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	T. BOONE PICKENS, JR. REMARKS HOUSTON SECURITY DEALERS ASSOCIATION BRIAR CLUB 2603 TIMMONS LANE HOUSTON, TEXAS DECEMBER 8, 1982

4PM-5PM

BRIEFING INFORMATION

AGENDA

LYNN HOUSTON (HOW-STON) HAS REQUESTED THAT YOU ARRIVE AT THE BRIAR CLUB AT APPROXIMATELY 3:45 PM. THE PROGRAM IS TO BEGIN AT 4:00 PM. IT HAS BEEN REQUESTED THAT YOUR PRESENTATION LAST 20-25 MINUTES FOLLOWED BY A 15 MINUTE QUESTION AND ANSWER PERIOD. A BRIEF RECEPTION WILL FOLLOW THE PRESENTATION. MESA WILL BE BILLED FOR THE USE OF THE ROOM AND FOR REFRESHMENTS SERVED ($350-$400). THE BRIAR CLUB IS LOCATED AT THE CORNER OF TIMMONS AND WESTHEIMER—NOT FAR FROM LAMAR TOWER.

AUDIENCE/ATTENDANCE

THE AUDIENCE WILL BE COMPRISED PRIMARILY OF RETAIL STOCKBROKERS. THERE IS A POSSIBILITY THAT MEMBERS OF THE PRESS MAY ATTEND (HOUSTON CHRONICLE, HOUSTON POST AND HOUSTON BUSINESS JOURNAL). ATTENDANCE COULD RANGE FROM 40 TO 70 PEOPLE.

TOPIC

LYNN HOUSTON HAS SUGGESTED THAT YOUR PRESENTATION INCLUDE AN OUTLOOK FOR THE INDUSTRY AND MESA'S PLANS FOR THE FUTURE.

PRESENTATION OUTLINE - HIGHLIGHTS

I. INTRODUCTION

A. ADDRESS TWO POINTS TODAY: (1) THE OUTLOOK FOR THE OIL AND GAS INDUSTRY; AND (2) A REVIEW OF MESA'S STRATEGY [HANDWRITTEN ADDITION: PIG STORY]

II. SHORT-TERM OUTLOOK FOR THE INDUSTRY.

A. NOT MUCH GOOD NEWS THIS YEAR.

1. EXCESS SUPPLY OF CRUDE OIL.
2. SOFT MARKET FOR GAS.
3. SEISMIC AND DRILLING ACTIVITY.
4. EARNINGS AND PROFITS.

B. BOOM IS OVER.

C. 31 YEARS—TOUGH BUSINESS.

D. SHAKEOUT WILL CONTINUE.

1. TECHNICAL BUSINESS.
2. UNQUALIFIED PEOPLE ENTERED THE BUSINESS IN BOOM TIMES.
3. MANAGEMENTS EXPOSED WHO HID BEHIND RISING PRICES.
4. SHAKEOUT WILL STRENGTHEN THE INDUSTRY.

E. OPTIMISTIC ABOUT THE FUTURE.

F. POSITIVE FACTORS.

1. INTEREST RATES.
2. DRILLING COSTS.
3. INFLATION.
4. WINTER AND INVENTORIES.

G. DRILLING IN U.S. HAS DROPPED BY ONE-HALF—DEMAND WILL RETURN.

H. INDUSTRY WILL RECOVER—BUT IT WILL BE SLOW. INDUSTRY WILL REMAIN AMONG THE STRONGEST ECONOMIC ENTITIES IN OUR COUNTRY.

III. MESA'S PERFORMANCE AND FUTURE PLANS.

A. 1982 GOOD YEAR TO REVIEW PLAN.

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

B. PLAN IS SIMPLE—TO INCREASE RESERVES THROUGH EXPLORATION AND/OR ACQUISITION.

C. RESERVE ENHANCEMENT BRINGS BEST RESULTS FOR STOCKHOLDERS.

D. GOAL OF MANAGEMENTS—PROTECT AND EXPAND ASSETS AND VALUE OF SHAREHOLDERS' INTERESTS.

1. DEPLETABLE ASSETS.
2. MUST PROTECT AND EXPAND.
3. SOME COMPANIES LIQUIDATING.

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

F. HOW DOES MANAGEMENT ACHIEVE OPTIMUM SIZE? BY BALANCING RESERVE BASE AND CASH FLOW WITH ITS PERSONNEL TO ACHIEVE ECONOMIC INCREASES OF RESERVES THROUGH EXPLORATION AND ACQUISITION.

G. MAY EQUATE SUCCESS WITH BECOMING LARGE.

H. MESA EQUATES SUCCESS WITH ACHIEVING OPTIMUM SIZE.

I. RECOGNIZING THE IMPORTANCE OF OPTIMUM SIZE IS NOT ENOUGH—MUST BE WILLING TO MAKE DECISIONS TO ADJUST.

J. MESA BELIEVES SUCCESSFUL MANAGEMENTS ARE THOSE WHO KNOW THEIR ASSETS WELL; WHO CAN ANALYZE ACCURATELY; AND WHO ARE WILLING AND ABLE TO MAKE TIMELY DECISIONS.

K. TOUGH CHALLENGE TO MAKE A DECISION TO DOWN SIZE.

L. REVIEW MESA'S ADJUSTMENTS TO ACHIEVE OPTIMUM SIZE.

1. RESERVES GREW SIGNIFICANTLY FROM 1969 THROUGH 1978 (EXPLORATION, HUGOTON AND PUBCO).
2. 1979, BEGAN SERIES OF ADJUSTMENTS TO DOWN SIZE—U.K., CANADA, MESA ROYALTY TRUST.
3. 1980, MTS.
4. 1982, MESA OFFSHORE TRUST.

M. MESA OFFSHORE TRUST.

1. TEN PROPERTIES OFFSHORE TEXAS AND LOUISIANA.
2. UNITS OF BENEFICIAL INTEREST.
3. PROPERTIES OPERATED BY MESA.
4. INVESTMENT OF ONE-HALF BILLION DOLLARS.
5. 31 SUCCESSFUL WELLS, 5 WELLS DRILLING.
6. 7 WELLS ON 3 PROPERTIES ARE PRODUCING.
7. EXCELLENT POTENTIAL.

N. REVIEW OUR MOST IMPORTANT MEASURE TO DETERMINE WHETHER OR NOT OUR PLAN HAS BEEN SUCCESSFUL—HAS THE STOCKHOLDER MADE MONEY?

1. INVESTMENT OF $10,000 IN 1964 FOR 1,000 SHARES OF MESA COMMON.
2. THREE 10% STOCK DIVIDENDS, THREE TWO-FOR-ONE STOCK SPLITS, A DISTRIBUTION OF THE MTR AND A PROJECTED DISTRIBUTION OF MOST.
3. 1,000 SHARES GROWN TO OVER 24,000 SHARES AND UNITS.
4. INVESTMENT GROWN TO OVER $200,000.

P. HAS THE PLAN WORKED? SHOULD WE STAY WITH IT?

1. GOOD TRACK RECORD.
2. SHOULD STAY WITH THE PLAN.
3. BE READY TO TAKE ADVANTAGE OF OPPORTUNITIES.

Q. PLANS FOR 1983.

1. IMPROVE BALANCE SHEET AND REDUCE DEBT.
2. MAINTAIN GOOD AVERAGE POSITION IN MAJOR BASINS OF USA.
3. CONTINUE TO STRIVE TO MAKE MONEY FOR INVESTORS BY OFFERING AN ENERGY PORTFOLIO CONSISTING OF:
   a. MESA COMMON
   b. MESA ROYALTY TRUST
   c. MESA OFFSHORE TRUST

IV. QUESTIONS AND ANSWERS.

T. BOONE PICKENS, JR. REMARKS: HOUSTON SECURITY DEALERS ASSOCIATION

I. INTRODUCTION

A. THANK YOU, LYNN.

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

C. I HAVE BEEN ASKED TO ADDRESS TWO POINTS TODAY: (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 SHORT-TERM 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—DUE TO HIGH FINDING COSTS, HIGH INTEREST RATES AND THE DECLINE IN PRICES.

B. THE INDUSTRY BOOM, WHICH STARTED IN 1973, CAME TO AN ABRUPT HALT IN 1982.

C. BUT, THIS TOUGH PERIOD WE ARE NOW EXPERIENCING 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. THE LIST OF COMPANIES FALLING BY THE WAYSIDE WILL CONTINUE TO GROW.

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.
3. THIS SHAKEOUT IS ALSO EXPOSING MANAGEMENTS WHO, LULLED BY RECORD EARNINGS DUE TO A TWELVE-FOLD INCREASE IN PRICES ORCHESTRATED BY OPEC, HAVE FAILED' TO EMPHASIZE EFFICIENCY AND PRODUCTIVITY IN THEIR OPERATIONS.
4. ALL IN ALL, THIS SHAKEOUT PERIOD WILL ULTIMATELY STRENGTHEN THE INDUSTRY.

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 HAVE DROPPED.
2. WITH THE REDUCTION IN DRILLING COSTS OF 200-300 THIS YEAR, WE SHOULD BEGIN TO EXPERIENCE A REDUCTION IN FINDING COSTS.
3. INFLATION HAS BEEN CURBED.
4. A COLD WINTER IS FORECAST, 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. RECOVERY WILL BE SLOW, 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 PERFORMIANCE AND FUTURE PLANS.

A. FOR MESA, 1982 HAS BEEN A GOOD TIME TO REVIEW OUR STRATEGIC PLAN AND TO ASK QUESTIONS ABOUT IT:

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

B. OUR PLAN IS REALLY QUITE SIMPLE...TO INCREASE OUR RESERVES THROUGH EXPLORATION AND/OR ACQUISITION.

C. TO ACHIEVE THE BEST RESULTS FOR OUR SHAREHOLDERS, OUR PLAN EMPHASIZES THE ENHANCEMENT OF RESERVES.

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, WHETHER LARGE OR 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 ABLE TO INCREASE THEIR RESERVES. AFTER PAYING CORPORATE AND WINDFALL PROFIT TAXES, THEIR DIVIDEND CHECK REPRESENTS A RETURN OF CAPITAL.

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

F. HOW DOES MANAGEMENT ACHIEVE OPTIMUM SIZE? BY BALANCING RESERVE BASE AND CASH FLOW WITH ITS PERSONNEL TO ACHIEVE ECONOMIC INCREASES OF RESERVES THROUGH EXPLORATION AND ACQUISITION.

G. TO MANY, SUCCESS MEANS BECOMING LARGE.

H. BUT TO MESA, SUCCESS IS EQUATED WITH ACHIEVING OPTIMUM SIZE—A SIZE THAT MAY INCREASE OR DECREASE DEPENDING UPON VARIOUS ECONOMIC FACTORS.

I. RECOGNIZING THE IMPORTANCE OF OPTIMUM SIZE IS NOT ENOUGH—MANAGEMENTS MUST BE WILLING TO MAKE TOUGH DECISIONS TO ACHIEVE IT.

J. THIS BRINGS ME TO AN IMPORTANT ELEMENT OF THE MESA PLAN—WE BELIEVE SUCCESSFUL MANAGEMENTS ARE THOSE WHO KNOW THEIR ASSETS WELL; WHO CAN ANALYZE ACCURATELY; AND WHO ARE WILLING AND ABLE TO MAKE TIMELY ADJUSTMENTS IN ORDER TO ACHIEVE OPTIMUM SIZE.

K. BELIEVE RAE, MAKING THE INITIAL DECISION TO DOWN SIZE A COMPANY IS A TOUGH CHALLENGE TO MOST MANAGEMENTS.

L. TO ILLUSTRATE THE TYPES OF ADJUSTMENTS THAT MAY BE NECESSARY TO ACHIEVE OPTIMUM SIZE, LET'S LOOK AT THE MESA RECORD.

M. 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.

1. THROUGH EXPLORATION SUCCESSES AND ACQUISITIONS OF HUGOTON IN 1970 AND PUBCO IN 1973, MESA'S RESERVE BASE GREW SIGNIFICANTLY FROM 1969 THROUGH 1978.
2. BEGINNING IN 1979, WE BEGAN MAKING SEVERAL ADJUSTMENTS TO DOWN SIZE IN OUR PURSUIT TO ACHIEVE THE OPTIMUM SIZE FOR OUR COMPANY. IN 1979, WE SOLD OUR PROPERTIES IN THE UNITED KINGDOM AND CANADA AND SPUN OFF PRODUCING PROPERTIES, REPRESENTING ABOUT ONE-HALF OF OUR RESERVES, TO THE MESA ROYALTY TRUST.
3. IN 1980, WE FORMED THE MTS LIMITED PARTNERSHIP WITH TEXACO AND SEQUOIA PETROLEUM. AS OPERATOR, MESA CONTRIBUTED 1.9 MILLION NET ACRES, REPRESENTING SUBSTANTIALLY ALL OF ITS UNDEVELOPED OIL AND GAS LEASES OTHER THAN IN THE OUTER CONTINENTAL SHELF.
4. OUR MOST RECENT OPTIMUM SIZE ADJUSTMENT IS THE PROPOSED FORMATION OF THE MESA OFFSHORE TRUST, TO BE PRESENTED TO OUR, SHAREHOLDERS TOMORROW.

N. I WOULD LIKE TO DIVERT FROM MY DISCUSSION OF OPTIMUM SIZE ADJUSTMENTS TO BRIEFLY REVIEW THE MESA OFFSHORE TRUST.

1. THE LOCATIONS OF THE TEN OIL AND GAS PROPERTIES PROPOSED FOR THE TRUST ARE OFFSHORE LOUISIANA AND TEXAS.
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 SELLING.
6. SEVEN "JELLS 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 FOR THESE PROPERTIES.

O. I WOULD LIKE TO CONCLUDE MY REVIEW OF OPTIMUM SIZE ADJUSTMENTS DICTATED BY OUR STRATEGIC PLAN BY EXAMINING OUR MOST IMPORTANT MEASUREMENT—HAS THE MESA STOCKHOLDER MADE MONEY?

1. LET'S CONSIDER A HYPOTHETICAL INVESTMENT OF $10,000 MADE IN 1964 TO PURCHASE 1,000 SHARES OF MESA COMMON STOCK TO ASSESS THE PERFORMANCE OF OUR OPTIMUM SIZE ADJUSTMENTS.
2. SINCE 1964, OUR HYPOTHETICAL INVESTOR HAS RECEIVED THREE loo 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. THE ORIGINAL 1,000 SHARES HAS GROWN TO APPROXIMATELY 24,000 SHARES AND ROYALTY UNITS, INCLUDING MOST. (MSA = 10,648; MTR = 2,662; MOST = 10 , 648).
4. THE VALUE OF THE INVESTMENT HAS GROWN FROM $10,000 TO OVER $200,000.

P. HAS THE MESA PLAN TO ACHIEVE OPTIMUM SIZE WORKED? SHOULD WE STAY WITH THE PLAN?

1. THE RESULTS OF OUR PLAN THAT I HAVE OUTLINED TODAY DO DEMONSTRATE A GOOD TRACK RECORD—OUR SHAREHOLDERS HAVE MADE MONEY...OUR PLAN TO ACHIEVE OPTIMUM SIZE THROUGH RESERVE ENHANCEMENT BY EXPLORATION, ACQUISITION, OR SPINOFF HAS BEEN SUCCESSFUL.
2. WHERE DO WE GO FROM HERE?
3. I'VE BELIEVE I'VE SHOULD STAY WITH OUR PLAN,
4. WE CAN'T CONTROL WORLD MARKETS AND THE NATIONAL ECONOMY. BUT, WE CAN ANALYZE SITUATIONS AND TAKE ADVANTAGE OF OPPORTUNITIES THAT ARISE.
5. BECAUSE WE ARE WILLING TO MAKE ADJUSTMENTS TO MAINTAIN OPTIMUM SIZE, WE HAVE ESTABLISHED A SOUND RECORD ON THE THINGS WE CAN CONTROL...PERSONNEL—EXPLORATION—ACQUISITIONS.

Q. WHAT ARE OUR PLANS FOR 1983?

1. IN 1983, WE PLAN TO IMPROVE OUR BALANCE SHEET BY REDUCING EXPENDITURES AND BRINGING BUDGET AND CASH FLOW MORE IN LINE, WE ALSO EXPECT TO REDUCE DEBT.
2. WE PLAN 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.

R. ABOVE ALL, 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.

IV. THANK YOU. I WILL NOW BE PLEASED TO ANSWER YOUR QUESTIONS.