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	T. BOONE PICKENS, JR. SPEECH 1982 ANNUAL CONFERENCE FINANCIAL ANALYSTS FEDERATION AND THE BOSTON SECURITY SOCIETY, INC. SHERATON-BOSTON HOTEL BOSTON MASSACHUSETTS MAY 11, 1982

4:00 P.M.—5:30 P.M.

(ENERGY SESSION MODERATED BY BARRY C. GOOD; OTHER SPEAKER IS E. H. CLARK)

I. INTRODUCTION

A. THANK YOU BARRY FOR YOUR KIND INTRODUCTION.

B. LADIES AND GENTLEMEN, I AM INDEED PLEASED TO BE HERE TODAY AND TO PARTICIPATE ON THE PROGRAM WITH BARRY AND "HUBIE" CLARK.

C. (PERSONAL COMMENTS)
1. [HANDWRITTEN ADDITION: 1951- 43 YRS OLD 1961- 430 M BUDGET 1981]
2.
3.

D. TODAY, I WOULD LIKE TO ADDRESS THREE QUESTIONS FROM AN OIL AND GAS PRODUCER'S STANDPOINT.

1. WHAT IS THE CONDITION OF THE OIL AND GAS INDUSTRY?
2. WHAT REMEDY MAY SOME MANAGEMENTS CONSIDER?
3. WHAT IS THE GENERAL PROGNOSIS FOR THE INDUSTRY?
4. FOLLOWING HUBIE CLARK'S PRESENTATION, I WILL BE PLEASED TO ANSWER YOUR QUESTIONS.

II. WHAT IS THE CONDITION OF THE INDUSTRY TODAY?

A. BARRY HAS GIVEN US A GOOD OVERALL ASSESSMENT OF THE INDUSTRY IN HIS OPENING REMARKS.

B. I WOULD LIKE TO ADD TO BARRY'S COMMENTS BY GIVING YOU MY PERSPECTIVE OF THE CONDITION OF THE OIL AND GAS INDUSTRY.

C. DESPITE THE GENERAL ECONOMIC SLOW DOWN IN THE UNITED STATES, THE OIL AND. GAS INDUSTRY REMAINS THE STRONGEST ECONOMIC ENTITY IN THE COUNTRY.

D. HOWEVER, THE INDUSTRY HAS NOT ESCAPED THE GENERAL ECONOMIC DECLINE IN OUR NATION.

E. WE HAVE BEEN FACED WITH:

1. HIGH INTEREST RATES—CAUSED PRIMARILY BY HUGE GOVERNMENT DEFICITS.
2. UNREASONABLY HIGH FINDING COSTS CAUSED IN LARGE PART BY POOR QUALITY OF EQUIPMENTAND SERVICES. [HANDWRITTEN ADDITION: BUT MORE IMPORTANTLY THE QUALITY OF PERSONNEL]
3. A TEMPORARY OVERSUPPLY OF NATURAL GAS AND CRUDE OIL.
4. A DECLINE IN WORLD CRUDE OIL PRICES FROM A HIGH OF APPROXIMATELY $40 PER BARREL IN EARLY 1981 TO THE CURRENT PRICE OF APPROXIMATELY $33.

F. THESE FACTORS HAVE CAUSED THE INDUSTRY'S STOCK PRICES TO PERFORM BELOW THE GENERAL MARKET IN RECENT MONTHS.

1. I BELIEVE THE DECLINE IN STOCK PRICES REFLECTS A SHORT-TERM OUTLOOK RATHER THAN A GENERAL WEAKNESS IN THE INDUSTRY—PARTICULARLY AS IT RELATES TO GAS PRODUCERS.
2. ITS UNFORTUNATE THAT THE MARKET HAS BEEN TOTALLY CONSUMED BY THE OIL-PRICE SITUATION AND HAS NOT FULLY DIFFERENTIATED BETWEEN COMPANIES WHOSE ASSETS ARE PREDOMINATELY GAS AS OPPOSED TO OIL.

G. IN RESPONSE TO THE NEGATIVE CONDITIONS AFFECTING THE INDUSTRY, MANAGEMENTS ARE BEGINNING TO CONSOLIDATE.

1. CAPITAL BUDGETS FOR EXPLORATION ARE BEING REDUCED BY MOST MAJORS AND INDEPENDENTS.
2. DRILLING ACTIVITY IS DECLINING—WE HAVE SEEN A DROP IN RIG COUNTS FROM THE HIGH WATER MARK OF 4,521 DURING THE THIRD WEEK OF DECEMBER TO THE CURRENT NUMBER OF [HANDWRITTEN ADDITION: 3222 (DOWN 90 FROM LAST WEEK)]
3. COMPANIES ARE BEGINNING TO TIGHTEN-UP ON PERSONNEL—IMPOSING HIRING FREEZES IN SOME INSTANCES.
4. MOST INTEGRATED COMPANIES HAVE CUTBACK ON THEIR DOWNSTREAM OPERATIONS—REFINING AND MARKETING.
5. CUTBACKS OR POSTPONEMENTS OF PROJECTS DEALING WITH ALTERNATIVE ENERGY SOURCES ARE BECOMING COMMONPLACE.

{STRICKEN TEXT: A. EXXON DROPPED ITS COLONY SHALE OIL PROJECT IN COLORADO AND LIGNITE PLANT IN EAST TEXAS.}
{STRICKEN TEXT: B. OCCIDENTAL AND TENNECO SHELVED THEIR JOINT SHALE OIL PROJECT IN COLORADO.}
{STRICKEN TEXT: C. SHELL AND GULF DROPPED THEIR SYNTHETIC FUEL PROJECT WHICH WAS THE LARGEST IN THE WORLD.}

H. THE FEDERAL GOVERNMENT IS ALSO BEGINNING TO FEEL THE PINCH—{STRICKEN TEXT: AND MANY CONGRESSMEN ARE NERVOUS}

1. WITH THE DECREASED PRICE OF OIL, THE GOVERNMENT STANDS TO LOSE AS MUCH AS $40 BILLION IN REVENUES FROM JIMMY CARTER'S WINDFALL PROFITS TAX.
2. AS A RESULT, CONGRESS IS NOW CONSIDERING PROPOSALS TO RAISE REVENUES BY IMPOSING A $5-$10 PER BARREL SURCHARGE ON IMPORTED OIL OR AN ADDITIONAL 5% INCREASE TO THE FEDERAL EXCISE TAX ON GASOLINE.

I. BUT TO ME, THE DROP IN PRICES OF CRUDE OIL IS NOT NECESSARILY UNHEALTHY.

1. IT IS CAUSING THE INDUSTRY TO TAKE A GOOD HARD LOOK AT ITSELF...THE NET RESULT WILL BE A STRENGTHENING OF THE INDUSTRY I BELIEVE.
2. THE DROP IN OIL PRICES HAS BENEFITTED OUR NATION'S ECONOMY.

A. WE HAVE SEEN THE RATE OF INFLATION DROP SIGNIFICANTLY. {STRICKEN TEXT: (1) ENERGY COSTS ACCOUNT FOR ABOUT 11% OF THE CONSUMER PRICE INDEX.} {STRICKEN TEXT: (2) FOR EVERY $2 DROP IN THE PRICE OF OIL, 1/2% CAN BE TAKEN OFF THE INDEX.}
{STRICKEN TEXT: B. THE CONSUMER' HAS BENEFITTED FROM THE CURRENT OVERSUPPLY OF OIL.} {STRICKEN TEXT: (1) IT HAS BEEN REPORTED THAT FOR EVERY $1 PER BARRELL DROP IN OIL PRICES, CONSUMERS GAIN ABOUT $6 BILLION IN INCREASED PURCHASING POWER.}

J. THE INDUSTRY HAS ALWAYS HAD ITS UPS AND DOWNS.

1. THE INDUSTRY WAS A WINNER FOR ALMOST A DECADE, AS PRICES ROSE STEADILY DUE TO OPEC.
2. AS A MATTER OF FACT, WE WITNESSED A TWELVE - FOLD INCREASE IN PRICES FROM 1973—1981.
3. {STRICKEN TEXT: NOW THE PRICES ARE DOWN - AND THE MARKET IS DOWN ON THE INDUSTRY}

III. WHAT ARE THE REMEDIES?

A. YOU WILL BE HAPPY TO KNOW THAT I WILL NOT ATTEMPT TO GIVE YOU A PRESCRIPTION FOR INTERNATIONAL AND NATIONAL ECONOMIC WELLNESS?

B. MY COMMENTS WILL BE DIRECTED TO THE SUBJECT THAT I KNOW BEST—THE OIL AND GAS PRODUCING BUSINESS.

C. THE OVERRIDING GOAL OF MANAGEMENT IN PUBLICALLY HELD COMPANIES {IS} [HANDWRITTEN ADDITION: SHOULD BE] THE SAME - QUITE SIMPLY TO PROTECT AND EXPAND THE ASSETS OF THE COMPANY AND THE VALUE OF THEIR SHAREHOLDERS' INTEREST.

D. OIL AND GAS COMPANIES, BOTH-LARGE-AND SMALL, ARE MANAGERS OF DEPLETABLE ASSETS—THEIR RESERVES OF OIL AND GAS.

E. THEREFORE IT IS INCUMBENT UPON THESE COMPANIES TO REPLACE PRODUCTION TO ENSURE THE MAINTENANCE AND GROWTH OF THEIR SHAREHOLDERS' INVESTMENT.

F. MANY OIL AND GAS COMPANIES, HOWEVER, MISLED BY RISING OIL PRICES AND RECORD EARNINGS, HAVE BEEN LIQUIDATING FOR YEARS; THEY SIMPLY HAVE NOT BEEN REPLACING THEIR RESERVES.

G. THE BIGGEST JOB FACING EXPLORATION AND PRODUCTION COMPANIES IS TO PROTECT THEIR RESERVE BASE AND TO FIND OIL AND GAS AT A REASONABLE COST...EITHER THROUGH EXPLORATION OR ACQUISITION.

H. A COMPANY MUST DECIDE UPON THE MOST ADVANTAGEOUS WAY FOR IT TO REPLACE RESERVES AND PROCEED WITH THIS GOAL IN MIND.

I. FOR SOME COMPANIES, THERE IS NO HOPE FOR REPLACING RESERVES.

{STRICKEN TEXT: 1. SELLOUTS AND TAKEOVERS WILL BE COMMONPLACE.}

{STRICKEN TEXT: A. TEXAS PACIFIC B. DELHI C. CONOCO D. MARATHON E. HOUSTON OIL AND MINERALS F. TRANS OCEAN G. AND THE LIST GOES ON.}

J. SELLOUTS WILL OCCUR FOR SEVERAL REASONS.

1. AGE OF MANAGEMENT - SUCCESSION
2. LACK OF DRILLABLE PROSPECTS.
3. COST OF MONEY
4. TOO SMALL TO COMPETE

K. TAKEOVERS WILL OCCUR BECAUSE:

1. IT MAY BE THE CHEAPEST WAY TO REPLACE RESERVES.
2. THERE IS A WIDE GAP BETWEEN FINDING COSTS ($15 - $20 PER BARREL) AND PURCHASE PRICES ($10 - $12 PER BARREL), [HANDWRITTEN ADDITION: CURVES MUST BE CLOSER TOGETHER BEFORE DREG TURNS UP]
3. OR, IT MAY BE BETTER TO JUST BUY YOUR OWN STOCK.

L. MANAGEMENTS MUST DEVELOP A.BETTER UNDERSTANDING OF THEIR COMPANY'S ASSETS.

1. STRENGTHS OF SOME COMPANIES ARE NOT BEING EXPLOITED.
2. ???

M. THERE ARE ALWAYS SEVERAL APPROACHES TO SOLVING A PROBLEM ONE MANAGEMENT TOOL TO CONSIDER IN ADDRESSING THE RESERVE BASE ISSUE IS RESTRUCTURING BASED UPON THE ROYALTY TRUST CONCEPT, WHICH WAS PIONEERED BY MESA IN 1979.

N. MESA CREATED ITS ROYALTY TRUST AS A MEANS OF ENSURING MORE REALISTIC VALUE FOR THE COMPANY'S ASSETS. WE ADDRESSED THE QUESTION, "WHY SELL AT BELOW ASSET VALUE IF YOU ARE REPLACING RESERVES?"

1. MESA HAD REPLACED RESERVES FOR 18 CONSECUTIVE YEARS.
2. HOWEVER, IN FEBRUARY 1979, MSA WAS SELLING FOR $34 WHILE THE BREAKUP VALUE OF THE COMPANY WAS TWICE THIS AMOUNT.
3. IN JUNE 1979, WE ANNOUNCED THE TRUST AND OUR STOCK WAS SELLING FOR $44.
4. IN NOVEMBER 1979, THE SPIN-OFF OF THE TRUST WAS IMPLEMENTED—RESULTING IN A COMBINED VALUE OF $65.
5. WE HAVE HAD TWO SPLITS SINCE THEN AND OUR COMBINED VALUE NOW IS $94.

O. COMPANIES THAT ARE CANDIDATES FOR THE ROYALTY TRUST ARE THOSE:

1. WHOSE RESERVE BASE IS TOO LARGE TO REPLACE.
2. WHOSE CASH FLOWS ARE TOO LARGE FOR QUALITY DRILLABLE PROSPECTS AVAILABLE. [HANDWRITTEN ADDITION: LESS A PROBLEM NOW]
3. WHOSE CASH FLOWS ARE ALSO TOO LARGE FOR THE NUMBER OF PERSONNEL AVAILABLE. [HANDWRITTEN ADDITION: TO ADMINISTER]
4. WHOSE FINDING COSTS ARE TOO HIGH; AND,
5. WHO HAVE A CONCENTRATION OF OWNERSHIP.

P. BASICALLY, THE ROYALTY TRUST GRANTS EACH STOCKHOLDER A DIRECT OWNERSHIP INTEREST IN PRODUCING PROPERTIES....WITH NO POSSIBILITY OF CONFLICTS OF INTEREST.

Q. MESA SPUN OFF APPROXIMATELY ONE-HALF OF ITS RESERVES TO THE MESA ROYALTY TRUST; 8 MILLION BARRELS OF OIL AND 800 BILLION CUBIC FEET OF GAS.

R. BY PROVIDING SHAREHOLDERS WITH A MORE DIRECT INCOME STREAM FROM THESE PROPERTIES, UNBURDENED BY INCOME TAXES AT THE CORPORATE LEVEL, THE STOCK MARKET IS MORE LIKELY TO RECOGNIZE THE VALUE OF THE ASSETS.

S. BY SPINNING OFF A TRUST, A COMPANY REDUCES ITS RESERVE BASE AND {STRICKEN TEXT: GROWS} [HANDWRITTEN ADDITION: BECOMES] SMALLER.

1. MANAGEMENTS SHOULD NOT BE CONCERNED WITH THEIR SIZE—THEY SHOULD ONLY BE CONCERNED WITH WHAT'S BEST FOR THE STOCKHOLDER.
2. BY REDUCING SIZE, NEW DISCOVERIES HAVE A GREATER IMPACT ON THE COMPANY.
3. COMPANIES ARE BETTER ABLE TO REPLACE PRODUCTION ON A CONTINUING BASIS AND AVOID THE DEPLETION OF THEIR STOCKHOLDERS' INVESTMENT.
4. CONSEQUENTLY, THEY WOULD INCREASE THEIR P/E MULTIPLES MAKING THEM MORE ATTRACTIVE TO THE INVESTMENT COMMUNITY.

T. REMEMBER, ON THE CREATION OF A TRUST THE COMPANY MAINTAINS A 100% WORKING INTEREST IN THE PROPERTIES; THEREFORE IT RETAINS CONTROL OF RESERVES AND DOES NOT HAVE TO REDUCE PERSONNEL.

U. THE IRS HAS NOW RULED, AS WE HAD EXPECTED, THAT THE MESA ROYALTY TRUST IS A GRANTOR TRUST FOR TAX PURPOSES. THIS RULING SHOULD CAUSE MORE MANAGEMENTS TO LOOK AT THE ROYALTY TRUST CONCEPT.

V. CURRENTLY, THE ROYALTY TRUSTS ARE: MTR, PERMIAN BASIN TRUST SAN JUAN TRUST, HOUSTON OIL TRUST AND HOUSTON OIL ROYALTY TRUST. SABINE HAS ANNOUNCED THAT THEIR ROYALTY TRUST WILL BECOME EFFECTIVE BY JANUARY 1, 1983.

W. I AM SURE OTHERS WILL BE ANNOUNCED IN MONTHS AHEAD [HANDWRITTEN ADDITION: MANY WAYS THE CONCEPT CAN BE USED.]

X. THE ROYALTY TRUST IS A PROVEN CONCEPT, BUT I WANT TO STRESS THAT IT IS NOT THE SOLUTION FOR ALL COMPANIES.

1. {STRICKEN TEXT: THE DEBT STRUCTURES OF SOME COMPANIES WILL NOT ALLOW FOR SPIN-OFFS.}
2. {STRICKEN TEXT: AND, IF THE PROJECTS AND CASH FLOWS ARE IN BALANCE, A ROYALTY TRUST PROBABLY SHOULD NOT BE CONSIDERED.}

Y. WITH THE ROYALTY TRUST CONCEPT, ALL PARTIES ARE WINNERS:

1. SHAREHOLDERS RECEIVE A GREATER AND MORE DIRECT RETURN ON THEIR INVESTMENT.
2. MANAGEMENT CAN MORE EASILY IMPACT THEIR RESERVE BASE BY REDUCING THE SIZE OF THE COMPANY.
3. GOVERNMENT CAN INCREASE ITS REVENUES, FOR EXAMPLE:

{STRICKEN TEXT: A. ACCORDING TO A PRELIMINARY STUDY BY OUR PEOPLE; IF 100 OIL AND GAS COMPANIES FORMED TRUSTS COMPRISED OF 1/2 THEIR U.S. RESERVES, THEY WOULD GIVE SHAREHOLDERS DIRECT OWNERSHIP OF APPROXIMATELY $130 BILLION IN PRESENT VALUE UPON DISTRIBUTION PLUS APPROXIMATELY $15 BILLION IN ANNUAL DISTRIBUTIONS.}

{STRICKEN TEXT: B. THIS WOULD CREATE ADDITONAL FEDERAL TAX REVENUES OF SOME $10 - $15 BILLION ON THE INITIAL DISTRIBUTION AND $2-$3 BILLION ON THE ANNUAL DISTRIBUTION.}

IV. WELL, WHAT IS THE GENERAL PROGNOSIS FOR THE INDUSTRY?

A. I THINK IT IS GOOD.

B. DURING THE ALMOST 30 YEARS THAT I HAVE BEEN INVOLVED IN THE OIL AND GAS BUSINESS, I CAN NOT RECALL TOO MANY "EASY YEARS".

1. THE INDUSTRY HAS A HISTORY OF HIGHS AND LOWS.
2. WE ARE CURRENTLY IN ONE OF THOSE {STRICKEN TEXT: LOW} [HANDWRITEN ADDITOIN: TOUGH] PERIODS—BUT I BELIEVE IT IS ONLY TEMPORARY.
3. EXCELLENT OPPORTUNITIES ARE AVAILABLE FOR COMPANIES THAT HAVE PROPERLY ANALYZED AND PREPARED FOR THE CURRENT BUSINESS CLIMATE.

C. A MATTER OF HIGH PRIORITY IN OUR LONG-TERM RECOVERY AS AN INDUSTRY IS FOR OUR NATION TO DEVELOP A VIABLE ENERGY PLAN THAT WILL MAKE US ENERGY INDEPENDENT.

1. AS LONG AS OUR COUNTRY IS DEPENDENT UPON IMPORTS OF CRUDE OIL FROM THE MID-EAST, THE STABILITY AND GROWTH OF OUR INDUSTRY AND THE NATION'S ECONOMY WILL BE TENUOUS.
2. OPEC, AND PARTICULARLY THE SAUDI'S HAVE US IN A VISE GRIP—THEY ARE IN CONTROL OF SUPPLY, DEMAND AND PRICING.
3. I BELIEVE THIS CAN BE ILLUSTRATED BY THE CURRENT SO-CALLED OIL GLUT—THE SAUDI'S CUT PRODUCTION, DEMAND IS BEGINNING TO INCREASE AND THEIR PRICE IS FIRMING UP.
4. {STRICKEN TEXT: I DO NOT BELIEVE OIL PRICES WILL SHRINK TO $20 PER BARREL OR $15 PER BARREL AS FORECAST BY SOME—I BELIEVE THE PRICE HAS BOTTOMED OUT.}
5. BE ASSURED, THAT AS LONG AS THE SAUDI'S ARE IN CONTROL OF PRICING, DEVELOPMENT OF ALTERNATIVE ENERGY SOURCES IN OUR COUNTRY WILL NOT BE ECONOMICALLY VIABLE.
6. I BELIEVE THAT PRESIDENT REAGAN {STRICKEN TEXT: UNDERSTANDS THE PROBLEMS OF THE OIL AND GAS BUSINESS AND WILL CONTINUE HIS EFFORTS} [HANDWRITTEN ADDITION: IS ATTEMPTING] TO HELP SOLVE THE PROBLEMS. BY EMPHASIZING FREE ENTERPRISE ORIENTED SOLUTIONS.
7. BUT UNTIL SUCH TIME AS OUR NATION IS ENERGY INDEPENDENT, INTERRUPTIONS IN THE SUPPLY OF CRUDE OIL FROM THE MID-EAST WILL BE A CONSTANT POSSIBILITY AND KEEP US IN THE MERCY OF OPEC.

D. THE 1980's COULD GO DOWN AS A PERIOD OF AWARENESS IN THE OIL AND GAS INDUSTRY—AWARENESS FOR BOTH STOCKHOLDERS AND MANAGEMENT.

1. COMPANY MANAGEMENTS AND SHAREHOLDERS ALIKE ARE BECOMING MORE AWARE THAT THE NAME OF THE GAME IS THE REPLACEMENT OF RESERVES.
2. INVESTORS WILL BE ANALYZING MORE CLOSELY THE MANAGEMENTS OF COMPANIES TO DETERMINE THEIR PHILOSOPHY AND PERFORMANCE ON RESERVE REPLACEMENT.
3. THEY WILL INVEST IN THOSE COMPANIES WHOSE PHILOSOPHY IS TO PROTECT {STRICKEN TEXT: AND EXPAND} THE ASSETS OF THE SHAREHOLDERS.
4. INVESTORS WILL BEGIN TO SPEAK OUT MORE PARTICULARLY WHEN THE ASSETS OF THE COMPANY ARE BEING LIQUIDATED.
5. I BELIVE WE WILL SEE MORE SHAREHOLDERS INSISTING THAT TOP MANAGEMENT BE GIVEN MEANINGFUL STOCK POSITIONS.
6. THIS SHOULD CAUSE MANAGEMENTS TO START ADDRESSING PROBLEMS WITH THE STOCKHOLDER'S INTEREST IN MIND, RATHER THAN MAKING DECISIONS TO PERPETRATE THEIR JOBS.
7. I KNOW THAT AT MESA WHERE 96% OF OUR EMPLOYEES ARE STOCKHOLDERS, WE HAVE A HIGH PRODUCTIVITY AND BUSINESS OPPORTUNITIES ARE ANALYZED FROM A STOCKHOLDER'S VIEWPOINT.
8. I'VE ALWAYS SAID THAT AS LONG AS YOU HAVE THE GAME PROGRAM, WITH WEIGHTS, NUMBERS, AIJID POSITIONS, YOU WILL KNOW WHAT TO EXPECT. THE INVESTOR NOW HAS THE PROGRAM AND CAN BETTER EVALUATE WHAT TEAM WILL BE SUCCESSFUL.

E. ANOTHER MEASUREMENT IN THE GAME PROGRAM THAT IS BECOMING MORE MEANINGFUL TO INVESTORS IS THE ABILITY OF THE COMPANY TO MAKE ADJUSTMENTS.

1. THE MANAGEMENT THAT SURVIVES WILL BE THE ONE THAT CAN ADJUST.
2. IT WILL BE THE MANAGEMENT THAT CAN ADJUST QUICKLY AND ACCURATELY.
3. FOR THOSE MANAGEMENTS THAT CAN'T ADJUST, IT WILL ONLY BE A MATTER OF TIME BEFORE THEY ARE ELIMINATED.
4. THE MANAGEMENTS THAT CAN ADJUST QUICKLY—ON THE FIELD OF ACTION—WITHOUT HAVING TO REVIEW THE GAME FILMS, WILL BE THE ONES WHO GET THE BEST MULTIPLES AND DO THE BEST JOB FOR THEIR STOCKHOLDERS.

V. IN SUMMARY,

A. THE OIL AND GAS BUSINESS HAS BEEN AFFECTED BY THE GENERAL ECONOMIC DECLINE {STRICKEN TEXT: BUT IS MAKING ADJUSTMENTS THAT WILL STRENGTHEN ITS POSITION} [HANDWRITTEN ADDITION: FORCING MANAGEMENTS TO CONSIDER ALTERNATIVES THAT THEY HAVE NOT CONSIDERED IN THE PAST. I BELIEVE WE WILL SEE MANY INTERESTING CHANGES IN THE INDUSTRY DURING THE NEXT 24 MONTHS.]

B. MORE AND MORE COMPANIES WILL BE EVALUATING THE VIABILITY OF THE ROYALTY TRUST CONCEPT.

C. BUT MANAGEMENTS AND INVESTORS ARE BEGINNING TO REALIZE THE REAL BOTTOM-LINE—THE REPLACEMENT OF RESERVES.

D. THOSE MANAGEMENTS THAT UNDERSTAND THIS REALITY AND CAN ADJUST TO MARKET CONDITIONS WILL SURVIVE.

E. INVESTORS WHO CAN IDENTIFY THOSE COMPANIES THAT HAVE THESE QUALITIES, WILL MAKE MONEY.

F. THANK YOU.