Raymond James Energy Group “Is The Stock Market or the Futures Market Correct?”

1. Raymond James Energy Group“Is The Stock Market or the Futures Market Correct?” Marshall.Adkins@RaymondJames.com Jim.Rollyson@RaymondJames.com Darren.Horowitz@RaymondJames.com Raymond James Oilservice Group (800) 945-6275 June 2006

2. Short-term Outlook (next 6 months)Increasingly Bullish! • Investor sentiment: never been more bearish • U.S. gas fears • Technical support levels have held firm • Stocks bounced off their 200 day moving avg. • Fundamentals are strong & improving • Strong upward earnings • Gas storage situation is improving • No indication of a slow down 2

3. Long-term Energy Outlook (6-18 months)Still Very Bullish! • Gas resets in November • Oil supply/demand remains tight • even with an economic slowdown & more drilling • Supply response is anemic • Both U.S. gas & global oil • Geopolitical issues are NOT going away 3

4. The Oil Bubble is Gone! 4

5. Oil Consumption Increases Fastest During Early Industrialization 5

6. Russian Oil Production Growth Slowing 6

7. Mature Areas Must Drill Deeper 7

8. Searching For Smaller Reserves 8

9. How Will More Rigs Affect Production? 9

10. Global Drilling Activity Has Surged Upward 10

11. Are We Seeing a Production Response? 11

12. Today’s Oil Outlook 12

13. What if We Have a Global Slowdown? 13

14. Where is the Price Floor?(OPEC Will Defend $55 or Higher) • Rising Saudi infrastructure costs • Higher shipping costs • Widening differential for poor quality crudes • Devaluation of the U.S. $ • Less OPEC purchasing power • Cheaper international oil prices • OPEC wants highest price w/o demand destruction 14

15. Discounts on Heavy Oil Have Widened 15

16. Dollar Devaluation Raises OPEC Target 16

17. OPEC Production Cuts Support Oil Prices 17

18. Our Oil Price Guess 18

19. Where Could We Be Wrong? 19

20. Iran Has Changed the Game! • Iran has re-opened nuclear efforts • New leader not backing down • U.S. & Israel will NOT let Iran get nuclear weapons • Iran’s 3.9 million Bpd is at risk • Situation should come to a head in 6 - 18 months • 80% probability Iran drives oil higher 20

21. Long-Term: Gas Will Be Linked to Crude(Moving Towards 6:1 Btu Parity) 21

22. Short-Term: Too Much Gas in Storage 22

23. Stock Market is Convinced We Are Headed Towards “Gas on Gas” Competition 23

24. What Are Gas Bears Missing? • Post hurricane demand destruction was greater than most people realize • At current prices, demand is returning • (or supply is falling) • Assuming normal weather & no hurricanes we are headed towards 3,500 Bcf, not 3,900 Bcf ending storage 24

25. How Do We Get To 3,500 Bcf? 25

26. Is Demand Returning? 26

27. Even DOE’s Numbers Suggest Big Demand Destruction 27

28. How Much Demand Will Return At Current Pricing? 28

29. Y/Y Gas Storage is Key to Gas Prices 29

30. Where Will Winter Storage End? 30

31. Long Term, U.S. Gas Will Be Linked to Oil • We are assuming 9:1 oil to gas ratio through summer • Currently we are at an 11:1 Ratio • Storage “resets” gas prices in November • Longer-term gas prices trend towards 6:1 Btu parity • RJ estimate: 2006 = $7.81/Mcf 2007 = $10.00/Mcf 31

32. How Do Prospect Inventories Look & Are Higher Service Costs Impacting Prospect Hurdle Rates? Our Take: • 5 years ago  “There aren’t enough prospects” • Today  “There aren’t enough rigs” • Reality  LT gas prices above $6/Mcf generates great revenues & more prospects despite higher costs 32

33. Reinvestment Returns Are Still Outstanding 33

34. How Far Do Oil & Gas Prices Need to Fall Before Activity Slows? Our Take: • Long-term price expectations (or 2 yr. strip) must fall below $6 gas and $50 crude • Short-term spike to $5 range will NOT slow activity • Most think gas pull-back will be short-lived • Many E&P companies have hedged @ higher prices • E&P companies are flush with cash & prospects • If E&P companies “lay down” a rig, they move to the “back of the line.” 34

35. Will the Service Industry Over-Build Rigs & Oilfield Equipment? Our Take: • Global rig fleet will grow 10-15% per year over the next 5 years. • Rig new build costs will rise & demand will exceed supply for the entire period 35

36. History Lesson 36

37. Do Earnings “Peak” With New Builds? 37

38. Conclusion • Longer-term bullish secular move is still intact • Oil & gas supply is not responding to rigs • Oil prices are signaling that demand must slow • Oil wildcards are not going away • Gas could be near a bottom 38

39. Disclaimer • Important Investor Disclosures. • Stock Ratings: Within our four-tiered rating system, Strong Buy means that the stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P 500 over the next six months; Outperform means the stock is expected to appreciate and outperform the S&P 500 over the next 12 months; Market Perform means the stock is expected to perform generally in line with the S&P 500 over the next 12 months and is potentially a source of funds for more highly rated securities; and Underperform means the stock is expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. • Out of approximately 519 stocks in the Raymond James coverage universe, 52% have Strong Buy or Outperform ratings, 35% are rated Market Perform and 12% are rated Underperform. Within those rating categories, 25% of the Strong Buy- or Outperform-rated companies either currently are or have been Raymond James Investment Banking clients within the past three years; 17% of the Market Perform-rated companies are or have been clients and 9% of the Underperform-rated companies are or have been clients. • Analyst Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination including the analyst’s success in rating stocks versus an industry index, support effectiveness to the retail and institutional sales forces, traders, and investment bankers, institutional research votes, as well as overall productivity and revenue generated in covered stocks. • Raymond James Relationships: Raymond James & Associates may make a market in stocks mentioned in this report and may have managed/co-managed a public/follow-on offering of these shares or otherwise provided investment banking services to companies mentioned in this report in the past three years. • RJA or its officers, employees, or affiliates may (1) currently own shares, options, rights or warrants and/or (2) execute transactions in the securities mentioned in this report that may or may not be consistent with this report's conclusions.  • Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available at www.rjcapitalmarkets.com/SearchForDisclosures_main.asp. Copies of research can be obtained by contacting any Raymond James & Associates or Raymond James Financial Services office (please see www.rjf.com for office locations) or by sending a written request to the Equity Research Library, Raymond James & Associates, Inc., Tower 3, 6th Floor, 880 Carillon Parkway, St. Petersburg, FL 33716. • Additional information is available on request. This document may not be reprinted without permission. 39