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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
PETRIE PARKMAN & Co.3
(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%
PETRIE PARKMAN & Co.4
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
PETRIE PARKMAN & Co.5
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
?
PETRIE PARKMAN & Co.6
(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
PETRIE PARKMAN & Co.7
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
PETRIE PARKMAN & Co.8
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
PETRIE PARKMAN & Co.9
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
PETRIE PARKMAN & Co.10
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.
PETRIE PARKMAN & Co.11
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
PETRIE PARKMAN & Co.12
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+
PETRIE PARKMAN & Co.13
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
PETRIE PARKMAN & Co.14
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
$/M
cfe
PETRIE PARKMAN & Co.15
• Continued Consolidation via M&A
• Maturation of the conventional petroleum resource base
• Middle East dynamics / imponderables
• Economic growth in China and India
• Maturing of Russian Export Inclination
Forces Shaping the End-of-DecadeForces Shaping the End-of-DecadePetroleum LandscapePetroleum LandscapeForces Shaping the End-of-DecadeForces Shaping the End-of-DecadePetroleum LandscapePetroleum Landscape
• Result: Continued intensified global competition for energy supplies
PETRIE PARKMAN & Co.16
Spring 1999 Fall 2003
Summer 2004
Inflection Point ThesisInflection Point Thesis
PETRIE PARKMAN & Co.17
Market EnvironmentMarket Environment
Energy back at center stage
Oil and natural gas prices have risen to near record levels
Prices expected to remain strong but significant gap remains between Wall Street & Futures Market
Higher commodity prices support:
Accelerated new technology implementation
Increased recovery from existing fields
Development of new resource plays
Premium returns achievable despite high “cost of entry”
PETRIE PARKMAN & Co.18
AppendixAppendixAppendixAppendix
PETRIE PARKMAN & Co.19
Corporate Transactions 2004 – 2005YTDCorporate Transactions 2004 – 2005YTD
Source: Petrie Parkman transaction database. Shading represents transactions on which PPC advised.
A B C D E F G H I J K
Acquiring Company/ Date Purch. Total Purchase Price / DsCF Total Inv / EBITDA IPPR / %
Target Company Announced Price Inv. CY FY CY FY Mcfe R/P Gas$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%