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TWST: Mark, you make a case for the $4 mcf normalized gas prices and the impact they will have on E&P stocks.

Mr. Meyer: We published that piece to articulate our views on how we see the longer-term supply/demand balance in North America and what kind of equilibrium gas price that implies. We use that price as our primary valuation basis for the E&P stocks. With the huge volatility in short run natural gas prices, the flat price assumption provides a more stable platform for evaluating performance. Companies that can grow margins and earnings when they get no help from the commodity price are doing it with things they directly control — production growth and cost management. We like to take as much of the pure commodity price benefit out of the equation as possible and focus on the execution capacity of individual companies when it comes to making performance comparisons and determining valuations. And investors have historically shown that they are very unwilling to reward E&P companies for the fortuitous coincidence of high prices. To answer the shorter-term question, we recently published our crude oil and natural gas price forecasts for the remaining quarters of 2001 and for the full-year 2002. We use these short-term price forecasts to drive our “official” earnings and cash flow estimates. We normally update our outlook on at least a quarterly basis. We’re currently at $26.70 a barrel on crude oil for 2001 and $5 per mcf on natural gas. Our early projections for 2002 average prices are $25 per barrel on crude and $4.20 per mcf on natural gas.

TWST: Mark, anything to add to the list?

Mr. Meyer: I’ll add one name to the list and that is Kerr-McGee (NYSE:KMG). When you start talking about next generation or the frontier-type projects, what grabs most of the headlines are things that the major oil and gas companies are doing in Angola or Brazil or the ultra-deep water in the Gulf of Mexico. The integrated majors are the most well equipped to execute those types of opportunities from soup to nuts, not from an exploration standpoint but rather an ability to design and execute what amount to very large and complex projects. E&P companies — and I’m talking about the independents — have historically not been built that way. I’ve looked at a name like Kerr-McGee, which is Ocean’s operating partner in a couple of very successful what I call “shallower” deepwater developments, Nansen and Boomvang, that are due to come online, either at the end of this year or at the beginning of 2002. With these projects, and with another discovery of the same stripe, Gunnison, Kerr-McGee is looking to maximize standardization and repeatability with the type of concept that they ultimately go with. These are not multibillion barrel types of prospects, but they are economically attractive in the 100-300 million-barrel potential range. I think that what Kerr-McGee is doing is really focusing on its definitive niche within the frontier arena. So that’s what I think you’re going to see more of from the independents with regard to next generation projects.