iogapa.org

OIL AND GAS EXPLORATION & PRODUCTION RESEARCH 1M A

Y

2 0

0

7

Joseph Allman, CFAExecutive Director [email protected](Houston) 713-216-6503

Brian [email protected](Houston) 713-216-6218

Nicholas [email protected](Houston) 713-216-5036

Rodney Clayton, [email protected](New York) 212-622-2873

Joseph Allman, CFAExecutive Director [email protected](Houston) 713-216-6503

Brian [email protected](Houston) 713-216-6218

Nicholas [email protected](Houston) 713-216-5036

Rodney Clayton, [email protected](New York) 212-622-2873

Oil and Gas Exploration & ProductionIndustry Update

See page 23 for analyst certification and important disclosures, including investment banking relationships. JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making their investment decision. Customers of JPMorgan in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganmarkets.com or can call 1-800-477-0406 toll free to request a copy of this research.


Y

2 0

0

7

E&P Stock Performance Long Term

Note: Indexed to 100 @ YE94

Source: Bloomberg (Prices as of 5/11/07)

0

200

400

600

800

1,000

1,200

1,400

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

E&P Index WTI 12 month strip Gas 12 month strip

100 = $1.78 Gas & $17.81 Oil

E&P Stock Index Participants:

APA, APC, BEXP, CHK, DNR, DVN, EAC, EOG, FST, KWK, NFX, PQ, PVA, PXD, SGY, SKE, SM, SWN, THX, TMR, VPI, WLL, WTI, XEC, XTO


Y

2 0

0

7

EPX Index Since Inception


150

175

200

225

250

275

300

325

350Ju

n-05

Jul-0

5

Aug

-05

Sep

-05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb

-06

Mar

-06

Apr

-06

May

-06

Jun-

06

Jul-0

6

Aug

-06

Sep

-06

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb

-07

Mar

-07

Apr

-07

May

-07

EC

B

G

A

D F

Declines Days Inclines Days B to C: 17.59% 38 C to D: 26.38% 82 D to E: 17.72% 37 E to F: 19.91% 43 F to G: 23.72% 53 G to H: 28.71% 57 H to I: 15.86% 55 I to J : 24.75% 59 J to K: 15.11% 41 K to L: 13.22% 46 L to M: 6.79% 7 M to N: 17.57% 39 Median 16.73% 40 24.75% 58

M

L

N

K

J

I

H

EPX Participants:

APA, APC, CHK, COG, DNR, DVN, ECA, EOG, FST, KWK, NBL, NFX, PPP, PXD, PXP, RRC, SM, SWN, UPL, WTI, XEC, XTO


Y

2 0

0

7

EPX Index Vs 12 Month Crude, 12 Month Gas, and OSX Index

Note: Indexed to 100 at 28 June 2005


40

60

80

100

120

140

160

180

200

220

Jun-

05

Jul-0

5

Au

g-0

5

Se

p-0

5

Oct

-05

No

v-0

5

De

c-0

5

Jan-

06

Fe

b-0

6

Ma

r-0

6

Ap

r-0

6

Ma

y-06

Jun-

06

Jul-0

6

Au

g-0

6

Se

p-0

6

Oct

-06

No

v-0

6

De

c-0

6

Jan-

07

Fe

b-0

7

Ma

r-0

7

Ap

r-0

7

Ma

y-07

Jun-

07

Date EPX OSX Spot Oil Spot Gas


Y

2 0

0

7

Stocks Covered (Comp Table as of 5-11-07)

U.S. E&Ps - SUMMARY COMPS

LAST PRICE ENTERPRISE NET ASSET VALUE / SHARE PRICE / NAV RLI EV / EBITDA E&P EV / McfeANALYST RATING COMPANY TICKER 5/11/2007 VALUE JPM DECK NYMEX JPM NYMEX (YEARS) 2007E 2008E ADJUSTED YE06

LARGE CAPITALIZATION (>$10B)Allman OW Anadarko Petroleum APC $45.60 $38,127 $47.99 $73.36 95% 62% 12.9 5.5x 5.1x $2.31Allman OW Apache Corporation APA $73.93 $28,857 $79.96 $102.64 92% 72% 11.6 4.5x 4.6x $2.01Allman OW Chesapeake Energy CHK $34.30 $25,957 $40.95 $55.76 84% 62% 13.4 5.3x 5.0x $2.78Allman N Devon Energy DVN $75.06 $40,455 $76.45 $105.26 98% 71% 10.4 5.7x 5.2x $2.84Allman OW EOG Resources EOG $75.91 $19,190 $79.95 $99.41 95% 76% 10.8 5.9x 5.5x $2.79Allman OW XTO Energy XTO $55.89 $23,846 $61.39 $78.58 91% 71% 13.9 6.0x 6.2x $2.74

MEDIUM CAPITALIZATION (>$2B)Clayton N Cabot Oil & Gas COG $37.18 $3,749 Pending 16.3 7.5x 7.6x $2.61Allman OW Denbury Resources DNR $34.58 $4,711 $40.97 $57.69 84% 60% 11.6 9.7x 8.7x $4.44Allman N Newfield Exploration NFX $44.03 $7,008 $47.79 $70.47 92% 62% 8.2 4.4x 4.2x $3.07Clayton OW Noble Energy NBL $59.91 $12,235 Pending 10.9 5.4x 5.3x $2.40Kuzma N Petrohawk Energy HK $15.07 $3,952 $16.58 $23.87 91% 63% 8.9 5.5x 5.0x $3.67Clayton N Pioneer Natural Resources PXD $49.28 $7,934 Pending 22.9 7.7x 6.9x $1.40Clayton N Plains Exploration PXP $48.95 $4,252 Pending 16.2 8.2x 7.1x $2.00Allman N Quicksilver Resources KWK $40.74 $4,109 $47.12 $66.12 86% 62% 21.2 12.3x 11.0x $2.56Clayton OW Range Resources RRC $37.13 $6,026 Pending 14.4 8.4x 7.5x $3.57Allman OW Southwestern Energy SWN $43.27 $7,513 $51.00 $69.28 85% 62% 9.4 12.0x 8.5x $7.23Clayton OW Ultra Petroleum UPL $62.60 $9,709 Pending 20.6 17.2x 13.3x $4.06Allman N W&T Offshore WTI $28.05 $2,858 $32.36 $43.21 87% 65% 5.3 3.5x 3.6x $3.88

SMALL CAPITALIZATION (<$2B)Allman UW Brigham Exploration BEXP $6.42 $478 $11.88 $15.81 54% 41% 9.5 4.9x 4.2x $3.21Allman N Delta Petroleum DPTR $19.73 $1,445 $27.97 $42.68 71% 46% 15.6 14.7x 8.5x $5.05Allman N Edge Petroleum EPEX $13.86 $782 $15.45 $19.97 90% 69% 8.3 5.0x 4.4x $3.31Clayton N Encore Acquisition Company EAC $27.15 $2,954 Pending 16.3 7.4x 6.2x $2.01Allman OW Endeavour International END $1.97 $615 $2.44 $4.32 81% 46% 2.8 4.8x 6.1x $10.37Clayton N EXCO Resources XCO $17.09 $6,145 Pending 12.4 7.9x 6.6x $3.00Clayton N Gasco Energy GSX $1.87 $215 Pending 6.2 10.1x 3.4x $4.90Allman OW Goodrich Petroleum GDP $35.70 $1,275 $30.06 $50.21 119% 71% 10.3 15.3x 9.2x $7.57Clayton N Houston Exploration THX $57.04 $1,781 Pending 8.2 3.7x 3.2x $2.55

Allman OW Mariner Energy** ME $23.74 $2,633 $33.86 $39.04 70% 61% 6.7 3.7x 3.4x $3.68Kuzma N McMoRan Exploration MMR $13.00 $668 $17.54 $23.48 74% 55% 2.7 5.3x 4.3x $8.80Allman N PetroQuest Energy PQ $13.74 $860 $12.47 $19.24 110% 71% 4.3 4.4x 3.6x $6.24Allman N St. Mary Land & Exploration SM $36.44 $2,415 $42.02 $57.19 87% 64% 8.7 4.0x 4.1x $2.70Clayton OW Stone Energy SGY $32.75 $1,706 Pending 7.6 3.7x 4.1x $2.89Allman OW Venoco VQ $18.89 $1,466 $21.30 $31.64 89% 60% 12.2 5.4x 4.9x $2.39Clayton N Whiting Petroleum WLL $42.65 $2,593 Pending 17.4 6.0x 6.2x $1.74

Group Median 88% 62% 10.8 5.6x 5.3x $2.94Group Totals* 12.1 5.8x 5.5x $2.63

2006 2007 2008 2009 2010 BeyondJPM WTI Oil ($/bbl) $66.36 $62.52 $60.00 $60.00 $55.00 $55.00Deck Henry Hub Gas($/Mcf) $7.23 $7.50 $7.50 $7.25 $7.00 $7.00

NYMEX WTI Oil ($/bbl) $66.34 $62.80 $69.61 $70.04 $69.05 $68.195/11/2007 Henry Hub Gas($/Mcf) $7.23 $7.89 $8.96 $8.69 $8.34 $8.04

*Group Totals metrics use the sum of each of the metric's components for the entire coverage universe (e.g. RLI = Group's Total Reserves / Group's Total Production).**NAV analysis does not reflect YE06 proved reserves, potential reserves, and updated cost estimates which may not be directly comparable to other companies' NAVs.

Source: Company reports, Bloomberg, and JPMorgan estimates. Note: OW - Overweight, N - Neutral, UW - Underweight


Y

2 0

0

7

Return on Drilling Dollars (RODD)

Source: Company Reports & JPMorgan Estimates

SUMMARY TABLE - RETURN ON DRILLING DOLLARS (RODD)

Current 2006 2006 2007EEV/PD Res. Acquired Drill-bit Return on Drill-bit Cash Margin Adj. YE06 Return on

PD F&D** PD F&D Drilling Dollars PD F&D PD RLI Drilling Dollars($/Mcfe) ($/Mcfe) ($/Mcfe) (RODD) ($/Mcfe) ($/Mcfe) (RODD)

LARGE CAPITALIZATION (>$10B)Anadarko Petroleum $3.20 $6.69 $5.58 0% $3.08 $4.96 8.3 8%Apache Corporation $3.04 $2.48 $5.06 1% $2.69 $5.30 8.1 14%Chesapeake Energy $4.66 $13.07 $4.90 1% $2.74 $5.38 8.9 13%Devon Energy $4.03 $9.86 $3.65 6% $3.33 $5.20 7.8 8%EOG Resources $4.02 $0.00 $3.46 5% $3.60 $4.95 7.9 5%XTO Energy $4.16 $8.77 $2.20 15% $1.99 $5.21 9.8 20%

MEDIUM CAPITALIZATION (>$2B)Cabot Oil & Gas $3.63 $0.00 $2.98 6% $2.67 $4.94 12.4 7%Denbury Resources $6.94 $4.00 $3.59 9% $4.15 $5.21 8.1 3%Newfield Exploration $4.72 $0.00 $5.06 0% $4.03 $5.18 * 7.0 4%Noble Energy $3.40 $6.53 $3.69 8% $2.80 $5.27 9.0 11%Pioneer Natural Resources $1.21 $1.84 $8.43 -5% $4.08 $4.71 14.8 1%Plains Exploration $7.27 $0.00 NM NM $4.17 $4.75 9.3 1%Quicksilver Resources $4.30 $0.00 $2.79 3% $2.46 $3.87 * 8.0 8%Range Resources $3.73 $7.48 $2.96 10% $2.88 $5.54 9.9 10%Southwestern Energy $9.05 $0.00 $5.30 -1% $3.48 $5.47 7.2 9%Ultra Petroleum $8.36 $0.00 $1.69 35% $1.55 $5.00 7.8 39%W&T Offshore $20.27 $7.62 $4.32 21% $3.97 $5.77 3.7 20%

SMALL CAPITALIZATION (<$2B)Brigham Exploration $0.00 $0.00 $7.08 -5% $4.79 $6.10 5.4 6%Delta Petroleum $4.65 $12.16 $6.67 -9% $4.70 $3.74 6.4 -6%Edge Petroleum $18.27 $13.85 $9.70 -19% $4.76 $5.63 3.5 8%Encore Acquisition Company$0.98 $0.00 $12.99 -7% $3.03 $5.11 11.7 6%Endeavour International $87.97 $7.50 $16.96 -67% $4.61 $4.82 3.0 1%EXCO Resources $0.84 $4.55 $3.93 3% $3.76 $5.28 10.8 4%Gasco Energy $149.71 $0.00 $3.20 -5% $2.76 $2.98 9.0 1%Houston Exploration $0.46 $5.10 $3.40 12% $9.54 $5.80 5.8 -8%Mariner Energy $3.12 $5.29 $4.53 14% $3.61 $6.15 3.9 32%McMoRan Exploration $26.15 $0.00 $12.65 -31% $3.90 $4.56 2.6 13%PetroQuest Energy $27.25 $0.00 $4.00 15% $4.03 $5.96 * 6.0 9%St. Mary Land & Exploration $0.92 $6.36 $3.92 7% $4.38 $5.59 6.9 4%Stone Energy $2.04 $0.00 $16.94 -15% $4.10 $5.80 5.3 9%Venoco $7.93 $4.46 $4.09 1% $4.72 $5.41 7.6 2%Whiting Petroleum $1.77 $12.17 $4.67 2% $3.84 $5.09 11.2 3%

Totals $3.99 $6.32 $4.30 3% $3.12 $5.18 8.4 9%

* Indicates that we have adjusted the company's historical number to better reflect future expectations.** Anadarko's KMG and WGR acquisitions account for 55% of the Acquired PD Reserves. Absent APC's acquisitions, the group's average Acquired PD F&D cost was $5.82/Mcfe


Y

2 0

0

7

Return on Drilling Dollars (RODD) – Why Proved Developed F&D?

Unit Metrics ($/Mcfe)E&Ps that have reported

2005 2006 ChangeAll-in F&D $1.96 $3.49 $1.53Drill-bit F&D $1.89 $2.70 $0.81 (Excl. revisions & corporate acquisitions)

PD F&D $2.54 $4.31 $1.76 (E&D Spending / Proved Developed Reserve Additions inc. Revisions)

Cash Operating $5.72 $5.13 ($0.60)Margins

Sensitivity of Returns

Required NYMEX Gas Price (assuming 8x oil/gas ratio)$4.98 $6.12 $7.26 $8.40 $9.54

Cash Operating Margins2.6% $3.00 $4.00 $5.00 $6.00 $7.00

$1.50 13% 22% 30% 39% 47%PD $2.50 3% 8% 13% 18% 24%F&D $3.00 0% 4% 9% 13% 18%Costs $3.50 -2% 2% 6% 10% 13%

$4.50 -6% -2% 1% 4% 7%

*Assumes PD RLI of 8 years

Source: Company Reports & JPMorgan Estimates

Increase in PUD% from 32.3% in 2005 to 34.2% in 2006.

Companies can book offset locations without incurring the cost.

When including PV impact, the full cash cost to find reserves (PD F&D) needs to be 2x cash operating margins to earn a reasonable rate of return.


Y

2 0

0

7

NAV Model – Devon Energy, Inc.D

evon

En

erg

yN

et A

ss

et V

alu

atio

n

YE

06

As

sum

ptio

ns

Co

mm

od

ity Price

JPM

org

anN

YM

EX

Fu

tures

Cu

stom

Deck

Op

tion

s:G

asO

ilG

asO

ilG

asO

il

2005-A$8.66

$56.57as of

4/27/07

2006-A$7.23

$66.36

2007-E$7.50

$62.52$7.86

$64.73$7.00

$56.00

2008-E$7.50

$60.00$8.90

$71.75$7.00

$56.00

2009-E$7.25

$60.00$8.60

$71.63$7.00

$56.002010-E

$7.00$55.00

$8.27$70.32

$7.00$56.00

Period E

nding

Be

yon

d$7.00

$55.00$8.00

$69.27$7.00

$56.00

Discount R

ate

Sh

ares Ou

tstand

ing

:P

erpetual Com

modity P

rice

Com

mon S

hares Outstanding

444.0as of Y

E06

G&

A C

osts

Potential D

ilution5.0

LOE

Costs

To

tal Po

tential S

hares

449.0S

ervice & D

rilling Costs

Valu

atio

n B

reakdo

wn

JPM

org

an P

ricesN

YM

EX

Strip

Prices

Un

Rsk R

srvR

eservesR

sk Rsrv

Disco

un

tedV

alue

Pre-T

axD

iscou

nted

Valu

e

PR

OV

ED

RE

SE

RV

ES

(at YE

06)(B

cfe)R

isking

(Bcfe)

Net C

FP

er Sh

areP

V-10

Net C

FP

er Sh

areU

.S. P

roved Reserves

8,7761.0%

8,688$16,083

$35.82$1.85

$20,249$45.10

Canadian P

roved Reserves

4,1231.5%

4,061$8,407

$18.72$2.07

$10,811$24.08

Other International (E

xcl. Egypt)

1,4645.0%

1,345$4,319

$9.62$3.21

$5,408$12.04

Adjustm

ent since YE

= P

UD

CA

PE

X - cash flow

generated by proved reserves$0

$0.00$0

$0.00T

otal V

alue O

f Pro

ved R

eserves8,776

1.0%8,688

$28,810$64.16

$3.32$36,468

$81.21

BA

LA

NC

E S

HE

ET

(As o

f YE

06):

Valu

eP

er Sh

areV

alue

Per S

hare

Long-Term

Debt (excludes C

VX

convertibles)($4,841)

($10.78)($4,841)

($10.78)O

ther Liabilities (excludes taxes, AR

O, &

derivative liabilities)($623)

(1.39)($623)

(1.39)N

et Working C

apital (excludes AR

O and derivative liabilities)

($1,271)(2.83)

($1,271)(2.83)

Investments &

Other A

ssets (excludes goodwill &

CV

X stock)

$5071.13

$5071.13

Preferred S

tock (Liquidation Value)

($150)(0.33)

($150)(0.33)

SO

LD

PR

OP

ER

TIE

S Y

ET

TO

BE

CL

OS

ED

Egypt A

sset Sale (after tax proceeds)

300.00.67

300.00.67

Net B

alance S

heet

($6,078)($13.54)

($6,078)($13.54)

FU

TU

RE

CO

ST

S &

OT

HE

RV

alue

Per S

hare

Valu

eP

er Sh

areD

iscounted Future C

ash G&

A (P

roved Reserves)

($3,370)(7.51)

($3,370)(7.51)

Discounted C

ash Taxes (P

roved Reserves)

35%A

ssumed T

ax Shield

($4,228)(9.42)

($5,750)(12.81)

Gathering and M

arketing$2,360

5.25$2,360

5.25P

resent Value O

f Hedges

$00.00

$00.00

Oth

er Co

sts / Reven

ue

($5,239)($11.67)

($6,761)($15.06)

Valu

e Of P

rov

ed R

eserves (A

fter Taxes, B

alance S

heet, &

Hed

ges)

$17,493$38.96

$23,629$52.62

RIS

KE

D P

OT

EN

TIA

LU

nR

sk Rsrv

Reserves

Rsk R

srvD

isc Fu

ture

Valu

eP

re-Tax

Disc F

utu

reV

alue

(Ev

erythin

g U

nb

oo

ked at Y

E06)

(Bcfe)

Riskin

g(B

cfe)N

et CF

Per S

hare

PV

-10N

et CF

Per S

hare

Barnett S

hale Core A

creage (Underbooked)

3570.0%

357538

1.201.51

7121.59

Barnett S

hale Non-C

ore Acreage

7,0780.0%

7,0787,102

15.821.00

9,42020.98

Arkom

a Basin - W

oodford Shale

2,1680.0%

2,1681,590

3.540.73

2,3915.32

Bossier &

Cotton V

alley1,170

0.0%1,170

1,6883.76

1.442,297

5.12Jackfish P

otential1,590

10.0%1,431

9142.03

0.641,607

3.58D

eepwater Low

er Tertiary - D

iscoveries2,439

15.0%2,073

4,93911.00

2.387,046

15.69D

eepwater G

ulf of Mexico- M

iocene Discoveries

2630.0%

263798

1.783.04

1,1192.49

Deepw

ater Gulf of M

exico- Lease Acreage

1,82350.0%

9111,104

2.461.21

1,9784.41

Brazil D

iscoveries - Polvo (U

nbooked)120

0.0%120

4531.01

3.77601

1.34B

razil Inventory2,028

75.0%507

6971.55

1.371,224

2.73O

ther acreage (AC

G, W

.Africa, C

hina, Rockies, T

X, O

ther Canada, G

OM

)3,820

8.51N

A4,514

10.05

Adjustm

ent for YT

D =

Exploration C

AP

EX

(Investment) - cash flow

generated by potential reserves0

0.000

0.00D

iscounted Future C

ash G&

A (P

otential Reserves)

(2,943)(6.55)

(2,943)(6.55)

Discounted C

ash Taxes (P

otential Reserves)

(3,865.3)(8.61)

(5,909.5)(13.16)

To

tal Po

tential N

AV

19,03515.5%

16,078$16,834

$37.49$24,057

$53.58

To

tal Cu

rrent N

AV

/ Sh

are$34,327

$76.4547,686

$106.20

Source: JP

Morgan &

Com

pany Reports

JPMorgan Price D

eck

NYM

EX Futures

Other Price D

eck

Com

modity Price

Discounting

2006YE

10.0%

0.0%

Escalation Assum

ptions

0.0%

0.0%

0.0%

Meth

od

olo

gy: U

se the company's P

V-10 data from

the 10-K to back into a production profile. U

se that production profile with JP

Morgan's com

modity price and

service cost forecasts to generate a cash flow profile for proved reserves. S

ubtract out cash taxes, G&

A, and balance sheet item

s. Develop risked production profiles

and cost schedules for unbooked reserves. Discount cash flow

s at the appropriate discount rate and take the summ

ation.

AR

O, T

axes, and Hedges are

included elsewhere in the m

odel and are based on user input rather than static book values.


Y

2 0

0

7

Crude Oil / Natural Gas Price Relationship


0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00Ja

n-98

May

-98

Sep

-98

Jan-

99

May

-99

Sep

-99

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Eq

uiv

alen

t

Ratio

BTU Equivalent

Median


Y

2 0

0

7

Outlook for Commodity Prices

2005 2006 2007 2008 2009 2010

JPMorgan estimates $56.57 $66.36 $62.52 $60.00 $60.00 $55.00

Consensus $61.07 $60.36 - -

NYMEX Futures $65.87 $69.64 $70.04 $69.06

JPMorgan estimates $8.66 $7.23 $7.50 $7.50 $7.25 $7.00

Consensus $7.47 $7.87 - -

NYMEX Futures $8.52 $8.97 $8.70 $8.34

Source: Bloomberg & JPMorgan (Prices as of 5/11//07)

Oil (WTI)

Gas (Henry Hub)


Y

2 0

0

7

Commodity Price Sensitivity

JPMorgan Ratings

OW = Overweight

N =Neutral

UW = Underweight

NR = Not Rated

CHK Stock Vs. Natural Gas

y = 0.4876x + 0.0015

R2 = 0.211

-15.0%

-7.5%

0.0%

7.5%

15.0%

-10.0% -7.5% -5.0% -2.5% 0.0% 2.5% 5.0% 7.5%

Wkly Chg in 12-Month Gas Strip

Wk

ly C

hg

in C

HK

OIL PRICE SENSITIVITY E&P GROUP AVERAGESTop 5 Companies Rating BETA Top 5 Companies Rating Correlation BETA CorrelationDenbury Resources OW 1.02 Debury Resources OW 0.67 OIL PRICE SENSITIVITY Southwestern Energy OW 1.01 XTO Energy OW 0.65 Spot Prices 0.51 0.43PetroQuest Energy N 0.99 Cimarex Energy NR 0.64 Front Month 0.50 0.43Quicksilver Resources N 0.93 Apache OW 0.60 12-Month Strip 0.60 0.45Gasco Energy N 0.90 Noble Energy OW 0.58 24-Month Strip 0.61 0.43Average Company 0.60 Average Company 0.45

GAS PRICE SENSITIVITYTop 5 Companies Rating BETA Top 5 Companies Rating CorrelationSouthwestern Energy OW 0.86 Quicksilver Resources N 0.65 GAS PRICE SENSITIVITY Quicksilver Resources N 0.80 Southwestern Energy OW 0.63 Spot Prices 0.12 0.31Gasco Energy N 0.66 Chesapeake Energy OW 0.60 Front Month 0.20 0.38Newfield Exploration N 0.60 XTO Energy OW 0.59 12-Month Strip 0.43 0.45Cabot Oil & Gas N 0.53 Newfield Exploration N 0.56 24-Month Strip 0.52 0.39Average Company 0.43 Average Company 0.45

Beta is a measure of the magnitude of the relationship Over the last 12 months based on weekly dataCorrelation is a measure of the consistency of the relationship

All data uses weekly price changes of the 12-month strip and stock prices from 10/21/05-10/20/0635 E&P companies were included in the survey.JPMorgan Calculation using Bloomberg Prices


Y

2 0

0

7

Natural Gas 12 & 24 Futures Price Performance


$0

$2

$4

$6

$8

$10

$12

$14Ju

n-96

Feb

-97

Oct

-97

Jun-

98

Feb

-99

Oct

-99

Jun-

00

Feb

-01

Oct

-01

Jun-

02

Feb

-03

Oct

-03

Jun-

04

Feb

-05

Oct

-05

Jun-

06

Feb

-07

12-Month Natural Gas Future 24-Month Natural Gas Future


Y

2 0

0

7

Oil 12 & 24 Month Futures Price Performance


$0

$10

$20

$30

$40

$50

$60

$70

$80

$90Ju

n-96

Feb

-97

Oct

-97

Jun-

98

Feb

-99

Oct

-99

Jun-

00

Feb

-01

Oct

-01

Jun-

02

Feb

-03

Oct

-03

Jun-

04

Feb

-05

Oct

-05

Jun-

06

Feb

-07

12-Month Crude Future 24-Month Crude Future


Y

2 0

0

7

US Monthly Natural Gas Production (bcf/day)

Source: EIA-914 Survey 4/30/07

2006 2007

Month Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb

Gross withdrawal 3.7 3.8 3.9 3.9 4.0 4.0 3.8 3.7 3.0 3.1 3.5 3.6 3.8 3.8 3.9 3.9 3.9 4.0 3.8 3.8 3.8 3.8 3.7 3.7 3.7 3.7

yoy change (%) 0% 0% 1% 0% -1% 0% 0% 3% 30% 20% 6% 2% -3% -4%


yoy change (%) -3% 0% 2% -1% -3% -1% -1% -1% 0% -3% -1% 1% -4% -5%


yoy change (%) 3% 3% 4% 4% 6% 7% 5% 4% 6% 4% 5% 7% 1% 0%


yoy change (%) 7% 5% 5% 5% 6% 5% 5% 5% 11% 6% 5% 6% 5% 7%


yoy change (%) 6% 4% 5% 6% 3% 6% 11% 7% 3% 7% 6% 11% 7% 5%


yoy change (%) 2% 2% 3% 6% 5% 5% 6% 7% 6% 6% 6% 6% 6% 4%


yoy change (%) 4% 3% 4% 4% 4% 4% 5% 5% 8% 6% 4% 6% 4% 3%


yoy change (%) -20%-23%-25%-21%-18%-17%-11% -6% 77% 72% 21% 2% -4% -2%


yoy change (%) -1% -2% -2% -1% 0% 0% 2% 3% 14% 12% 7% 5% 3% 2%

2005

Wyoming

Other states ex.

Alaska

Lower 48 States

Onshore + State

Waters

Texas

Federal Offshore

GOM

Louisiana

New Mexico

Oklahoma


Y

2 0

0

7

Gross Withdrawals (EIA 914) & Marketed Production

40.0

42.0

44.0

46.0

48.0

50.0

52.0

54.0

56.0

58.0

60.0

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

Pro

du

ctio

n (

Bcf

/d)

Gross Withdrawals from lower 48 (including GOM) - EIA 914

Marketed Production from Lower 48 (including GOM) - EIA NG Monthly

Gross Withdrawals from Lower 48 (excluding GOM) - EIA 914

Marketed Production from Lower 48 (excluding GOM) - EIA NG Monthly

Source: EIA


Y

2 0

0

7

Offshore Rig Count - GOM

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

Offshore GOM Rig Count

Source: Land Rig Newsletter


Y

2 0

0

7

Natural Gas Storage Inventories

Source: EIA & JPMorgan (Storage data as of 5/04/07)

2007 West Natural Gas Storage Vs. 5 Year Average and Prior Year

050

100150200250300350400450500

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Gas

In S

tora

ge

(Bcf

)

Average 2006 2007

2007 Producing Natural Gas Storage Vs. 5 Year Average and Prior Year

0100200300400500600700800900

10001100

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Gas

In S

tora

ge

(Bcf

)

Average 2006 2007

2007 Total Natural Gas Storage Vs. 5 Year Average and Prior Year

0

500

1000

1500

2000

2500

3000

3500

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Gas

In S

tora

ge

(Bcf

)

Average 2006 2007

2007 East Natural Gas Storage Vs. 5 Year Average and Prior Year

0

500

1000

1500

2000

2500

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Gas

In S

tora

ge

(Bcf

)

Average 2006 2007


Y

2 0

0

7

Possible Natural Gas Storage Trajectories

Source: EIA, JPMorgan Estimates

Possible Storage Trajectories(Using 12 Year Mininum, Maximum, Average Weekly Injections through Early December)

Beginning with 1747 Bcf in Storage on May 4, 2007

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

4500.0

2/23 3/9

3/23 4/6

4/20 5/4

5/18 6/1

6/15

6/29

7/13

7/27

8/10

8/24 9/7

9/21

10/5

10/1

9

11/2

Gas

in S

tora

ge (B

cf)

Average Low Average Actual High Average

3502

3213

4297


Y

2 0

0

7

U.S. Natural Gas Demand By Sector


Monthly Total Gas Usage (Bcf/d)

40.0

50.0

60.0

70.0

80.0

90.0

J F M A M J J A S O N D

5 Yr

2006e

2005

Monthly Residential Gas Usage (Bcf/d)

0.0

5.0

10.0

15.0

20.0

25.0

30.0


5 Yr

2006e

2005

Monthly Industrial Gas Usage (Bcf/d)

15.0

17.0

19.0

21.0

23.0

25.0


5 Yr

2006e

2005

Monthly Commercial Power Usage (Bcf/d)

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0


5 Yr

2006e

2005

Monthly Electric Power Usage (Bcf/d)

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0


5 Yr

2006e

2005


Y

2 0

0

7

Natural Gas Electric Generation as % of Total Generation


10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

26.0%

28.0%

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06

2001

2002

2003

2004

2005

2006


Y

2 0

0

7

Monthly Electric Generation (by Source)

Source: JPMorgan, EIA

Electric Generation by Source

0%

10%

20%

30%

40%

50%

60%No

v-00

Feb-

01

May

-01

Aug-

01

Nov-

01

Feb-

02

May

-02

Aug-

02

Nov-

02

Feb-

03

May

-03

Aug-

03

Nov-

03

Feb-

04

May

-04

Aug-

04

Nov-

04

Feb-

05

May

-05

Aug-

05

Nov-

05

Feb-

06

May

-06

Aug-

06

Oct

-06

Sour

ce G

ener

atio

n as

% o

f Tot

al G

ener

atio

n CoalNGNukePetrolOther

Coal

Petroleum Products

Other

NG

Nuclear


Y

2 0

0

7

Natural Gas Production and Rig Count

38.0

43.0

48.0

53.0

58.0

63.0

Ja

n-9

9

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Pro

du

cti

on

(B

cf/

d)

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

Rig

Co

un

t

Total US Marketed Production

Lower 48 Onshore Marketed Production

Onshore Rig Count

Source: EIA, Land Rig Newsletter


Y

2 0

0

7

U.S. Natural Gas Supply and Demand (Bcfe/d) – Calendar Year

Source: JPM Estimates, Department of Energy, NOAA, & Bloomberg

U.S. Natural Gas Supply And Demand (@ $7/Mcf and $55/bbl)

(Billions of cubic feet per day unless otherwise noted)

Supply 1990 1995 1998 2000 2001 2002 2003 2004 2005 2006 2007e 2008e 2009e 2010e 2001 2005 2010e

Dry Production 48.8 51.0 52.1 51.9 53.9 52.0 52.2 50.8 49.5 50.7 52.4 53.0 53.2 53.4 0.9% -1.1% 1.5% - Marketed Production (Onshore + State Waters)48.8 51.0 52.1 41.2 42.7 42.2 42.5 42.5 43.3 45.3 47.0 47.8 48.4 48.9 - Marketed Production (Federal Waters) 13.5 13.8 12.4 12.1 10.8 8.6 7.8 7.8 7.7 7.3 6.9 - NGL & Extraction Losses Inc. With Onshore Marketed (2.8) (2.6) (2.6) (2.4) (2.5) (2.4) (2.3) (2.4) (2.4) (2.4) (2.5)Suppl. Gaseous Fuels 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 -4.6% -6.7% 0.3%Pipeline Imports 4.0 7.7 8.4 9.7 10.2 10.4 9.4 9.9 10.2 9.9 9.3 8.9 9.1 8.7 5.3% 0.9% -3.0%LNG Imports 0.2 0.0 0.2 0.6 0.7 0.6 1.4 1.8 1.7 1.6 2.4 2.9 3.5 4.0 42.8% 23.2% 18.5%

Total Dry Gas Supply 53.3 59.0 61.0 62.4 65.0 63.1 63.1 62.6 61.6 62.3 64.2 64.9 65.9 66.3 1.6% -0.4% 1.5%

Demand

Residential 13.3 13.3 12.4 13.7 13.1 13.4 13.9 13.3 13.2 11.9 13.3 13.4 13.5 13.5 -1.8% -0.7% 0.5%Commercial 8.3 8.3 8.2 8.7 8.3 8.6 8.7 8.5 8.5 8.0 8.4 8.4 8.5 8.5 -0.8% -0.5% 0.0%Industrial 22.4 22.4 22.8 22.2 20.1 20.6 19.6 19.8 18.5 18.1 18.2 18.2 18.3 18.3 -2.7% -3.6% -0.2%Electric Power 11.6 11.6 12.6 14.2 14.6 15.5 14.1 14.9 16.1 17.1 18.3 18.9 19.9 20.9 7.1% 2.5% 5.4%Other (lease/plant/pip/vhcl fuel) 5.3 5.3 5.0 4.9 4.8 4.9 4.7 4.6 4.7 4.8 4.8 4.8 4.8 4.8 -2.2% -1.0% 0.5%

Total U.S. Demand 60.8 60.8 60.9 63.8 60.9 63.0 61.0 61.2 60.9 60.0 63.0 63.7 64.9 66.0 -0.3% -0.9% 1.6%Exports 0.4 0.4 0.4 0.7 1.0 1.4 1.9 2.3 2.0 1.8 1.6 1.6 1.6 1.6 19.5% 24.6% -4.2%

Total Dry Gas Demand 61.3 61.3 61.4 64.4 62.0 64.4 62.9 63.5 62.9 61.7 64.6 65.3 66.5 67.6 -0.1% -0.5% 1.5%

5-Year CAGR


Y

2 0

0

7

U.S. Natural Gas Supply and Demand (Bcfe/d) – April-to-April

Source: JPM Estimates, Department of Energy, NOAA, & Bloomberg

U.S. Natural Gas Supply And Demand (@ $7/Mcf and $55/bbl)April to April

(Billions of cubic feet per day unless otherwise noted)

Supply 00-01 01-02 02-03 03-04 04-05 05-06 06-07e 07-08e 08-09e 09-10e 2001 2005 2010e

Dry Production 52.5 53.3 52.0 51.9 50.7 49.3 51.0 52.5 53.2 53.3 0.9% -1.1% 1.5% - Marketed Production (Onshore + State Waters) 41.6 42.6 42.2 42.4 42.7 43.7 45.6 47.1 48.0 48.5 - Marketed Production (Federal Waters) 13.7 13.4 12.4 11.9 10.5 8.0 7.7 7.8 7.6 7.2 - NGL & Extraction Losses Inc. With Onshore Marketed (2.7) (2.6) (2.6) (2.4) (2.5) (2.3) (2.3) (2.4) (2.4) (2.4)Suppl. Gaseous Fuels 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 -4.6% -6.7% 0.3%Pipeline Imports 10.0 10.1 10.3 9.4 10.1 10.0 9.7 9.0 8.9 9.0 5.3% 0.9% -3.0%LNG Imports 0.7 0.5 0.8 1.6 1.8 1.6 1.8 2.5 3.0 3.6 42.8% 23.2% 18.5%

Total Dry Gas Supply 63.4 64.2 63.3 63.0 62.8 61.1 62.7 64.1 65.3 66.0 1.6% -0.4% 1.5%

Demand

Residential 14.4 12.5 14.4 13.7 13.2 12.4 12.8 13.4 13.5 13.6 -1.8% -0.7% 0.5%Commercial 9.0 8.1 9.1 8.6 8.5 8.1 8.4 8.4 8.5 8.5 -0.8% -0.5% 0.0%Industrial 21.8 20.1 20.5 19.6 19.7 18.1 18.2 18.2 18.3 18.3 -2.7% -3.6% -0.2%Electric Power 14.2 14.9 15.4 14.1 14.9 16.0 17.7 18.2 19.1 20.1 7.1% 2.5% 5.4%Other (lease/plant/pip/vhcl fuel) 5.0 4.8 4.9 4.7 4.6 4.6 4.8 4.8 4.8 4.8 -2.2% -1.0% 0.5%

Total U.S. Demand 64.3 60.3 64.3 60.6 60.9 59.3 61.9 63.0 64.2 65.3 -0.3% -0.9% 1.6%Exports 0.7 1.1 1.6 2.0 2.5 1.7 1.7 1.6 1.6 1.6 19.5% 24.6% -4.2%

Total Dry Gas Demand 65.0 61.4 65.9 62.6 63.3 61.0 63.6 64.6 65.8 66.9 -0.1% -0.5% 1.5%

5-Year CAGR


Y

2 0

0

7

U.S. Petroleum Inventories Are Above Average

180,000

185,000

190,000

195,000

200,000

205,000

210,000

215,000

220,000

225,000

230,0001/

6

2/6

3/6

4/6

5/6

6/6

7/6

8/6

9/6

10/6

11/6

12/6

Source: EIA (Data as of 5/4/07)

2007 DOE Gasoline Stocks Vs. 5 Year Average and Prior Year

180,000

185,000

190,000

195,000

200,000

205,000

210,000

215,000

220,000

225,000

230,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10

/5

11

/5

12

/5

Ba

rre

ls (

00

0's

)

5-Year 2006 2007

2007 DOE Crude Stocks Vs. 5 Year Average and Prior Years

250,000

270,000

290,000

310,000

330,000

350,000

370,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Bar

rels

(00

0's)

5-Year 2006 2007

2007 DOE Distillate Stocks Vs. 5 Year Average and Prior Year

90,000

100,000

110,000

120,000

130,000

140,000

150,000

160,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Bar

rels

(00

0's)

5-Year 2006 2007

2007 DOE Resid. Stocks Vs. 5 Year Average and Prior Year

25,000

30,000

35,000

40,000

45,000

50,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10

/5

11

/5

12

/5

Ba

rre

ls (

00

0's

)

5-Year 2006 2007


Y

2 0

0

7

U.S. Demand Bouncing Back From Weak 1H06

Source: EIA (Data as of 5/4/07)

DOE Diesel Fuel Implied Demand Vs. 5 Year Average and Prior Year

2,000

2,500

3,000

3,500

4,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10/5

11/5

12/5

Bar

rels

/day

(00

0's)

5-Year 2006 2007

DOE Gasoline Demand Vs. 5 Year Average and Prior Year

7,000

8,000

9,000

10,000

11,000

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10

/5

11

/5

12

/5

Ba

rre

ls/d

ay

(0

00

's)

5-Year 2006 2007

DOE Residual Fuel Demand Vs. 5 Year Average and Prior Year

0

200

400

600

800

1,000

1,200

1,400

1,600

1/5

2/5

3/5

4/5

5/5

6/5

7/5

8/5

9/5

10

/5

11

/5

12

/5

Ba

rre

ls/d

ay

(0

00

's)

5-Year 2006 2007


Y

2 0

0

7

OPEC Spare Capacity

Source: IEA and JPMorgan estimates.

20

22

24

26

28

30

32

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

MM

Bb

ls/d

ay

18

23

28

33

38

43

48

53

58

63

68

73

78

$/B

bl

OPEC-10 Production OPEC Spare Capacity WTI Nigeria Outages


Y

2 0

0

7

Expected Additions to OPEC Capacity

Source: JPMorgan Energy Strategy, wire and company reports.


Y

2 0

0

7

Independence Hub Subsea

Source: Enterprise Products Partners L.P.


Y

2 0

0

7

Arctic Gas Opportunities

Two gas projects competing to bring arctic gas to US markets

Mackenzie Delta Three fields controlled by Imperial Oil, ConocoPhillips,

Shell Canada and Exxon Mobil Initital pipeline capacity of 1.2 Bcf/d and expandable to

1.9 Bcf/d on pipeline to Alberta Production online 2011 or 2012 at earliest, regulatory

delays have pushed dates back Fields contain 5.8 Tcf of proved natural gas reserves

Alaska’s North Slope Fields controlled by BP, ExxonMobil, and ConocoPhillips Alaska pushing plan for pipeline to Alberta, recently

passed bill for path of pipeline (May 2007) Production online by 2014-2016 Initital capacity of 4.3 Bcf/d and expandable to 7 Bcf/d Potential northern route would connect both projects, but

is opposed by Alaska politicians North Slope fields contain 34 Tcf of proved natural gas

reserves

Winning proposal could delay other project by 10-15 years according to ExxonMobil

Source: Hydrocarbon Technology


Y

2 0

0

7

Analyst Certification:

The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on JP Morgan’s website https://mm.jpmorgan.com/disclosures/company or by calling this U.S. toll-free number (1-800-477-0406)

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

JPMorgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

Coverage Universe: Joseph Allman, CFA: Anadarko Petroleum (APC), Apache Corporation (APA), Brigham Exploration Company (BEXP), Chesapeake Energy (CHK), Delta Petroleum (DPTR), Devon Energy (DVN), Edge Petroleum (EPEX), EOG Resources, Inc. (EOG), Mariner Energy, Inc. (ME), Newfield Exploration Company (NFX), PetroQuest Energy, Inc. (PQ), Quicksilver Resources Inc (KWK), Southwestern Energy Company (SWN), Venoco Inc. (VQ), W&T Offshore, Inc. (WTI), XTO Energy (XTO)

JPMorgan Equity Research Ratings Distribution, as of September 29, 2006

Overweight (buy)Neutral (hold)Underweight (sell)JPM Global Equity Research Coverage42%41%17% IB clients*44%46%35%JPMSI Equity Research Coverage38%48%15% IB clients*62%55%47%*Percentage of investment banking clients in each rating category.For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Valuation and Risks: Please see the most recent JPMorgan research report for an analysis of valuation methodology and risks on any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on the front of this note or your JPMorgan representative.

Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.


Y

2 0

0

7

Other Disclosures

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation’s Characteristics and Risks of Standardized Options, please contact your JPMorgan Representative or visit the OCC’s website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf.

Legal Entities Disclosures U.S.: JPMSI is a member of NYSE, NASD and SIPC. J.P. Morgan Futures Inc. is a member of the NFA. J.P. Morgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188, regulated by ASIC) and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066, a Market Participant with the ASX) (JPMSAL) are licensed securities dealers. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Commission. India: J.P. Morgan India Private Limited is a member of the National Stock Exchange of India Limited and The Stock Exchange, Mumbai and is regulated by the Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Jakarta Stock Exchange and Surabaya Stock Exchange and is regulated by the BAPEPAM. Philippines: This report is distributed in the Philippines by J.P. Morgan Securities Philippines, Inc. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Japan: This material is distributed in Japan by JPMorgan Securities Japan Co., Ltd., which is regulated by the Japan Financial Services Agency (FSA). Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [mica (p) 069/09/2006 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-x) (formerly known as J.P. Morgan Malaysia Sdn Bhd) which is a Participating Organization of Bursa Malaysia Securities Bhd and is licensed as a dealer by the Securities Commission in Malaysia

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL’s Policies for Managing Conflicts of Interest in Connection with Investment Research which can be found at http://www.jpmorgan.com/pdfdoc/research/ConflictManagementPolicy.pdf. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd. Frankfurt Branch and JPMorgan Chase Bank, N.A., Frankfurt Branch who are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Australia: This material is issued and distributed by JPMSAL in Australia to “wholesale clients” only. JPMSAL does not issue or distribute this material to “retail clients.” The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms “wholesale client” and “retail client” have the meanings given to them in section 761G of the Corporations Act 2001. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for persons licensed by or registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months’ prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider for derivative warrants issued by J.P. Morgan International Derivatives Ltd and listed on The Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk/prod/dw/Lp.htm. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul branch. Singapore: JPMSI and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Legal Disclosures section above. India: For private circulation only not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL.

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively JPMorgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMSI and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a JPMorgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

Revised September 30, 2006.

Copyright 2007 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of JPMorgan.

Documents

iogapa.org