University of Houston
Bauer College -- GEMI
Energy Advancement Leadership
Conference
CONVENTIONAL ENERGY
UNDER STRESS
Arthur L. Smith, CFA
John S. Herold, Inc.
Chairman & CEO
November 17, 2004
The end of the Oil Age?
October 25-31, 2003 edition
Let’s Place Today in Perspective
• Very Difficult 1998-99
• Exceptionally Strong
Wellhead Prices for Oil &
Natural Gas
• Phobia of another Price
Meltdown (2001)
• Profound Cynicism among
Energy Investors
• No visible reaction (demand
downturn) to sharp (100%+)
run up in all basic energy
sources – oil, gas, coal,
nuclear, et al.
Oil Price Crash of 1986
$10 Barrel
Why Energy Investors are
Skeptical and Cynical

The Sector is Insignificant (7% up from 4.9%)

The record is Ugly -- Growth for Growth’s Sake
Doesn’t Work

The duration of fundamental energy cycles
have been increasingly brief

It’s hard to measure performance – RD/SC

Oil and Natural Gas prices are volatile
and the accounting practices are always “
looking in the rear view mirror”
S&P 500 Historical Composition
Technology
9%
Transport
1%
Financials
6%
Utilities
11%
Health Care
18%
1982
2000
Energy
25%
Materials
6%
Consumer
Staples
11%
Telecommunication
s Services
Utilities
5%
4%
Information
Technology
22%
Industrials
7%
Financials
17%
Consumer
Discretionary
6%
2004
Telecommunica
tions Services Utilities
3%
3%
Information
Technology
17%
Financials
21%
5%
Materials
Industrials
2%
11%
Consumer
Discretionary
10%
Health Care
14%
Energy
7%
Materials
Industrials
3%
11%
Consumer
Discretionary
11%
Health Care
14%
Consumer
Staples
11%
Consumer Staples
8%
Life Cycle of U.S. Oil Production
World Oil Production
Colin Campbell
2004
NYMEX Crude Futures Price Expectations
$40
$38
$36
$34
$32
$30
$28
$26
$24
$22
2002
$20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Crude Futures Price Expectations
$40
$38
$36
$34
$32
$30
$28
$26
2003
$24
$22
2002
$20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Crude Futures Price Expectations
$40
$38
$36
$34
2004
$32
$30
$28
$26
2003
$24
$22
2002
$20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Crude Futures Price Expectations
$55
$50
$45
2005
$40
$35
2004
$30
2003
$25
2002
$20
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Gas Future Strip Price Expectations
$8.00
$7.50
$6 MMBTU
$7.00
$6.50
$6.00
$5.50
$5.00
$4.50
$4.00
2002
$3.50
$3.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Gas Future Strip Price Expectations
$8.00
$7.50
$6 MM BTU
$7.00
$6.50
$6.00
$5.50
2003
$5.00
$4.50
2002
$4.00
$3.50
$3.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Gas Future Strip Price Expectations
$8.00
$7.50
$6 MM BTU
$7.00
$6.50
$6.00
2004
$5.50
$5.00
2003
$4.50
$4.00
2002
$3.50
$3.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
NYMEX Gas Future Strip Price Expectations
$8.00
$6 MM BTU
$7.50
$7.00
2005
$6.50
$6.00
$5.50
2004
$5.00
$4.50
2003
$4.00
$3.50
2002
$3.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Cumulative Gas Storage Withdrawals
Bcf
CUMULATIVE GAS STORAGE WITHDRAWALS
5 Yr Avg.
2003-04
2002-03
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
0
2
4
6
8
10
12
Week Number
14
16
18
20
Gulf of Mexico
E & P in a Mature Basin
Mature Production Area
Deep Water Exploration
0
25
Miles
50
Deep Shelf Focus Area
Peaked?
•By virtually all measures, the domestic oil industry
activity levels peaked in 1981– Operators, Seismic
Crews, Rigs (4000), Exploratory Wells, Employment
•But Oil Production Peaked in 1970 (9.8 MMb/d)
• & Natural Gas Output peaked in 1973 (22.6 TCF)
•Domestic Oil and Natural Gas Consumption has yet
to peak (2004 will top 2003)
•Oil Imports set new records daily – Gas Imports
from Canada peaked in 2002
OXYMORONS
JSH Favorites
1950
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
1960
1970
1980
1990
Humble Oil & Refining
Exxon
Standard Oil (NJ)
Socony Vacuum
Mobil
Superior Oil
Anglo-Iranian Oil
British Petroleum
Standard Oil (Ohio)
BP Amoco
Pan American
Standard Oil (Indiana)
Amoco
Dome Petroleum
Atlantic Refining
Richfield
Atlantic Richfield
Sinclair
Supron Energy
Union Sulfur & Oil
Union Texas (IPO)
Allied Chemical/Signal
Anderson Pritchard
Royal/Dutch Shell
Shell Union
(Shell Oil)
The Texas Company
Tidewater
Texaco
Getty
Pacific Western-Getty
Skelly
Gulf
Chevron
Standard Oil (CA)
Standard Oil (KY)
Cities Service
Occidental
Phillips
Aminoil
Phillips
General American Oil
Conoco
Continental Oil
(Conoco)
Dupont
Union Oil
Pure Oil
Sun Oil
Sunray-Sunray DX
Sun Oil
Midcontinent
Texas Pacific
Kerr McGee
Plymouth Oil
Ohio Oil
(Marathon)
USX
Texas Oil & Gas
Amerada Petroleum
Hess Oil and Chemical
Total Petroleum
PetroFina
Fina Inc.
Elf Aquitaine
Oryx
2000
ExxonMobil
BP
PZL
RD/SC
ChevronTexaco
Occidental
ConocoPhillips
s
Unocal
Sunoco
Kerr- McGee
Marathon
Amerada Hess
TotalFinaElf
Worldwide O&G $ Volume (US$B) vs.
Implied Reserve Value (US$/boe)
$140
BP/Amoco
$9
XOM
$8
$7
CVX
$100
$6
$80
$5
$60
$4
COP
$3
$40
$2
$20
Implied Reserve Value (US$/boe)
O&G Reserve $ Volume (US$B)
$120
BP/ARCO
$1
$0
$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
O&G $ Volume (US $B)
Implied Reserve Value (US$/boe)
Copyright © 2002 John S. Herold, Inc.
Average U.S. Implied Reserve Value (US$/boe)
2000
2001
2002
2003
2004
$12.00
$9.64
$10.00
$9.53
$6.44
$8.00
$5.88
$5.98
$6.00
$4.00
$2.00
$0.00
Q1 '00 Q2 '00 Q3 '00 Q4 '00 Q1 '01 Q2 '01 Q3 '01 Q4 '01 Q1 '02 Q2 '02 Q3 '02 Q4 '04 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 Q2 '04 Q3 '04
Copyright © 2004 John S. Herold, Inc.
JSH Coverage--January 1970
86 INDEPENDENT E&P COMPANIES
Alminex Ltd.
Amarex, Inc.
Amerada Hess
Apco Oil
Asamera, Inc.
Austral Oil
Aztec Oil & Gas
Banff Oil, Ltd.
Belco Petroleum
BP Oil & Gas
British Col. Oil & Gas
Butte Oil & Gas
Canadian Exports Oil/Gas
Canadian Gridoil
Canadian Homestead
Canadian Ind. Gas & Oil
Canadian Superior
Central-Del Rio
Cleary Petroleum
Clinton Oil
Consolidated Oil & Gas
Consolidated Production
Continental Oil Co.
Creole
Crestomont Oil & Gas
Crystal Oil & Land
Dome Petroleum
Eason Oil
Empire State Oil Co.
Equity Oil & Gas
Exchange Oil & Gas
Falcon Seaboard
Felmont Oil
Forest Oil
General American Oil
General Crude Oil
Great Basins Petroleum
Great Plains Development
Gulf Oil Canada
Hamilton Bros. Petroleum
Helmerich & Payne
Home Oil
Hudson's Bay Oil & Gas
Husky Oil, Ltd.
Imperial Oil
Inexco Oil
Kathol Petroleum
Kewanee
Kirby Petroleum
Louisiana Land & Exp.
LVO Corp.
Mesa Petroleum
Midwest Oil
Mission Corp.
Noble Affiliates
Ocean Drilling & Exp.
Pacific Petroleum
Pan Ocean Oil Company
Pauley Petroleum
Pennzoil United
Petrofina Canada
Pubco
Ranger Oil
Reading & Bates
Reserve Oil & Gas
Sabine Royalty
Scurry-Rainbow
Shenandoah Oil
Signal Companies
Sinclair Venezuelan
Skelly
Southern Natural Gas
Southland Royalty
Southwest Gas Producing Co.
Superior Oil
Texas American Oil
Texas Int’l Petroleum
Texas Oil & Gas
Texas Pacific Oil Co.
Tipperary Land & Exp.
TransOcean Oil
United Canso Oil & Gas
Webb Resources
Westates Petroleum
Westcoast Production Co.
Western Decalta
Wilshire Oil of Texas
JSH Coverage--January 1980
INDEPENDENT E&P COMPANIES-- 45 Survivors
Amarex, Inc.
Amerada Hess
Asamera, Inc.
Belco Petroleum
Butte Oil & Gas
Canadian Homestead
Equity Oil & Gas
Felmont Oil
Forest Oil
General American Oil
Great Basins Petroleum
Gulf Oil Canada
Hamilton Bros. Petroleum
Helmerich & Payne
Home Oil
Hudson's Bay Oil & Gas
Husky Oil, Ltd.
Imperial Oil
Inexco Oil
Conoco, Inc.
Consolidated Oil & Gas
Kirby Petroleum
Crystal Oil & Land
Dome Petroleum
Noble Affiliates
Ocean Drilling & Exp.
Energy Reserve Group
Louisiana Land & Exp.
Mesa Petroleum
Pauley Petroleum
Pennzoil United
Petrofina Canada
Ranger Oil
Reading & Bates
Sabine Corp.
Scurry-Rainbow
Southern Natural Resources
Southland Royalty
Texas American Oil
Texas International Petroleum
Texas Oil & Gas
Tipperary Land & Exploration
TransOcean Oil
United Canso Oil & Gas
Webb Resources
Westcoast Production Co.
Wilshire Oil of Texas
JSH Coverage 1990 & 2004
INDEPENDENT E&P COMPANIES
Jan 1990 - 14 Survivors
Amerada Hess
Equity Oil & Gas
Mesa Inc.
Nov 2004 – 4 Survivors
Amerada Hess
Noble Affiliates
Equity Oil & Gas
Forest Oil
Pennzoil
Forest Oil
Home Oil
Helmerich & Payne
Ranger Oil
Reading & Bates
Imperial Oil
SONAT
Louisiana Land
Wilshire Oil of Texas
Imperial Oil
Noble Energy
2600
1984 Jan
Jul
1985 Jan
Jul
1986 Jan
Jul
1987 Jan
Jul
1988 Jan
Jul
1989 Jan
Jul
1990 Jan
Jul
1991 Jan
Jul
1992 Jan
Jul
1993 Jan
Jul
1994 Jan
Jul
1995 Jan
Jul
1996 Jan
Jul
1997 Jan
Jul
1998 Jan
Jul
1999 Jan
July
2000 Jan
July
2001 Jan
July
2002 Jan
July
2003 Jan
July
2004 Jan
July
Bcf
2800
Monthly U.S. Consumption
and Production of Natural Gas
Dry Gas Production
Consumption
2400
2200
2000
1800
1600
1400
1200
1000
Source: Energy Information Administration
U.S. Natural Gas Production
20 largest producers (1992)
1600
1400
Companies that have been acquired by 2002
Enron became EOG Resources
1200
1000
800
600
Average – 380 Bcf
400
Consol. Nat. Gas
Anadarko
Pennzoil
Enron
Union Pacific Res
Oryx Energy
Amerada Hess
USX-Marathon
Occidental
Conoco
Burlington
Phillips Petroleum
Unocal
Atlantic Richfield
R/D Shell
Mobil
Exxon
Texaco
Amoco
0
Chevron
200
Copyright © 2003 John S. Herold, Inc.
0
Chesapeake Energy
Apache
XTO Energy
Occidental Petroleum
Williams Companies
600
EOG Resources
Kerr-McGee
Marathon Oil
Consol. Natural Gas
Unocal
Dominion Resources
Burlington Resources
El Paso
Devon Energy
ConocoPhillips
Anadarko Petroleum
Royal Dutch/Shell Group
ChevronTexaco
Exxon Mobil
BP plc
U.S. Natural Gas Production
20 largest producers (2002)
1600
1400
1200
1000
800
Average – 440 Bcf
400
200
Copyright © 2003 John S. Herold, Inc.
0
2001
2000
1996
1997
1998
1999
1993
1994
1995
1991
1992
1990
1989
1986
1987
1988
1982
1983
1984
1985
1981
1980
1979
1975
1976
1977
1978
1973
1974
Bcf
Nat Gas Imports from Canada
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Run out of Steam
4,000
2001
2000
1996
1997
1998
1999
1993
1994
1995
1991
1992
1990
1989
1986
1987
1988
1982
1983
1984
1985
1981
1980
1979
1975
1976
1977
1978
1973
1974
Bcf
Canadian Nat Gas Imports
2004
3,500
3,000
2,500
2,000
1,500
1,000
500
Large Canadian E&P companies
1995 vs. 2004
• AEC
• Anderson
• Canadian
Natural
• Conwest
• Crestar
• Gulf Canada
• Home Oil
• Husky
• Nexen
•
•
•
•
•
•
•
•
Norcen
Pan Canadian
Poco
Ranger
Renaissance
Talisman
Tarragon
Wascana
•Canadian
Natural
•Husky
•Nexen
•EnCana
•Talisman
Small & Mid-Cap Canadian E&Ps
1995 vs. 2004
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Amber
Archer
Barrington
Baytex
Beau Canada
Berkley
Blue Range
Bonavista
Cabre
Canadian 88
Cimarron
Chauvco
CS Resources
Dorset
ELAN
Elk Point
Encal
Genesis
Maxx
Morgan
Morrison
Newport
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Northrock
Northstar
Numac
Pacalta
PanEast
Paramount
Penn West
Petromet
Pinnacle
Remington
Rigel
Rio Alto
Sceptre
Stampeder
Summit
Tri-Link
Ulster
Vermilion
•Baytex Energy Trust
•Bonavista Energy Trust
•Enerplus Resources
•Espirit Exploration
•Freehold Royalty Trust
•NAL O&G Trust
•Paramount Energy Trust
•Pengrowth Energy Trust
•Petrofund Energy Trust
•Penn West Energy Trust
•Progress Energy
•Ultima Energy Trust
•Vermilion Energy Trust
World Crude Oil Production
Million Barrels per day
70
65
60
South America
55
50
Europe (including F.S.U.)
45
Far East
40
35
30
Africa
25
20
Middle East
15
10
North America
5
0
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
Source: Degoyler & Macnaughton
2001
2002
2003
2000
1991
1992
1993
1994
1995
1996
1997
1998
1999
1990
1981
1982
1983
1984
1985
1986
1987
1988
1989
1980
1973
1974
1975
1976
1977
1978
1979
Imports of LNG
500
450
400
350
300
250
200
150
100
50
0
2001
2002
2003
2000
1991
1992
1993
1994
1995
1996
1997
1998
1999
1990
1981
1982
1983
1984
1985
1986
1987
1988
1989
1980
1973
1974
1975
1976
1977
1978
1979
Imports of LNG
2004
500
450
400
350
300
250
200
150
100
50
0
What a Year for Energy – 2003!
• Natural Gas $4.41 Mcf
+71%
Oil Prices Up $4/Bbl to
$27
World Production of
JSH Oils climbed 5%
to 11.3 Billion BOEs
John S. Herold, Inc.
Is The Best!
2004 Implied Values by Region
US$/boe
$18
$16.56
$14.92
$16
$14
$12
$9.66
$9.25
$10
$7.12
$8
$6.98
$6
$4.81
$4
$1.50
$2
$0
Canada
GOM
Gulf Coast
MidRocky Appalachia North Sea
Other
Offshore Onshore Continent Mountains
Worldw ide
Copyright © 2004 John S. Herold, Inc.
Capital Flowing out of Mature Regions
2001-2003 Spending Changes Within Regions
80%
63%
60%
62%
40%
20%
20%
13%
4%
0%
(20%)
(18%)
(40%)
Worldwide
United States
(30%)
Canada
Europe
Africa & Middle
East
Asia-Pacific
Capital flowing to areas with higher returns
South & Central
America
3-Year Average RRC, 3-Yr Replacement
$9.00
Canada
$8.00
Europe
$7.00
United States
Europe
$6.00
U.S.
South & Central America
Canada
$5.00
$4.00
$3.00
$2.00
$1.00
0%
Africa & Middle East
So./Central America
Africa/Middle East
Bubble Size = Total Costs Incurred
Bubble with no Fill = 2001 values
Bubble with Fill = 2002 values
50%
100%
Asia-Pacific
150%
200%
Reserve Replacement %
Asia-
250%
300%
SuperMajors Shun U.S. Upstream
Plowback 40-50% of 2003E CashFlow
$7,000
100%
$6,500
90%
$6,000
$5,500
$4,000
$4,500
$4,500
$3,950
70%
60%
50%
$3,000
$1,600
36.0%
$1,700
38.0%
$1,000
40%
$2,218
40.0%
$2,000
61.0%
$ Millions
$5,000
80%
$0
30%
20%
10%
0%
BP
E&P CashFlow
ExxonMobil
ChevronTexaco
Capital & Exploratory Expenditure
Shell
% Reinvested
Source: John S. Herold, Inc. data and analysis
Sustainable Growth?
2500
Gas Reserves/Well for Super-Integrateds*
Gas Reserves/Well for All Integrateds*
Gas Reserves/Well for All Sampled Companies
2000
1500
1000
500
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Private Equity Capital
is Plentiful
•
•
•
•
•
•
•
Natural Gas Partners
EnCap Investments
Yorktown Partners
First Reserve Group
Spectrum
Quantum
Lyme Rock Partners
•
•
•
•
•
•
•
Riverstone Holdings
Harvard
Yale Investments
Warburg Pincus
JP Morgan Partners
GE Structured Finance
Lehman Brothers
Independent E & P IPOs
1992-2003
18
E ne rgy
P a rt ne rs
16
We s t po rt
R e s o urc e s
14
D evX
12
B urlingt o n
R e s o urc e s
B e lc o O il &
Gas
C he s a pe a k e
C a v e ll
E ne rgy
C la yt o n
Willia m s
10
C o m pt o n
P e t r.
C ro s s
T im be rs
C o s t illa
E ne rgy
G e ne ra l
A t la nt ic
8
E ne rgy
A f ric a
Lo uis
D re yf us
N e wf ie ld
E xpl.
6
4
2
D o m inio n
R e s o urc e s /
B lk .Wa rrio r
B a s in E xpl.
S t o ne
E ne rgy
F lo re s &
R uc k s
C ro s s
T im be rs R T
T o rc h
E ne rgy
H ugo t o n
St.
M a ryLa nd
Unit e d
M e ridia n
Willia m s
1992
1993
A rro w
E ne rgy
P e t ro C hina
P e t ro bra s
E ne rgy
P a rt ne rs
T a t ha m
O f f s ho re
T ra ns t e xa s
Gas
1994
We s t po rt
R e s o urc e s
M o nt e re y
R es.
D evX
O f f s ho re
E ne rgy
CEC
Reso urces
DLB Oil & Gas
Fo rcenergy
We s t e rn O il
S a nds
P e t ro le um
S e c urit ie s
A us t ra lia
A nglo
S ibe ria n
1995
R ut he rf o rdM o ra n
M ille r E xp.
T a p O il N L
1996
C hina
P e t ro le um &
C he m ic a l
E uro s o v
E ne rgy
D e s ire
P e t ro le um
T it a n
E xplo ra t io n
Vastar
0
C hina
P e t ro le um
& C he m ic a l
H o us t o n
E xpl.
P a t t e rs o n
E ne rgy
HS
R e s o urc e
We s t e rn O il
S a nds
1997
1998
B e t a O il &
Gas
A rro w
E ne rgy
P e t ro C hina
ATP
B la c k R o c k
O il
C N OOC
E a s t e rn S t a r
Gas
E nc o re
A c qus
E s s e nt ia l
P e t ro le um
GM X
R e s o urc e s
H ugo t o n R T
H e rit a ge
R e s o urc e s
1999
2000
2001
A pe xindo
P ra t a m a
B o unt y O &G
C o o pe r
E ne rgy
R e ga l
P e t ro le um
S uns hine
Gas
Faroe
Petroleum
2002
2003
Quit Complaining – Gas is Cheap!
16
14
12
10
8
6
Avg. Cost / Mile: 1936-2002
4
April 2004 = $0.08 cents
= $0.09 cents
2
Source : EIA, EPA and JSH Analysis
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1955
1945
0
1936
"2002" Cost in Cents per Mile
Consumer Cost of Gasoline per Mile Traveled
How about 85.9 cents per gallon?
Relative Prices per 42-Gallon Barrel
Relative
Prices
per
42-Gallon
Relative
Prices
per
42-Gallon
Barrel Barrel
Relative
Prices
per
42-Gallon
Barrel
Relative
Prices
per 42-Gallon
Barrel
$41.38
$28.03 $28.03
$79.80
$54.14$28.03
$189.90$54.14
$1,105.44
$54.14 $54.14
$189.90 $189.90
$1,105.44$1,105.44$1,105.44
$28.03
$189.90
Crude OilCrude Oil Crude
Gasoline
Evian® Water
Ben Water
& Evian®
Jerry’s
Gasoline
Evian®
Water
Ben &Water
Jerry’s
Oil Crude
Evian®
Ben & Jerry’s
Oil Gasoline
Gasoline
Ben & Jerry’s
“Chunky“Chunky “Chunky
Ben“Chunky
& Jerry’s
Crude Oil
Monkey”®
Evian®
Water
Monkey”®Monkey”®Monkey”®
Gasoline
“Chunky Monkey”®
•Relative Prices per 42-Gallon Barrel*
$78.73
$150.36
$2,661.12
$615,240.95
$615,240.95
$78.73$78.73 $78.73
$150.36
$2,661.12
$615,240.95
$150.36 $150.36
$2,661.12$2,661.12
$615,240.95
Coca Coca
Cola®
Cola®Milk
Coca Cola®
Milk
Coca Cola®
Coca Cola®
Milk
Milk
Tabasco
Sauce®
Milk
Tabasco
Sauce®
Flonase®
Tabasco
Sauce®Sauce®
Flonase®
Tabasco
Flonase® Flonase®
Tabasco Sauce® Flonase®
Recommendation:
It’s a Marathon & not a Sprint
 “Great success is possible, even in a
hostile environment, even in a mature
industry”
Willam K. Hall
 “Failure is never fatal, and success is
never final.”
Joe B. Foster, Newfield Exploration
Sep-01
Sep-00
Sep-99
Sep-98
Sep-97
Sep-96
Sep-95
Sep-94
Sep-93
Sep-92
Sep-91
C$/Share
Anderson Exploration
Stock Price vs. JSH ANW
40
30
20
10
0
Top Winning Strategies
of Successful E&P Companies
•
•
•
•
Focus Wins!
Measure and Model
Treasure Innovation
Nurture Risk Taking
• Understand where
we are on the Macro
Energy Cycle
• Acquire/Divest like
Warren Buffet
• Stick with a Good
Strategy
• Don’t Confuse Brains
with a Bull Market
• Balance Development
and Exploration
• Use Leverage
Judiciously
Sep-01
Sep-00
Sep-99
Sep-98
Sep-97
Sep-96
Sep-95
Sep-94
Sep-93
Sep-92
$/Share
Barrett Resources Corp.
Stock Price vs. JSH ANW
80
70
60
50
40
30
20
10
0
Royal Dutch/Shell Experience
Relative Performance
150%
BP
130%
RD
XOM
Reserve Announcement
01/08/04
110%
March was horrible for
performance
By 03/01/04 had made
11/8/2004
9/27/2004
8/16/2004
7/5/2004
5/24/2004
4/12/2004
3/1/2004
12/8/2003
10/27/2003
9/15/2003
8/4/2003
1/19/2004
almost all back
90%
Copyright © 2004 John S. Herold
Price per BOE(6:1) (50/50)
1997
1998
1999
2000
2001
2002
2003
$40.00
Strip @
7/1/04
$35.00
$37.76
% Change
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$22
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
$0.00
Month
Oil annual avg.
Gas annual avg.
BOE annual avg.
BOE 7-yr. Avg.
 The 7-yr. avg. per BOE was $22.16 on a 50/50 split
 Prices for ’01-’03 averaged $25.12 – up 56% from ’97-’99 average of $16.06