ISM Mid-winter Conference Short Term Perspectives for Natural Gas February 2006

1. ISM Mid-winter ConferenceShort Term Perspectives for Natural GasFebruary 2006 knowledge to bridge the gap

2. Petral Consulting Company knowledge to bridge the gap

3. Katrina & RitaThrough the heart of the Gulf of Mexico Petral Consulting Company knowledge to bridge the gap

4. Shut-in Natural Gas ProductionKatrina/Rita Impact Petral Consulting Company knowledge to bridge the gap

5. 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 Petral Consulting Company knowledge to bridge the gap

6. Gas Pricing Differentials • Usually, gas prices in Louisiana average 5-10 ¢ per MMBtu above Houston Ship Channel. During the 4th 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 Petral Consulting Company knowledge to bridge the gap

7. 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 Petral Consulting Company knowledge to bridge the gap

8. Gas Fired Power GenerationPeak Demand Season Petral Consulting Company knowledge to bridge the gap

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

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

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

12. Working Gas StorageExplanations 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” Petral Consulting Company knowledge to bridge the gap

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

14. Working Gas In StorageSeasonal Min Petral Consulting Company knowledge to bridge the gap

15. Natural Gas In Working StorageSeasonal Peak Petral Consulting Company knowledge to bridge the gap

16. Houston Ship Channel Gas Pricing2003/2005 Petral Consulting Company knowledge to bridge the gap

17. Cash Market Henry Hub Natural GasWinter Averages Petral Consulting Company knowledge to bridge the gap

18. Cash Market Natural Gas PricesShort Term Forecast Petral Consulting Company knowledge to bridge the gap

19. Cash Market Henry Hub Gas PricesLong Term Forecast Petral Consulting Company knowledge to bridge the gap