heard and determined by the
Bankruptcy Court prior to the date and time established by the Bankruptcy Court
for commencement of the Confirmation Hearing. In addition, a vote may be
disregarded if the Bankruptcy Court determines that such vote was not solicited
or procured in good faith, in accordance with the provisions of the Bankruptcy
Code.


                                      -13-
<PAGE>   19


         C. DEFINITION OF IMPAIRMENT.

         Under Section 1124 of the Bankruptcy Code, a class of claims or
interests is impaired under a plan of reorganization unless, with respect to
each claim or interest of such class, the Plan:

         1.   leaves unaltered the legal, equitable, and contractual rights of
              the holder of such claim or interest; or

         2.   notwithstanding any contractual provision or applicable law that
              entitles the holder of a claim or interest to receive accelerated
              payment of such claim or interest after the occurrence of a
              default:

              a.    cures any such default that occurred before or after the
                    commencement of the case under the Bankruptcy Code, other
                    than a default of a kind specified in Section 365(b)(2) of
                    the Bankruptcy Code;

              b.    reinstates the maturity of such claim or interest as it
                    existed before the default;

              c.    compensates the holder of such claim or interest for damages
                    incurred as a result of reasonable reliance on such
                    contractual provision or applicable law; and

              d.    does not otherwise alter the legal, equitable, or
                    contractual rights to which such claim or equity interest
                    entitles the holder of such claim or interest.

         D. Vote Required for Class Acceptance.

         As a condition of confirmation, the Bankruptcy Code requires acceptance
of a plan of reorganization by all impaired classes (except as discussed below).
The Bankruptcy Code defines acceptance of a plan by a class of claims as
acceptance by holders of two-thirds (2/3rds) in dollar amount and one-half (1/2)
in number of the claims of that class which actually cast ballots for acceptance
or rejection of the plan, i.e., acceptance takes place only if two-thirds
(2/3rds) in amount and majority in number of the holders of claims in a given
class actually voting cast their ballots in favor of acceptance. The Bankruptcy
Code defines acceptance of a plan by a class of equity interest.


                                      -14-
<PAGE>   20


holders as acceptance by holders of two-thirds in amount of the interests of
that class which actually cast ballots for acceptance or rejection of the plan.
Notwithstanding the requirement of class acceptance, a plan may be confirmed
even if one or more impaired classes does not accept the plan if at least one
impaired class of non-insider claims has accepted the plan and the Court
determines that the plan does not discriminate unfairly, and is fair and
equitable, with respect to each class that is impaired and has not accepted the
plan.

         If the Plan is confirmed, all holders of Claims against and Equity
Interests in the Debtors, whether voting or non-voting and, if voting, whether
accepting or rejecting the Plan, will be bound by the terms of the Plan.

                                       VI.

                            CONFIRMATION OF THE PLAN

         Under the Bankruptcy Code, the following steps must be taken to confirm
the Plan:

         A. CONFIRMATION HEARING.

         Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court,
after notice, to hold a hearing to determine whether all requirements for
confirmation of the Plan have been satisfied. By Order of the Bankruptcy Court
entered on April 17, 2000 the Confirmation Hearing has been scheduled for May
____, 2000, at ______ ___.m., Central Time, at the United States Bankruptcy
Court, Northern District of Texas, United States Courthouse, l4th Floor, Earl
Cabell Federal Office Building, 1100 Commerce, Dallas, Texas 75242 (the
"Confirmation Hearing"). The Confirmation Hearing may be adjourned from time to
time by the Bankruptcy Court without further notice, except for an announcement
made at the Confirmation Hearing or any adjournment thereof.


                                      -15-
<PAGE>   21

         ANY ANNOUNCEMENT OF ADJOURNMENT OF THE DATE AND TIME OF THE
CONFIRMATION HEARING MADE IN COURT SHALL BE THE ONLY NOTICE PROVIDED TO HOLDERS
OF CLAIMS AND EQUITY INTERESTS, UNLESS THE BANKRUPTCY COURT ORDERS OTHERWISE.

         Section 1128(b) of the Bankruptcy Code provides that any party in
interest may object to confirmation of the Plan. Any objection to confirmation
must be made in writing and filed with the Bankruptcy Court with proof of
service and served upon the Debtors' counsel and Creditors' Committee's counsel
listed below on or before May ___,2000 at _____ __.m. Central Time.

                       COUNSEL FOR CREDITORS COMMITTEE OF
                          NATIONAL ENERGY GROUP, INC.:

                                    Hugh Ray
                                   Van Oliver
                             ANDREWS & KURTH L.L.P.
                          Suite 3700, 1717 Main Street
                               Dallas, Texas 75201

                    COUNSEL FOR NATIONAL ENERGY GROUP, INC.:

                               Patrick J. Neligan
                                 Mark A. Andrews
                        Neligan, Andrews, Bryson & Foley
                            Suite 4050, 1717 Main St.
                               Dallas, Texas 75201

UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED UPON THE CREDITORS'
COMMITTEE'S COUNSEL AND FILED WITH THE BANKRUPTCY COURT, IT WILL NOT BE
CONSIDERED BY THE BANKRUPTCY COURT.


         B. REQUIREMENTS FOR CONFIRMATION OF THE PLAN.

         At the Confirmation Hearing, the Bankruptcy Court shall determine
whether the confirmation requirements of Section 1129 of the Bankruptcy Code
have been satisfied, in which event the


                                      -16-
<PAGE>   22


Bankruptcy Court shall enter an order confirming the Plan. The applicable
requirements for confirmation are as follows:

         1.   The Plan complies with the applicable provisions of the Bankruptcy
              Code.

         2.   The Creditors Committee has complied with the applicable
              provisions of the Bankruptcy Code.

         3.   The Plan has been proposed in good faith and not by any means
              forbidden by law.

         4.   Any payment made or promised by the Debtors or Creditors
              Committee, or by a person acquiring property under the Plan, for
              services or for costs and expenses in or in connection with the
              Chapter 11 Cases, or in connection with the Plan and incident to
              the Chapter 11 Cases, has been disclosed to the Bankruptcy Court,
              and any such payment made before the confirmation of the Plan is
              reasonable, or if such payment is to be fixed after confirmation
              of the Plan, such payment is subject to the approval of the
              Bankruptcy Court as reasonable.

         5.   The Creditors Committee has disclosed the identity and
              affiliations of any individual proposed to serve, after
              confirmation of the Plan, as a director, officer, or voting
              trustee of the Debtors, an affiliate of the Debtors participating
              in a Plan with the Debtors, or a successor to the Debtors under
              the Plan, and the appointment to, or continuance in, such office
              of such individual, is consistent with the interests of creditors
              and equity security holders and with public policy, and the
              Creditors Committee has disclosed the identity of any insider that
              will be employed or retained by the reorganized Debtors, and the
              nature of any compensation for such insider.

         6.   With respect to each Class of impaired Claims or Equity Interests,
              either each holder of a Claim or Equity Interest of such class has
              accepted the Plan, or will receive or retain under the Plan on
              account of such Claim or Equity Interest property of a value, as
              of the Effective Date of the Plan, that is not less than the
              amount that such holder would so receive or retain if the Debtors
              were liquidated on such date under Chapter 7 of the Bankruptcy
              Code; or if Section 1111(b)(2) of the Bankruptcy Code applies to
              the Claims of such Class, each holder of a Claim will receive or
              retain under the Plan on account of such Claim property of a
              value, as of the Effective Date of the Plan, that is not less than
              the value of such holder's interest in the Debtors' estates'
              interest in the property that secures such Claims.

         7.   Each Class of Claims or Equity Interests has either accepted the
              Plan or is not impaired under the Plan.


                                      -17-
<PAGE>   23
         8.   Except to the extent that the holder of a particular Claim has
              agreed to a different treatment of such Claim, the Plan provides
              that Allowed Administration Expense Claims and Allowed Other
              Priority Claims will be paid in full on the Effective Date and
              that Allowed Priority Tax Claims will receive on account of such
              Allowed Claims deferred cash payments, over a period not exceeding
              six years after the date of assessment of such Claim, of a value,
              as of the Effective Date, equal to the Allowed amount of such
              Claim.

         9.   At least one Class of Claims has accepted the Plan, determined
              without including any acceptance of the Plan by any insider
              holding a Claim of such Class.

         10.  Confirmation of the Plan is not likely to be followed by the
              liquidation, or the need for further financial reorganization, of
              the Debtors or any successor to the Debtors under the Plan, unless
              such liquidation or reorganization is proposed in the Plan.

         11.  The Plan must provide that the quarterly fees required under 28
              U.S.C. Section 1930 have been paid or that they will be paid on
              the Effective Date of the Plan.

         The Creditors Committee believes that the Plan satisfies all of the
statutory requirements of Chapter 11 of the Bankruptcy Code, that it has
complied or will have complied with all of the requirements of Chapter 11, and
that the proposal of the Plan is made in good faith. As to NEG Preferred and
Common Stock Interests, the Creditors Committee intends to seek confirmation of
the Plan under the cramdown provisions of the Bankruptcy Code discussed below.

         C. CRAMDOWN.

         Generally, under the Bankruptcy Code, a plan of reorganization must be
approved by each impaired class of creditors. A Bankruptcy Court, however, may
confirm a plan that has not been approved by each impaired class if at least one
impaired class accepts the plan by the requisite vote and the Bankruptcy Court
determines that the plan "does not discriminate unfairly" and is "fair and
equitable" with respect to each class that is impaired and has not accepted the
plan. A plan of reorganization does not discriminate unfairly within the meaning
of the Bankruptcy Code if each


                                      -18-
<PAGE>   24


dissenting class is treated equally with other classes of equal rank. "Fair and
equitable" has different meanings with respect to the treatment of secured
claims, unsecured claims and equity interests.

         As set forth in Section 1129(b)(2) of the Bankruptcy Code, the
condition that a plan of reorganization be fair and equitable with respect to a
class includes the following requirements. With respect to a secured claim,
"fair equitable" means either (i) the impaired secured creditor retains its
liens to the extent of its allowed claim and receives deferred cash payments at
least equal to the allowed amount of its claims with a present value as of the
effective date at least equal to the value of such creditor's interest in the
property securing its liens, (ii) property subject to the lien of the impaired
secured creditor is sold free and clear of that lien, with that lien attaching
to the proceeds of sale, and such lien proceeds must be treated in accordance
with clauses (i) and (iii) hereof, or (iii) the impaired secured creditor
realizes the "indubitable equivalent" of its claim under the plan.

         With respect to an unsecured claim, "fair and equitable" means either,
(i) each impaired unsecured creditor receives or retains property of a value
equal to the amount of its allowed claim, or (ii) the holders of claims and
interests that are junior to the claims of the dissenting class will not receive
any property under the plan.

         With respect to equity interests, "fair and equitable" means either (i)
each impaired equity interest receives or retains on account of such interest
property of a value equal to the greatest of the allowed amount of any fixed
liquidation preference to which such holder is entitled, any fixed redemption
price to which such holder is entitled, or the value of such interest; and (ii)
the holder of any interest that is junior to the interest of such class will not
receive under the plan any property on account of such junior interest.


                                      -19-
<PAGE>   25


         In the event one or more Classes of impaired Claims rejects the Plan,
the Creditors Committee reserves the right to proceed with confirmation pursuant
to Section 1129(b) of the Bankruptcy Code, and the Bankruptcy Court will
determine at the Confirmation Hearing whether the Plan is fair and equitable and
does not discriminate unfairly against any rejecting impaired Class of Claims.

                                      VII.

                           DESCRIPTION OF THE DEBTORS


         A. BUSINESS.

            1. GENERAL OVERVIEW OF THE COMPANY.

         National Energy Group, Inc. was incorporated under the laws of the
State of Delaware on November 20, 1990. Effective June 11, 1991, Big Piney Oil
and Gas Company and VP Oil, Inc. merged with and into the Company. On August 29,
1996, Alexander Energy Corporation was merged with and into a wholly-owned
subsidiary of the Company, which subsidiary was merged with and into the Company
on December 31, 1996.

         The Company is an independent energy company which has historically
engaged in the exploration, acquisition, exploitation, development and operation
of oil and natural gas properties in major producing basins onshore in Texas,
Louisiana, Oklahoma, Arkansas, and Mississippi, and offshore in the Gulf of
Mexico.

            2. BUSINESS PRIOR TO BANKRUPTCY.

         Historically, the Company has developed and exploited existing
properties by drilling Development Wells, and recompleting and reworking
existing wells. The Company in late 1998


                                      -20-
<PAGE>   26
continued to participate in non-operated wells as described above and limited
drilling operations in 1998.

         The following table sets forth the Company's principal areas of
operations and the Company's Proved Reserves of oil and natural at July 1, 1999.



                   SUMMARY OF RESERVES AND FUTURE NET REVENUE

                               AS OF JULY 1, 1999

                      NATIONAL ENERGY GROUP, INC. INTEREST



<TABLE>
<CAPTION>
                           Net Reserves               Future Net Revenue
                           ------------               ------------------
                        Oil           Gas                        Present Worth
Area/Category          (MBBL)        (MMCF)         Total           at 10%
-------------          ------        ------         -----        -------------
<S>                  <C>          <C>            <C>             <C>
ANADARKO
Proved Developed
  Producing             481,005    24,835,779    $ 58,377,100    $  33,194,000
  Non-Producing          68,426     2,889,907       8,588,600        1,942,300
Proved Undeveloped       19,415     1,695,960       2,384,100          930,700
                     ----------   -----------    ------------    -------------

   Total Proved         568,846    29,421,646    $ 69,349,800    $  36,067,000

Probable(1)              73,330     1,297,471    $  2,576,800    $     617,300

ARKOMA
Proved Developed
 Producing               31,332     7,308,900    $ 13,635,700    $   8,819,300
 Non-Producing                0       305,738         914,000          101,300
Proved Undeveloped            0       277,710         286,600          176,600
                     ----------   -----------    ------------    -------------

   Total Proved          31,332     7,892,348    $ 14,836,300    $   9,097,200

Probable(1)                   0       936,763    $  1,140,200    $     652,000
GULF COAST
Proved Developed
</TABLE>


                                      -21-
<PAGE>   27


<TABLE>
<CAPTION>
                           Net Reserves               Future Net Revenue
                           ------------               ------------------
                        Oil           Gas                        Present Worth
Area/Category          (MBBL)        (MMCF)         Total           at 10%
-------------          ------        ------         -----        -------------
<S>                  <C>          <C>            <C>             <C>
 Producing            1,417,289     2,347,359    $ 13,466,300    $  13,362,600
 Non-Producing          936,849     2,017,409      16,246,400       10,819,500
Proved Undeveloped       78,173     3,938,268       6,573,800        4,790,100
                     ----------   -----------    ------------    -------------

   Total Proved       2,432,311     8,303,036    $ 36,286.500    $  28,972,200

Probable(1)             876,938     1,773,464    $ 18,588,800    $  10,173,500
</TABLE>



                                      -22-
<PAGE>   28
<TABLE>
<CAPTION>
                           Net Reserves               Future Net Revenue
                           ------------               ------------------
                        Oil           Gas                        Present Worth
Area/Category          (MBBL)        (MMCF)         Total           at 10%
-------------          ------        ------         -----        -------------
<S>                  <C>          <C>            <C>             <C>

EAST TEXAS
Proved Developed
  Producing             132,382    21,525,430    $ 44,420,200    $  25,086,400
  Non-Producing          18,777       196,542         608,900          102,200
Proved Undeveloped        1,564     1,564,336       1,540,500          346,800
                     ----------   -----------    ------------    -------------

    Total Proved        152,723    23,286,308    $ 46,569,600    $  25,535,400

Probable(1)              13,044     2,276,604    $  2,412,200    $     484,600

WEST TEXAS
Proved Developed
  Producing           1,679,616     1,622,377    $ 12,896,600    $  10,101,300
  Non-Producing          47,145        47,653         219,500          151,300
Proved Undeveloped      450,784       495,180       3,444,200        1,528,700
                     ----------   -----------    ------------    -------------

    Total Proved      2,177,545     2,165,210    $ 16,560,300    $  11,781,300

Probable(1)                   0             0    $          0    $           0

TOTAL ALL AREAS
Proved Developed
  Producing           3,741,624    57,639,845    $142,795,900    $  90,563,600
  Non-Producing       1,071,197     5,457,249      26,577,400       13,116,600
Proved Undeveloped      549,936     7,971,454      14,229,200        7,772,900
                     ----------   -----------    ------------    -------------

    Total Proved      5,362,757    71,068,548    $183,602,500    $ 111,453,100

Probable(1)             963,312     6,284,302    $ 24,718,000    $  11,927,400
</TABLE>



                                      -23-
<PAGE>   29


         a. Mid-Continent Area

         At July 1, 1999, approximately 52.5% (37.3 Bcfe) of the Company's
Proved Reserves were located in the Mid-Continent area in Oklahoma and western
Arkansas which includes the Anadarko and Arkoma Basins.

         b. Anadarko Basin.

         The Anadarko Basin is considered a mature oil and natural gas province
characterized by multiple producing horizons and relatively long reserve lives.
Drilling a Producing Well on these locations can convert Proved Undeveloped
Reserves to Proved Developed Producing Reserves, and can provide additional PUD
locations on the Company's leasehold acreage.

         The Company's Anadarko Basin properties were initially drilled on 640
acre producing units. Industry has successfully demonstrated to Oklahoma
regulators that deeper wells in the Anadarko Basin will not efficiently drain
640 acres and have obtained authorization for increased density drilling on
smaller acreage units. Further, under the forced pooling rules in Oklahoma, even
if the Company is not the operator of the property for which increased density
drilling has been approved, the Company may propose to drill and operate
additional wells on the original production unit. Frequently this results in the
proposing party owning a larger portion of newly drilled wells because other
Working Interest owners may decline to participate.

         During the year ended December 31, 1998, the Company drilled 7 Gross
(2.4 Net) Development Wells in the Anadarko Basin of which 5 Gross (1.6 Net)
Development Wells were completed as commercially productive. The Company's wells
typically are completed in horizons


                                      -24-
<PAGE>   30


ranging in depth between 7,000 and 15,000 feet Since Chapter 11, the Company has
drilled no additional wells.

         c. East and West Texas Area

         At December 31, 1998 approximately 35.8% (25.4 Bcfe) of the Company's
Proved-Reserves were located in the East and West Texas area, including East
Texas and the Goldsmith Adobe Unit in West Texas.

         (1) East Texas.

         These reserves are found in the Cotton Valley formation and the Travis
Peak formation. The Cotton Valley formation is generally found at depths of
8,500 to 10,500 feet in the Company's area of interest. These properties produce
from low permeability reservoirs that generally contain relatively long life
natural gas reserves. A significant portion of the cost to complete Cotton
Valley wells is incurred due to the low permeability of interbedded sandstones
and shales, which requires large hydraulic fracture stimulation, typically of
multiple zones of the producing formation, to obtain the increased production
levels necessary to make such wells commercially viable. The Travis Peak
formation is generally found at a depth of 7,200 feet and principally contains
oil reserves.

         (2) Goldsmith Adobe Unit ("Gau").

         The Goldsmith Adobe Unit is in the Permian Basin in West Texas. The
Company owns approximately a 95% Working Interest in the GAU, which it operates.

         Originally the GAU was drilled on 40 acre spacing units. Previous
operators had drilled several wells on 20 acre spacing units and, based on the
results of this drilling and 20 acre spacing development on adjoining leases,
the Company began a drilling program in July 1994 to


                                      -25-
<PAGE>   31
develop the GAU on 20 acre spacing units. During 1998, the Company drilled and
completed as commercially productive, 4 Gross (3.8 Net) Development Wells on the
GAU.

         Typically, wells drilled by the Company in the GAU in 1998 were drilled
to depths between 5,600 and 6,000 feet into the Clearfork formation.

         d. Gulf Coast Area

         At July 11, 1999 approximately 11.7% (8.3 Bcfe) of the Company's Proved
Reserves were located in the Gulf Coast areas, principally in the Greater Bayou
Sorrel Area in Iberville Parish, Louisiana and at Mustang Island in offshore
Gulf of Mexico. The Company also has participated in exploratory activity in
various parishes throughout Southern Louisiana.

         e. Greater Bayou Sorrel Area.

         The Greater Bayou Sorrel Area is located approximately eighty miles
west of New Orleans, in Iberville Parish, Louisiana, in the Atchafalaya River
Basin. The target formations of the Company's exploration prospects in this area
range from approximately 11,000 to 14,000 feet and include the Marg Vag, Marg
Howeii, Camerina, Cib Haz, and Marg Tex zones. The topography of the surface is
river swamp and all work must be done with barge-mounted drilling rigs and
boats. Production platforms are mounted on pilings. The Company first
participated in the successful exploratory test of the Schwing #1 well in the
Company's East Bayou Sorrel prospect in January 1996. This discovery well was
drilled to a total depth of approximately 14,000 feet on the eastern flank of
the old Bayou Sorrel Field, which was discovered by Shell Oil Company in 1954.
The old Bayou Sorrel Field was drilled in the 1950s and 1960s, with a total of
87 wells drilled and produced in twenty-eight different horizons ranging in
depths from 7,000 to 11,100 feet. During 1997, the Company successfully drilled
and completed a second test well, the Schwing #2.


                                      -26-
<PAGE>   32


         During 1998, the Company drilled 2 Gross (1.2 Net) Exploratory Wells in
the Greater Bayou Sorrel area both of which were determined to be dry holes.
Also during 1998, the Company successfully drilled and completed 1 Gross (.8
Net) Development Well in the Greater Bayou Sorrel area.

         The Company has completed shooting, processing and interpreting, an
approximate 54 square mile 3-D seismic survey over the Greater Bayou Sorrel
Area. The Company has identified additional potential drilling locations for
prospects in this area through interpretation of the 3-D seismic data. The
Greater Bayou Sorrel Area has produced and continues to produce significant oil
and gas. Because of the difficult topography, very little seismic data had been
acquired prior to the Company's 3-D survey. The Company controls approximately
13,400 acres either by lease or option to lease, within the Greater Bayou Sorrel
Area.

         In March 1998, the Company acquired Fortune Natural Resources
Corporations interests in the East Bayou Sorrel field for approximately $4.5
million in cash.

         3. OIL AND NATURAL GAS RESERVES

         The estimated reserves and related future net revenues as of July 1,
1999 were prepared by the Company's outside engineers Netherland, Sewell &
Associates, Inc. All of the Company's reserves are located in the continental
United States. This reserve report was prepared using constant prices and costs
in accordance with the published guidelines of the SEC. The net weighted average
prices used in the Company's reserve report at July 1, 1999 were $20.065 per
barrel of oil, increasing through 12/31/99 and then decreasing to $17.610 per
barrel of oil on December 31, 2002 and $2.30 per MMBTU of gas on July 1, 1999
and increasing to a high of $3.06 on December 31, 1999 and then decreasing to
$2.57 on December 31, 2002. The estimation of


                                      -27-
<PAGE>   33


reserves and future net revenues materially affected by the oil and gas prices
used in preparing the reserve report.

         4. LEASEHOLD ACREAGE.

         The following table shows the approximate Gross and Net Acres in which
the Company had a leasehold interest as of July 31, 1999

<TABLE>
<CAPTION>
                      DEVELOPED ACREAGE   UNDEVELOPED ACREAGE
                      -----------------   -------------------
                       GROSS      NET      GROSS        NET
                      -------   -------   -------     -------
<S>                   <C>       <C>       <C>         <C>
Area:
Mid-Continent         104,654    53,900     3,700         2.4
East and West Texas    17,863    14,315     6,374         3.6
Gulf Coast             15,778    10,657    30,832        22.0
                      =======   =======   =======     =======
 Totals               138,295    78,872    40,906        28.1
</TABLE>


         5. Title to Oil and Natural Gas Properties.

         The Company has acquired interests in producing wells and undeveloped
acreage in the form of Working Interests, Royalty Interests, and overriding
Royalty Interests. To reduce the Company's financial exposure in any one
exploratory prospect, the Company often acquired less than 100% of the Working
Interest in a prospect.

         6. Control over Production Activities.

         The Company operated 394 of the 550 producing wells in which it owned
an interest as of December 31, 1998. The non-operated properties are operated by
unrelated third parties pursuant to operating agreements which are generally
standard in the industry. Significant decisions about operations regarding
non-operated properties may be determined by the outside operator rather


                                      -28-
<PAGE>   34
than by the Company. If the Company declines to participate in additional
activities proposed by the outside operator under certain operating agreements,
the Company will not receive revenues from, and/or will lose its interest in the
activity in which it declined to participate.

         7. MARKETS AND CUSTOMERS.

         The availability of a ready market for any oil and natural gas produced
by the Company and the prices obtained for such oil and natural gas depend upon
numerous factors beyond its control, including the demand for and supply of oil
and natural gas; fluctuations in production and seasonal demand; the
availability of adequate pipeline and other transportation facilities; weather
conditions; economic conditions; imports of crude oil; production by and
agreements among OPEC members; and the effects of state and federal governmental
regulations on the import, production, transportation, sale and taxation of oil
and natural gas. The occurrence of any factor that affects a ready market for
the Company's oil and natural gas or reduces the price obtained for such oil and
natural gas may adversely affect the Company.

         A large percentage of the Company's oil and natural gas sales are made
to a small number of purchasers. The Company normally sells its oil under six
month contracts. During 1996, Plains Marketing and Transportation accounted for
83% of the Company's oil sales, while Crosstex Energy and GPM Natural Gas
Corporation each accounted for 22% of the Company's natural gas sales. For the
year ended December 31, 1997, Plains accounted for 84% of the Company's oil
sales, and Crosstex and GPM accounted for 20W and 14%, respectively, of the
Company's natural gas sales. For the year ended December 31, 1998, Plains
accounted for 85% of the Company's oil sales, and Crosstex and Aquila Energy
Marketing accounted for 23% and 26%, respectively, of the Company's natural gas
sales. The agreement with Plains, entered into in 1993, provides for Plains


                                      -29-
<PAGE>   35
to purchase the Company's oil pursuant to West Texas Intermediate posted prices
plus a premium. The Company does not believe that the loss of any purchaser
would have a material adverse effect on its business because, under prevailing
market conditions, such purchaser could be replaced.

         A portion of the Company's natural gas production has been sold in the
past pursuant to long term netback contracts. Under netback contracts, gas
purchasers buy gas from a number of producers, process the gas for natural gas
liquids, and sell the liquids and residue gas. Each producer receives a fixed
portion of the proceeds from the sale of the liquids, and residue gas. The gas
purchasers pay for transportation, processing, and marketing of the gas and
liquids, and assume the risk of contracting pipelines and processing plants in
return for a portion of the proceeds of the sale of the gas and liquids.
Generally, because the purchasers are marketing large volumes of hydrocarbons
gathered from multiple producers, higher prices may be obtained for the gas and
liquids. A portion of the Company's natural gas production is also sold under
forward sales contracts. See Note 9 of Notes to Consolidated Financial
Statements. Deliveries under these contracts are priced based on NYMEX prices
less a differential whereby the Company may fix the price for deliveries under
these contracts at any time three days prior to the close of the then current
contract based on the NYMEX prices at that time. The Company pays the cost of
transportation of the natural gas to the delivery point specified in these
contracts. The remainder of the Company's natural gas is sold on the spot market
under short-term contracts.

         8. OFFICE SPACE.

         The Company leases approximately 25,000 square feet of office space in
Dallas, Texas. The Company also leases a small amount of office space in Odessa,
Texas, Fort Smith, Arkansas and Yukon, Oklahoma for its business activities.


                                      -30-

<PAGE>   36
                  9.       EMPLOYEES.

                  In late 1999, the Company had approximately 50 full-time
employees. Of these employees, eight are field-related personnel. The Company
does not have any collective bargaining agreements with employees and believes
that relations with its employees are generally satisfactory.

                  10.      LEGAL PROCEEDINGS.

                  The Company filed suit against Mr. R.E. Steakley in August
1995 to enjoin Mr. Steakley from interfering with the operations of the Company.
Mr. Steakley counterclaimed against the Company for surface damages, alleging
certain environmental claims. In February 1999, without admitting any liability,
the Company and Mr. R.E. Steakley entered into a Settlement and Release
Agreement which provided that each of the Company and Mr. Steakley release and
discharge the other from all claims and damages which may have occurred through
January 31, 1999 and dismiss the pending lawsuits against each other. The
Company further agreed to pay Mr. Steakley an amount of $75,000, purchase
certain materials from Mr. Steakley at market value which the Company shall use
to maintain roads incidental to its operations on the Steakley property and
limit the Company's ingress and egress to specified entrances on the Steakley
property.

                  Other than the Bankruptcy Court proceedings, the Company is a
defendant in one additional material pending legal proceedings that it
anticipates settling.

                  While the ultimate results of these proceedings cannot be
predicted with certainty, the Company does not believe that the outcome of these
matters will have a material adverse effect on the Company.



                                      -31-
<PAGE>   37
                  11.      ABANDONMENT COSTS.

         NEG is generally responsible for the costs associated with the plugging
of wells, the removal of facilities and equipment and site restoration on its
oil and gas properties, pro rata to its working interest. Historically, NEG has
provided for expected future abandonment liabilities by accruing for such costs
as a component of depletion, depreciation and amortization as production occurs.
Between $1 and $2 million in abandonment costs are anticipated to be incurred in
connection with transactions involving the sale or NEG divestiture of Lake
Mongoulois. Estimates of abandonment costs and their timing may change due to
many factors, including actual drilling and production results, inflation rates,
changes in abandonment techniques and technology and changes in environmental
laws and regulations.

                  If a sale of the Debtors' interest in the Lake Mongoulois
properties does not occur, the Creditors' Trust may seek to rescind the
acquisition of such properties from EEX Corp. or, alternatively recover damages
from EEX Corp., in a minimal amount to cover such plugging and abandonment
costs. EEX may assert defenses to any such litigation, such that the ultimate
outcome cannot be predicted.

                  Other plugging and abandonment costs will be assumed and paid
by Arnos Corp. except with respect to Mustang Island where the expected
production of which may carry such costs as part of its operations.

                  The Company and Creditors Committee have been in negotiations
with third parties relative to their acquiring NEG's interest in both Lake
Mongoulois and Mustang Island and the assumption of the related plugging and
abandonment costs. Two such parties have executed letters



                                      -32-
<PAGE>   38
of intent which are subject to negotiations, Court approval and consummation of
a finalized agreement.

         B.       SELECTED FINANCIAL INFORMATION.

                  1.       MARKET INFORMATION.

         The Company's Common Stock traded on the NASDAQ National market since
September 1, 1995 under the symbol 11NEGX11. On November 9, 1998, NASDAQ
notified the Company that its common stock would be delisted effective at the
close of business that day for failing to meet the net tangible asset test and
minimum bid price requirements set forth in NASD Marketplace Rules 4450(a)(3)
and 4450(a)(5). NASDAQ also advised the Company that its common stock was
immediately eligible for trading on the OTC Bulletin Board through authorized
broker-dealers who had been market makers in the Company's stock during the last
30-days. The Company contacted its OTC Market Makers to notify them of NASDAQ's
action and to facilitate future trading activity. The Company's common stock has
traded in 1999 on the OTC Bulletin Board under the symbol 11NEGXQ11.

                  a.       10-3/4% SENIOR NOTES DUE 2006 - APPROXIMATELY $165
                           MILLION OUTSTANDING.

                  In November 1996, the Company issued $100 million aggregate
principal amount of unregistered 10 3/4 Series A Notes due 2006. The net
proceeds of the Series A Notes of approximately $96.1 million were used to repay
approximately $62.0 million of borrowings under the predecessor to the credit
facility and to increase the Company's working capital. In 1997, the Series A
Notes were exchanged for the registered 10 3/4% Series B Notes due 2006 which
are substantially identical to the Series A Notes. Collectively, the Series A
Notes and



                                      -33-
<PAGE>   39

Series B Notes are referred to as the "Series A/B Notes." In August 1997, the
Company issued $65.0 million aggregate principal amount of its unregistered
10 3/4% Series C Notes. The net proceeds of the Series C Notes of approximately
$64.8 million were used to repay approximately $23.0 million of borrowings under
the Bank One Credit Facility, to fund that year's drilling program, and to
increase the Company's working capital. In December 1997, the Company exchanged
substantially all of the Series A/B Notes and the Series C Notes for registered
10 3/4% Series D Notes due 2006. The Series D Notes are substantially identical
to the Series A/B Notes and the Series C Notes. Collectively, the Series A/B
Notes, the Series C Notes, and the Series D Notes are referred to as the
"Notes." The Notes bear interest at 10 3/4% per annum, payable semi-annually on
May 1 and November 1.

                  b.       ARNOS SECURED CLAIMS PURCHASE FROM BANK GROUP.

                  On August 29, 1996, the Company, NEG-OK and Boomer Marketing,
entered into a credit facility with Bank One, as Bank and Administrative Agent,
and the Credit Lyonnais New York Branch, as Bank and Syndication Agent
(collectively, the "Banks"). The credit facility consisted of a $100.0 million
reducing revolving line of credit, with an initial borrowing base of $60.0
million and a $5.0 million term loan. Interest under the reducing revolving line
of credit was payable monthly at the Bank One base rate, as adjusted. The
proceeds from the credit facility were used to repay a prior credit facility and
the existing indebtedness of NEG-OK, resulting in an extraordinary charge of
$292,372 or $.01 per common share in 1996.

                  In November 1996, the Company repaid the outstanding
borrowings under the credit facility with a portion of proceeds from the
issuance of $100.0 million principal amount of 10 3/4% Senior Notes due 2006
(the "Series A Notes"). 5.





                                      -34-
<PAGE>   40

                  Also in November 1996, in connection with the issuance of the
Series A Notes, the Company revised the credit facility. The credit facility had
a borrowing base of $25.0 million. The principal amount of borrowings was due at
maturity, August 29, 2000 and interest is payable monthly.

                  The Company granted liens to the Banks on substantially all of
the Company's oil and natural gas properties, whether currently owned or
thereafter acquired, and a negative pledge on all other oil and natural gas
properties. The credit facility required, among other things, semiannual
engineering reports covering oil and natural gas properties, and maintenance of
certain financial ratios, including the maintenance of a minimum interest
coverage, a current ratio, and a minimum tangible net worth.

                  The credit facility contained other covenants prohibiting cash
dividends, distributions, loans, or advances to third parties, except that cash
dividends on preferred stock will be allowed so long as no event of default
exists or would exist as a result of the payment thereof.

                  The Company was required to pay a commitment fee on the unused
portion of the borrowing base equal to 1% per annum.

                  On December 7, 1998, Bank one and Credit Lyonnais gave notice
to the Company that all outstanding obligations under the credit facility were
accelerated and were immediately due and payable due to certain unspecified
Events of Default as defined in the loan agreement. Effective December 22, 1998,
the credit facility and all associated liens were assigned by the Banks to
Arnos, Corp. ("Arnos") an affiliated subsidiary of the Company's Series D
Preferred Stockholder and entity controlled by Carl Icahn. In a letter dated
December 23, 1998 to the Company, Arnos (1) rescinded the acceleration of the
loan, (2) waived all defaults existing at that



                                      -35-
<PAGE>   41

time and (3) made sufficient borrowings available to pay the interest on the
Senior Notes that was due on November 2, 1998 conditioned upon the Bankruptcy
Court's dismissal of the Involuntary Petition. The Company had $25,000,000
outstanding under the Arnos credit facility as of December 1, 1999.

                  In connection with its proposed purchase of substantially all
the oil and gas properties of NEG as of November 1, 1999, Arnos Corp. credit bid
under Section 363(k) of the Bankruptcy Code the $25 million of principal owed it
by NEG, leaving only approximately $100,000 in accrued interest to be paid to
Arnos Corp. on that debt.

                  c.       NEG PREFERRED STOCK.

                  In June 1994, the Company consummated the sale of $5.0 million
of the Series B Preferred Stock. Fifty thousand shares of the Series B Preferred
Stock were sold by the Company at $100 per share. The Series B Preferred Stock
is convertible into shares of the Common Stock at a conversion price of $1.625
per share. In October 1997, 13,813 shares of the Series B Preferred Stock were
converted into Common Stock, leaving 38,687 shares of the Series B Preferred
Stock outstanding. The board of directors declared dividends on the Series B in
December of 1998, which would be made in shares of Series B Preferred Stock.
That dividend-in-kind was not made and is currently in arrears.

                  In June 1995, the Company consummated the sale of $4.0 million
of the Series C Preferred Stock. Forty thousand shares of the Series C Preferred
Stock were sold by the Company at $100 per share. The Series C Preferred Stock
is convertible into shares of the Common Stock at a conversion rate of $2.00 per
share. The Series B Preferred Stock and Series C Preferred Stock require that
dividends be paid on the Series B Preferred Stock and Series C



                                      -36-
<PAGE>   42

Preferred Stock before any dividends are paid on the Common Stock. In October
1997, 17,000 shares of the Series C Preferred Stock were converted into Common
Stock, leaving 23,000 shares of the Series C Preferred Stock outstanding. The
board of directors declared dividends on the Series C in December of 1998, which
would be made in shares of Series C Preferred Stock. This dividend-in-kind was
not made and is currently in arrears.

                  In August 1996, the Company completed the sale of 100,000
shares of the Series D Preferred Stock for $10.0 million and 50,000 shares of
the Series E Preferred Stock for $5.0 million. The Series D Preferred Stock and
Series E Preferred Stock are convertible into shares of the Common Stock at a
conversion price of $2.25 per share. As part of such sale, the Company agreed to
extend the date at which it may first redeem the Series B Preferred Stock and
Series C Preferred Stock from June 14, 1997 to June 14, 1999. In October 1997,
40,500 shares of the Series E Preferred Stock were converted into Common Stock,
leaving 9,500 shares of the Series E Preferred Stock outstanding.

                  2.       SIGNIFICANT EVENTS OCCURRING DURING CHAPTER 11

         A number of significant events have occurred to National Energy Group,
Inc. and Boomer Marketing, Inc. since the filing of the involuntary petition in
bankruptcy against National Energy Group, Inc. on December 4 1998. The more
significant events include the following:

                  a.       GRANTING PETITIONING CREDITORS RELIEF AND DECLARING
                           NEG INSOLVENT.

                  At a hearing conducted before the Honorable Robert C. McGuire
on February 9, 1999, the Court after considering evidence, testimony and
arguments determined that the Company was not paying its debts as they generally
came due within the meaning of Section 303 of the



                                      -37-
<PAGE>   43

Bankruptcy Code, that an order for relief should be entered against the Company
and that the Company was insolvent.

                  b.       CESSATION OF MOST DRILLING ACTIVITIES.

                  On February 26, 1999, the Creditors Committee filed an
"Emergency Motion to Compel Debtors to Justify and Comply with Budget and to
Prohibit Future Drilling Activities in Chapter 11." Subsequently, the Company
agreed and the Court ordered that the Company discontinue exploratory or
development drilling programs commenced by it.

                  c.       TERMINATION OF THE EXCLUSIVE RIGHT TO FILE A PLAN OF
                           REORGANIZATION

         On April 2, 1999, the Creditors Committee filed a "Motion to Terminate
the Exclusive Right of the Debtors to File a Plan of Reorganization." At a
hearing conducted on April 22, 1999, the Court entered an order granting in part
and denying in part that motion by requiring the Company to file a comprehensive
summary plan of reorganization by the close of business on Monday, May 24, 1999
and for the Creditors Committee to submit an outline of a plan by the same date.
At subsequent hearings conducted before the Court on June 4, 1999 and
thereafter, the Company and the Creditors Committee agreed to a general
procedure for selling substantially all the oil and gas assets of the Company
through an auction to be conducted in the courtroom of and pursuant to sale
procedures approved by the Court. The Debtors did not to file a plan of
reorganization and disclosure statement, and as a consequence, its exclusive
right for doing so has expired.

                  d.       JOINT EMPLOYMENT OF CIBC WORLD CAPITAL MARKETS

         On July 30, 1999, the Company and the Creditors Committee jointly filed
an Application to Employ CIBC World Markets Corporation ("CIBC") as marketing
agent for the sale of the


                                      -38-
<PAGE>   44

more substantially valued oil and gas assets of the Company located in the
Arkoma and Anadarko Basins of Oklahoma, the East Texas and Gulf Coast fields of
Louisiana and Texas and the Company's Gau Unit in West Texas. The professionals
of CIBC worked with the land department, petroleum engineers, geologists,
financial and other personnel of the Company to develop a comprehensive
marketing brochure which was distributed to in excess of 400 industry parties,
announcing the intended sale of the Company's assets. The Company, together with
the assistance of PricewaterhouseCoopers and CIBC organized and oversaw the
operations of a data room, including visits of in excess of 30 companies
interested in purchasing all or sub-parts of the Company's oil and gas assets.
At an auction conducted before the Bankruptcy Court on November 1, 1999, Arnos
Corp.("Arnos") was determined to be the high bidder for substantially all the
oil and gas assets of the Debtors. Exco Resources, Inc. was determined to be the
back-up bidder.

                  e.       PROPOSED SALE TO ARNOS

         In connection with the November 1, 1999 auction sale, Arnos deposited
with Bank One, Texas as escrow agent for that auction sale, $9,250,000, to be
held pending a sale closing. Subsequently, Arnos indicated its desire to
negotiate with the Creditors Committee toward a consensual plan of
reorganization pursuant to which Arnos would either buy or end up controlling
all of NEG, including its common stock, intangible and other assets remaining
that were not sold as part of the November 1, 1999 auction sale. Pursuant to the
Court's directives, Arnos deposited into the Registry of the Court the sum of
$61,825,000 on or about December 9, 1999. As part of that registry deposit, the
Court permitted Arnos to credit bid pursuant to Section 363(k) of the Bankruptcy
Code $25,000,000 as the principal amount of its secured credit


                                      -39-
<PAGE>   45

facility purchased on December 22, 1998 from Bank One and Credit Lyonnais. As a
result, Arnos Corp. is left with only interest accruing on its debt from
December 1, 1999 through approximately December 13, 1999. As of the date of this
filing, the Creditors Committee and Arnos have yet to negotiate or finalize the
terms of a consensual plan of reorganization to address the Company's remaining
assets.


                  f.       EBCO AUCTION SALE OF NOMINALLY VALUED PROPERTIES

         In order to facilitate the auction sale and not complicate its process
with smaller and lesser valued and, in certain instances, non-contiguous
properties to those of the more highly valued assets, the Company and the
Creditors Committee filed a joint application to retain EBCO Auction Company and
include in its December, 1999 Oklahoma City, Oklahoma auction approximately 100
miscellaneous oil and gas assets of the Debtors. After accounting for offset,
secured and miscellaneous claims relating directly to those properties, the fee
commissions and other costs of sale, the net sale proceeds generated for the
benefit of creditors approximate $2.9 million.

                  3.       LIQUIDITY AND CASH RESOURCES FOR FUNDING PLAN

                  The following schedule sets forth the estimates of funds and
other assets on hand or available with which to pay Allowed Claims of creditors
under the Plan. This information, including an estimate of liabilities, was
compiled from information provided the Creditors' Committee by the Company:



                                      -40-
<PAGE>   46

                                     ASSETS

o        Net Sales Provided from November 1, 1999 Auction Sale to Arnos Corp.,

<TABLE>
<S>                                          <C>
                  Bank One                   $          9.625 million
                  Court Registry             $         61.875 million
                                             ------------------------
                                             $           71.5 million


o        EBCO Auction Net Proceeds           $            2.9 million
o        Marketable Securities               $            0.4 million
o        Cash as of 10/31/99                 $          24.35 million
o        Accounts Receivable                 $            492-million
o        Oil and Gas Assets
o        Miscellaneous Assets (AR-Joint      $          1-2.5 million
         Interest Billings; Office
         Property; Office Lease; Mustang
         Island)
o        Litigation Proceeds (unknown)
o        Value of Intangible Assets and
         Remaining Assets, including
         claims against Arnos Corp. for
         operating Debtor's oil and gas
         properties since November 1,
         1999                                $ 5-10 million (estimate)
                                             ------------------------
                  Assets Total               $        105-117 million
</TABLE>


LIABILITIES

<TABLE>
<S>                                                         <C>
o        Ad Valorem; Severance; Sales and
         Use Taxes                                          $    0.5 million
o        Pre-Petition Trade Claims                          $    1.5 million
o        Post-Petition Trade Claims                         $   2.25 million
o        Involuntary Petition Gap Claims                    $   1.75 million
o        Rejection of Office Lease                          $    0.5 million
o        Professional Chapter II Fees                       $  2-2.5 million
o        Severance/Stay Bonus                               $  l-2.5 million
o        Gas Pre-Payment: Gas Imbalances                    $    1-3 million
         (Suspense Liability not being paid by Arnos)
o        Sr. Notes-Principal                                $    165 million
o        Sr. Notes-Interest at Petition Date                $     10 million
                                                            ----------------
                  Liabilities Total                         $185-190 million
</TABLE>



                                      -41-
<PAGE>   47

                  4.       DIRECTORS AND OFFICERS OF NEG.

                  The following table lists the name, age as of December 31,
1999 and present position with the Company for each of the Company's directors
and executive officers.


<TABLE>
<CAPTION>
NAME                     AGE    PRESENT POSITION WITH THE COMPANY
----                     ---    ---------------------------------

<S>                      <C>    <C>
Bob G. Alexander         65     Chairman of the Board of Directors. Executive Officer

Jim L. David             59     Director, Assistant to the President

Russell D. Glass         36     Director

Martin Hirsch            44     Director

Robert H. Kite           44     Director

Robert J. Mitchell       51     Director

Jack G. Wasserman        62     Director

Philip D. Devlin         54     Vice President. General Counsel

R. Kent Lueders          42     Vice President. Corporate Development

Melissa H. Rutledge      33     Vice President. Controller
</TABLE>

                  Messrs. Alexander, David and Mitchell were appointed to the
Board on August 29, 1996 and Mr. Alexander was appointed President and Chief
Executive Officers of the Company effective November 23, 1998. Messrs. Glass,
Hirsch and Wasserman were appointed to the Board on December 1, 1998. Pursuant
to the terms of the Series B. Preferred Stock, Series C. Preferred Stock and
Series D Preferred Stock, the holders of a majority of the outstanding shares of
each series have the right to appoint one member to the Company's Board of
Directors at all times while such series are outstanding. Mr. Elwood Schafer,
the Series C Preferred Stock appointees, resigned from the Board of Directors
effective December 31, 1998 Directors generally serve for a term of one year
(until the net annual meeting of shareholders) and until


                                      -42-
<PAGE>   48

their successors are duly elected and qualified, or until their death,
resignation or removal, at which time the Board of Directors has the authority
to appoint replacements to fill any such vacancies until the next annual meeting
of shareholders.

                  The following table sets forth compensation for Officers and
Directors as of December 31, 1999:


<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION                       YEAR      SALARY           BONUS
---------------------------                       ----      ------           -----


<S>                                               <C>       <C>             <C>
BOB G. Alexander                                  1999      148,910
        President and Chief Executive Officer     1998      148,645
                                                  1997      132,008

Jim L. David                                      1998      105,000
        (former Vice President. Exploration       1997      132,500         35,000
                                                  1996      115,000         10,000

Philip D. Devlin                                  1998      193,882         --
        Vice President. General Counsel           1997      137,500         25,000
                                                  1996           --

Melissa Rutledge                                  1998      107,000         --
        Vice President. Controller and Chief      1997       80,000         15,000
        Accounting Officer                        1996       80,000         15,000



R. Kent Lueders                                   1998       80,556         --
        Vice President. Corporate Development     1997           --         --
                                                  1996           --         --
</TABLE>



                  a.       New Directors and Officers

                  Upon the Plan's Effective Date, all present directors of NEG
will be terminated and replaced by Chris Ryan, Kate Kutasi, Darryl Schall and
Joseph Radecki, who shall serve temporarily as Chairman of the Board.


                                      -43-
<PAGE>   49

                  5.      EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
                          CHANGE-IN-CONTROL ARRANGEMENTS


                  In January 1996, the Company executed an employment agreement
with Melissa H. Rutledge, Vice President, Controller and Chief Accounting
Officer, which has a term of three years from the effective date of a "change in
control" of the Company. In March 1997, April 1998 and June 1998, respectively,
the Company executed a similar employment agreement with Philip D. Devlin, Vice
President, General Counsel and Secretary; R. Kent Leuders, Vice President,
Corporate Development; Leslie J. Wylie, Vice President, Land, which has a term
of three years from the effective date of a "change of control" of the Company
(together with the above-referenced employment agreements, the "Employment
Agreements"). The Employment Agreements each provided that the three-year term
would continuously roll over (so that at any time during the term of such
agreements there is a remaining term of three years, but in no event beyond the
time the executive and/or officer reaches age 65).

                  The Employment Agreements defined the "change in control" to
have occurred when (i) a person, entity or group becomes the beneficial owner of
a majority of the securities of the Company ordinarily having the right to vote
for election of directors, (ii) during any connective two year period, the
directors at the beginning of the period (together with directors approved by a
vote of 66-2/3% of such initial directors plus directors previously approved by
such 66-2/3% margin) cease to constitute a majority of the Company's Board of
Directors, (iii) any sale, lease, exchange or transfer of all, or substantially
all, of the Company's assets occurs or (iv) a merger or consolidation occurs
with the effect that any person, entity or group, or the shareholders thereof,
become the owner of securities of the surviving corporation representing a
majority of the voting power of such surviving corporation for the election of
directors.


                                      -44-
<PAGE>   50

                  The Employment Agreements provided for a three year employment
term during which the executive and/or officer received for each year (i) 100%
of the average of the executive's annual base salary at the time in question and
the executive's annual base salary for each of the preceding two years, and (ii)
100% of the average of the bonuses paid to the executive and/or officer for
each of the preceding three fiscal years. If the executive and/or officer were
discharged without cause or resigns for "good reason" (as defined therein) after
a change in control, then in lieu of the compensation described in the
preceding sentence, the executive and/or officer claimed to be entitled to a
lump sum cash severance payment equal to three times the sum of (a) the
executive's annual base salary then in effect, (b) the average of cash bonuses
for each of the three previous years, and (c) the average of fully-vested
contributions to retirement plans for such executive and/or officer for each of
the three preceding year. In addition, at such time, all options and all other
retirement or pension contributions or benefits were to become fully vested and
remain fully exercisable for 360 days. Pursuant to an agreement with the Company
dated December 2, 1998, each of Ms. Rutledge, Mr. Devlin, Mr. Lueders and Ms.
Wylie agreed to terminate their existing Employment Agreements; provided that no
court (including the bankruptcy court) reduces or dismisses any of the Severance
Pay Benefits (described below) available to such executive pursuant to the
Company's Severance Policy.

                  6.       SEVERANCE POLICY.

                  While the Company was in default of its Notes, the Company's
directors initiated a Severance Policy effective November 23, 1998 for all
employees which provides that for a period ending October 31,2000, all Eligible
Participants would be entitled to a Severance Pay


                                      -45-
<PAGE>   51

Benefit up to 18 months (as defined in the Policy) in the event such Eligible
Participant was terminated by the Company for any reason other than "cause" (as
defined in the Policy). The Policy also provide that payments to such terminated
employee were to be subject to the employee's execution of a Separation
Agreement which would include the following provisions:

                  (i)      a release of all claims against the Company;

                  (ii)     a confidentiality provision; and

                  (iii)    an agreement to give notice to the Company and not
                           accept or retain any further Severance Pay Benefit in
                           the event the Eligible Participants were to accept
                           the same or substantially similar employment with any
                           other employer.

Payments under the Policy were to have been made to each such terminated
employee on a monthly basis; provided that in the event the Company was sold
pursuant to a merger or liquidation proceeding and the Eligible Participant was
not offered the same or substantially similar employment, such Severance Pay
Benefit would be paid to each Eligible Participant in a lump sum. To date, no
employees have been terminated by the Company who would be eligible for
Severance Pay Benefits under the Policy. Arnos has indicated to the Creditors
Committee that it is considering making a proposal either to pay this liability
or employ substantially all employees post-reorganization and thereby reduce
significantly the maximum estimated liability of $2.5 million.


                                      -46-
<PAGE>   52

                  7.       SECURITY OWNERSHIP Of CERTAIN BENEFICIAL OWNERS.

                  The following table sets forth as of April 20, 1999, the
individuals or entities known to the Company to own more than 5% of the
Company's outstanding shares of capital stock(1):


<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS           NUMBER OF SHARES

<S>                                          <C>                      <C>
Carl C. Icahn(2)                             Common Stock             8,847,033
114 West 47th St.
19th Floor
New York, NY 10036
</TABLE>


--------------------
         (1) Based upon the 40,527,482 shares of Common Stock, 38,687 shares of
issued and outstanding Series B Preferred Stock, 23,000 shares of issued and
outstanding Series C Preferred Stock, 100,000 shares of issued and outstanding
Series D Preferred Stock and 9,500 shares of issued and outstanding Series E
Preferred Stock that are outstanding as of April 20, 1999. For each person or
group, the percentages are calculated on the basis of the amount of outstanding
securities of the particular class plus and securities that such person or
group has the right to acquire within 60 days of April 20, 1999 pursuant to
options, warrants, conversion privileges or other rights.

         (2) High River Limited Partnership, the record owner of these shares,
is a Delaware limited partnership, and has pledged these shares to ING Capital.
Riverdale Investors Corp. Inc. is a Delaware corporation and is the general
partner of High River. Mr. Carl C. Icahn is the sole stockholder and a director
of Riverdale. Riverdale's principal business address is 90 South Bedford Road,
Mount Kisco, New York 10549, and Mr. Icahn's principal business address is c/o
lcahn Associates Corp., 114 West 47th Street, 19th Floor, New York, New York
10036. Gascon Partners, a New York general partnership, an affiliate of Mr.
Icahn, High River and Riverdale holds warrants to purchase 300,000 shares of
Common Stock. High River also holds acquisition of and merger with Alexander
Energy Company. The ownership figures in the table assume that all the shares of
Series D Preferred Stock are converted and warrants for 1,000,000 shares of
Common Stock are exercised. Riverdale and Mr. lcahn, by virtue of their
relationships to High River and Gascon, may be deemed to beneficially own (as
that term is defined in Rule 13d-3 under the Exchange Act) the shares which High
River directly beneficially owns and the shares which Gascon has warrants to
purchase. Each of Riverdale and Mr. Icahn disclaims beneficial ownership of such
shares for all other purposes. Mr. Robert J. Mitchell has been appointed a
director of the Company as the representative of the holders of the Series D
Preferred Stock. Mr. Mitchell does not have dispositive or voting power over any
of the shares owned by High River.


                                      -47-
<PAGE>   53




<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Kayne Anderson(3)                            Common Stock                  4,547,069
Investment Management, Inc.
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Croft-Leominster, Inc.(4)                    Common Stock                  2,161,710
207 E. Redwood St.
Suite 802
Baltimore, MD 21202

Kayne Anderson Investment                    Series B Preferred Stock      38,687
Management, Inc.
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067
</TABLE>




--------------------
         (3) Richard A. Kayne ("Kayne") is President, Chief Executive Officer
and Director of Kayne Anderson Investment Management Inc. ("KAIM") and of KA
Associates, Inc., a registered broker/dealer. KAIM is the general partner of
KAIM NonTraditional, L.P. ("L.P."), registered investment advisor, which is the
general partner of and investment advisor to the investment partnerships
referred to in this footnote. Mr. Kayne is also a limited partner in each
investment partnership and a general partner on one of them. Mr. Kayne and L.P.
have shared dispositive and voting power through investment partnerships for
38,687 shares of Series B Preferred Stock, 23,000 shares of Series C Preferred
Stock, and 9,500 shares of Series E Preferred Stock, which may be converted at
any time into 2,380,738, 1,150,000 and 422,222 shares of Common Stock,
respectively, and for warrants to purchase 350,000 shares of Common Stock. The
percentage ownership figures in the table assume that all shares of Series B
Preferred Stock. Series C Preferred Stock and Series E Preferred Stock are
converted, the warrants to purchase 350,000 shares of Common Stock are exercised
and 4,302,960 shares of Common Stock are issued, and such shares are added to
the shares of Common Stock outstanding. Mr. Kayne disclaims beneficial ownership
of the shares held by the investment partnerships in excess of the amount
attributable to him by virtue of his direct interest as a limited or general
partner and by virtue of his indirect interest in L.P.'s interest in the
investment partnerships. L.P. disclaims beneficial ownership of the shares held
by the investment partnerships in excess of the amount attributable to them by
virtue of their percentage interest in the investment partnerships.

         (4) Croft-Leominsser, Inc. the record owner of the shares, is a
Maryland corporation.


                                      -48-
<PAGE>   54


<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Arbco Associates, L.P.(5)                    Series B Preferred Stock      13,928
1800 Avenue of Stars
Suite 1424
Los Angeles, CA 90067

Offense Group Associates L.P.                Series B Preferred Stock      11,607
1800 Avenue of Stars
Suite 1424
Los Angeles, CA 90067

Kayne Anderson Non-Traditional              Series B Preferred Stock       10,382
Investments, L.P.
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Opportunity Associates L.P.                  Series B Preferred Stock      2,320
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Kayne Anderson Investment(6)                Series C Preferred Stock       23,000
Management, Inc.
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067
</TABLE>


------------------
         (5) Beneficial ownership of all the Series B Preferred Stock is
attributed to KAIM. For information on Richard A. Kayne, KAIM and L.P., see
footnote (3) above. Arbco Associates L.P. has shares dispositive and voting
power with Mr. Kayne and L.P. of 13,928 shares of Series B Preferred Stock
which is convertible at anytime into 857,107 shares of Common Stock. Offense
Group Associates has shared dispositive and voting power with Mr. Kayne, and
L.P. for 11,607 shares of Series B Preferred Stock which is convertible at any
time into 7 14,276 shares of Common Stock. Kayne Anderson Non-Traditional
Investments has shared dispositive and voting power with Mr. Kayne and L.P. for
10,832 shares of Series B Preferred Stock, which is convertible at an~' time
into 666,584 shares of Common Stock. Opportunity Associates L.P. has shared
dispositive and voting power with Mr. Kayne and L.P. of 2,320 shares of Series
B Preferred Stock, which is convertible at any time into 142,769 shares of
Common Stock.

         (6) Beneficial ownership of all the Series C Preferred Stock is
attributed to KAIM. For information on Richard A. Kayne, KAIM and L.P., see
footnote (3) above. Arbco Associates L.P. has shared dispositive and voting
power with Mr. Kayne and L.P. of 8,280 shares of Series C Preferred Stock,
which is convertible at any time into 414,000 shares of Common Stock. Offense
Group Associates has shared dispositive and voting power with Mr. Kayne and
L.P. for 7,240 shares of Series C Preferred Stock, which is convertible at any
time into 362,000 shares of Common Stock. Kayne Anderson Non-Traditional
Investments has shared dispositive and voting power with Mr. Kayne and L.P. for
6,100 shares of Series C Preferred Stock, which is convertible at any time into
305,000 shares of Common Stock. Opportunity Associates L.P. has shared
dispositive and voting power with Mr. Kayne and L.P. for 1,380 shares of Series
C Preferred Stock, which is convertible at anytime into 69,000 shares of Common
Stock.


                                      -49-
<PAGE>   55

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Arbco Associates, L.P.                       Series C Preferred Stock      8,280
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Offense Group Associates, L.P.               Series C Preferred Stock      7,240
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Kayne Anderson Non-Traditional               Series C Preferred Stock      6,100
Investments, L.P.
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067

Opportunity Associates L.P.                  Series C Preferred Stock      1,380
1800 Avenue of the stars
Suite 1424
Los Angeles, CA 90067

Carl C. Icahn                                Series D Preferred Stock      100,000
114 West 47th Street
19th Floor
New York, NY 10036

Kayne Anderson Investment(7)                 Series E Preferred Stock      9,500
Management, Inc.
1800 Avenue of the stars
Suite 1424
Los Angeles, CA 90067

Foremost Insurance Company                   Series E Preferred Stock      7,500
5230 33rd St., S.E.
Grand Rapids, MI 49512
</TABLE>


-----------------
         (7) Beneficial ownership of all the Series E Preferred Stock is
attributed to KAIM. Foremost Insurance Company has dispositive and voting power
for 7,500 shares of Series E Preferred Stock, which is convertible at any time
into 333,333 shares of Common Stock and warrants for 105,000 shares of Common
Stock. Topa Insurance Company has dispositive and voting power for 2,000 shares
of Series E Preferred Stock, which is convertible at any time into 88,888 shares
of Common Stock and warrants for 28,000 shares of Common Stock.



                                      -50-
<PAGE>   56

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Topa Insurance Company                       Series E Preferred Stock      2,000
c/o Kayne Anderson Investment
1800 Avenue of the Stars
Suite 1424
Los Angeles, CA 90067
</TABLE>


                  8.       SECURITY OWNERSHIP OF MANAGEMENT

                  The following table sets forth information concerning the
beneficial ownership of the Company's capital stock as of April 20, 1999 by each
of the Company's present directors and executive officers and certain other
parties, and the directors and executive officers of the Company as a group, all
as reported by each such person as of April 20, 1999.


<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Miles D. Bender (former CEO)                 Common Stock                  847,944
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206

Jim L. David                                 Common Stock                  475,389
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206

Bob G. Alexander                             Common Stock                  456,252
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206

Robert H. Kite                               Common Stock                  406,455
2722 N. 7th st.
Phoenix, AZ 85006

Melissa H. Rutledge                          Common Stock                  66,800
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206
</TABLE>



                                      -51-
<PAGE>   57


<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER         TITLE OF CLASS                NUMBER OF SHARES

<S>                                          <C>                           <C>
Philip D. Devlin                             Common Stock                  41,473
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206

Robert J. Mitchell                           Common Stock                  37,500
767 Fifth Avenue
New York, NY 10153

All officers and directors as a              Common Stock                  2,336,813
group (12 people)
</TABLE>


                                      -52-
<PAGE>   58

                                      VIII.
                   FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

         THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE DEBTORS AND THEIR COUNSEL AND FINANCIAL ADVISORS ARE NOT MAKING ANY
REPRESENTATIONS REGARDING THE PARTICULAR TAX CONSEQUENCES OF CONFIRMATION AND
CONSUMMATION OF THE PLAN, WITH RESPECT TO THE DEBTORS, HOLDERS OF CLAIMS,
HOLDERS OF EQUITY INTERESTS, OR REORGANIZED DEBTORS, NOR ARE THEY RENDERING ANY
FORM OF LEGAL OPINION OR TAX ADVICE ON SUCH TAX CONSEQUENCES. THE TAX LAWS
APPLICABLE TO CORPORATIONS IN BANKRUPTCY ARE EXTREMELY COMPLEX, AND THE
FOLLOWING SUMMARY IS NOT EXHAUSTIVE. HOLDERS OF CLAIMS AND HOLDERS OF EQUITY
INTERESTS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS REGARDING TAX
CONSEQUENCES OF THE PLAN, INCLUDING FEDERAL, FOREIGN, STATE AND LOCAL TAX
CONSEQUENCES.


         A.       FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS.

                  1.       GENERAL DISCUSSION.

         In general, the Creditors Committee does not expect the Debtors to
incur any substantial tax liability as a result of implementation of the Plan.
Based on the current state of the law and the facts known to Debtors the
Creditors Committee at this time, it is contemplated that the Plan


                                      -53-
<PAGE>   59

may permit the retention of a portion of the accumulated net operating loss
carryforwards ("NOLS") of the Debtors for future use if the Creditors Committee
elects to sell its rights to receive Additional Common Stock to a third party.
Accordingly, subject to the possible adjustment of the NOLs in connection with
future IRS examinations, and further subject to the limitations in the Tax Code
on the use of NOLs in calculating the alternative minimum tax ("AMT"), the NOLs
may be available to reduce at least a portion of the Debtors' future taxable
income.

                  2.       CANCELLATION OF INDEBTEDNESS.

         In general, the Tax Code, with certain exceptions, provides that
taxpayers that realize a "cancellation of indebtedness" must include the amount
of cancelled indebtedness in gross income to the extent that the indebtedness
canceled exceeds any consideration given for such cancellation. The Tax Code
further provides, however, that where the taxpayer is in a Chapter 11 case and
the cancellation of indebtedness is pursuant to a plan approved by the
bankruptcy court, such cancellation of indebtedness will not be included in
gross income, but the taxpayer must generally reduce tax attributes in a
specified order.

         The Debtors may realize a material amount of cancellation of
indebtedness ("COD") income as a result of the Plan. With certain exceptions, to
the extent that any creditor receives a distribution under the Plan in an amount
less than such creditor's Claim, the Debtor will realize COD income. Because the
Debtors are in bankruptcy, they will not be required to include COD income in
taxable income, but rather will be required to reduce their NOLs (and possibly
certain other tax attributes, including tax basis of assets) by the amount of
the COD income. Tax attributes must be reduced in the order specified as
follows: (i) NOLs, (ii) business credits,


                                      -54-
<PAGE>   60

(iii) minimum tax credits, (iv) capital loss carryovers, (v) tax basis in
assets, (vi) passive activity losses and credits, and (vii) foreign tax credit
carryovers. In lieu of this order, however, the Debtors may elect to apply any
portion of the reduction to reduce the basis of its depreciable assets first.

                  3.       NOLs AND FUTURE UTILIZATION.

         The total consolidated NOL carryforward available to the Debtors as of
December 31, 1999, is presently estimated to be approximately $90 million. The
foregoing amount, however, is only an estimate. It is not binding on the IRS and
is subject to adjustment as a result of future IRS audits of the Debtors' tax
returns, which may not take place for several years. Such losses are also
subject to reduction, as discussed in paragraph 2 above. It is expected that COD
realized by the Debtors pursuant to the Plan will subsequently reduce the
Debtors' NOLs and could reduce certain other tax attributes, including the tax
basis of assets.

         Section 382 (in conjunction with Section 383) of the Tax Code imposes
limitations upon the utilization of a corporation's NOLs, built-in losses and
credit carryforwards following significant changes in the corporation's stock
ownership, called an "ownership change." Issuance of Additional Common Stock
pursuant to the Plan may result in an "ownership change" as defined in Section
382 of the Tax Code. Thus, subject to certain exceptions applicable to Chapter
11 proceedings as discussed below, the Debtors' utilization of their NOLs
remaining after application of the COD rules described above (and also certain
"built-in losses") to reduce taxable income generated after the ownership change
may generally be subject to an annual limitation equal to the equity value of
the Debtors as a group multiplied by the Section 382 federal rate prescribed by
the IRS for the month in which the ownership change occurs.


                                      -55-
<PAGE>   61


         If the Debtors have a "net unrealized built-in loss" (excess of
aggregate adjusted tax basis of assets over aggregate fair market value of such
assets immediately before the ownership change) that exceeds certain thresholds,
such loss will be subject to the annual limitation to the extent it is
recognized during any of the first five years after the Effective Date. For
these purposes, in addition to recognized built-in losses resulting from the
disposition of these assets, any depreciation, amortization or depletion that is
deductible during the five year period and attributable to the built-in loss
existing on the Effective Date is treated as a recognized built-in loss subject
to these rules. If a deduction for any portion of a recognized built-in loss is
disallowed, such portion is carried forward. Accordingly, the utilization of any
portion of the Debtors' built-in loss (including depreciation deductions
attributable thereto) that is recognized during the five year period will be
subject to limitation under Section 382.

         Section 382(1)(5) of the Tax Code and the regulations thereunder
provide that the foregoing limitations on the utilization of NOLs after an
ownership change do not apply if (i) immediately before the ownership change,
the loss corporation is under the jurisdiction of a court in a Title 11 or
similar case, (ii) the transaction resulting in such ownership change is ordered
by the court or is pursuant to a plan approved by the court, and (iii) the
pre-change shareholders and "qualified creditors" of the loss corporation
determined immediately before the ownership change own in the aggregate 50% or
more of the value and voting power of the reorganized corporation after the
ownership change. Qualified creditors are creditors who held their indebtedness
for at least 18 months before the date of the filing of the title 11 case or who
hold debt that arose in the ordinary course of the trade or business if such
other creditors have, at all


                                      -56-
<PAGE>   62

times, been the beneficial holders thereof. The taxpayer may elect not to have
Section 382(l)(5) apply.

         If Section 382(1)(5) applies then the NOLs must be computed as if no
deduction had been allowed for interest paid by the corporation on any
obligations that were exchanged for stock pursuant to the plan during any
taxable year ending during the three-year period preceding the taxable year in
which the ownership change occurs. However, if an ownership change to which
Section 382(l)(5) applied were to occur pursuant to the Plan, the NOLs and other
tax attributes of the Debtors would be eliminated in their entirety if there
were a second ownership change during the two-year period following the date of
the ownership change pursuant to the Plan.

         The Reorganized Debtors can determine whether the requirements of
Section 382(1)(5) have been satisfied and, if so, whether to elect to have
Section 382(l)(5) not apply. Whether Section 382(l)(5) or Section 382(l)(6)
applies to the Plan, however, it appears that the application of Section 382
will limit the future use of the Debtors' remaining NOLs.

                  4.       ALTERNATIVE MINIMUM TAX.

         A corporation may be subject to the AMT even if its regular taxable
income is entirely offset by NOL carryforwards. For purposes of computing a
taxpayer's regular federal tax liability, all of the income recognized in a
taxable year may be reduced by NOL carryovers. For purposes of the AMT, however,
only 90% of a taxpayer's alternative minimum taxable income ("AMTI") may be
reduced by NOL carryovers ("AMTNOL carryovers"), the amount of which is
determined separately from the amount of regular NOL carryovers. Therefore, any
alternative minimum taxable income recognized by the Debtors will be taxable at
a rate of at least 2% (10% of the 20% AMT tax rate). Moreover, the Debtors' AMTI
(after certain adjustments and without



                                      -57-
<PAGE>   63

taking into account any deduction for AMTNOL carryovers) may be subject to a
 .12% environmental tax under Section 59A of the Tax Code.

         B.       FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CLAIMS.

                  1.       REALIZATION AND RECOGNITION OF GAIN OR LOSS IN
                           GENERAL.

         Generally, the holder of an Allowed Claim will realize a gain or loss
on the exchange of his Allowed Claim for the consideration received by the
holder under the Plan. The amount of realized gain will be equal to the
difference between (a) the sum of the amount of any Cash, and the fair market
value (generally issue price in the case of debt obligations received under the
Plan) of other consideration received (including Additional Common Stock) and
(b) the adjusted basis of the Allowed Claim exchanged therefor. (The adjusted
basis would generally be equal to the amount paid for the Allowed Claim,
increased by any amounts previously accrued as original issue or market
discount, and reduced to the extent that a bad debt deduction has been claimed
for federal income tax purposes with respect to the Allowed Claim.) However,
whether such realized gain or loss will be recognized (i.e., taken into account)
for federal income tax purposes will depend in part upon whether such exchange
qualifies as a "recapitalization" as defined in the Tax Code. Furthermore, even
if the exchange constitutes a recapitalization, it will nevertheless be fully
taxable unless the Claim exchanged is classified as a "security" for federal
income tax purposes and any note received in the exchange may be treated for
this purpose as if it were cash unless such note also constitutes a "security"
for federal income tax purposes.

         The term "security" is not defined in the Tax Code or the Regulations.
Whether a debt instrument constitutes a "security" depends on an overall
evaluation of the facts and circumstances surrounding the nature of the debt
instrument, with the term of the debt instrument


                                      -58-
<PAGE>   64

usually regarded as the most important factor. In general, the longer the term
of an instrument, the greater the likelihood that it will be considered a
security. As a rule of thumb, a corporate debt obligation evidenced by written
instruments having a term often or more years, when issued, will be classified
as a security, and an instrument having an original maturity of five years or
less, or arising out of the extension of trade credit, will not. Debt
instruments having a term of between five years and ten years are often treated
as securities, but may not be, depending on all the relevant factors.

         The Creditors Committee expresses no view with respect to whether
Claims or any new obligations exchanged therefor constitute securities for tax
purposes. Each holder of a Claim is urged to consult such holder's own tax
advisor in this regard.

         Under current law, if the terms of an obligation are significantly
modified, the modified obligation may be treated for federal income tax purposes
as a new obligation issued in exchange for the original obligation. Thus,
modifications to certain holder's Claims under the Plan, if treated as
significant, could cause such holder to be treated for federal income tax
purposes as receiving new obligations in exchange for the Debtors' original
obligations. However, the Creditors Committee expresses no view with respect to
whether any particular holder will be so treated. Each holder is urged to
consult such holder's own tax advisor in this regard. Each holder is also urged
to consult such holders own tax advisor as to the treatment of any new
obligations under the original discount rules.

         2.       HOLDERS OF CLAIMS WHOSE ALLOWED CLAIMS CONSTITUTE SECURITIES.

         The exchange of securities for stock and/or securities pursuant to the
Plan will likely constitute a recapitalization for federal income tax purposes.
As such, holders of Claims whose


                                      -59-
<PAGE>   65

Allowed Claims constitute securities (as defined for federal income tax
purposes) generally will not recognize gain or loss to the extent that their
securities are exchanged in part for Additional Common Stock and/or debt
obligations constituting securities. Such creditors will, however, recognize
gain to the extent of cash and the value (generally issue price in the case of
debt obligations) of other property received (e.g., any debt obligations that do
not constitute securities).

         The tax basis of stock and/or securities received in exchange for
securities will equal the exchanging holder's tax basis in the surrendered
securities increased by the amount of any gain recognized on the exchange, and
decreased by cash and the fair market value of any other consideration received.

                  3.       HOLDERS OF CLAIMS WHOSE ALLOWED CLAIMS DO NOT
                           CONSTITUTE SECURITIES.

         A holder of a Claim who exchanges an Allowed Claim that does not
constitute a security will recognize gain or loss on the exchange in an amount
equal to the difference between the holder's tax basis in the Allowed Claim and
the amount realized on the exchange. For tax purposes, the amount realized will
be the amount of Cash received, if any, plus the fair market value of any stock
or other property received (in the case of debt obligations received, generally
the issue price of such obligations). The tax basis of property received will be
the fair market value of such property on the date of exchange, and the holding
period for such property will begin on the day following such date.


                                      -60-
<PAGE>   66
                  4.       CHARACTER OF GAIN OR LOSS.

         In general, except for market discount discussed below, and except to
the extent that a bad debt deduction has been claimed (with corresponding tax
benefit) with respect to the Allowed Claims, any gain or loss recognized on the
exchange will be capital gain or loss if the Allowed Claims were capital assets
in the hands of a holder, and such gain or loss will be long-term capital gain
or loss if such holder's holding period for the Allowed Claim surrendered
exceeds one year at the time of the exchange. However, it should be noted that
Section 582(c) of the Tax Code provides that the sale or exchange of a bond,
debenture, note or certificate, or other evidence of indebtedness by a bank or
certain other financial institutions, shall not be considered the sale or
exchange of a capital asset. Accordingly, any gain recognized by such holders of
Claims as a result of the implementation of the Plan will be ordinary income,
notwithstanding the nature of their Allowed Claims.

         Under current law, net long-term capital gains of individuals are
subject to a maximum federal income tax rate of 20% (not taking into account any
phaseout of personal exemptions and certain itemized deductions), whereas the
maximum federal income tax rate on ordinary income (and net short-term capital
gains) of an individual is currently 39.6% (not taking into account any phaseout
of personal exemptions and certain itemized deductions). For corporations,
capital gains and ordinary income are taxed at the same maximum rate of 35%.
Capital losses are currently deductible only to the extent of capital gains
plus, in the case of taxpayers other than corporations, $3,000 of ordinary
income. In the case of individuals and other noncorporate taxpayers, capital
losses that are not currently deductible may be carried forward to other years,
subject to certain limitations. In the case of corporations, capital losses that
are not currently


                                      -61-
<PAGE>   67

deductible may generally be carried back to each of the three years preceding
the loss year and forward to each of the five years succeeding the loss year,
subject to certain limitations.

                                       IX.

                           BANKRUPTCY CAUSES OF ACTION

         A.       PREFERENCES.

         Pursuant to the Bankruptcy Code, a debtor may recover certain
preferential transfers of property, including cash, made while insolvent during
the ninety (90) days immediately prior to the filings of its bankruptcy petition
in respect of pre-existing debts to the extent the transferee received more than
it would have in respect of the pre-existing debt had the debtor been liquidated
under chapter 7 of the Bankruptcy Code. The recovery period is one year if the
recipient of the preferential transfer is an insider of the debtors. There are
certain defenses to such recoveries. Transfers made in the ordinary course of
the debtor's and the transferee's business according to the ordinary business
terms in respect to debt less than ninety (90) days old are not recoverable.
Furthermore, if the transferee extended credit subsequent to the transfer (and
prior to the commencement of the bankruptcy case) for which transferee was not
repaid, such extension constitutes an offset against any otherwise recoverable
transfer of property. If a transfer is recovered by the debtor, the transferee
has a general unsecured claim against the debtor to the extent of the recovery.
The Creditors Committee is continuing to review the payments made during the
ninety (90) days prior to the Commencement Date to creditors and during the one
(1) year prior to the Commencement Date to Insiders to determine whether the
Debtors should seek recovery of any such payments under Section 547 of the
Bankruptcy Code. The Creditors Committee's review is not yet complete, and
therefore, the Creditors Trust



                                      -62-
<PAGE>   68

reserves the right to commence an avoidance action under Sections 547 and 550 of
the Bankruptcy Code against any creditor or Insider that received a payment from
the Debtors during the ninety (90) days or one (1) year, respectively, prior to
the Commencement Date.

         B.       FRAUDULENT CONVEYANCES.

         Under the Bankruptcy Code and under various state laws, a debtor may
recover certain transfers or property, including the grant of a security
interest in property, made while insolvent or which rendered it insolvent if and
to the extent the debtor received less than fair value for such property. The
Creditors Committee is continuing to review all transfers or transactions that
may constitute fraudulent transfers to determine whether the Creditors Trust
should seek recovery of any such payments or transfers under Section 548 of the
Bankruptcy Code.

         C.       D&O AND RELATED LITIGATION.

         The Creditors Committee and/or the creditors will evaluate whether
claims the Debtors may have against former and present officers and directors
and auditors exist and have merit. The rights to bring such causes of action are
being conveyed to the Creditors' Trust which will be responsible for final
evaluation and, if deemed appropriate, filing, prosecution and/or settlement.
The Creditors Committee has already notified the Debtors that such causes of
action may exist.

                                       X.

                        ALTERNATIVES TO CONFIRMATION AND
                            CONSUMMATION OF THE PLAN

         The Creditors Committee believes that the Plan affords the holders of
Claims and Equity Interests the potential for the greatest realization on their
Claims and Equity Interests and,


                                      -63-
<PAGE>   69

therefore, is in the best interest of such holder. If the Plan is not confirmed,
however, the theoretical alternatives include: (a) continuation of the pending
Chapter 11 Cases; (b) alternative plans of reorganization; or (c) liquidation of
the Debtors under Chapter 7 of the Bankruptcy Code.

         A.       CONTINUATION OF THE CHAPTER 11 CASES.

         If the Debtors remain in Chapter 11 and the Plan as currently proposed
is not confirmed within the time period projected, the Debtors could continue to
operate their business and manage their properties as debtors-in-possession. The
value of assets and cash flow would be affected by the expenses of operating
under the jurisdiction of the Bankruptcy Court for an extended period of time.
Such delay would, therefore, in all probability, significantly reduce the
recoveries received by Creditors and Equity Interest holders under any future
plan or reorganization.

         B.       ALTERNATIVE PLANS OF REORGANIZATION.

         If the Plan is not confirmed, it is possible that another party in
interest in the Chapter 11 Cases could attempt to formulate and propose a
different plan or plans on such terms as they may desire. Such alternative plan
would still have to meet the requirements of confirmation.

         C.       CHAPTER 7 LIQUIDATION.

         If no plan can be confirmed, the Debtors' Chapter 11 Cases may be
converted to cases under Chapter 7 of the Bankruptcy Code. A business undergoing
a Chapter 7 liquidation typically has no prospect of rehabilitation. In a
Chapter 7 case a trustee would be elected or appointed to liquidate the Debtors'
assets. The proceeds of the liquidation would be distributed


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<PAGE>   70

to the respective holders of Claims against the Debtors in accordance with the
priorities established by the Bankruptcy Code.

         In a Chapter 7 case, the amount distributed to unsecured creditors
depends upon the net estate available after all assets of the Debtors have been
reduced to cash. The cash realized from liquidation of the Debtors' assets would
be distributed in accordance with the priorities set forth in Section 507 of the
Bankruptcy Code. Claims entitled to priority under the Bankruptcy Code would be
paid in full before any distribution to general unsecured creditors. Whether a
bankruptcy case is one under Chapter 7 or Chapter 11, Administrative Expense
Claims, Professional Compensation and Reimbursement Claims, Involuntary Gap
Claims, Priority Tax Claims and Other Priority Claims are entitled to be paid in
cash and in full before general unsecured creditors receive any funds.

         If the Chapter 11 Cases were converted to ones under Chapter 7 of the
Bankruptcy Code, the present priority claims may have a priority lower than
priority claims generated by the Chapter 7 case, such as the Chapter 7 trustee's
fees or the fees of attorneys, accountants and other professionals the trustee
may engage. Conversion to Chapter 7, then, would create an additional layer of
priority claims, including significantly the additional fees of a Chapter 7
Trustee (3-5% of total assets) and the expenses of any professionals hired by
the Trustee.

         The Creditors Committee believes that liquidation under Chapter 7 would
result in a substantial diminution of the value of the estates to unsecured
creditors because of (i) the additional administrative expenses involved in the
appointment of a trustee, hiring of attorneys, accountants and other
professionals to assist such trustee and other additional expenses and claims,
some of which would be entitled to priority, that would arise by reason of the
liquidation;


                                      -65-
<PAGE>   71

and (ii) of the failure to realize the potential going concern value of the
Debtors' assets; and (iii) the lost returns on distributions delayed by at least
a year as a consequence of conversion to Chapter 7. As a result, the Creditors
Committee believes that all Creditors will receive more under the Plan than they
would receive in the event of a Chapter 7.


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<PAGE>   72

                                       XI.

                                   SIGNATURES

         The undersigned have executed this Disclosure Statement as of the 28th
day of February 2000.



                              Respectfully submitted,

                              OFFICIAL CREDITORS COMMITTEE FOR
                              NATIONAL ENERGY GROUP, INC./BOOMER
                              MARKETING CORPORATION

                              By: /s/ KATALIN KUTASI -with permission
                                 -----------------------------------
                                 Katalin Kutasi, Chairman



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<PAGE>   73

                                   SIGNATURES

         The undersigned have executed this Disclosure Statement as of the 28th
day of February 2000.



                              Respectfully submitted,

                              ANDREWS & KURTH L.L.P.
                              By: /s/ HUGH M. RAY
                                 -----------------------------------
                                 Hugh M. Ray
                                 State Bar No. 16611000
                                 Van Oliver
                                 State Bar No. 15258700
                                 1717 Main Street, Suite 3700
                                 Dallas, Texas 75201
                                 Telephone:    (214) 659-4400
                                 Facsimile:    (214) 659-4401

                              ATTORNEYS FOR THE
                              COMMITTEE



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