Jefferies Mission Resources Oil & Gas E&P Jan 2004 Greg Imbruce

7/30/2019 Jefferies Mission Resources Oil & Gas E&P Jan 2004 Greg Imbruce

1/7

Mission Resources Corp.

Recommendation: Buy

We recommend Mission Resources Corp.'s (MSSN) 10.875% Sr. Sub. Notes '07 as a BUY at 98(11.62% YTW,+916 bps)due to the attractive relative yield in todays market coupled with the following: Recent debt-for-equity swap that reduces debt by $10 mm in exchange for 4.5 million shares

Approximately 1.4x asset coverage attributable to the 10.875s Adequate credit statistics (1.7x interest coverage and 4.5x leverage) that are expected to

improve in response to: (i) the recent debt-for-equity swap that results in $1mm of annual interestcost savings; and (ii) higher EBITDA from lower unit costs and strong commodity prices, both inthe spot market as well as through the Company's hedging program

The Company's financial performance is somewhat insulated from commodity prices with almost46% of the next 12-months production hedged at $4.50/MCFE

Ample liquidity ($47 mm 4Q03E) as a result of asset sales completed during 4Q03 Stabilized production (63 MMCFE per day) from the Company's impressive year-to-date drilling

program, despite the recent asset sales We are also encouraged by the recently announced asset sale of Mission's long-life, lower

quality, high cost properties in East Texas at attractive valuations relative to the asset quality($5.38/BOE or $0.90/MCFE) - this sale in combination with new natgas finds of low unit cost

reserves achieves the Company's goal toward high-grading its oil and gas reserves by focusingon optimizing unit economics

Expectation that the Company will pursue the restructuring efforts management stated in its3Q03 conference call,"We are continuing our efforts to lower debt to a more appropriate level,and are investigating a number of opportunities, including a refinancing of our senior creditfacility, a refinancing of the remaining notes, and new equity or debt" - we estimate that acollection of these options could potentially reduce annual interest costs an additional $7-8 mmper year and enable the stock to trade in-line with comparables

If the Company were successful in refinancing the Notes, outside of a tender, it would require theCompany to call the 10.875s at the current 103.625 call price - we expect, however, MSSNwould wait until the call price declines to 101.8125 on 4/1/04

Impressive stock performance (+479% Year-over-Year) should enable the company to deleverusing equity or an equity-linked instrument - we expect that the stock will maintain support

trading at 5.9x LTM EBITDA, a discount to its comparables, which trade at 6.6x (median) to11.1x (average)

Solid M&A market which should will result in further consolidation of E&P companies during2004, which we expect will support MSSNs stock since management owns 5% of the equity andindicated that its intention is to restructure and then consider attractive exit strategies - this, ofcourse, would trigger the 101.0 change-of-control put

XTO Energy Inc. (XTO) announced today that it will acquire 182 BCFE of East Texas andnorthern Louisiana properties for $249 mm or $1.37/MCFE this unit valuation is in-line with ourMSSN upside scenario of $1.32/MCFE, which results in a $3.41 NAV per share for MSSN

EnergyExploration & Production

High Yield ResearchJanuary 8, 2004

Greg Imbruce800/937-5333

[email protected]

Mission Resources Corp. (MSSN)Restructuring Underway

Amount Yrs. Coupon

Seniority Coupon Maturity O/S $MM Rating Price CY YTW STW to Mty. Pmts. Recommendation

Sr. Sub. Nts. (1) 10.875% 4/1/07 $117.4 Ca / NR 98.0% 11.10% 11.62% 916 3.4 4/1,10/1 Buy

(1) Original $225 mm issue. On 3/23/03, MSSN acquired $97.6 mm in face amount for approx. $71.7 mm (73.5%), plus accrued interest.

Additionally, on 12/18/03, MSSN announced it had acquired $10 MM of its 10.875% Sr. Sub. Nts. for 4.5 MM common shares.


2/7

Exploration & ProductionCOMPANY DESCRIPTION:

BOND SUMMARY:

Jefco Amt O/S

Description: Rec. Maturity $MM Moody's S&P Date Price Price CY YTW STW

Sr. Sub. Nts. 10.875% '07 Buy 4/1/2007 $117.4 Ca NR 4/1/04 101.813 98.0 11.10% 11.62% 916

COMPANY DATA: PROVED RESERVES:Company Mission Resources Corporation Total Proved

Symbols (Equity/Debt) MSSN / MSSN Proved NatGas Undvlpd. US CN INTL

Headquarters Houston, TX BCFE % % % % %

Phone (713) 495-3000 1999 182.1 230.8 56% 21% 100% -- --

Website www.missionresourcescorp.com 2000 145.1 189.6 39% 23% 100% -- --

Currency USD (1.000 per USD) 2001 300.9 403.7 38% 25% 100% -- --Fiscal Year End December 2002 176.4 229.1 36% 23% 100% -- --

Accounting Method Full Cost 2003 NA NA NA NA NA NA NAMost Recent Quarter 9/30/03 YTD Est. (3) 175.9 228.5 NA NA NA NA NA

Number of Employees 90 FINDING COSTS-$/MCFE (99-03): RESERVE REPLACE (99-03):Auditor KPMG LLP Drilling $2.12 Drilling 57%Company Type Public Drilling + Revisions $8.17 Drilling + Revisions 15%

Current Stock Price $2.36 (+4% YTD, +479% YOY) Acquisitions $0.78 Acquisitions 290%Shares Outstanding (MM) 28.0 (Incl. 12/04 Debt-for-Equity Swap) Drilling + Acquisitions $1.00 All Sources 305%MarketCap / Enterprise Value ($MM) $66 / $263 All Sources $1.14 Net Sources (After Sales) 142%

Total Debt / Net Debt ($MM) $197 / $197 DRILLING SUCCESS (99-03): PRODUCING WELLS (2002):

Net Asset Value (NAV) $1.57-$3.41/shr or $44-$96 MM Exploration 55% Gross Wells 2,521Stock Price / NAV 150%-69% Development 86% Net Wells 703Total Debt per MCFE (Dvlpd./Total) $1.12 / $0.86 Overall 80% Net Interest 28%Proved Reserves - BCFE @ 12/31/02 229 (23% PUDs / 36% NatGas) CAPEX: Acq. Dvlp. Expl. Drilling Total Dvlp. % Expl. %Production - MMCFE (Recent Qtr.) 62.8 per Day (41% NatGas) 1999 $22.4 $16.9 $14.1 $30.9 $39.3 55% 45%Reserve Life - Yrs. 10.0 2000 $5.1 $58.0 $13.1 $71.2 $63.1 82% 18%Reserve Engineer(s) 2001 $280.3 $32.1 $12.5 $44.6 $312.4 72% 28%

2002 $0.9 $19.3 $1.3 $20.6 $20.1 94% 6%Properties 2003 NA NA NA NA NA NA NA

2004E NA NA NA NA NA NA NAASSET COVERAGE: RESERVE VALUE MATRIX: (X-Axis=$/Bbl and Y-Axis=$/Mcf)

Value $MM Sr. Sec. Sr. Unsec. Sr. Sub Other Total 2002 $20.00 $22.50 $25.00 $27.50 $30.00 $32.50

Oil & Gas $244 3.04x NA 1.39x NA 1.23x $3.00 $86 $117 $148 $180 $211 $243Energy Assets $244 3.04x NA 1.39x NA 1.23x $3.50 $106 $137 $169 $200 $232 $263

Total Excl. WC $241 3.01x NA 1.37x NA 1.22x $4.00 $126 $157 $189 $220 $252 $283 $MMTotal Assets $241 3.02x NA 1.37x NA 1.22x $4.50 $146 $178 $209 $241 $272 $304LIQUIDATION ANALYSIS: (Based on Total Asset Values) $5.00 $166 $198 $229 $261 $292 $32418-Month Recovery: $5.50 $187 $218 $249 $281 $312 $344

PV15 80.0% 100% NA 100% NA 98% Unit Value $20.00 $22.50 $25.00 $27.50 $30.00 $32.50PV20 74.3% 100% NA 100% NA 91% $3.00 $0.37 $0.51 $0.65 $0.79 $0.92 $1.06PV25 69.0% 100% NA 95% NA 84% $3.50 $0.46 $0.60 $0.74 $0.87 $1.01 $1.15

24-Month Recovery: $4.00 $0.55 $0.69 $0.82 $0.96 $1.10 $1.24 $/MCFEPV15 74.2% 100% NA 100% NA 91% $4.50 $0.64 $0.78 $0.91 $1.05 $1.19 $1.32PV20 67.3% 100% NA 93% NA 82% $5.00 $0.73 $0.86 $1.00 $1.14 $1.28 $1.41PV25 61.1% 100% NA 84% NA 75% $5.50 $0.81 $0.95 $1.09 $1.23 $1.36 $1.50

DEBT SENIORITY: QUARTERLY SUMMARY: 9/30/02 12/31/02 3/31/03 6/30/03 9/30/03

Description Sr. Sec. Sr. Unsec. Sr. Sub Other Total 12/02Q 3/03Q 6/03Q 9/03Q

WC Facility 4.750% '06 -- -- -- -- -- Production, MMCFE/Day 77.2 63.4 61.7 62.8

Sr. Sec. Nts. 12.000% '05 $80 -- -- -- $80 NatGas % 32% 40% 39% 41%Sr. Sub. Nts. 10.875% '07 -- -- $117 -- $117 Adj. EBITDA(X) $MM $11.2 $11.1 $11.0 $10.9

Adj. LTM EBITDA(X) $MM $46.8 $47.4 $42.9 $44.2

CapEx $MM $4.0 $6.5 $9.1 $8.2

Adj. EBITDA(X)/Cash Int. Exp. 1.7x 1.8x 1.7x 1.7xNet Debt/Annual Adj. EBITDA(X) 4.9x 4.4x 4.6x 4.7x

LOE (Incl. Taxes) per MCFE $1.73 $2.03 $1.89 $1.83G&A per MCFE $0.36 $0.45 $0.51 $0.45

Total Debt $80 -- $117 -- $197 Interest Expense per MCFE $0.91 $1.06 $1.14 $1.14LIQUIDITY: WORKING CAPITAL: Total Costs per MCFE $3.44 $3.45 $3.53 $3.42

Cash & Equivalents $14 Cash & Equivalents $14 $/Bbl Realized Excl. Hedges $23.44 $30.92 $28.60 $28.54Revolver Avail. $12 +Accounts Receivable $15 $/Mcf Realized Excl. Hedges $4.01 $6.23 $5.33 $4.79Other -- -Accounts Payable $29 $/Bbl Differential Excl. Hedges -$4.84 -$3.08 -$0.45 -$1.91Liquidity $27 Working Capital (Deficit) $1 $/Mcf Differential Excl. Hedges -$0.29 -$0.06 -$0.30 -$0.38RECENT EVENTS:

4/1,10/1

Mission Resources Corporation (MSSN) Greg [email protected]

800/937-5333

Coupon

Pmt Dates

January 8, 2004

Next CallRatings Yield

Mission Resources Corporation (NASDAQ: MSSN) is a Houston-based independent exploration and production company created by the merger of Bellwether Exploration Company

with Bargo Energy Company, which was consummated in 2001. The property base combines Bargo's long life oil properties in West Texas with Bellwether's high deliverabilitiy gas

producing properties in the Gulf Coast and the Gulf of Mexico. MSSN's long-term strategy is to be geographically focused onshore in the Louisiana Gulf Coast, South Texas and

the Permian Basin. At December 31, 2002, MSSN's 229 BCFE (38 MMBOE) of proved reserves, as engineered by Netherland Sewell, were 64% Oil and 77% Proved Developed,

and maintained an 10-year reserve life based on the Company's most recent quarter's production rate. In addition to its oil and gas assets, the Company holds leases on over61,000 net undeveloped acres in the US. In accordance with its plan to high-grade its oil and gas reserve quality, the Company targeted a 70% natural gas mix for year-end 2003

proved reserves. The Company expects 2003 CapEx to total $32 million with nearly $27 million or 83% allocated to development and exploration drilling targets.

>>MSSN repurchased $97.6 mm 10.875% Sr. Sub. Nts. in March 2003 for $71.7 mm (73% of face value) plus accrued interest, funded by a new $80 mm credit facility. The New

facility has an initial 12% coupon, which increases to 13% on 2/16/04>>On 12/18/03, MSSN announced it had acquired $10 MM of its 10.875% Sr. Sub. Nts. for 4.5 MM common

shares, which equates to $2.22/share if assuming bonds at par or if assuming the $2.14 closing share price on 12/18, bonds were repurchased at 96.3% >>Company is reorientinggeographic focus towards onshore Gulf Coast with natgas concentration.>>MSSN signed definitive agreement in early October 2003 to sell E. Texas properties to Danmark Energy

for $21.5 mm. Reserves total 4.0 MMBOE (24 BCFE)) and equates to $5.38/BOE or $0.90/MCFE. New production from wells recently completed should improve MSSN's

production mix from 39% to 50% natgas by year-end.

Permian Basin, Gulf Coast, GOM

Netherland Sewell

Global Mix

[Page 2 of 7]


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Exploration & Production

Mission Resources Corporation (MSSN) Greg [email protected]

800/937-5333

CAPITALIZATION: ISSUER RATINGS

Capitalization: Book Mkt. Effective Watch

Total Debt $197 $195 Rating Date Outlook Watch DatePreferred Stock (Liq. Value) -- -- Moody's Caa1 3/26/2003 NEG ... ...+Shareholders' Equity (Book) $70 $66 S&P ... ... ... ... ...Total Capital $267 $261CREDIT STATISTICS: BANK FACILITY: 9/30/03

Leverage Qtr. LTM Bank Facility

Total Debt / Adj. EBITDA(X) 4.5x 4.5x Borrowing Base $12.5 Provider: Wells Fargo FoothillNet Debt / Adj. EBITDA(X) 4.5x 4.4x Amount Funded -- Maturity: 6/6/06Total Debt / Book Capitalization 74% 74% L/C's Outstanding $0.1 Rate: PRIME+50 (4.75% Min.)Total Debt / Market Capitalization 76% 76% Amount Avail. $12.4 L/C Subfacility $3.0FFO / Total Debt 10% 11% L/C Fee: 3.0%

FFO / Net Debt 10% 11%NET ASSET VALUE:

Interest Coverage Qtr. LTM Base(1) Upside(2)

Adj. EBITDA(X) / Cash Interest Expense 1.7x 1.7x Proved Reserves YTD Est. (BCFE) 228.5 228.5[Adj. EBITDA(X) - CapEx] / Cash Interest Exp. 0.4x 0.6x Risked Unit Value ($/MCFE) $1.07 $1.32

Oil and Gas Assets $244 $302

Proved Total Gathering System -- EBITDA@ 5.5x -- --Debt per Unit Dvlpd. Proved Energy Assets Excl. Acreage $244 $302

Total Debt / MCFE (YTD Est.) (YTD Est.) 175.9173 $1.12 $0.86 US Net Acreage 61 Per Acre $50 $3 $3Net Debt / MCFE (YTD Est.) (YTD Est.) $1.12 $0.86 CN Net Acreage -- Per Acre $25 -- --ENTERPRISE VALUE: Intl. Net Acreage -- Per Acre $5 -- --

Par Mkt. Hedge Contracts (4) ($6) ($13)Stock Price $2.36 $2.36 Equity Interests & Other Assets -- --Shares Outstanding 28.0 28.0 Total Assets $241 $292Market Capitalization $66 $66 Working Capital (Deficit) $1 $1+LT Debt $197 $195 Total Assets after Working Capital $241 $293

+Preferred Stock (Liq.) -- -- Less: LT Debt & Preferred Stock $197 $197-Working Capital/(Deficit) $1 $1 Net Asset Value $44 $96

Enterprise Value (EV) $263 $260 NAV per Share $1.57 $3.41VALUATION: DEBT MARKET VALUE

Debt Only Par Mkt. Description Coupon Maturity Face Price Mkt

Total Debt / MCFE (YE) $0.86 $0.85 WC Facility 4.750% 06/06 -- 100.0 --Net Debt / MCFE (YE) $0.86 $0.85 Sr. Sec. Nts. 12.000% 01/05 $80.0 100.0 $80.0Total Debt / LQA EBITDA(X) 4.5x 4.5x Sr. Sub. Nts. 10.875% 04/07 $117.4 98.0 $115.1Net Debt / LQA EBITDA(X) 4.5x 4.4x

Enterprise Values Par Mkt.

EV / MCFE (YE) $1.15 $1.14EV / Assets 1.1x 1.1xEV / LQA EBITDA(X) 6.0x 5.9xEV / LTM EBITDA(X) 5.9x 5.9x Total Debt 11.331% $197.4 $195.1COUPON PAYMENTS: MATURITY SCHEDULE:

Description Pmt $MM Year Debt

WC Facility 4.750% '06 -- Monthly 2004 --Sr. Sec. Nts. 12.000% '05 $0.8 Monthly 2005 $80.0Sr. Sub. Nts. 10.875% '07 $6.4 4/1 10/1 2006 --

2007 $117.42008 --2009 --2010 --Thereafter --

MANAGEMENT: OIL & GAS HEDGES (Next 12-Months):

ROBERT L CAVNAR, CHAIRMAN/PRESIDENT/CEO 12/03Q 3/04Q 6/04Q 9/04Q NTMRICHARD W PIACENTI, SENIOR VP/CFO Production Hedged:JOSEPH G NICKNISH, SENIOR VP:OPERS & EXPLOITATION Oil, MBbls per day 3.5 3.5 2.5 2.5 3.0KENT A WILLIAMSON, SENIOR VP:PLANNING & EXPLORATN Gas, MMCF per day 15.0 15.0 7.0 7.0 11.0DANIEL P FOLEY, SENIOR VP:FINANCE MMCFE per day 36.0 36.0 22.0 22.0 29.0

% Volume Hedged:

LARGEST SHAREHOLDERS: % O/S Oil 56% 56% 40% 40% 48%FRANKLIN ADVISORS (Result of 12/04 Debt-for-Equity Swap) 16.1% Gas 59% 59% 27% 27% 43%IRONWOOD CAPITAL 5.3% Total 57% 57% 35% 35% 46%ENCAP INVESTMENT 4.4% Avg. Prices (NYMEX):BANK OF AMERICA 3.8% Assuming Put PricesDIMENSIONAL FUND 3.6% Oil ($/Bbl) $23.59 $26.03 $24.67 $24.30 $24.67STATE STREET RESEARCH 3.1% Gas ($/Mcf) $3.24 $4.80 $3.93 $3.93 $3.99RHO CAPITAL PARTNERS 1.9% Assuming Ceiling PricesIDEX MANAGEMENT 1.3% Oil ($/Bbl) $23.59 $26.72 $24.67 $24.30 $24.87

39.6% Gas ($/Mcf) $4.54 $6.11 $4.37 $4.34 $5.01

NOTE: Debt balances are proforma for the Company's debt-for-equity swap, which involved $10 MM of its 10.875% Sr. Sub. Nts. for 4.5 MM common shares

Payment Dates

B3/NRCa/NR

B3/NRRating

(1) Represents an internal market value estimate which is based on NYMEX prices of $26.65/Bbl and $4.86/Mcf (90% of 24-month average NYMEX prices) to which ($1.50)/Bbl and ($0.20)/Mcf

price differentials are applied in addition to risking Proved Developed and Undeveloped reserves at a 97% and 80% success factor, respectively.

(2) Represents an internal market value estimate which is based on NYMEX prices of $29.61/Bbl and $5.40/Mcf (100% of 24-month average NYMEX prices) to which ($1.50)/Bbl and ($0.20)/Mcf

price differentials are applied in addition to risking Proved Developed and Undeveloped reserves at a 97% and 80% success factor, respectively.

(3) The YTD Proved Reserve figure is an estimate based on the prior year's proved reserves plus Extension/Discoveries plus Acquisitions less Property Sales; each is based on the Company's 4-

Yr. Avg. FD&A cost, except for Property Sales and Acquisitions, which are calculated based on commodity and market conditions.

(4) The hedge contract value is derived from NYMEX prices of $26.65/Bbl and $4.86/Mcf, which are based on 90% of the 24-Mth average prices and not indicative of the current mark-to-market

value.

[Page 3 of 7]


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Mission Resources CorporationReserve & Production Data

Daily Production (MMCFE)

86.295.0

104.1

90.6

NA0

20

40

60

80

100

120

99 00 01 02 03

Natural Gas %

56%

39% 38%36%

NA

60% 59%

46%

38%

NA0%

10%

20%

30%

40%

50%

60%

70%

99 00 01 02 03

Proved Reserves Production

Proved Developed Reserves %

79% 77% 75% 77%

NA0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

99 00 01 02 03

Reserve Life (Years)

7.3

5.5

10.6

6.9

NA0

2

4

6

8

10

12

99 00 01 02 03

Pretax SEC-10 ($MM)

NA NA

$365

$327

NA$0

$50

$100

$150

$200

$250

$300

$350

$400

99 00 01 02 03

Reserves by Region

100% 100% 100% 100%

0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

99 00 01 02 03

US CN INTL

Annual Production (BCFE)

3135

38

33

NA0

5

10

15

20

25

30

35

40

99 00 01 02 03

Proved Reserves (BCFE)

231

190

404

229

NA0

50100

150

200

250

300

350

400

450

99 00 01 02 03

[Page 4 of 7]


5/7

Mission Resources CorporationFinancial Performance

EBITDA ($MM)

$40

$76

$69

$47

NA$0

$10

$20

$30

$40

$50

$60

$70

$80

99 00 01 02 03

Capital Expenditures ($MM)

$31

$82

$49

$21

NA

$26

$7

$166

$1 NA$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

99 00 01 02 03

Capex Acquisitions

Unit Costs ($/MCFE)

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

99 00 01 02 03

LOE+Other Taxes G&A Interest

LOE Excl. Tax ($/MCFE)

$0.69$0.77

$1.23$1.31

NA$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

99 00 01 02 03

Interest Coverage(EBITDA/Cash Interest Exp.)

3.4x

4.9x

2.9x

1.7x

NA0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

99 00 01 02 03

Total Debt/Proved Reserve ($/MCFE)

$0.56$0.66 $0.64

$0.98

NA$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

99 00 01 02

Total Debt/Developed Reserve ($/MCFE)

$0.71

$0.86 $0.86

$1.28

NA$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

99 00 01 02 03

Total Debt Leverage(Total Debt/EBITDA)

3.2x

1.7x

3.8x

4.8x

NA0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

99 00 01 02 03

[Page 5 of 7]


6/7

Mission Resources CorporationDrilling Results & Producing Well Data

Reserve Replacement - Drilling Only

47%

64%

106%

6%0%

57%

0%

20%

40%

60%

80%

100%

120%

99 00 01 02 03 99-03

Reserve Replacement - Overall

-600%

-400%

-200%

0%

200%

400%

600%

800%

1,000%

99 00 01 02 03 99-03

All Sources Net After Sales

Finding Cost - Drilling Only ($/MCFE)

$2.11

$3.22

$1.11

$10.84

NA

$2.12

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

99 00 01 02 03 99-03

Production per Well (MMCFE/Yr.)

& Avg. Net Interest per Well (%)

85

130

3447

NA

17%16%

24%

28%

NA0

2040

60

80

100

120

140

99 00 01 02 03

0%

5%

10%

15%

20%

25%

30%

Drilling Success Rate

0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

99 00 01 02 03 99-03

Exploration Development Overall

Price Differentials ($/MCFE)

-$0.34

-$0.69

-$0.30

-$0.56

NA

-$0.47

-$0.80

-$0.70

-$0.60

-$0.50

-$0.40

-$0.30

-$0.20

-$0.10

$0.00

99 00 01 02 03 99-03

Finding Cost - All-Sources ($/MCFE)

$0.54

$2.37

$0.96

NA NA

$1.14

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

99 00 01 02 03 99-03

Net Undeveloped Acreage (000's)

NA NA

365

327

NA0

50100

150

200

250

300

350

400

99 00 01 02 03

[Page 6 of 7]


7/7

2001 Jefferies & Company, Inc. All rights reserved.

This material has been prepared by Jefferies & Company, Inc. ("Jefferies") a U.S.-registered broker-dealer, employing appropriate

expertise, and in the belief that it is fair and not misleading. It is approved for distribution in the United Kingdom by Jefferies International

Limited ("JIL") regulated by the Financial Services Authority ("FSA"). The information upon which this material is based was obtained from

sources believed to be reliable, but has not been independently verified. Therefore except for any obligations under the rules of the FSA,

we do not guarantee its accuracy. Additional and supporting information is available upon request. This is not an offer or solicitation of

an offer to buy or sell any security or investment. Any opinion or estimates constitute our best judgment as of this date, and are subject to

change without notice. Jefferies and JIL and their affiliates and their respective directors, officers and employees may buy or sell securities

mentioned herein as agent or principal for their own account. This material is intended for use only by professional or institutional

investors falling within articles 19 or 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001and not the

general investing public. None of the investments or investment services mentioned or described herein are available to other persons in

the U.K. and in particular are not available to "private customers" as defined by the rules of the FSA or to anyone in Canada who is not a

"Designated Institution" as defined by the Securities Act (Ontario)."

I, Greg Imbruce, certify that all of the views expressed in this research report accurately reflect my personal views about the subject

security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to

the specific recommendations or views expressed in this research report.

[Page 7 of 7]

Documents

Jefferies Mission Resources Oil & Gas E&P Jan 2004 Greg Imbruce