Erac Koch P+ spread options

---------------------- Forwarded by Stinson Gibner/HOU/ECT on 01/29/2001
10:42 AM ---------------------------

Stinson Gibner
01/29/2001 09:47 AM
To: Bob Lee/NA/Enron@Enron, Paulo Issler/HOU/ECT@ECT, Zimin Lu/HOU/ECT@ECT
cc:
Subject: Erac Koch P+ spread options

Booking spreadsheet in in O:\research\common\projects\exotic2001_0125.xls

Sheet where options are booked is called "index deals".

--Stinson

---------------------- Forwarded by Stinson Gibner/HOU/ECT on 01/29/2001
09:43 AM ---------------------------

Mark Fondren
01/26/2001 10:53 AM
To: Stinson Gibner/HOU/ECT@ECT
cc:
Subject: Erac Koch P+ spread options

---------------------- Forwarded by Mark Fondren/HOU/ECT on 01/26/2001 10:53
AM ---------------------------

Mark Fondren
01/25/2001 12:07 PM
To: John L Nowlan/HOU/ECT@ECT
cc: Spencer Vosko/HOU/ECT@ECT
Subject: Erac Koch P+ spread options

Price 1 = WTI Cushing physical cash price (WTI Nymex
contract) For example, the April 2001
WTI cushing price equals the Apr01 WTI Nymex
contract.

Price 2 = Koch Oil posting for West Texas/New Mexico Intermediate.

Koch P+ = Price 1 - Price 2

Price 2 is calculated by subtracting 3 spreads from Price 1

1. Koch Posting/Wti NYMEX basis spread
2. 66.6% (April01/May01 WTI Nymex spread)
3. 33.3% (April01/Jun01 WTI Nymex spread)

Example using 1/24/2001 WTI settles APR01 28.31

MAY01 27.72

JUN01 27.19

April 2001 Koch posting = April 2001 WTI NYMEX settlement -
KOCH/NYMEX basis spread - .666(Apr/May) - .333(Apr/Jun)

= 28.31 -
2.75 - .666(.59) - .333(1.12)
= 28.31 -
2.75 - .3929 - .37296
= 24.794

Koch P+ = 28.31 - 24.794
= 3.516

Please call with any questions

Mark F
ext 853-1982