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	T. BOONE PICKENS, JR. REMARKS NEW YORK SOCIETY OF SECURITY ANALYSTS 71 BROADWAY, ROOM 1 NEW YORK, NEW YORK OCTOBER 26, 1982

11:45am - 2pm

BRIEFING INFORMATION

FORMAT

THE FOLLOWING IS A PROPOSED SCHEDULE:
11:45—Cocktail Reception for head table
12:15—Lunch
12:45—Introductory Remarks—Kurt Wulff
12:55—Presentations
1:30—Questions and Answers
2:00—Adjourn

TWO OTHER COMPANIES WILL BE SHARING THE SAME AREA WHERE THE COCKTAIL RECEPTION IS SCHEDULED: INFLIGHT SERVICE (LAWRENCE MILES, PRESIDENT) AND KOGER PROPERTIES (IRA KOGER, CHAIRMAN). KURT WULFF WILL BE THE HOST FOR THE LUNCHEON AND WILL INTRODUCE YOU.

AUDIENCE/ATTENDANCE

THE AUDIENCE WILL BE COMPRISED OF MEMBERS OF THE NEW YORK SOCIETY OF SECURITY ANALYSTS AND A FEW GUESTS. AN ATTENDANCE OF APPROXIMATELY 150-200 IS EXPECTED.

PRESENTATION OUTLINE—HIGHLIGHTS

1. OUTLOOK FOR THE INDUSTRY
2. REVIEW OF MESA'S STRATEGY—PAST, PRESENT AND FUTURE

II. OUTLOOK FOR THE INDUSTRY

A. NOT MUCH GOOD NEWS THIS YEAR.

B. BOOM IS OVER.

C. TOUGH PERIOD—NOT NEW FOR THE INDUSTRY.

D. SHAKEOUT WILL ULTIMATELY STRENGTHEN THE INDUSTRY.

E. OPTIMISTIC ABOUT THE FUTURE.

F. POSITIVE FACTORS AT WORK IN THE MARKET PLACE.

G. INDUSTRY WILL REMAIN AMONG THE STRONGEST ECONOMIC ENTITIES IN THE U.S.

III. REVIEW OF MESA PLAN

A. (SLIDE #1 - MESA LOGO): 1982 HAS BEEN A YEAR TO ASSESS THE PLAN.

B. PLAN IS SIMPLE {STRICKEN TEXT: TO MAKE MONEY FOR OUR SHAREHOLDERS BY INCREASING} [HANDWRITTEN ADDITION: INCREASE] OUR RESERVES THROUGH EXPLORATION AND/OR ACQUISITION. [HANDWRITTEN ADDITION: UNTIL WE DECIDE TO REDUCE SIZE BY SPIN-OFF.]

C. TWO IMPORTANT ASPECTS OF PLAN—RESERVE REPLACEMENT AND PERSONNEL.

D. RESERVE {STRICKEN TEXT: REPLACEMENT} [HANDWRITTEN ADDITION: ENHANCEMENT]—GOAL OF MANAGEMENT IS TO PROTECT AND EXPAND ASSETS OF THE COMPANY AND THE VALUE OF SHAREHOLDERS' INTERESTS.

1. MANAGERS OF DEPLETABLE ASSETS
2. INCUMBENT TO INCREASE RESERVES
3. SOME COMPANIES ARE LIQUIDATING

E. PERSONNEL

1. HIGHLY TECHNICAL AND EXPERIENCED
2. EMPHASIS ON PRODUCTIVITY
3. INCENTIVES
4. SHAREHOLDER ORIENTATION

F. KEY TO MANAGING THE PLAN—MAINTAIN OPTIMUM SIZE.

G. OPTIMUM SIZE—SIZE ENABLING YOUR PERSONNEL TO INCREASE RESERVES AND ENHANCE VALUE OF SHAREHOLDERS' INVESTMENT.

H. TO MANY, SUCCESS EQUATES WITH GROWTH.

I. TO MESA—SUCCESS EQUATES TO MAINTAINING OPTIMUM SIZE.

J. TO MAINTAIN OPTIMUM SIZE, MANAGEMENTS MUST BE WILLING TO MAKE ADJUSTMENTS.

IV. MESA'S OPTIMUM SIZE ADJUSTMENTS

A. (SLIDE #2 - INVERTED TRIANGLE): SERIES OF ADJUSTMENTS.

1. JUNE 1979—UK
2. OCTOBER 1979—CANADA
3. NOVEMBER 1979—MESA ROYALTY TRUST
4. DECEMBER 1982—MOST

B. (SLIDE #3 - OFFSHORE MAP): REVIEW OF MOST.

1. LOCATION
2. TRUST
3. OPERATED BY MESA
4. MESA INVESTMENT
5. ACTIVITY ON PROPERTIES
6. POTENTIAL
7. MESA'S CONTINUED PRESENCE IN THE GULF

C. (SLIDE #4 - RESERVES: IMPORTANCE OF RESERVE {STRICKEN TEXT: REPLACEMENT} [HANDWRITTEN ADDITION: ENHANCEMENT]

1. CHALLENGE
2. CONSISTENTLY {STRICKEN TEXT: REPLACED} [HANDWRITTEN ADDITION: INCREASED RES. BASE] SINCE 1964
3. RESERVE BASE SLIDE ILLUSTRATES OUR ADJUSTMENTS
4. INCREASED RESERVES THROUGH EXPLORATION AND ACQUISITION (HUGOTON, PUBCO)
5. DECREASED RESERVES THROUGH SALES (U.K., CANADA) AND SPIN-OFFS (MTR, MOST)

D. (SLIDE #5 - EMPLOYEES PER $1 MILLION ASSETS).

1. RATIO OF EMPLOYEES TO ASSETS

E. THE STOCKHOLDER BENEFIT.

1. (SLIDE #6 - GROWTH OF 1,000 SHARES)
2. EVENTS IMPACTING GROWTH
3. SHARES GROWN TO 23,958 SHARES AND UNITS
4. VALUE GROWN FROM $10,000 TO $228,266

V. (SLIDE #7 - MESA LOGO): SHOULD WE STAY WITH THE PLAN?

A. YES

B. WHERE DO WE GO FROM HERE?

{STRICKEN TEXT: C. STAY WITH PLAN}

D. TAKE ADVANTAGE OF OPPORTUNITIES.

E. CONCENTRATE ON THE THINGS WE CAN CONTROL— {STRICKEN TEXT: RESERVE REPLACEMENT}, PERSONNEL, EXPLORATION, ACQUISITIONS,{STRICKEN TEXT: BUDGET}

F. (SLIDE #8 - OIL AND GAS EXPENDITURES): CONTROL BALANCE SHEET—REDUCE DEBT.

G. (SLIDE #9 - U.S. MAP): MAINTAIN GOOD ACREAGE POSITION IN ALL MAJOR BASINS IN U.S. AND EXPECT CONTINUED EXPLORATION SUCCESS.

H. (SLIDE #10 - MESA LOGO): CONTINUE TO STRIVE TO MAKE MONEY FOR SHAREHOLDER BY OFFERING AN ENERGY PORTFOLIO:

1. MESA COMMON—CAPITAL GROWTH
2. MESA ROYALTY TRUST—LONG-TERM INCOME
3. MOST—EXPLORATORY POTENTIAL

VI. THIRD QUARTER EARNINGS REPORT

VII. QUESTIONS AND ANSWERS

T. BOONE PICKENS, JR. REMARKS: NEW YORK SOCIETY OF SECURITY ANALYSTS

I. INTRODUCTION

A. THANK YOU, KURT.

B. (PERSONAL COMMENTS)
1. [HANDWRITTEN ADDITION: 18 MONTHS AGO WE WERE REALLY IN DEMAND, ALL OIL CO. CEO'S WERE—KURT SAID IT WAS OK TO GO AHEAD AND COME BUT THEY WOULDN'T SERVE ME UNLESS ONE OF THE ANALYSTS DIDN'T SHOW—WHAT A DIFFERENCE A YEAR MAKES]

C. THIS AFTERNOON, I WOULD LIKE TO ADDRESS TWO POINTS: (1) THE OUTLOOK FOR THE OIL AND GAS INDUSTRY; AND (2) A REVIEW OF MESA'S STRATEGY—PAST, PRESENT AND FUTURE.

D. I WILL THEN BE PLEASED TO ANSWER YOUR QUESTIONS.

II. FIRST, LET'S BRIEFLY ASSESS THE OUTLOOK FOR THE INDUSTRY.

A. WE HAVEN'T HEARD MUCH GOOD NEWS ABOUT OUR INDUSTRY THIS YEAR:

1. THERE HAS BEEN AN EXCESS SUPPLY OF CRUDE OIL RESULTING IN THE DROP AND STABILIZATION OF PRICES.
2. THE MARKET FOR NATURAL GAS HAS BEEN SOFT.
3. SEISMIC AND DRILLING ACTIVITY HAS PLUNGED.
4. EARNINGS AND PROFITS HAVE SLOWED AND IN MOST CASES DECLINED—PRIMARILY BECAUSE OF HIGH FINDING COSTS, HIGH INTEREST RATES AND THE DECLINE IN PRICES DUE TO OVERSUPPLY.

B. THE BOOM IS OVER FOR THE INDUSTRY.

C. BUT, THIS TOUGH PERIOD THAT WE ARE NOW CHALLENGED BY IS NOTHING REALLY NEW—OF THE 31 YEARS I'VE BEEN IN THE OIL AND GAS INDUSTRY—THERE HAVE BEEN FEW YEARS IN WHICH WE "LINED 'UM UP AND RAN OVER 'UM."

D. WE HAVE SEEN SHAKEOUT PERIODS BEFORE—AND, I'M CONVINCED THAT THIS SHAKEOUT WE'RE NOW EXPERIENCING WILL ULTIMATELY STRENGTHEN THE INDUSTRY.

1. THIS BUSINESS IS A HIGHLY TECHNICAL BUSINESS.
2. DURING BOOM TIMES, WHEN MONEY WAS PLENTIFUL AND DRILLING WAS SKYROCKETING, MANY WHO HAD NO QUALIFICATIONS GOT INTO THE BUSINESS. THEY ARE THE FIRST WHO WILL FALL BY THE WAYSIDE.
3. THIS SHAKEOUT IS ALSO EXPOSING MANAGEMENTS WHO, LULLED BY RECORD EARNINGS DUE TO TWELVE-FOLD INCREASE IN PRICES ORCHESTRATED BY OPEC, HAVE FAILED TO EMPHASIZE EFFICIENCY AND PRODUCTIVITY IN THEIR OPERATIONS.

E. I'M OPTIMISTIC ABOUT THE FUTURE OF THE INDUSTRY...BUT I'M ALSO REALISTIC...WE WILL HAVE A RECOVERY—BUT IT WILL BE SLOW.

F. CONSIDER SOME OF THE POSITIVE FACTORS CURRENTLY AT WORK IN THE MARKETPLACE:

1. INTEREST RATES ARE DROPPING...
2. COMBINED WITH THE REDUCTION IN DRILLING COSTS {STRICKEN TEXT: SOME ESTIMATE THAT} COSTS OF DRILLING ARE 20%-30% BELOW WHAT THEY WERE AT THIS TIME LAST YEAR)...WE SHOULD BEGIN TO SEE A REDUCTION IN FINDING COSTS.
3. A COLD WINTER IS FORECAST.
4. AND, INVENTORIES ARE LOW.

G. ANOTHER FACTOR THAT WE SHOULD CONSIDER IN THE ANALYSIS IS THAT DRILLING IN THE U.S. HAS DROPPED BY ALMOST 1/2 THIS YEAR—IT'S ONLY A MATTER OF TIME BEFORE DEMAND INCREASES AND WITH IT—ANOTHER PRICE HIKE BY OPEC.

H. YES, I DO BELIEVE WE ARE ON THE ROAD TO RECOVERY IN THE INDUSTRY—IT WILL PERHAPS BE A PROLONGED JOURNEY WITH A FEW DETOURS—BUT, I BELIEVE THE OIL AND GAS INDUSTRY WILL REMAIN AMONG THE STRONGEST ECONOMIC ENTITIES IN OUR COUNTRY.

III. NOW, LET'S TURN TO MESA AND ADDRESS OUR PERFORMANCE AND FUTURE PLANS.

A. (SLIDE #1 - MESA LOGO): FOR MESA, 1982 HAS BEEN A GOOD TIME TO REVIEW OUR STRATEGIC PLAN AND TO ASK QUESTIONS ABOUT IT:

1. IS IT WORKING?
2. ARE WE STILL USING OUR PLAN?
3. SHOULD WE CHANGE IT?

B. OUR PLAN IS REALLY QUITE SIMPLE...{STRICKEN TEXT: TO MAKE MONEY FOR OUR SHAREHOLDERS BY INCREASING} [HANDWRITTEN ADDITION: TO INCREASE] OUR RESERVES THROUGH EXPLORATION OR ACQUISITION [HANDWRITTEN ADDITION: UNTIL WE DECIDE TO REDUCE SIZE BY SPINNING-OFF]

C. TO ACHIEVE RESULTS FOR OUR SHAREHOLDERS, OUR PLAN EMPHASIZES TWO IMPORTANT ELEMENTS—RESERVE {STRICKEN TEXT: REPLACEMENT} [HANDWRITTEN ADDITION: ENHANCEMENT] AND PERSONNEL.

D. THE OVERRIDING GOAL OF MANAGEMENT IS TO PROTECT AND EXPAND THE ASSETS OF THE COMPANY AND THE VALUE OF THEIR SHAREHOLDERS' INTERESTS.

1. OIL AND GAS COMPANIES, BOTH LARGE AND SMALL, ARE MANAGERS OF DEPLETABLE ASSETS—THEIR RESERVES OF OIL AND GAS.
2. THEREFORE, IT IS INCUMBENT UPON COMPANIES TO INCREASE THEIR RESERVES TO ENSURE THE MAINTENANCE AND GROWTH OF THEIR ASSETS AND SHAREHOLDERS' INVESTMENT.
3. SOME COMPANIES, HOWEVER, MISLED BY RISING OIL PRICES AND RECORD EARNINGS, HAVE BEEN LIQUIDATING FOR YEARS; THEY SIMPLY HAVE NOT BEEN {STRICKEN TEXT: REPLACED} [HANDWRITTEN ADDITION: INCREASING] THEIR RESERVES [HANDWRITTEN ADDITION: ANNUALLY] AFTER PAYING CORPORATE AND WINDFALL PROFIT TAXES, THEIR DIVIDEND CHECK MERELY REPRESENTS A RETURN OF CAPITAL.

E. THE SECOND ESSENTIAL ELEMENT OF OUR PLAN IS PERSONNEL.

1. WE STRIVE TO ATTRACT AND KEEP HIGHLY TECHNICAL AND EXPERIENCED PERSONNEL.
2. WE BELIEVE IN RUNNING A TIGHT SHIP WITH A LEAN CREW—EMPHASIZING PRODUCTIVITY.
3. WE PAY OUR PEOPLE WELL—AND GIVE THEM PROPER INCENTIVES TO ENSURE HIGH PERFORMANCE.
4. BECAUSE OUR EMPHASIS IS UPON ACHIEVING RESULTS FOR OUR SHAREHOLDERS, WE SEE TO IT THAT OUR EMPLOYEES HAVE A "STOCKHOLDER ORIENTATION."
5. HOW? WE MAKE THEM STOCKHOLDERS, THROUGH MEANINGFUL STOCK OPTIONS FOR MANAGEMENT AND {STRICKEN TEXT: PROFIT SHARING} [HANDWRITTEN ADDITION: A STOCK PURCHASE] PLAN FOR ALL EMPLOYEES.
6. WITH 96% OF OUR EMPLOYEES AS STOCKHOLDERS—ONE CAN CONCLUDE THAT OUR COMPANY TRULY THINKS LIKE STOCKHOLDERS. [HANDWRITTEN ADDITION: WE ARE NOT KIDDING WITH THIS APPROACH—WE ALL BELIEVE IT.]

F. THE KEY TO MANAGING OUR PLAN IS TO KEEP OUR COMPANY AT ITS OPTIMUM SIZE.

G. WHAT DO I MEAN BY OPTIMUM SIZE? A SIZE THAT ENABLES YOUR PERSONNEL TO [HANDWRITTEN ADDITION: ANNUALLY] INCREASE THE RESERVES OF THE COMPANY. {STRICKEN TEXT: TO ENHANCE THE SHAREHOLDERS' INVESTMENT} [HANDWRITTEN ADDITION: H. TO SOME, SUCCESS MEANS BIGNESS.]

{STRICKEN TEXT: H. SUCCESS TO MANY COMPANIES MEANS MERELY GROWTH:}

1. {STRICKEN TEXT: ENLARGEMENT OF RESERVE BASE: AND}
2. {STRICKEN TEXT: INCREASE IN PERSONNEL.}

I. BUT, WE EQUATE SUCCESS WITH MAINTAINING OPTIMUM SIZE—A SIZE THAT MAY INCREASE OR DECREASE DEPENDING UPON ECONOMIC AND BUSINESS FACTORS.

J. BUT, KNOWING ABOUT OPTIMUM SIZE AND DOING SOMETHING ABOUT IT ARE TWO DIFFERENT THINGS.

K. WHICH BRINGS ME TO ANOTHER IMPORTANT INGREDIENT OF THE MESA PLAN—WE BELIEVE AN ADVANTAGE GOES TO THE MANAGEMENT THAT KNOWS ITS ASSETS WELL, THAT CAN ANALYZE ACCURATELY, {STRICKEN TEXT: AND} THAT IS WILLING TO MAKE ADJUSTMENTS TO ACHIEVE OPTIMUM SIZE. [HANDWRITTEN ADDITION: AND WHO ARE DECISION-MAKERS.]

IV. LET'S NOW EXAMINE THE MESA RECORD, KEEPING IN MIND OUR BASIC GOAL: {STRICKEN TEXT: TO MAKE MONEY FOR THE SHAREHOLDERS BY} [HANDWRITTEN ADDITION: TO] MAINTAIN{ING} OPTIMUM SIZE. {STRICKEN TEXT: THROUGH EXPLORATION OR ACQUISITIOIN.}

A. (SLIDE #2 - INVERTED TRIANGLE): THIS SLIDE DEPICTS A SERIES OF ADJUSTMENTS MADE BY MESA TO ACHIEVE OPTIMUM SIZE.

1. MOST OF YOU ARE VERY FAMILIAR WITH OUR HISTORY, SO I WILL NOT GIVE YOU A DETAILED EXPLANATION OF EACH OF THESE OPTIMUM SIZE ADJUSTMENTS.
2. IN JUNE 1979, WE SOLD OUR INTERESTS IN PROPERTIES OFF THE COAST OF SCOTLAND WHEN IT BECAME OBVIOUS TO OUR MANAGEMENT THAT TAXATION AND REGULATION OF THE NORTH SEA OPERATIONS BY THE UNITED KINGDOM WOULD SERIOUSLY AFFECT OUR OPERATING MARGIN.
3. IN OCTOBER 1979, AGAIN FOR REASONS OF GOVERNMENT REGULATION AND INVOLVEMENT, WE SOLD OUR CANADIAN PROPERTIES, RETAINING A 12.5% GROSS OVERRIDING ROYALTY ON 1.2 MILLION NET UNDEVELOPED ACRES.
4. FROM THESE TWO TRANSACTIONS, WE REALIZED A PRE-TAX GAIN OF $345 MILLION.
5. ALSO IN 1979, IN NOVEMBER, WE DISTRIBUTED ABOUT ONE-HALF OF OUR OIL AND GAS RESERVES TO THE MESA ROYALTY TRUST FOR THE BENEFIT OF OUR SHAREHOLDERS. INCIDENTALLY, THE IRS HAS CONCLUDED THAT ROYALTY INCOME ATTRIBUTABLE TO THE TRUST WILL NOT BE TAXABLE TO MESA. [HANDWRITTEN ADDITION: THIS CLEARED THE LAST HURDLE]
6. OUR MOST RECENT OPTIMUM, SIZE ADJUSTMENT IS THE PROPOSED FORMATION OF THE MESA OFFSHORE TRUST, TO BE ACCOMPLISHED BEFORE THE END OF THE YEAR.

B. (SLIDE #3 - OFFSHORE MAP): AT THIS TIME, I WOULD LIKE TO DIVERT FROM MY DISCUSSION OF OPTIMUM SIZE ADJUSTMENTS TO BRIEFLY REVIEW MOST.

1. FROM THIS SLIDE YOU CAN SEE THE LOCATION OF THE TEN OIL AND GAS PROPERTIES OFFSHORE LOUISIANA AND TEXAS THAT ARE INVOLVED.
2. WE INTEND TO CONVEY NET OVERRIDING ROYALTY INTERESTS FROM THESE PROPERTIES TO A TRUST AND TO DISTRIBUTE UNITS OF BENEFICIAL INTEREST IN THE TRUST TO MESA SHAREHOLDERS.
3. THESE PROPERTIES ARE ALL OPERATED BY MESA AND ARE IN VARIOUS STAGES OF DEVELOPMENT.
4. MESA HAS ALREADY INVESTED ALMOST ONE-HALF BILLION DOLLARS ($474 MILLION), INCLUDING LEASEHOLD BONUSES OF ALMOST $200 MILLION, IN THESE PROPERTIES.
5. ON THE TEN PROPERTIES, 31 SUCCESSFUL WELLS HAVE BEEN DRILLED AND 5 WELLS ARE CURRENTLY DRILLING.
6. SEVEN WELLS ON THREE OF THE PROPERTIES ARE CURRENTLY PRODUCING.
7. WE BELIEVE THERE IS EXCELLENT POTENTIAL IN THESE PROPERTIES FOR OUR SHAREHOLDERS, AS EVIDENCED BY OUR 1983 CAPITAL BUDGET OF $85 MILLION.
8. BEFORE WE LEAVE MOST, I WANT TO POINT OUT FROM THIS SLIDE THAT MESA HAS A NUMBER OF OTHER {STRICKEN TEXT: PROPERTIES} [HANDWRITTEN ADDITION: TRACTS. 14 FED, 67 STATE] OFFSHORE TEXAS AND LOUISIANA AND WE PLAN TO REMAIN ACTIVE IN THE AREA. [HANDWRITTEN ADDITION: WE ARE NOT GETTING OUT OF THE BUSINESS OF FINDING OIL & GAS.]

C. (SLIDE #4 - NET, PROVED EQUIVALENT GAS RESERVES): I MENTIONED EARLIER THE IMPORTANCE WE PLACE ON RESERVE {STRICKEN TEXT: REPLACEMENT} [HANDWRITTEN ADDITION: ENHANCEMENT] IN OUR STRATEGIC PLAN.

1. MANAGING THE RESERVE BASE IS OUR GREATEST CHALLENGE...TO KEEP IT AT THE SIZE THAT FITS OUR PEOPLE AND RESOURCES. {STRICKEN TEXT: SO THAT WE CAN REPLACE RESERVES ANNUALLY.}
2. SINCE 1964, MESA HAS CONSISTENTLY {STRICKEN TEXT: REPLACED} [HANDWRITTEN ADDITION: INCREASED] ITS RESERVES [HANDWRITTEN ADDITION: ANNUALLY 18 STRAIGHT YEARS]
3. THIS SLIDE ILLUSTRATES THE HISTORY OF OUR RESERVE BASE AND GRAPHICALLY DEMONSTRATES THE IMPACT OF OUR ADJUSTMENTS TO MAINTAIN OPTIMUM SIZE.
4. YOU CAN SEE HOW WE HAVE INCREASED OUR RESERVE BASE THROUGH EXPLORATION SUCCESS AND ACQUISITIONS, HIGHLIGHTED BY THE HUGOTON MERGER IN 1970 AND PUBCO ACQUISITION IN 1973.
5. ADJUSTMENTS MADE TO SHRINK THE SIZE OF OUR RESERVE BASE ARE THE ADJUSTMENTS I HAVE PREVIOUSLY MENTIONED: IN 1979, THE SALE OF U.K. AND CANADIAN PROPERTIES AND THE FORMATION OF MESA ROYALTY TRUST; AND IN 1982 THE PROPOSED CREATION OF MESA OFFSHORE TRUST.

D. (SLIDE #5 - EMPLOYEES PER $1 MILLION ASSETS): I ALSO MENTIONED EARLIER THE IMPORTANCE OF PERSONNEL HAVING THE RIGHT TEAM, PROPERLY MOTIVATED AND IN QUANTITIES THAT OPERATE IN THE MOST PRODUCTIVE MANNER TO HELP ENSURE OPTIMUM SIZE.

1. THIS SLIDE ILLUSTRATES MY POINT.
2. YOU WILL NOTE OUR STEADY IMPROVEMENT IN THE RATIO OF EMPLOYEES TO ASSETS. IN A PERIOD WHEN NATIONAL PRODUCTIVITY HAS BEEN DECLINING, MESA CONTINUES TO LOWER THE {STRICKEN TEXT: NUMBER} [HANDWRITTEN ADDITION: RATIO] OF EMPLOYEES NECESSARY TO HANDLE ITS ASSETS.
3. {STRICKEN TEXT: AS WE HAVE MADE ADJUSTMENTS IN RESERVE BASE, WE HAVE BECOME MORE EFFICIENT.}

E. I WOULD LIKE TO CONCLUDE MY REVIEW OF OUR PROGRESS IN FULFILLING OUR PLAN BY EXAMINING OUR MOST IMPORTANT MEASUREMENT...HAS THE MESA STOCKHOLDER MADE MONEY?

1. (SLIDE #6 - GROWTH OF 1000 SHARES): THIS SLIDE ILLUSTRATES THE GROWTH OF A $10,000 INVESTMENT IN 1000 SHARES OF MESA MADE IN 1964 AND HOW IT HAS BEEN IMPACTED BY OUR ADJUSTMENTS TO MAINTAIN OPTIMUM SIZE.
2. SINCE 1964, OUR "INVESTOR" HAS RECEIVED THREE 10% STOCK DIVIDENDS (1967, 1968 AND 1972), THREE TWO-FOR-ONE STOCK SPLITS (1973, 1980 AND 1981), A DISTRIBUTION OF THE MESA ROYALTY TRUST (1979), AND A PROJECTED DISTRIBUTION OF THE MESA OFFSHORE TRUST (1982).
3. {STRICKEN TEXT: HIS} [HANDWRITTEN ADDITION: THE] ORIGINAL 1,000 SHARES HAS GROWN TO 23,958 SHARES AND UNITS (MSA = 10,648; MTR = 2,662; MOST = 10,648)...{STRICKEN TEXT: 2296% INCREASE}
4. THE VALUE OF THE INVESTMENT HAS GROWN FROM $10,000 TO $228,266. {STRICKEN TEXT: AS OF FRIDAY, OCTOBER 22 (MSA=15-3/4%; MTR= 22-3/4%; MOST= [VALUE INCLUDED IN MESA COMMON]...2182% INCREASE.}

V. (SLIDE #7 - MESA LOGO): HAS THE MESA PLAN TO MAINTAIN OPTIMUM SIZE WORKED? SHOULD WE STAY WITH THE PLAN?

A. THE RESULTS OF OUR PLAN THAT I HAVE OUTLINED TODAY DO DEMONSTRATE A {STRICKEN TEXT: SUCCESSFUL} [HANDWRITTEN ADDITION: GOOD] TRACK RECORD—OUR SHAREHOLDERS HAVE MADE MONEY, {STRICKEN TEXT: BY} [HANDWRITTEN ADDITION:...] OUR PLAN TO ACHIEVE OPTIMUM SIZE THROUGH RESERVE {STRICKEN TEXT: REPLACEMENT} [HANDWRITTEN ADDITION: ENHANCEMENT] BY EXPLORATION OR ACQUISITION [HANDWRITTEN ADDITION: OR SPINOFF, HAS BEEN SUCCESSFUL.]

B. WHERE DO WE GO FROM HERE?

C. WE BELIEVE WE SHOULD STAY WITH OUR PLAN.

D. WE CAN'T CONTROL WORLD MARKETS AND THE NATIONAL ECONOMY. BUT, WE CAN ANALYZE SITUATIONS AND TAKE ADVANTAGE OF OPPORTUNITIES THAT EXIST.

E. BECAUSE WE ARE WILLING TO MAKE ADJUSTMENTS TO MAINTAIN OPTIMUM SIZE, WE HAVE ESTABLISHED A SOUND RECORD ON THE THINGS WE CAN CONTROL...{STRICKEN TEXT: RESERVE REPLACEMENT}—PERSONNEL—EXPLORATION {STRICKEN TEXT: SUCCESS}—ACQUISITIONS—{STRICKEN TEXT: BUDGET}

F. (SLIDE #8 - OIL AND GAS EXPENDITURES): IN 1983, WE WILL {STRICKEN TEXT: HAVE BETTER CONTROL OVER} [HANDWRITTEN ADDITION: IMPROVE] OUR BALANCE SHEET BY REDUCING EXPENDITURES AND BRINGING BUDGET AND CASH FLOW MORE IN LINE.

1. FROM THIS SLIDE, YOU WILL ALSO NOTE THAT WE EXPECT TO REDUCE OUR DEBT.

G. (SLIDE #9 - U.S. MAP): IN 1983, WE EXPECT TO MAINTAIN A GOOD ACREAGE POSITION IN THE MAJOR BASINS IN THE UNITED STATES, AND BE SUCCESSFUL IN EXPLORATION AS WE HAVE BEEN IN 1982.

H. (SLIDE #10 - MESA LOGO): WE WILL CONTINUE TO STRIVE TO MAKE MONEY FOR OUR SHAREHOLDERS IN 1983, BY OFFERING AN ENERGY INVESTMENT PORTFOLIO CONSISTING OF:

1. MESA COMMON—FOR INVESTORS INTERESTED IN CAPITAL GROWTH IN A STANDARD OPERATING COMPANY AND WHO KNOW THEY WILL SHARE IN FUTURE SUCCESSES OF THE COMPANY.
2. MESA ROYALTY TRUST—FOR INVESTORS WANTING LONG-TERM, HIGH INCOME FROM OIL AND GAS PROPERTIES.
3. MESA OFFSHORE TRUST—FOR INVESTORS WHO ARE INTERESTED IN EXPLOSIVE EXPLORATORY POTENTIAL.

VI. I WOULD LIKE TO CONCLUDE TODAY BY ANNOUNCING OUR 3RD QUARTER EARNINGS.

A. OUR NET INCOME FOR COMMON SHARES FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1982, WAS $29.4 MILLION, A 23% INCREASE OVER $24 MILLION REPORTED FOR THE SAME PERIOD LAST YEAR.

B. EARNINGS WERE $.43 PER SHARE, COMPARED TO $.35 PER SHARE LAST YEAR.

C. OIL AND GAS REVENUES FOR THE THIRD QUARTER WERE $92.8 MILLION, COMPARED TO $92.7 MILLION LAST YEAR.

D. TOTAL REVENUES WERE $99.7 MILLION, COMPARED TO $103.8 MILLION DURING LAST YEAR'S THIRD QUARTER.

{STRICKEN TEXT: E. MESA'S NET DAILY U.S. PRODUCTION DURING THE THIRD QUARTE WAS AS FOLLOWS:}

{STRICKEN TEXT: 1982 1981
1. NATURAL GAS (MCF/DAY) 246,452 272,346
2. NATURAL GAS LIQUIDS (BBLS/DAY) 1,609 1,821
3. OIL AND CONDENSATE (BBLS/DAY) 7,939 8,454}

{STRICKEN TEXT: F. THE DECREASE IN OIL AND GAS PRODUCTION RESULTED FROM LOWER PIPELINE TAKES FROM PROPERTIES IN SOUTHWESTERN KANSAS, THE GULF OF MEXICO AND THE SAN JUAN BASIN.}

G. THE FULL RELEASE IS IN HANDOUT MATERIALS. (SLIDES OFF).

VII. NOW, I'LL BE PLEASED TO ANSWER YOUR QUESTIONS.