DeGolyer and MacNaughton
                             5001 Spring Valley Road
                                 Suite 800 East
                               Dallas, Texas 75244

                                APPRAISAL REPORT
                                      as of
                                DECEMBER 31, 2005
                                       on
                               CERTAIN PROPERTIES
                                    owned by
                                DUNE ENERGY, INC.

<PAGE>

                            DeGolyer and MacNaughton
                             5001 Spring Valley Road
                                 Suite 800 East
                               Dallas, Texas 75244

                                APPRAISAL REPORT
                                      as of
                                DECEMBER 31, 2005
                                       on
                               CERTAIN PROPERTIES
                                    owned by
                                DUNE ENERGY, INC.

FOREWORD

Scope of Investigation

            This report presents an appraisal, as of December 31, 2005, of the
extent and value of the proved oil, condensate and natural gas reserves of
certain properties owned by Dune Energy, Inc. (Dune). The reserves estimated in
this report are located in Louisiana and Texas. The properties appraised are
listed in detail in the appendix bound with this report.

            Reserves estimated in this report are expressed as gross and net
reserves. Gross reserves are defined as the total estimated petroleum to be
produced from these properties after December 31, 2005. Net reserves are defined
as that portion of the gross reserves attributable to the interests owned by
Dune after deducting royalties and interests owned by others.

            This report also presents values for proved reserves using initial
prices and costs provided by Dune. Future prices were estimated using guidelines
established by the United States Securities and Exchange Commission (SEC) and
the Financial Accounting Standards Board (FASB). A detailed explanation of the
future price and cost assumptions is included in the Valuation of Reserves
section of this report.

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DeGolyer and MacNaughton                                                       2


            Values of proved reserves in this report are expressed in terms of
estimated future gross revenue, future net revenue, and present worth. Future
gross revenue is that revenue which will accrue to the appraised interests from
the production and sale of the estimated net reserves. Future net revenue is
calculated by deducting estimated production taxes, ad valorem taxes, operating
expenses, and capital costs from the future gross revenue. Operating expenses
include field operating expenses, compression charges, transportation charges
and the estimated expenses of direct supervision, but do not include that
portion of general administrative expenses sometimes allocated to production.
Future income tax expenses were not taken into account in the preparation of
these estimates. Present worth is defined as future net revenue discounted at a
specified arbitrary discount rate compounded monthly over the expected period of
realization. In this report, present worth values using a discount rate of 10
percent are reported in detail and values using discount rates of 5, 8, 12, 15,
20, 25, and 30 percent are reported as totals in the appendix bound with this
report.

            Estimates of oil, condensate and gas reserves and future net revenue
should be regarded only as estimates that may change as further production
history and additional information become available. Not only are such reserves
and revenue estimates based on that information which is currently available,
but such estimates are also subject to the uncertainties inherent in the
application of judgmental factors in interpreting such information.

Authority

            This report was prepared at the request of Dr. Amiel David,
President and COO, Dune.

Source of Information

            Data used in the preparation of this report were obtained from Dune,
and from public sources. Additionally, this information includes data supplied
by Petroleum Information/Dwights LLC; Copyright 2006 Petroleum
Information/Dwights LLC. In the preparation of this report we have relied,
without independent verification, upon information furnished by Dune with
respect to its property interests, production from such properties, current
costs of operation and development, current prices for production, agreements
relating to current and future operations and sale of production, and various
other information and data that were accepted as represented. A field
examination of the properties was not considered necessary for the purposes of
this report.

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DeGolyer and MacNaughton                                                       3


CLASSIFICATION of RESERVES

            Petroleum reserves included in this report are classified as proved
and are judged to be economically producible in future years from known
reservoirs under existing economic and operating conditions and assuming
continuation of current regulatory practices using conventional production
methods and equipment. In the analyses of production-decline curves, reserves
were estimated only to the limits of economic production under existing economic
and operating conditions using prices and costs as of the date the estimate is
made, including consideration of changes in existing prices provided only by
contractual arrangements but not including escalations based upon future
conditions. The petroleum reserves are classified as follows:

      Proved - Reserves that have been proved to a high degree of certainty by
      analysis of the producing history of a reservoir and/or by volumetric
      analysis of adequate geological and engineering data. Commercial
      productivity has been established by actual production, successful
      testing, or in certain cases by favorable core analyses and electrical-log
      interpretation when the producing characteristics of the formation are
      known from nearby fields. Volumetrically, the structure, areal extent,
      volume, and characteristics of the reservoir are well defined by a
      reasonable interpretation of adequate subsurface well control and by known
      continuity of hydrocarbon-saturated material above known fluid contacts,
      if any, or above the lowest known structural occurrence of hydrocarbons.

      Developed - Reserves that are recoverable from existing wells with current
      operating methods and expenses.

      Developed reserves include both producing and nonproducing reserves.
      Estimates of producing reserves assume recovery by existing wells
      producing from present completion intervals with normal operating methods
      and expenses. Developed nonproducing reserves are in reservoirs behind the
      casing or at minor depths below the producing zone and are considered
      proved by production from other wells in the field, by successful
      drill-stem tests, or by core analyses from the particular zones.
      Nonproducing reserves require only moderate expense to be brought into
      production.

      Undeveloped - Reserves that are recoverable from additional wells yet to
      be drilled.

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DeGolyer and MacNaughton                                                       4


      Undeveloped reserves are those considered proved for production by
      reasonable geological interpretation of adequate subsurface control in
      reservoirs that are producing or proved by other wells but are not
      recoverable from existing wells. This classification of reserves requires
      drilling of additional wells, major deepening of existing wells, or
      installation of enhanced recovery or other facilities.

            Reserves recoverable by enhanced recovery methods, such as injection
of external fluids to provide energy not inherent in the reservoirs, may be
classified as proved developed or proved undeveloped reserves depending upon the
extent to which such enhanced recovery methods are in operation. These reserves
are considered to be proved only in cases where a successful fluid-injection
program is in operation, a pilot program indicates successful fluid injection,
or information is available concerning the successful application of such
methods in the same reservoir and it is reasonably certain that the program will
be implemented.

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DeGolyer and MacNaughton                                                       5


ESTIMATION of RESERVES

            Estimates of reserves were prepared by the use of standard
geological and engineering methods generally accepted by the petroleum industry.
The method or combination of methods used in the analysis of each reservoir was
tempered by experience with similar reservoirs, stage of development, quality
and completeness of basic data, and production history.

            When applicable, the volumetric method was used to estimate the
original oil in place (OOIP) and original gas in place (OGIP). Structure maps
were prepared to delineate each reservoir, and isopach maps were constructed to
estimate reservoir volume. Electrical logs, radioactivity logs, core analyses,
and other available data were used to prepare these maps as well as to estimate
representative values for porosity and water saturation. When adequate data were
available and when circumstances justified, material-balance and other
engineering methods were used to estimate OOIP or OGIP.

            Estimates of ultimate recovery were obtained after applying recovery
factors to OOIP or OGIP. These recovery factors were based on consideration of
the type of energy inherent in the reservoirs, analyses of the petroleum, the
structural positions of the properties, and the production histories. When
applicable, material-balance and other engineering methods were used to estimate
recovery factors. An analysis of reservoir performance, including production
rate, reservoir pressure, and gas-oil ratio behavior, was used in the estimation
of reserves.

            For depletion-type reservoirs or those whose performance disclosed a
reliable decline in producing-rate trends or other diagnostic characteristics,
reserves were estimated by the application of appropriate decline curves or
other performance relationships. In the analyses of production-decline curves,
reserves were estimated only to the limits of economic production based on
current economic conditions.

            In certain cases, when the previously named methods could not be
used, reserves were estimated by analogy with similar wells or reservoirs for
which more complete data were available.

            Certain properties evaluated in this report produce from the Barnett
Shale. The Barnett Shale has low porosity and permeability. Gas production from
this depletion-drive reservoir is a function of both the natural fractures and
the hydraulically induced fractures. The production-decline curves for the
Barnett Shale wells in Denton and Wise Counties, Texas, were analyzed to
determine the shape and final decline of a typical well producing from this
reservoir in the various areas.

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DeGolyer and MacNaughton                                                       6


            Proved developed producing reserves were estimated by extrapolation
of historical production trends using a hyperbolic curve with a 6-percent
exponential tail that was terminated at an economic limit based on current
economic conditions.

            Proved developed producing reserves were also estimated for the
refracturing of certain Barnett Shale wells based on analogy with other wells
that have been refractured and have established decline rates.

            Proved undeveloped reserves were estimated for undrilled locations
by analogy using producing offset wells. Future rates of production from these
wells were estimated using the type curve previously discussed.

            Gas volumes estimated herein are expressed as wet gas and sales gas.
Wet gas is defined as the total gas to be produced before reductions for volume
loss due to fuel and flare consumption and reduction for plant processing. Sales
gas is defined as the total gas to be produced after deduction for fuel usage
and shrinkage resulting from field separation and plant processing. Gross gas
volumes are reported as wet gas. Net gas volumes are reported as sales gas. All
gas volumes are expressed at a temperature base of 60 degrees Fahrenheit
((degree)F) and at the legal pressure base of the state in which the property is
located. Oil and condensate reserves estimated herein are those to be recovered
by conventional lease separation.

            In the preparation of this study, as of December 31, 2005, gross
production estimated to December 31, 2005, was deducted from gross ultimate
recovery to arrive at the estimates of gross reserves. In some fields this
required that the production rates be estimated for up to 2 months, since
production data from certain properties were available only through October
2005. Data available from wells drilled through December 31, 2005, were used in
this report.

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DeGolyer and MacNaughton                                                       7


            The table below presents estimates of the proved reserves, as of
December 31, 2005, of the properties appraised, expressed in thousands of
barrels (Mbbl) or millions of cubic feet (MMcf):

                                                          Gross Reserves
                                                  ---------------------------
                                                   Oil and            Wet
                                                  Condensate          Gas
                                                    (Mbbl)           (MMcf)
                                                  ----------       ----------

      Proved
         Developed Producing                             615           87,399
         Developed Nonproducing                           12              650
         Undeveloped                                   1,357           67,754
                                                  ----------       ----------

      Total Proved                                     1,984          155,803

                                                            Net Reserves
                                                   ---------------------------
                                                    Oil and           Sales
                                                   Condensate          Gas
                                                     (Mbbl)           (MMcf)
                                                   ----------       ----------

      Proved
         Developed Producing                              131            5,432
         Developed Nonproducing                             5              301
         Undeveloped                                      442           20,315
                                                   ----------       ----------

      Total Proved                                        578           26,048

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DeGolyer and MacNaughton                                                       8


VALUATION of RESERVES

            This report has been prepared using initial prices and costs
specified by Dune. Future prices were estimated using guidelines established by
the SEC and the FASB.

            Revenue values in this report were estimated using prices,
differentials, and costs provided by Dune. The following assumptions were used
for estimating future prices and costs:

      Oil and Condensate Prices

            Oil and condensate prices were calculated for each property using
            the differentials to a NYMEX price of $61.04 per barrel and were
            held constant for the lives of the properties. The weighted average
            price over the lives of the properties was $59.29.

      Natural Gas Prices

            Gas prices were calculated for each property using the differentials
            to a NYMEX price of $11.36 per barrel and were held constant for the
            lives of the properties. The weighted average price over the lives
            of the properties was $9.49 per thousand cubic feet.

      Operating Expenses and Capital Costs

            Current operating expenses and capital costs were provided by Dune
            and were used in estimating future expenditures required to operate
            the properties. In certain cases, future expenditures, either higher
            or lower than current expenditures, may have been used because of
            anticipated changes in operating conditions. Operating expenses and
            capital costs were not escalated for inflation.

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DeGolyer and MacNaughton                                                       9


            The estimated future revenue to be derived from the production and
sale of the proved reserves, as of December 31, 2005, of the properties
appraised are as follows:

<TABLE>
<CAPTION>
                                                                   Proved
                                            ------------------------------------------------------
                                            Developed      Developed                         Total
                                            Producing   Nonproducing    Undeveloped         Proved
                                            ------------------------------------------------------
<S>                                            <C>             <C>          <C>            <C>
Future Gross Revenue, M$                       59,429          3,562        218,506        281,497
Production and Ad Valorem Taxes, M$             5,466            341         20,517         26,324
Operating Expenses, M$                          9,832            714         20,466         31,012
Capital Costs, M$                               1,791             82         44,393         46,266
Future Net Revenue*, M$                        42,340          2,425        131,130        177,895
Present Worth at 10 Percent*, M$               26,483            142         70,182         96,807
</TABLE>

* Future income taxes have not been taken into account in the preparation of
these estimates.

            Timing of capital expenditures and the resulting development of
production were based on a development plan provided by Dune.

            The appendix bound with this report includes (i) summary projections
of proved reserves and revenue by reserves classification, (ii) tabulations of
proved reserves and revenue by field, reserves classification, and lease, and
(iii) projections of proved reserves and revenue by field, reserves
classification, and lease.

            In our opinion, the information relating to estimated proved
reserves, estimated future net revenue from proved reserves, and present worth
of estimated future net revenue from proved reserves of oil, condensate, and
natural gas contained in this report has been prepared in accordance with
Paragraphs 10-13, 15, and 30(a)-(b) of Statement of Financial Accounting
Standards No. 69 (November 1982) of the FASB and Rules 4-10(a) (1)-(13) of
Regulation S-X and Rule 302(b) of Regulation S-K of the SEC; provided, however,
(i) certain estimated data have not been provided with respect to changes in
reserves information and (ii) future income tax expenses have not been taken
into account in estimating the future net revenue and present worth values set
forth herein.

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DeGolyer and MacNaughton                                                      10


            To the extent the above-enumerated rules, regulations, and
statements require determinations of an accounting or legal nature or
information beyond the scope of our report, we are necessarily unable to express
an opinion as to whether the above-described information is in accordance
therewith or sufficient therefor.

SUMMARY and CONCLUSIONS

            Dune owns working interests in certain properties located in
Louisiana and Texas. The estimated net proved reserves, as of December 31, 2005,
of the properties appraised are summarized as follows, expressed in thousands of
barrels (Mbbl) or millions of cubic feet (MMcf).

                                                        Net Reserves
                                                ---------------------------
                                                 Oil and           Sales
                                                Condensate          Gas
                                                  (Mbbl)           (MMcf)
                                                ----------       ----------

      Proved
         Developed Producing                           131            5,432
         Developed Nonproducing                          5              301
         Undeveloped                                   442           20,315
                                                ----------       ----------

      Total Proved                                     578           26,048

            Estimated revenue and costs attributable to Dune's interests in the
proved reserves, as of December 31, 2005, of the properties appraised under the
aforementioned assumptions concerning future prices and costs are summarized as
follows:

<TABLE>
<CAPTION>
                                                                   Proved
                                            ------------------------------------------------------
                                            Developed      Developed                         Total
                                            Producing   Nonproducing    Undeveloped         Proved
                                            ------------------------------------------------------
<S>                                            <C>             <C>          <C>            <C>
Future Gross Revenue, M$                       59,429          3,562        218,506        281,497
Production and Ad Valorem Taxes, M$             5,466            341         20,517         26,324
Operating Expenses, M$                          9,832            714         20,466         31,012
Capital Costs, M$                               1,791             82         44,393         46,266
Future Net Revenue*, M$                        42,340          2,425        131,130        177,895
Present Worth at 10 Percent*, M$               26,483            142         70,182         96,807
</TABLE>

* Future income taxes have not been taken into account in the preparation of
these estimates.

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DeGolyer and MacNaughton                                                      11


                                                                            Page

            All gas reserves in this report are expressed at a temperature base
of 60 (degree)F and the legal pressure base of the state in which the property
is located.

                                                     Submitted,


                                                     /s/ James Terracio, P.E.

                                                     DeGOLYER and MacNAUGHTON

SIGNED: February 8, 2006