1 Energy Outlook 2005-2010 Which Way From Here? OGIS 2005– London, England July 7, 2005 PETRIE...

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Energy Outlook 2005-2010Energy Outlook 2005-2010Which Way From Here?Which Way From Here?

OGIS 2005– London, England OGIS 2005– London, England July 7, 2005July 7, 2005

PETRIEPETRIE PARKMAN & Co.PARKMAN & Co.

Thomas A. Petrie,CFAThomas A. Petrie,CFAChairman & CEOChairman & CEO

Petrie Parkman & Co IncPetrie Parkman & Co Inc

PETRIE PARKMAN & Co.2

Key Inflationary Measures Key Inflationary Measures

US West Texas Intermediate Crude Oil Spot Price

$20.00$25.00$30.00$35.00$40.00$45.00$50.00$55.00$60.00$65.00

1/2/

2003

3/2/

2003

5/2/

2003

7/2/

2003

9/2/

2003

11/2/

2003

1/2/

2004

3/2/

2004

5/2/

2004

7/2/

2004

9/2/

2004

11/2/

2004

1/2/

2005

3/2/

2005

5/2/

2005

6/29/2005Close $57.26


(millions of barrels per day)

World Oil Demand – 1993-2005E World Oil Demand – 1993-2005E

67.369.1

70.2

72.474.2

75.1 76.1 76.6 77.1 78.179.7

82.7

84.7

60

65

70

75

80

85

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

E

Source: Bloomberg & IEA

YTY percent change 0.7% - 3.8%

Avg. 1.9%


0

5

10

15

20

25

30

U.S.

South

Kor

ea

Japa

n

Ger

man

y

Russia

Brazil

China

India

(Bb

ls) ∆

Demand ?

Per Capita Annual Oil ConsumptionPer Capita Annual Oil ConsumptionPer Capita Annual Oil ConsumptionPer Capita Annual Oil Consumption


0

10

20

30

40

50

1975 1980 1985 1990 1995 2000

MM

b/d

Excess Capacity

Production

Source: International Energy Agency

OPEC Excess Crude Production CapacityOPEC Excess Crude Production Capacity

?


(millions b/d)

End of Decade Potential New Production SourcesEnd of Decade Potential New Production Sources

U.S. (Alaska/ Deepwater GOM) 1.0 - 2.5

South America 1.5 - 3.0

West Africa 2.0 - 4.0

Caspian Sea 1.5 - 3.0

Russia 1.0 - 2.5

Asia 1.5 - 3.0

Canada 1.0 - 2.0

Middle East 2.5 - 5.0

Total 12.0 - 25.0


Current World Production in Decline Current World Production in Decline 84.7

80.5

76.4

72.6

69.0

65.5

55

60

65

70

75

80

85

2005 2006 2007 2008 2009 2010

(Millions b/d)

-19.2


Oil PricesWTI Spot Cushing Pricing

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

$/B

bl

Actual Futures

As of 6/24/05

First Call Consensus Estimates

Source: Bloomberg

Oil PricesOil Prices

Supermajor Capex Price Assumptions


Source: Bloomberg

Natural Gas PricesNatural Gas Prices

Natural Gas PricesHenry Hub Spot Pricing

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07

$/M

MB

tu

Actual Futures

As of 6/24/05

First Call Consensus Estimates


Source: Petrie Parkman database; Bloomberg.

F, D & A CostsF, D & A Costs

$5.39

$6.75

$10.85

$8.44

$10.24

$11.03

0

2

4

6

8

10

12

1999 2000 2001 2002 2003 2004

($/B

OE

)

Includes APA, APC, BBG, BR, DNR, DVN, EAC, ECA, EOG, EPL, FST, KMG, MHR, NBL, NFX, POG, PPP, PXD, RRC, SFY, SM, SWN, THX, UCL, UPL, WGR, WLL, XEC and XTO.


WTI ( 1995- 2004)WTI ( 1995- 2004)

Henry Hub ( 1995- 2004)Henry Hub ( 1995- 2004)

0%0%<1%2%

9%9%

18%

3%

8%

11%

15%

25%

0% 0% 0% <1%

3%4%

2%

7%

20% 20%

16%

27%

0

50

100

150

200

250

300

350

Da

ys

1995-2000

2000-2004 YTD

2%

9%9%

18%

3%

8%11%

15%

25%

4%2%6%

<1% 3%4%

2%

7%

20% 20%16%

9%6%

0

50100

150

200

250300

350

Price Range

Day

s

1995 - 1999

2000 - 2004 YTD

Tra

ding

Tim e W eighted D istribution of O il Prices

y H u b (1 9 9 5 -2 0 0 4 Y T D )

0 0 %

5 %

0 %

3 0 %

4 2 %

1 5 %

4 %3 %

< 1 % < 1 % 0 %< 1 %

6 %7 %

1 %

8 %1 1 %

1 3 %

7 %

1 1 % 1 0 %

1 5 %

1 1 %

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

4 5 0

5 0 0

5 5 0

6 0 0

1 9 9 5 -2 0 0 0

2 0 0 0 -2 0 0 4 Y T D

5%

30%

42%

16%

4% 3% <1% <1% <1%6%7%

1%8%

11% 13%7%

11% 10%

16%11%

0

100

200

300

400

500

600

Price Range

Day

s

1995 - 1999

2000 - 2004 YTD

`Tra

ding

T im e W e ig h te d D is tr ib u tio n o f G a s P r ic e s

Commodity Price TrendsCommodity Price TrendsCommodity Price TrendsCommodity Price Trends


Commodity Price TrendsCommodity Price TrendsWTI (2005 – 2010 Projected)WTI (2005 – 2010 Projected)

Henry Hub (2005 – 2010 Projected)Henry Hub (2005 – 2010 Projected)

0

5

10

15

20

25

30

$3 $4 $5 $6 $7 $8 $9

Average Prices

Tra

ding

Da

ys

3%

?%

?%

?%

+-

3%

?%

?%

$10+

0

5

10

15

20

25

30

$20 $30 $40 $50 $65 $70 $75

Average Prices

Tra

ding

Da

ys

3%

?%

?%

?%

+-

3%

?%

?%

$80+


M&A TrendsM&A Trends

Independent E&P Asset Acquisitions (Announced between 1997- 2005 YTD)

$12.4

$7.7

$4.2

$15.9

$3.5$5.1

$8.4

$18.1

$7.3

$0

$5

$10

$15

$20

$25

1997 1998 1999 2000 2001 2002 2003 2004 2005YTD

$Bil

lio

ns

Independent E&P Company Acquisitions (Announced between 1997- 2005 YTD)

$15.9

$10.7

$3.8

$21.8

$16.0

$3.3

$6.3

$13.5

$20.6

$0

$5

$10

$15

$20

$25

1997 1998 1999 2000 2001 2002 2003 2004 2005YTD

$Bil

lio

ns

Source: Petrie Parkman transaction database.

Expectations for sustained higher prices, in combination with rebuilt liquidity have supported an increasingly robust asset market

After a marked slowdown in 2002 and 2003, corporate M&A activity has accelerated

Eight corporate transactions in 2004

Three transactions in 2005 YTD

Companies have limited organic growth opportunities

Capital is available


Source: Petrie Parkman database; Bloomberg.

Acquisition Pricing vs. Commodity PricesAcquisition Pricing vs. Commodity PricesAcquisition Pricing vs. Commodity PricesAcquisition Pricing vs. Commodity Prices

Blended Strip Blended Strip (70%/30%)(70%/30%)

Acquisition PricingAcquisition Pricing012345678

1998 1999 2000 2001 2002 2003 2004 2005YTD

$/M

cfe


• Continued Consolidation via M&A

• Maturation of the conventional petroleum resource base

• Middle East dynamics / imponderables

• Economic growth in China and India

• Maturing of Russian Export Inclination

Forces Shaping the End-of-DecadeForces Shaping the End-of-DecadePetroleum LandscapePetroleum LandscapeForces Shaping the End-of-DecadeForces Shaping the End-of-DecadePetroleum LandscapePetroleum Landscape

• Result: Continued intensified global competition for energy supplies


Spring 1999 Fall 2003

Summer 2004

Inflection Point ThesisInflection Point Thesis


Market EnvironmentMarket Environment

Energy back at center stage

Oil and natural gas prices have risen to near record levels

Prices expected to remain strong but significant gap remains between Wall Street & Futures Market

Higher commodity prices support:

Accelerated new technology implementation

Increased recovery from existing fields

Development of new resource plays

Premium returns achievable despite high “cost of entry”


AppendixAppendixAppendixAppendix


Corporate Transactions 2004 – 2005YTDCorporate Transactions 2004 – 2005YTD

Source: Petrie Parkman transaction database. Shading represents transactions on which PPC advised.

A B C D E F G H I J K

Acquiring Company/ Date Purch. Total Purchase Price / DsCF Total Inv / EBITDA IPPR / %

Target Company Announced Price Inv. CY FY CY FY Mcfe R/P Gas$MM $MM x x x x $/Mcfe

Petrohawk Energy Corporation 04/04/05 $391 $572 4.5x 3.9x 5.7x 5.1x $2.53 9.4 41%

Mission Resources

ChevronTexaco 04/04/05 $16,775 $18,857 6.0x 6.3x 5.2x 5.5x $1.79 11.3 62%

Unocal

Cimarex Energy 01/26/05 $1,452 $2,102 4.8x 4.6x 6.6x 5.6x $2.34 10.0 59%

Magnum Hunter

Noble Energy 12/16/04 $2,755 $3,198 7.9x 7.4x 8.0x 7.6x $2.07 13.1 68%

Patina Oil & Gas

Petro-Canada 06/09/04 $534 $473 10.1x 10.3x 8.2x 8.1x $3.76 8.2 76%

Prima Energy

Forest Oil Corporation 05/24/04 $171 $348 2.8x 2.5x 4.7x 4.3x $1.81 8.2 51%

Wiser Oil Company

Pioneer Natural Resources 05/04/04 $1,751 $2,085 10.2x 8.7x 10.1x 8.4x $1.39 27.3 99%

Evergreen Resources, Inc.

EnCana Corporation 04/15/04 $2,333 $2,708 6.5x 7.0x 6.7x 6.8x $2.29 11.8 92%

Tom Brown, Inc.

Kerr-McGee Corporation 04/07/04 $2,543 $3,675 4.4x 4.5x 5.9x 5.8x $1.84 10.8 76%

Westport Resources Corporation

Plains Exploration & Production 02/12/04 $594 $943 4.0x 4.8x 5.2x 6.0x $0.76 14.0 12%

Nuevo Energy Company

Whiting Petroleum 02/02/04 $47 $76 N/A N/A N/A N/A $0.77 12.5 37%

Equity Oil Company

Max $16,775 $18,857 10.2x 10.3x 10.1x 8.4x $3.76 27.3 99%

Mean $2,668 $3,185 6.1x 6.0x 6.6x 6.3x $1.94 12.4 61%

Median $1,452 $2,085 5.4x 5.6x 6.3x 5.9x $1.84 11.3 62%

Min $47 $76 2.8x 2.5x 4.7x 4.3x $0.76 8.2 12%

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