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	T. BOONE PICKENS, JR. REMARKS OPPENHEIMER FORUM ON CORPORATE RESTRUCTURING THE PIERRE HOTEL NEW YORK, NEW YORK OCTOBER 5, 1982

2:15 pm - 3:40 pm

BRIEFING INFORMATION

AUDIENCE

OPPENHEIMER HOLDINGS, INC. HAS INVITED MORE THAN 100 OF THEIR INSTITUTIONAL INVESTOR CLIENTS TO ATTEND A ONE DAY SEMINAR ON CORPORATE RESTRUCTURING. INCLUDED IN THIS GROUP WILL BE CHIEF INVESTMENT OFFICERS, RESEARCH DIRECTORS AND HEADS OF MAJOR PORTFOLIO GROUPS.

SEMINAR FORMAT

THE SEMINAR FORMAT FEATURES PANELS ORGANIZED AS FOLLOWS:

1. "THE COMING TAKEOVER TRENDS" (9:00-9:50) LESTER POLLACK: OPPENHEIMER & CO. (CHAIRMAN) ARTHUR FLEISCHER, JR.: FRIED, FRANK, HARRIS, SHRIVER & JACOBSON JOSEPH H. FLOM : SKADDEN, ARPS, SLATE, MEAGHER & FLOM
2. "THE WASHINGTON CLIMATE" (10:10-11:00) IRA M. MILLSTEIN: WEIL, GOTSHAL & MANGES THOMAS J. CAMPBELL, FEDERAL TRADE COMMISSION
3. "HOW CORPORATIONS HANDLE RESTRUCTURING - I/II" (11:00-2:15) JEFFREY BECK: OPPENHEIMER & CO. (CHAIRMAN) ROBERT T. BRIGGS: ESMARK, INC. STEPHEN M. MCGRATH: WARNER-LAMBERT COMPANY THOMAS D. SEGE: VARIAN ASSOCIATES DONALD G. CONRAD: AETNA LIFE & CASUALTY
4. "CORPORATE RESTRUCTURING AND THE INSTITUTIONAL SHAREHOLDER" (2:15-3:40) HEIDI FISKE: OPPENHEIMER & CO. (CHAIRMAN) T. BOONE PICKENS, JR.: MESA PETROLEUM CO. TODD LANG: WEIL, GOTSHAL & MANGES ELLEN GREENSPAN : OPPENHEIMER & CO. PETER LUSK : FORSTMAN-LEFF

FOLLOWING YOUR PANEL, BILL AGEE IS NOW SCHEDULED TO SPEAK TO THE FORUM. HE IS SCHEDULED AT 3:45 PM (NOTE YOUR PANEL TIME HAS BEEN CHANGED FROM [HANDWRITTEN ADDITION: 2:25-3:45] {STRICKEN TEXT: 2:15 PM - 3:40 PM}).

AGENDA/ FORMAT

YOUR PANEL'S PORTION OF THE SEMINAR IS SCHEDULED FROM 2:15 PM UNTIL 3:40 PM. EACH OF THE FOUR SPEAKERS ON YOUR PANEL ARE GIVEN 10-12 MINUTES FOR REMARKS. FOLLOWING REMARKS GIVEN BY ALL PANELISTS, QUESTIONS WILL BE ENTERTAINED FROM THE AUDIENCE.

HEIDI FISKE SUGGESTS THAT YOUR COMMENTS NOT DEAL WITH MESA PER SE; EMPHASIZING THAT "THE AUDIENCE WILL FIND IT OFFENSIVE IF THERE IS AN ATTEMPT TO SELL THE COMPANY."

TOPIC/KEY POINTS

YOU HAVE BEEN ASKED TO ADDRESS THE TOPIC "HOW CAN INSTITUTIONAL INVESTORS DETERMINE WHETHER OR NOT MANAGEMENTS ARE ACTING IN THE BEST INTERESTS OF THEIR SHAREHOLDERS."

1. THE BOTTOM LINE IS WHETHER OR NOT THE COMPANY HAS ESTABLISHED A TRACK RECORD OF MAKING MONEY FOR THEIR INVESTORS.
2. OIL AND GAS COMPANY MANAGEMENTS THAT UNDERSTAND THE SIGNIFICANCE OF RESERVE REPLACEMENT, AND ESTABLISH A GOOD TRACK RECORD IN THIS REGARD, ARE ACTING IN THE BEST INTERESTS OF THEIR SHAREHOLDERS.
3. AS WE ENTER THE "AGE OF AWARENESS" IN THE OIL AND GAS INDUSTRY, SHAREHOLDERS WILL BECOME MORE VOCAL IN THEIR CRITICISM OF MANAGEMENTS THAT ARE LIQUIDATING ASSETS—THEY WILL INSIST THAT MANAGEMENTS BE GIVEN SIGNIFICANT STOCK OPTIONS TO ENSURE THEIR DECISION-MAKING [HANDWRITTEN ADDITION: WILL BE] ORIENT[ED] {STRICKEN TEXT: ATION DE} TOWARD "WHAT IS BEST FOR THE STOCKHOLDER."

T. BOONE PICKENS, JR. REMARKS:
OPPENHEIMER FORUM ON CORPORATE RESTRUCTURING

I. INTRODUCTION

A. THANK YOU, HEIDI, FOR YOUR KIND INTRODUCTION.

B. (PERSONAL COMMENTS)
1.
2.
3.

C. IT IS A PLEASURE FOR ME TO BE HERE TODAY TO PARTICIPATE ON THE PROGRAM...A PROGRAM DEALING WITH A VERY TIMELY SUBJECT—CORPORATE RESTRUCTURING.

D. HEIDI HAS ASKED ME TO ADDRESS THE TOPIC..."HOW CAN INSTITUTIONAL INVESTORS DETERMINE WHETHER OR NOT MANAGEMENTS ARE ACTING IN THE BEST INTERESTS OF THEIR SHAREHOLDERS?"

E. THIS QUESTION CAN BE ANSWERED VERY EASILY BY POSING ANOTHER QUESTION..."ARE THE SHAREHOLDERS MAKING MONEY?"

F. HEIDI, I WILL GO A BIT FURTHER THAN THIS IN ANSWERING YOUR QUESTION!

G. MY BRIEF REMARKS THIS AFTERNOON APPLY TO THE OIL AND GAS INDUSTRY—HOWEVER—I'M SURE YOU MAY FIND PARALLELS WITH OTHER INDUSTRIES. I WILL LOOK FORWARD TO YOUR QUESTIONS FOLLOWING THE PRESENTATIONS OF THE OTHER PANELISTS.

II. WE ARE EMBARKING UPON AN "AGE OF AWARENESS" IN THE OIL AND GAS INDUSTRY—FOR MANAGEMENTS AND STOCKHOLDERS. LET'S CONSIDER MANAGEMENTS FIRST.

A. THE OVERRIDING GOAL OF MANAGEMENT SHOULD BE TO PROTECT AND EXPAND THE ASSETS OF THE COMPANY AND THE VALUE OF THEIR SHAREHOLDERS' INTERESTS.

B. OIL AND GAS COMPANIES, BOTH LARGE AND SMALL, ARE MANAGERS OF DEPLETABLE ASSETS...THE RESERVES OF OIL AND GAS (REPEAT FOR EMPHASIS).

C. IT IS, THEREFORE, INCUMBENT UPON COMPANIES IN OUR BUSINESS TO REPLACE PRODUCTION ANNUALLY TO ENSURE THE MAINTENANCE AND GROWTH OF THEIR SHAREHOLDERS' INVESTMENT.

D. MANY COMPANIES IN OUR INDUSTRY, MISLED BY RISING OIL AND GAS PRICES AND RECORD EARNINGS, HAVE BEEN LIQUIDATING FOR YEARS; THEY SIMPLY HAVE NOT BEEN REPLACING THEIR RESERVES. THE DIVIDEND CHECK THAT THEY HAVE BEEN SENDING THEIR SHAREHOLDERS HAS BEEN A RETURN OF CAPITAL.

E. THERE ARE TWO WAYS TO REPLACE RESERVES—THROUGH EXPLORATION OR ACQUISITION.

F. [HANDWRITTEN ADDITION: CURRENTLY] THERE IS A LARGE GAP {STRICKEN TEXT: CURRENTLY} BETWEEN THE FINDING COST CURVE AND THE PURCHASE PRICE CURVE.

G. BECAUSE OF THIS FACTOR, MERGERS AND ACQUISITIONS ARE ATTRACTIVE WAYS OF REPLACING RESERVES IN TODAY'S BUSINESS ENVIRONMENT...BECAUSE IT IS THE CHEAPEST WAY TO REPLACE RESERVES.

H. FACED WITH THE CHALLENGE OF RESERVE REPLACEMENT AND THE REALITIES OF HIGH FINDING COSTS, WE WILL SEE MORE COMPANIES ENGAGE IN SOME FORM OF RESTRUCTURING MERGER, ACQUISITION, FORMATION OF A ROYALTY TRUST, SALE OF ASSETS...

I. THE MANAGEMENTS THAT ARE WILLING TO MAKE THESE ADJUSTMENTS—AND MAKE THEM QUICKLY—WILL BE SUCCESSFUL IN TODAY'S BUSINESS ENVIRONMENT.

J. THE OBJECTIVE OF THESE RESTRUCTURING MEASURES IS TO BRING A COMPANY TO ITS OPTIMUM SIZE—A SIZE THAT WILL ENABLE IT TO MAINTAIN AND ENHANCE ITS ASSETS AND THE VALUE OF ITS SHAREHOLDERS' INTERESTS.

K. SOME OF THE RESTRUCTURING OPTIONS, SUCH AS SPINNINGOFF ASSETS TO A ROYALTY TRUST, MAY REDUCE THE SIZE OF THE COMPANY.

L. MANAGEMENTS SHOULD NOT BE CONCERNED WITH GROWTH FOR GROWTH'S SAKE—THEY SHOULD BE CONCERNED WITH KEEPING THEIR COMPANY'S SIZE AT A LEVEL THAT PROVIDES ITS SHAREHOLDERS THE BEST OPPORTUNITY TO MAKE A PROFIT.

III. NOW, LET'S EXAMINE THE ROLE OF SHAREHOLDERS IN THE IMPENDING "AGE OF AWARENESS" I MENTIONED EARLIER.

A. SHAREHOLDERS WILL BEGIN TO SCRUTINIZE MANAGEMENTS MORE CAREFULLY ABOUT THEIR RESERVE REPLACEMENT PHILOSOPHY AND TRACK RECORD.

B. AND, WILL BECOME MORE VOCAL AND HAVE GREATER INFLUENCE ON CORPORATE DECISIONS.

C. INVESTORS ARE BECOMING MORE AWARE OF THE SIGNIFICANCE OF RESERVE REPLACEMENT AND THE CONSEQUENCES OF THEIR INVESTMENT IF RESERVES ARE NOT REPLACED ANNUALLY.

D. INSTITUTIONAL INVESTORS WILL BE THE GROUP THAT SPEAKS THE LOUDEST WHEN IT BECOMES OBVIOUS THAT A COMPANY'S ASSETS ARE BEING LIQUIDATED.

E. INSTITUTIONAL INVESTORS WILL "LEAD THIS REVOLUTION" BECAUSE OF THEIR FIDUCIARY RESPONSIBILITY AND ORIENTATION TOWARD BOTTOM-LINE RESULTS.

F. THEY WILL ALSO PLAY A MAJOR ROLE IN FUTURE MERGER AND ACQUISITION ACTIVITIES.

G. HOWEVER, IT'S STILL INCREDIBLE TO ME THE ATTITUDES SOME CEO'S HAVE TOWARD THEIR SHAREHOLDERS...THEY EQUATE COMPANY WITH MANAGEMENT RATHER THAN EQUATING COMPANY WITH SHAREHOLDER. MANY MANAGEMENTS FORGET THE FACT THAT THEY ARE HIRED TO ACHIEVE THE BEST RETURN FOR THEIR SHAREHOLDERS' INVESTMENTS.

H. UNFORTUNATELY, THE QUESTION MANAGEMENTS OFTEN ASK DURING A DECISION-MAKING PROCESS IS—"WHAT IMPACT WILL THIS DECISION HAVE ON MY CAREER?"...IN OTHER WORDS, WILL THIS DECISION HELP PERPETUATE MY JOB.

I. SHAREHOLDERS WILL BEGIN TO INSIST THAT MANAGEMENTS (AND BOARDS OF DIRECTORS) BE GIVEN SIGNIFICANT STOCK OPTIONS TO HELP ENSURE THAT THERE IS AN ORIENTATION TOWARD THE STOCKHOLDER AS DECISIONS ARE BEING CONSIDERED BY MANAGEMENT.

IV. IN CONCLUSION, INSTITUTIONAL INVESTORS WILL EVALUATE MANAGEMENTS' ORIENTATION TOWARD SHAREHOLDERS BY INCLUDING THE FOLLOWING TYPES OF QUESTIONS IN THEIR ASSESSMENT PROCESS:

A. HAS MANAGEMENT DEVELOPED A PROVEN TRACK RECORD FOR ENHANCING THEIR SHAREHOLDERS' INVESTMENTS?

B. WHAT IS MANAGEMENTS' PHILOSOPHY ON RESERVE REPLACEMENT?

C. WHAT IS MANAGEMENTS' RECORD ON RESERVE REPLACEMENT?

D. IS MANAGEMENT WILLING TO MAKE ADJUSTMENTS THROUGH RESTRUCTURING, INCLUDING REDUCING THE SIZE OF THEIR ASSETS, TO OPTIMIZE THE SIZE OF THEIR COMPANY?

E. DOES MANAGEMENT HAVE SIGNIFICANT STOCK OPTIONS THAT WILL ORIENT THEIR DECISION MAKING TOWARD SHAREHOLDERS' INTERESTS?

F. THE "AGE OF AWARENESS" THAT WE ARE ENTERING IN THE OIL AND GAS BUSINESS WILL BRING WITH IT REVOLUTIONARY CHANGES—CHANGES THAT WILL STRENGTHEN THE INDUSTRY AND PROVIDE THE SHAREHOLDER BETTER OPPORTUNITIES TO REALIZE A PROFIT.

G. THANK YOU.