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Natural Gas Reserve Acquisition presentation to

Natural Gas Reserve Acquisition presentation to APPA – Engineering and Operations Technical Conference April 19, 2005. Presentation Overview. Why purchase fuel reserves? History of Public Gas Partners Experience to date Other opportunities in natural gas. Why Purchase Fuel Reserves?.

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Natural Gas Reserve Acquisition presentation to

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  1. Natural Gas Reserve Acquisition presentation to APPA – Engineering and Operations Technical Conference April 19, 2005

  2. Presentation Overview • Why purchase fuel reserves? • History of Public Gas Partners • Experience to date • Other opportunities in natural gas 3

  3. Why Purchase Fuel Reserves? • To secure long-term supply and price hedge • Demand and supply uncertainty in the market have increased • To reduce in price volatility • To create value through capital markets 4

  4. History of PGP • Idea of “super-joint action” percolated in 2003 with MGAG, FMPA and MEAG • In 2004 started with 15 potential members, 10 signed LOI • Final documents signed by 7 members • Nominations of 55,000 mmBtu/day 5

  5. Why PGP? • Experience in owning reserves • Diversification • Larger pool leads to more deals • Cover wider geographic area • Spreading of risk on each transaction • Spreading of risk among participants • Load diversity between electric and gas utilities 6

  6. PGP Risk Profile • Generally risk averse • Acquisition criteria • Economic • Reserve type limitation • Location • Outside reservoir engineers and price deck adjustments 7

  7. Experience to Date • Ongoing consolidation in Exploration & Production market • Risk profile of purchasers differs from ours • Investigating partnerships to create market risk profile • Staying the course 8

  8. Other Opportunities in Natural Gas • Pre-pays still have security issues • Take-and-pay arrangements • Volumetric production payments • Pool #2 in PGP 9

  9. Summary • Investigate reserve ownership as a small portion of portfolio • Understand risks with ownership • Discussions may lead to new opportunities outside of reserve ownership • Look for any and all opportunities to reduce the effect of price volatility 10

  10. Natural Gas Reserve Acquisition Questions? 11

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