A View from Wall Street

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A View from Wall Street Independent Petroleum
Association of America Private Capital
Conference April 19, 2004
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Background

• Formed in 1981
• Oil Gas Focus Since 1996
• Research Focus
• Full Service Investment Bank

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Equity Research Focus

• Exploration Production
• Market Capitalization of gt500m
• Focus on Core Research Thesis

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Selective Selling
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Review of 2003

• Stock Market Performance
• Commodity Prices
• Drilling Rig Count
• Acquisition/Merger Market
• Share Price Performance

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Commodity Prices
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Drilling Rig Count
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Price Paid per Mcfe
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Peer Group Performance Index
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2004 Summary Outlook

• Larger Market Exposure
• Solid Fundamental Outlook
• Increasing Prices for Acquisitions
• Ample Access to Capital
• Niche Value Success

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Capital Formation - Private

• Evolution of this Aspect of Capital Markets
• Capital Growth for all size of EP issues
• Relative Quick Execution
• 5 to 45 Days

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Private Placement(s)
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Typical Deal Terms

• Common Stock Transactions
• Discount to Market Price
• 10 20 Discount
• Warrant Coverage
• 0 100 Coverage
• Varying Exercise Price Term

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Typical Deal Terms

• Preferred Stock
• Typical Premium to Market
• 5 25
• Multiple Options Bells Whistles
• Warrant(s) sometimes included

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Market Evolution
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Breakdown of 2003/04 Transactions
Transactions
NYSE Common 2 73.6 million
NYSE Non Common 1 15.0 million
AMEX Common 9 101.7 million
Amex Non-Common 4 37.0 million
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Breakdown of 2003/04 Transactions
Transactions
NASDAQ/NMS Common 8 95.8 million
NASDAQ/NMS Non-Common 8 88.7 million
NASDAQ/Small-Cap Common 5 37.8 million
NASDAQ/Small-Cap Non-Common 7 59.4 million
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Breakdown of 2003/04 Transactions
Transactions
OTCBB Common 50 322.0 million
OTCBB Non-Common 16 149.0 million
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Quality vs. Size
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Visible Trends

• Access to Capital across the Spectrum
• Smaller Companies Smaller Deals
• Continue evolution of Business Cycles Fewer
  Issues at Higher Tiers

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Use of Proceeds
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Visible Trends

• Investors Desire Upside Development
• Restructuring Balance Sheet in an Attractive
  Interest Rate Market
• Acquisitions _at_ Higher Price Matrixs
• General Corporate Purposes (Large Degree of
  Story)

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Conclusion

• Ample Capital in the Public Markets through
  Private Placements
• Use of Proceeds is not as Critical as in early
  2003
• Quality Issuer Terms Size