Energy Capital Will Wall Street Be There For

Energy Capital: Will Wall Street Be There For Energy Financings Next Year? Raymond James Energy Group Marshall Adkins Raymond James Oilservice Group (800) 945 -6275 June 2004 Marshall. Adkins@Raymond. James. com

Will “The Street” Be There? ¨ 2003 was the biggest equity offering year in two decades ¨ The equity window is still open ¨ M&A activity (mostly sales by majors) is driving capital demand ¨ Oil & gas prices will dictate future capital availability 2

E&P High Yield Offerings Driven by Rates 3

2003 Record For E&P Equity Offerings 4

2003 E&P Equity Offering Performance Has Been Excellent 5

E&P Equity Capital Raised vs. Average Natural Gas Prices 6

E&P Equity Capital Raised vs. Average Oil Prices 7

Energy Prices Will Drive Wall Street Capital Availability ¨ Long-term secular up-trend is intact ¨ Look for a late summer gas price squeeze ¨ Oil fundamentals are solid – More upside than downside ¨ Is this a 1970’s re-run? 8

We Are In A Long-Term Secular Upswing (Higher Highs, Higher Lows) 9

U. S. Rig Fleet Size Shows Long-Term Secular Moves 10

Drilling Success Rates Are Up 11

New Drilling Techniques Are Here To Stay 12

New Areas Are Now Accessible 13

But, We Are Drilling Deeper 14

Searching For Smaller Reserves 15

Which is Driving Decline Rates Higher 16

How Will More Rigs Affect Production? 17

Today’s U. S. Gas Production Is Replay Of 1970’s Oil Production 18

Q 1 Natural Gas Production Still Down 19

The Gas Market Is Working! (Approaching 4 Bcf/day less gas vs. last year) 20

What Happens This Summer? 2003 Injections 2, 450 Bcf - Supply Down 2% (1 Bcf/day) - 215 Bcf - Economy/Ind. Demand (1 Bcf/day) - 215 Bcf - Weather* ? ? ? (Normal) 0 Bcf - Fuel Switching ? ? ? 0 Bcf - Electric Consumption ? ? ? 2004 Injections April Beginning Storage October Ending Storage 0 Bcf 2, 020 Bcf 1, 000 Bcf 3, 020 Bcf * Weather impact: +/- 1/2 Bcf/day per 1% change in temperature 21

U. S. Gas Conclusion ¨ Falling supply will continue to drive prices higher ¨ Look for a mid-summer squeeze ¨ Oil prices will set gas price range – Divide oil price by 5 ½ for the midpoint – Gas prices should fluctuate $1/Mcf around the midpoint ¨ RJ estimate: 2004 ~ $5. 92/Mcf ¨ These estimates will probably prove too low 22 2005 ~ $6. 00/Mcf

Oil Market Continues To Tighten, Big Wildcards ¨ Oil Inventories suggest low $30 oil prices ¨ Nigeria/Venezuela/OPEC/Middle East wild cards ¨ Missing Barrels: Part 2 – Larger oil demand (China, Global Economy) – Smaller oil supply (Venezuela, Russia) ¨ Dollar weakening is having an impact ¨ OPEC resolve is stronger at sub $30 oil 23

Our Oil Model Suggests Low $30 Oil Prices 24

Chinese Oil Demand Is Going Insane! 25

Russian Oil Production Growth Slows 26

OPEC Excess Capacity Is Tightening! 27

No Room For Error 28

Oil Conclusion ¨ IEA miss-calculations have confused the market ¨ Implied oil demand growth is huge! ¨ Russian supply growth should slow in 2005 ¨ Oil markets should tighten in late 2004 ¨ When will we hit the wall? ¨ OPEC wants $30+ oil prices ¨ RJ estimates: 2004 ~ $34. 36/Bbl 2005 ~ $33. 00/Bbl 29

Conclusion ¨ 2003 was an outstanding year for energy equity offerings ¨ “Window” is open for energy equity deals ¨ Strong oil and gas fundamentals should allow energy access to Wall Street’s capital 30

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