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AWASH IN CASH!

CERA Week 2005. AWASH IN CASH!. ALL DRESSED UP AND NO PLACE TO INVEST?. Use of Cash. CERA WEEK 2005. Balance Sheet Repair Increase Dividends Repurchase Shares Acquisitions Invest in Existing Assets Unconventional Resource Plays LNG Build Cash and Wait Organic Growth - Exploration.

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AWASH IN CASH!

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  1. CERA Week 2005 AWASH IN CASH! ALL DRESSED UP AND NO PLACE TO INVEST?

  2. Use of Cash CERA WEEK 2005 • Balance Sheet Repair • Increase Dividends • Repurchase Shares • Acquisitions • Invest in Existing Assets • Unconventional Resource Plays • LNG • Build Cash and Wait • Organic Growth - Exploration

  3. Why Decreasing Exploration Emphasis? CERA WEEK 2005 • Financial Obstacles • Company Size Limits Impact Opportunity • Out of Favor with Capital Markets • Poor Industry Track Record • Long Term Investment Commitment • Risk of Failure • High Entry Cost to Best Zip Codes • Lack of Management Discipline • Increasing Government Regulations • Lack of Management Know-how and Confidence • Political and Environmental Restraints

  4. Why Decreasing Exploration Emphasis? CERA WEEK 2005 • Technical Obstacles • Lack of Industry Success • Rising F&D Costs • Decreasing Reserve Size • No Breakthrough Technology • Loss of Qualified Personnel • Lack of Creative Exploration Thinking

  5. Why Exploration For the Long Haul? CERA WEEK 2005 The Opportunity Source: IHS Energy

  6. Why Exploration For the Long Haul? CERA WEEK 2005 Source: IHS Energy

  7. Why Invest in Exploration? CERA WEEK 2005 • New Value Creation • Organic Growth • Reduced Competition • Improving Technology • Attracts Superior Technical Talent • Increasing Global Opportunities • Has More Impact on Smaller Size Companies

  8. CERA WEEK 2005 Discoveries > 100 MMBOE 2000 - 2003 40% of spend for 17>100mmboe • Common Themes: • Zip Code • Deepwater Basins • New Geography 9 20 143 discoveries >100 mmboe 114

  9. CERA WEEK 2005 Exploration Business Environment STRANDED DISCOVERIES DEEP WATER BASINS Competition & Costs EXPLORATION PLAY EXTENSIONS NEW CONCEPT PLAY Increasing Risk

  10. CERA WEEK 2005 Frontier Exploration Business Environment DEEP WATER BASINS STRANDED DISCOVERIES Qatar Sudan Peru-Camisea Algeria Russia-Sakhalin, E. Siberia Venezuela – Offshore Arctic Basins Chad Bolivia GOM Brazil-Santos,Campos Angola-L.Congo Indonesia-Mahakam Delta Nigeria Delta Mauritania-Chinguetti Malaysia-Kikeh Egypt-Nile Delta Equatorial Guinea Competition & Costs EXPLORATION PLAY EXTENSIONS NEW CONCEPT PLAY India Mangala Ireland Corrib Gas Oman Athel Play Kazakhstan-Pre Caspian Saudi Arabia N.S.-Buzzard China-Ordos Jungger Egypt - W. Desert, Gulf of Suez) Australia-NW Shelf Trinidad Russia-Pechora Offshore Vietnam-Offshore Iran India-Dhirubri Increasing Risk

  11. Successful Exploration Companies…. CERA WEEK 2005 • Contrarian Mind Set • Foster and Emphasize Exploration • Long Term Value Focus • Financial Staying Power • Financial Discipline • Multi-Year Programs • Risk Management Management Techniques

  12. Successful Exploration Companies…. CERA WEEK 2005 Common Elements • Exploration Culture Emphasis • Creative People • Focus on Front-end of E&P Process • Large Prospect Inventory • Focus on High Potential Company impact Prospects • Technology • Financial Strength • Commercial Judgment

  13. $ $$$ $$ CERA WEEK 2005 • THE END

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