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


                                APPRAISAL REPORT
                                      as of
                                DECEMBER 31, 2006
                                       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, 2006
                                       on
                               CERTAIN PROPERTIES
                                    owned by
                                DUNE ENERGY, INC.

FOREWORD

Scope of Investigation

      This report presents an appraisal, as of December 31, 2006, 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, 2006. 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.

<PAGE>

      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, transportation expenses, compression charges,
and an allocation of overhead that directly relates to production activities.
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.


                                       2
<PAGE>

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 limit of economic rates of 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. Proved reserves classifications used in this report are in
accordance with the reserves definitions of Rules 4-10(a) (1)-(13) of Regulation
S-X of the SEC. The petroleum reserves are classified as follows:

      Proved oil and gas reserves - Proved oil and gas reserves are the
      estimated quantities of crude oil, natural gas, and natural gas liquids
      which geological and engineering data demonstrate with reasonable
      certainty to be recoverable in future years from known reservoirs under
      existing economic and operating conditions, i.e., prices and costs as of
      the date the estimate is made. Prices include consideration of changes in
      existing prices provided only by contractual arrangements, but not on
      escalations based upon future conditions.

            (i) Reservoirs are considered proved if economic producibility is
            supported by either actual production or conclusive formation test.
            The area of a reservoir considered proved includes (A) that portion
            delineated by drilling and defined by gas-oil and/or oil-water
            contacts, if any; and (B) the immediately adjoining portions not yet
            drilled, but which can be reasonably judged as economically
            productive on the basis of available geological and engineering
            data. In the absence of information on fluid contacts, the lowest
            known structural occurrence of hydrocarbons controls the lower
            proved limit of the reservoir.

            (ii) Reserves which can be produced economically through application
            of improved recovery techniques (such as fluid injection) are
            included in the "proved" classification when successful testing by a
            pilot project, or the operation of an installed program in the
            reservoir, provides support for the engineering analysis on which
            the project or program was based.


                                       3
<PAGE>

            (iii) Estimates of proved reserves do not include the following: (A)
            oil that may become available from known reservoirs but is
            classified separately as "indicated additional reserves"; (B) crude
            oil, natural gas, and natural gas liquids, the recovery of which is
            subject to reasonable doubt because of uncertainty as to geology,
            reservoir characteristics, or economic factors; (C) crude oil,
            natural gas, and natural gas liquids, that may occur in undrilled
            prospects; and (D) crude oil, natural gas, and natural gas liquids,
            that may be recovered from oil shales, coal, gilsonite, and other
            such sources.

      Proved developed oil and gas reserves - Proved developed oil and gas
      reserves are reserves that can be expected to be recovered through
      existing wells with existing equipment and operating methods. Additional
      oil and gas expected to be obtained through the application of fluid
      injection or other improved recovery techniques for supplementing the
      natural forces and mechanisms of primary recovery should be included as
      "proved developed reserves" only after testing by a pilot project or after
      the operation of an installed program has confirmed through production
      response that increased recovery will be achieved.

      Proved undeveloped reserves - Proved undeveloped oil and gas reserves are
      reserves that are expected to be recovered from new wells on undrilled
      acreage, or from existing wells where a relatively major expenditure is
      required for recompletion. Reserves on undrilled acreage shall be limited
      to those drilling units offsetting productive units that are reasonably
      certain of production when drilled. Proved reserves for other undrilled
      units can be claimed only where it can be demonstrated with certainty that
      there is continuity of production from the existing productive formation.
      Under no circumstances should estimates for proved undeveloped reserves be
      attributable to any acreage for which an application of fluid injection or
      other improved recovery technique is contemplated, unless such techniques
      have been proved effective by actual tests in the area and in the same
      reservoir.


                                       4
<PAGE>

      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.


                                       5
<PAGE>

ESTIMATION of RESERVES

      Estimates of reserves were prepared by the use of 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.


                                       6
<PAGE>

      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 the indigenous gas in the reservoir to be produced. Sales gas is defined
as that portion of the wet gas to be delivered into a gas pipeline for sale
after separation, processing, fuel use, and flare. Gross gas reserves are
reported as wet gas. The net gas reserves are reported as sales gas. 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 interest is located.
Condensate reserves estimated herein are those to be recovered by conventional
lease separation.

      In the preparation of this study, as of December 31, 2006, gross
production estimated to December 31, 2006, was deducted from gross ultimate
recovery to arrive at the estimates of gross reserves. This required that the
production rates be estimated for up to 5 months, since production data from
certain properties were available only through July 2006. Data available from
wells drilled through December 31, 2006, were used in this report.


                                       7
<PAGE>

      The following table presents estimates of proved reserves, as of December
31, 2006, 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                         536           98,870
   Developed Nonproducing                       16           17,078
   Undeveloped                               1,240           57,317
                                   ----------------     ------------

Total Proved                                 1,792          174,265

                                              Net Reserves
                                   ---------------------------------
                                       Oil and             Sales
                                     Condensate             Gas
                                       (Mbbl)              (MMcf)
                                   ----------------     ------------
Proved
   Developed Producing                         179            9,203
   Developed Nonproducing                        5            3,493
   Undeveloped                                 256           14,068
                                   ----------------     ------------

Total Proved                                   440           26,764


                                       8
<PAGE>

VALUATION of RESERVES

      Revenue values in this report have been prepared using initial prices and
costs specified by Dune. Future prices were estimated using guidelines
established by the SEC and the FASB. 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 West Texas Intermediate price of $61.05 per
            barrel and were held constant for the lives of the properties. The
            weighted average price over the lives of the properties was $59.53.

      Natural Gas Prices

            Gas prices were calculated for each property using the differentials
            to a Henry Hub price of $5.635 per million British thermal units
            (MMbtu). No escalation was applied to prices. The weighted average
            price over the lives of the properties was $5.536 per thousand cubic
            feet.

      Operating Expenses and Capital Costs

            Operating expenses and capital costs were based on information
            provided by Dune and were used in estimating future costs required
            to operate the properties. In certain cases, future costs, either
            higher or lower than current costs, may have been used because of
            anticipated changes in operating conditions.


                                       9
<PAGE>

      The estimated future revenue to be derived from the production and sale of
the proved reserves, as of December 31, 2006, of the properties appraised,
expressed in thousands of dollars (M$) is summarized as follows:

<TABLE>
<CAPTION>
                                                                 Proved
                                       ---------------------------------------------------------
                                       Developed        Developed                          Total
                                       Producing       Nonproducing    Undeveloped        Proved
                                       ---------       ------------    -----------        ------
<S>                                       <C>              <C>             <C>          <C>
Future Gross Revenue, M$                  61,378           19,704          93,303       174,385
Production and Ad Valorem Taxes, M$        5,224            1,680           8,482        15,386
Operating Expenses, M$                    17,553            6,150          20,819        44,522
Capital Costs, M$                          2,662            1,446          38,597        42,705
Future Net Revenue*, M$                   35,939           10,428          25,405        71,772
Present Worth at 10 Percent*, M$          22,957            6,992           5,269        35,218
</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.

      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.

      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.

      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.


                                       10
<PAGE>

SUMMARY and CONCLUSIONS

      Dune owns working interests in certain properties located in Louisiana and
Texas. The estimated net proved reserves, as of December 31, 2006, 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                         179            9,203
   Developed Nonproducing                        5            3,493
   Undeveloped                                 256           14,068
                                   ----------------     ------------

Total Proved                                   440           26,764

      Estimated revenue and costs attributable to Dune's interests in the proved
reserves, as of December 31, 2006, 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$                 61,378           19,704          93,303       174,385
Production and Ad Valorem Taxes, M$       5,224            1,680           8,482        15,386
Operating Expenses, M$                   17,553            6,150          20,819        44,522
Capital Costs, M$                         2,662            1,446          38,597        42,705
Future Net Revenue*, M$                  35,939           10,428          25,405        71,772
Present Worth at 10 Percent*, M$         22,957            6,992           5,269        35,218
</TABLE>

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


                                       11
<PAGE>

                                TABLE of CONTENTS

      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/ DeGOLYER and MacNaughton

                                               DeGOLYER and MacNAUGHTON

SIGNED: April 16, 2007