1. 2004 Indiana Energy Conference 2004 Indiana Energy Conference “Perspectives on the Energy Puzzle” September 16, 2004 September 16, 2004 HOWARD WEIL INC.

2. Oil Prices – Hitting all-time highs, but easing Oil Prices – Hitting all-time highs, but easing WTI ($/BBl) HOWARD WEIL INC. 14-yr. avg. $22.94 Avg. 1990 – 2000 $20.68 Avg. ‘00 – ‘04 $29.86 Source: Bloomberg

3. What is driving high crude oil prices? Demand pull – particularly China Less spare production capacity Weak U.S. dollar Political uncertainty - Iraq - Russia – Yukos and recent terrorist attacks - Up until Aug. 15, referendum in Venezuela Speculators in market HOWARD WEIL INC.

4. Energy expenditures as a % of GDP are declining HOWARD WEIL INC. Source: EIA/DOE

5. HOWARD WEIL INC. Inflation adjusted, crude is below highs of early 1980’s Average Annual price ($/Bbl) Crude Oil Prices in 2003 Dollars 1970-1983 Arabian Light/1984 – Current Brent Spot Average = $31.35/bbl Source: Bloomberg and Howard Weil

6. Coal prices at record highs Coal prices at record highs Eastern Coal ($/Short-ton) HOWARD WEIL INC. Source: Bloomberg

7. Coal Demand Fundamentals Tremendous consumption in China pulling worldwide prices – –China disincentivized coal exports in 2003 – –U.S. exports up 57% year-to-date Change in ownership of domestic electric coal-fired generation – capacity utilization up to 72% from 67% six years ago Cost advantage of coal fleet relative to natural gas Stronger U.S. economy translates into higher steam and metallurgical coal demand HOWARD WEIL INC.

8. Coal Supply Fundamentals Lack of capital deployed to develop new mines – –3-5 year lag before “greenfield” mines can add substantial production Permitting constraints delay future production growth Railroad constraints impeding deliverability, predominantly from Powder River Basin (western US) – –Only region with excess production capacity More reserves in hands of publicly traded companies – –Companies maintaining capital discipline – –Private equity buying companies out of bankruptcy HOWARD WEIL INC.

9. Absence of surety bond market squeezing out smaller producers Rising mining costs – –Low hanging fruit has been picked Inventories now 20% below 3-year average Coal Supply Fundamentals (cont.) HOWARD WEIL INC.

10. Coal stockpiles heading toward 30-year lows HOWARD WEIL INC. Source: EIA, Bloomberg, Howard Weil

11. As coal demand has risen, inventories continue to decline HOWARD WEIL INC. Source: EIA, Bloomberg, Howard Weil

12. Declining Inventories = Rising Prices HOWARD WEIL INC.Source: EIA, Bloomberg, Howard Weil

13. Coal still trading at 50% discount to natural gas Historical Average 34% HOWARD WEIL INC. Source: EIA, Bloomberg, Howard Weil

14. Natural gas prices… more than a spike Futures HOWARD WEIL INC.Source: Bloomberg

15. Gas storage near full…not the problem 2001200220032004 HOWARD WEIL INC. Source: EIA/DOE

16. Natural gas rig count is at all time highs HOWARD WEIL INC. Source: Baker Hughes

17. Despite increased drilling, production not responding Annual Production Change Avg. Gas Rig Count 2000 2001 2002 2003 2004E -1.2% 0.6% -4.7% -4.8% -2.5% 720 939 691 872 1,031 HOWARD WEIL INC. Source: Baker Hughes and Howard Weil

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19. Trend toward declining Canadian exports HOWARD WEIL INC. Canadian gas deregulated Source: EIA/DOE

20. Rising exports to Mexico a negative HOWARD WEIL INC. Source: EIA/DOE and Howard Weil

21. LNG imports are helping with the problem… LNG Imports (MMcf/d) HOWARD WEIL INC. Source: EIA/DOE and Howard Weil

22. …but the impact is longer term and there are ramifications HOWARD WEIL INC. Source: EIA/DOE, FERC and Howard Weil

23. Fundamentals point to continued strength in gas prices Natural Gas Supply/Demand Balance HOWARD WEIL INC. Source: EIA/DOE and Howard Weil

24. A step-change to higher gas prices $2.00 Gas $2.75 Gas $4.00 - $5.00 Gas HOWARD WEIL INC. Source: Bloomberg and Howard Weil

25. Sampling of Regional Electricity prices ($/MWhr) HOWARD WEIL INC. Source: Megawatt Daily

26. Sampling of regional spark spreads ($/MWhr) Source: Megawatt Daily

27. Solutions to the Energy Dilemma Conservation Fuel diversity Spending on electric transmission grid Alternative energy Alaskan Pipeline Energy bill HOWARD WEIL INC.

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