1. ISM Mid-winter Conference Short Term Perspectives for Natural Gas February 2006 knowledge to bridge the gap

2. Page # 2 Petral Consulting Company knowledge to bridge the gap

3. Page # 3 Petral Consulting Company knowledge to bridge the gap Katrina & Rita Through the heart of the Gulf of Mexico

4. Page # 4 Petral Consulting Company knowledge to bridge the gap Shut-in Natural Gas Production Katrina/Rita Impact

5. Page # 5 Petral Consulting Company knowledge to bridge the gap What Happened after Katrina & Rita?  With 5-8 Bcfd of GOM production shut-in, forecasts of $20 per MM Btu were prevalent in the fourth quarter of 2005  Gas inventory reports were generally ignored during October/November  How did we avoid a price spike to $20 per MM Btu? » Rules of curtailment were very important » Price premiums versus resid triggered fuel switching

6. Page # 6 Petral Consulting Company knowledge to bridge the gap Gas Pricing Differentials  Usually, gas prices in Louisiana average 5-10 ¢ per MMBtu above Houston Ship Channel. During the 4 th quarter, the premium average $2.00 per MMBtu. Why were pricing differentials so much wider than normal? » Rules of curtailment ARE very important » Consumers who were curtailed were willing to pay very high prices to buy gas away from consumers who were not curtailed

7. Page # 7 Petral Consulting Company knowledge to bridge the gap Natural Gas Price Influences  Other than hurricanes, natural gas prices respond to three fundamental influences: » Trends in crude oil and resid pricing » Weekly inventory report & year-to-year comparisons » Demand in the power generation market

8. Page # 8 Petral Consulting Company knowledge to bridge the gap Gas Fired Power Generation Peak Demand Season

9. Page # 9 Petral Consulting Company knowledge to bridge the gap Gas Fired Power Generation: Share of Total Generation

10. Page # 10 Petral Consulting Company knowledge to bridge the gap Residential/Commercial Demand: Winter Season

11. Page # 11 Petral Consulting Company knowledge to bridge the gap Injections into Working Gas Storage

12. Page # 12 Petral Consulting Company knowledge to bridge the gap Working Gas Storage Explanations for Weak Injection Rates  Railroad maintenance in Wyoming began in July and coal deliveries were curtailed – by some amount. Some power generators switched to gas // demand was 3-5 Bcfd higher than in 2004  Hot weather pushed electric power demand sharply higher.  Katrina & Rita disrupted short term supply plans for many power generators and industrial consumers.  Despite the loss of 5-8 Bcfd for 2 months, natural gas storage injections were sufficient to push inventories to a peak of 3.25 Tcf by mid-November – gas pipelines affected by supply losses invoked “rules of curtailment”

13. Page # 13 Petral Consulting Company knowledge to bridge the gap Injections into Working Gas Storage

14. Page # 14 Petral Consulting Company knowledge to bridge the gap Working Gas In Storage Seasonal Min

15. Page # 15 Petral Consulting Company knowledge to bridge the gap Natural Gas In Working Storage Seasonal Peak

16. Page # 16 Petral Consulting Company knowledge to bridge the gap Houston Ship Channel Gas Pricing 2003/2005

17. Page # 17 Petral Consulting Company knowledge to bridge the gap Cash Market Henry Hub Natural Gas Winter Averages

18. Page # 18 Petral Consulting Company knowledge to bridge the gap Cash Market Natural Gas Prices Short Term Forecast

19. Page # 19 Petral Consulting Company knowledge to bridge the gap Cash Market Henry Hub Gas Prices Long Term Forecast