1. October 26 th, 2004 75 th Annual Meeting Independent Producers Association of America James K. Wicklund Managing Director – Energy Research Banc of America Securities LLC James K. Wicklund Managing Director – Energy Research Banc of America Securities LLC

2. October 26 th, 2004 Wall Street’s Perspective on Natural Gas  Little faith, lots of optimism and no loyalty at all  Roller coasters are a lot of fun until the dizziness hits  Price, Price, Price – Don’t get confused by details  Little faith, lots of optimism and no loyalty at all  Roller coasters are a lot of fun until the dizziness hits  Price, Price, Price – Don’t get confused by details

3. October 26 th, 2004 “In the future, it is unlikely that the world will ever again let itself become as dependent on one source of fuel as it once did on Arab oil.” Conservatism as Heresy” J.J. Ray 1974 Conservatism as Heresy” J.J. Ray 1974

4. US Oil Drilling vs Price

5. US Gas Drilling vs Price

6. Returns Drive Activity

7. Mature Basins Change Economics Previously, commodity price drove returns with little impact from other variables In a return focused industry, activity can slow without a demand drop No industry allocates capital based on revenues No industry allocates capital on the basis of “greater good” Previously, commodity price drove returns with little impact from other variables In a return focused industry, activity can slow without a demand drop No industry allocates capital based on revenues No industry allocates capital on the basis of “greater good”

8. Momentum Drives EPS

9. Future of the US Industry High levels of sustained activity – low volatility Operators focused on returns, NOT growth Cash Cow – dividend yield “Wal-Mart” model Investors pay a lower multiple opposed to historical “hyper-cyclical growth” High levels of sustained activity – low volatility Operators focused on returns, NOT growth Cash Cow – dividend yield “Wal-Mart” model Investors pay a lower multiple opposed to historical “hyper-cyclical growth”

10. “It’s Different this Time??”

11. Fear, Greed & Fear Investors are afraid not to be invested in the stocks They won’t trust it but will play it till it doesn’t work anymore, with no loyalty except to profits “It’s different this time” is always right, and always wrong and never enough of either Service companies are afraid to add capacity E&P companies are afraid to sign term contracts but want the party to last as long as possible The commodity price is always going to go up, until its not any more Investors are afraid not to be invested in the stocks They won’t trust it but will play it till it doesn’t work anymore, with no loyalty except to profits “It’s different this time” is always right, and always wrong and never enough of either Service companies are afraid to add capacity E&P companies are afraid to sign term contracts but want the party to last as long as possible The commodity price is always going to go up, until its not any more

12. Summary The “secular” trend of natural gas is toward higher drilling levels, higher prices and higher consumption LNG will supplant demand but won’t change the economics for a generation to come Nothing in the oil business is linear and neither are economics keeping the business cyclical Investors will always bend and rationalize reality towards the idea of “secular growth” Every three year flirtations may look more like a dating relationship but marriage is out of the question The “secular” trend of natural gas is toward higher drilling levels, higher prices and higher consumption LNG will supplant demand but won’t change the economics for a generation to come Nothing in the oil business is linear and neither are economics keeping the business cyclical Investors will always bend and rationalize reality towards the idea of “secular growth” Every three year flirtations may look more like a dating relationship but marriage is out of the question