1. 1 TRENDS IN ENERGY LENDING 7 August 2008

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3. 3 FIRST QUARTER 2008 BANK INDUSTRY PERFORMANCE Deteriorating real estate portfolios – loan loss provisions 4 times 1st quarter 2007 Shrinking profits - especially largest banks Lower non-interest revenues: trading and loan sales Charge-offs climbed to a five-year high Past due loans increased 24% from 4 th quarter 2007 Of banks that paid dividends, half were lowered

4. 4 REPERCUSSIONS Banks’ underwriting standards have tightened –Reasons: market liquidity/capital pressure, economic outlook, risk appetite, loan performance and the financial condition of some banks. –The impact of this tightening is seen in loan pricing, covenants, collateral, guarantor requirements, and equity requirements. –Standards that have eased…..maturity and amortization.

5. 5 INDICATIONS OF STRESS Stock price of top 20 energy banks – DOWN 29% LTM (vs. 9% down for DJA) Cost of external debt capital for banks –LIBOR + 300 bps (more for troubled banks)

6. 6 ENERGY SEGMENT – STILL DESIRABLE Estimated Energy Loan Commitments - Largest Energy Banks Bank 12/31/0612/31/07 Citigroup $25 B $31 B Bank of America $19 B $24 B JP Morgan Chase $18 B $26 B BNP Paribas* $ 8 B $14 B Wachovia $ 6 B $ 7 B Includes impact of currency fluctuation

7. 7 IMPACT OF ENERGY PRICES Positive: Lender price decks are climbing –Median prices for oil and gas* 2008: $70.00/$7.00 2009: $67.75/$6.75 2010: $61.25/$6.50 2011: $60.00/$6.25 2012: $60.00/$6.15 Negative: Calculated exposure for commodity hedges has ballooned due to price volatility - exacerbates capital allocation issues. * Tristone Capital, Inc. Energy Lender Price Survey, Q3/08

8. 8 IMPACT OF BANKS’ STRESS ON ENERGY CLIENTS Certain formerly stout players in the lending market have scaled back both lending and hedging Very active secondary senior loan market Push-back on stretch deals due to capital allocation issues Lower hold limits on loans Failed syndications Fewer transactions fully underwritten Structures becoming more conventional Interest margin up +/- 25 bps; up-front fees higher

9. 9 OTHER….. Impact of new entrants in energy lending market uncertain. Semgroup bankruptcy – bad timing.

10. 10 OPPORTUNITIES For well-capitalized banks……get your phone calls returned. Improve position in credits at attractive prices. Enhanced cross-sell opportunities. Banks with hedging capacity desired. Rewards for stepping up: sharing of bond economics and equity issuance fees.

11. 11 FUTURE Some old names will exit/merge/go away. Competition will be somewhat abated. More banks per credit facility.

12. 12 QUESTIONS Will banks’ capital crunch slow down oil and gas acquisitions? Where does it end? Who will be left?

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