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September 21, 2001

San Juan/Permian Proposal. Prepared for: Texaco. September 21, 2001. Proposal. Texaco would take assignment of up to 30,000 MMBtu per day of El Paso capacity for the term of November 2001 through May 2006 current rates: $0.3854 / MMBtu & 3.47%

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September 21, 2001

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  1. San Juan/Permian Proposal Prepared for: Texaco September 21, 2001

  2. Proposal • Texaco would take assignment of up to 30,000 MMBtu per day of El Paso capacity for the term of November 2001 through May 2006 • current rates: $0.3854 / MMBtu & 3.47% • includes the associated right-of-first-refusal for contract extension after May 2006 • ENA would act as agent and manage the capacity, providing all scheduling and nomination services. If desirable to Texaco, ENA could act as agent for Texaco on upstream nominations. Thereby creating a “wellhead purchase”. • Texaco would have the option to make production available from either San Juan or Permian supply points on a daily basis. • ENA would provide a market for up to 30,000 MMBtu per day of Texaco’s production under the following terms: • ENA would pay all demand and variable charges to El Paso, with Texaco reimbursing ENA for 100% of the demand charges • Texaco’s gas that is transported on El Paso would be purchased at Gas Daily PG&E (large pkgs) daily index minus El Paso variable and fuel charges minus $0.06 per MMBtu • Texaco’s San Juan gas that does not flow on El Paso would be priced at Gas Daily NW, Wyoming Pool daily index minus $0.10 per MMBtu

  3. Benefits • Provides diversification of pricing exposure thereby protecting against San Juan basin basis “blowouts” and providing participation in PG&E Citygate price spikes. • Provides wellhead pricing option in order to more accurately reflect the true netback price received for royalty purposes. • Transportation contract comes with “Right of First Refusal” which is a free option to retain the capacity upon expiration of the contract in May 2006. • Provides a firm market in a very constrained capacity environment.

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