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Crescendo Energy, LLC Purchase of Wildhorse South Gathering System

Crescendo Energy, LLC Purchase of Wildhorse South Gathering System. December 2000. Executive Summary. Wildhorse Gathering System Is for Sale from Tom Brown following the Dissolution of the Tom Brown - Kinder Morgan Joint Venture

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Crescendo Energy, LLC Purchase of Wildhorse South Gathering System

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  1. Crescendo Energy, LLC Purchase of Wildhorse South Gathering System December 2000

  2. Executive Summary • Wildhorse Gathering System Is for Sale from Tom Brown following the Dissolution of the Tom Brown - Kinder Morgan Joint Venture • The South Portion of this System is in the Area of Crescendo’s Is a Key Component to Getting Its Gas to Market • Tom Brown has given Crescendo the Right to Bid prior to Opening the Data Room to Other Bidders • By Purchasing the System, Crescendo Could Potentially Save on its Gathering Fees and Increase the Profitability of the System as More Entrada and Dakota Gas Is Produced in the Area following on to Crescendo’s strategy to Exploit Low-BTU Gas. • Potential Value to Crescendo Could Exceed $13 Million • Because the System Has Relatively Little Value to Tom Brown, Enron Energy Capital Resources Recommends that Crescendo Purchase the Assets for $1 to $3 Million.

  3. Facts About Wildhorse South Gathering System and Area • Located in Eastern Utah and Western Colorado • 4(?) Interconnects with Northwest Pipeline • 2 Liquid Removal Plants - San Arroyo and South Canyon • San Arroyo currently operating • South Canyon has not operated for 3 years • x??? Compressors • x??? Miles of Pipe • 5 Long Term Gathering Contracts Currently • Current System Volume of 17 MMcf/d(????) [NEED TO KNOW IF THIS ACCURATE] • 28 Wells Have Been Drilled in the Area in the Last 3 Years with a 57% Success Rate • Average Production of Successful Wells: 444 Mcf/d • OTHERS?????????????????????????????

  4. Assumptions in Valuing Wildhorse South System • Close on Sale at End of 1st Quarter 2001 • Maintain Current Dakota Production Contract Terms • Beartooth: 0.200 $/Mcf • Crescendo: 0.250 $/Mcf • D&G Roustabout: 13% of NWPL Index within range of 0.14 - 0.55 $/Mcf • Hallwood 0.255 $/Mcf • Lone Mountain/Premier 0.200 $/Mcf • National Fuels 13% of NWPL Index within range of 0.10 - 0.55 $/Mcf • Northstar 13% of NWPL Index within range of 0.10 - 0.45 $/Mcf • Tom Brown 0.250 $/Mcf • Trend Oil 0.220 $/Mcf • Wasatch 0.250 $/Mcf • Venoco 0.040 $/Mcf • Dakota Production Decline Ranges from 6% to 10% • Plant is Moved from Badger Wash Location to South Canyon Location

  5. Assumptions in Valuing Wildhorse South System (continued) • O&M: $917,000 per year • Additional G&A: $180,000 per year • Ad Valorem Tax: $115,000 per year • Additional Costs: $ 60,000 per year • NGL’s recovered through San Arroyo Plant with Keep Whole Provisions • Keep Whole at 75% of NWPL Index • NGL Revenues Pricing includes ($0.13/gal) deduct for T&F across all components • Includes production from Crescendo, D&G Roustabouts, and Northstar • Production taxes on 4% of NGL Revenues

  6. Value Components

  7. Assumptions to Upside Value Components Gathering • Additional Dakota or Entrada Volumes Increase Operating Costs by $120M per year for compression rental • Additional Dakota Gas Is Gathered at $0.20/Mcf • Additional Entrada Gas Is Gathered at $0.25/Mcf • Sensitivity to Dakota Decline: a 5% increase in decline results in ($0.6MM) NPV-15% Processing • Processing Fee of $0.62/Mcf on Additional Entrada Gas at South Canyon Plant • Cost of Operations of $0.25/Mcf on Additional Entrada Gas at South Canyon Plant

  8. MAP OF SYSTEM HERE

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