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	REMARKS FOR THE MESA LIMITED PARTNERSHIP ANNUAL MEETING AMARILLO TX MAY 17, 1988 9:00 A.M.

Welcome to Mesa Limited Partnership’s second annual Meeting. . .(Mesa’s first was in 1965; 23 years)

[Handwritten addition: My Dad is missing his first mtg.—Mother last mtg. was 1977.]

I appreciate your attendance here today.

The collection and tabulation of proxies at today’s meeting will be conducted by the independent, certified public accounting firm of Peat Marwick Main & Co.

Management will not see results of the individual voting, but will be told the cumulative results of the election.

Mesa began using confidential voting procedures at last year’s annual meeting, and this year we will vote on the establishment of formal confidential voting procedures in the Partnership Agreement.

As far as we’ve been able to determine, we are the only publicly traded entity in America to have totally confidential voting.

In order to give the election judge time to tally votes and determine the number of units represented at the meeting, anyone still holding proxies should pass them to the center aisle.

If you have not already voted and don’t have a proxy, please raise your hand and a representative of Peat Marwick will get one to you.

The first part of this meeting will cover formal business. . .Prior to concluding this portion of the meeting, unitholders will be given an opportunity to bring proposals before the meeting.

Then I’ll comment on Mesa’s 1987 performance and outline our plans for the future.

Finally, I’ll open it up for questions.

Based upon comments following last year’s meeting, some unitholders felt that too much time was devoted to issues not relevant to the Partnership.

To prevent this from occurring today, questions or general statements from the audience will not be allowed until the question and answer period at the end of our meeting.

Questions during the Q & A session should be short and concise.

This meeting will be conducted under general rules of parliamentary procedure in accordance with Roberts Rules of Order.

Any procedural questions will be answered by our parliamentarian, Lin Patterson.

While we’re waiting for the additional proxies and ballots to be counted, I would like to introduce Mesa’s advisory committee members and officers.
—Jerry Walsh, not here today
—Wales Madden
—Bob Stillwell
—Paul Cain, President
—Tex Corley, Vice President and Secretary
—Jared Hazleton, Vice President Economics

This meeting has been called for the following purposes.

First, to consider and vote upon a number of proposed amendments to the Partnership Agreement that provide for:
—The annual election by cumulative voting of the Advisory Committee members
—Independent and confidential collection and counting of proxies
—A reduction of the number of votes required to remove the general partner
—And a revision of the Property Acquisition Fee payable to the General Partner

Second, assuming the amendments I just outlined are adopted, to elect three members of the Advisory Committee.

Third, to ratify the appointment of Arthur Andersen & Co. as the Partnership’s independent public accountants for 1988.

Fourth, to consider and vote upon a unitholder proposal calling for publication of Mesa’s political contributions.

And last, to act on any other business matters that may properly come before the meeting.

According to our ownership list there were an aggregate of [Handwritten addition: 174,424,063] common and preference units held by limited partners and entitled to vote at the meeting.

Each unit is entitled to one vote.

A majority of the issued and outstanding units held by limited partners represents a quorum for all matters to be considered at this meeting.

Will the secretary please advise the meeting if a quorum is present.?
—[Handwritten addition: Tex Corley]: “Mr. Pickens, Peat Marwick reports there are present in person or represented by proxy       units, or approximately       % of the units entitled to vote as of the record date. Accordingly, a quorum is present.”

We will now proceed with a tally of the votes.

Will the secretary please report on the voting results for the various proposals on the ballot?
—[Handwritten addition: Tex Corley]: “Peat Marwick reports there were       units, or approximately [Handwritten addition: 51]% of the units entitled to vote, voting in favor of the proposed amendments to the Partnership Agreement; Consequently, the proposal has passed.”
—[Handwritten addition: Tex Corley]: “Peat Marwick reports       units, or approximately [Handwritten addition: 71]% of the units entitled to vote, were cast for Jerry Walsh in the election of Advisory Committee members;       units, or [Handwritten addition: 68]% of the units entitled to vote, were cast for Wales Madden; and       units, or [Handwritten addition: 68]% of the eligible units, were cast for the election of Bob Stillwell. Consequently, Messrs. Walsh, Madden and Stillwell have been elected members of the Advisory Committee.”
—[Handwritten addition: Tex Corley]: “Peat Marwick reports       units, or approximately       % of the units entitled to vote, voted in favor of the ratification of Arthur Andersen & Co. as Mesa’s independent public accountants for 1988; Consequently, the proposal has passed.”
—[Handwritten addition: Tex Corley]: “Peat Marwick reports       units, or approximately       % of the units entitled to vote, voted in favor of the unitholder proposal calling for publication of the Partnership’s political contributions; Consequently, the proposal has not passed.”

If any unitholder has formal business to be brought before this meeting, the chair will entertain such business at this time.

It would be appreciated if such business could be stated concisely. . .The chair will allow 3 minutes per unitholder for discussion and debate.

If there is no further business, that concludes the formal part of the Partnership’s second annual meeting.

I’d like to begin the next portion of the meeting by reviewing Mesa’s results for 1987.

One of our most significant accomplishments was that we replaced 4% more reserves than we produced, at a replacement cost of only $.36 per thousand cubic feet. . .a very low replacement cost.

Cash flow from operations was up 4% from 1986’s.

And, probably of more interest to you as owners, we paid our partners $310 million in mostly tax-deferred distributions.

Now I’d like to review our outlook for the industry, since it determines our strategy for the future.

We decided some time back that the future of the U.S. industry is gas, not oil, since most of the oil in the United States has been found.

Gas prices will lead the industry’s return to prosperity. . .but not until supply and demand balance.

Gas supply is declining.

Look at the peak drilling years from about 1980-85, when an average of more than 3,000 rigs were operating. . .peaked at 4,500 in 1981 .

Yet the industry barely replaced its production.

Once the number of rigs went below 2,300, gas reserves began a rapid decline.

So with fewer than 1,000 rigs operating in the United States today and no incentive to explore, the supply will continue its drop.

The problem that has plagued gas producers since 1980 is what we call the gas “bubble.”

We expect supply and demand to balance during 1990.

Only a 10-year bubble. . .some said it would last only 6 months.

There’s a good possibility of localized shortages this coming winter, which we believe will push gas prices up.

Once supply and demand come into balance, we believe gas prices will increase.

The only thing that may restrict gas price increases would be the cost of alternate fuels such as oil and coal.

Smooth sledding to $2.50, then competition will slow the increase.

But because gas is a much cleaner fuel than oil or coal, we expect gas to sell at a premium on an energy equivalent basis by the mid-1990s.

Mesa today is the largest independent producer of domestic oil and gas in the United States, with natural gas accounting for nearly 80% of our reserves.

About 80% of Mesa’s reserves are in the Hugoton field of southwest Kansas and the adjacent Panhandle field of Texas.

The Hugoton and Panhandle fields are very important to our operations because they contain long-lived, shallow gas reserves that will produce well beyond the year 2000.

These gas reserves are greatly responsible for Mesa’s reserve life index of 18.4 years, which is among the longest in the industry.

Mesa’s other significant holdings are in the Gulf of Mexico and in the Midcontinent, San Juan, Permian Basin and Rocky Mountain regions.

Mesa’s current properties have the potential for significant price and production enhancement in the future.

One important factor in the valuation of these reserves is a low-price gas contract with Kansas Power & Light that will expire in December 1989.

By 1990, almost all of our production will be available for sale at market prices.

The value of Mesa’s Hugoton reserves is being enhanced through our infill drilling program, which we expect to substantially increase our reserves and production capability in the field.

Recently received $2.60/MCF for the sale of our infill gas to KP&L.

Since initiating the program in 1986, we have drilled about 100 infill wells, and we expect to drill about 250 more by 1991.

We also have identified 450 locations in other areas that we expect will add substantial reserves when drilled.

Our future strategy includes adding reserves in our primary producing areas.

A second part of our future strategy is to continue investing in undervalued situations.

A question has been what effect October 19th’s market crash had on Mesa’s investments.

There’s no denying that the market drop cut our profits dramatically.

But as a testimonial to our investment strategy, Mesa still realized a $10 million profit from its marketable securities for 1987. . .after the worst market decline in history.

And for the first quarter of 1987, Mesa has recognized gains of about $6 million from its investments.

The third part of our future strategy is to reduce costs everywhere we can.

This year’s annual report is a good example.

You’ll be pleased to know we cut the 1987 annual report’s cost by more than half, from $175,000 down to $85,000. . .a little plain, but much cheaper.

The average cost of annual reports for America’s 11,000 publicly traded companies in 1987 was $463,000. . .or $3 a copy compared to Mesa’s $.39 a copy.

I think our reports may very well be the best in the industry for reporting the facts clearly and concisely.

While a savings of a couple hundred thousand dollars at a company this size may look like peanuts on the books, you as owners realize that such savings from all of Mesa’s operations eventually add up to a lot of money in your pockets.

And that, after all, is management’s job. . .to maximize value for the owners by doing the best we can with the capital and assets available to us.

That was the reason behind our recent decision to repurchase up to $100 million worth of the Partnership’s common units.

We have so far repurchased 2.4 million units for about $30 million.

To summarize Mesa’s performance, we’re maintaining our profitability even with today’s energy prices, we’re paying our partners the highest distribution-to-equity ratio of any of the country’s 20 largest oil and gas producers, and at the same time we’re building our reserve base in expectation of higher energy prices.

You can rest assured that Mesa’s 574 employees are dedicated to maximizing value for you, the owners.

After all, about 95% of us are Mesa unitholders as well, so we know where our priorities lay.

Now, I look forward to your questions.