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---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 10/23/2000 08:15 AM --------------------------- Chris Mahoney 10/20/2000 03:20 PM To: Chris Mahoney/LON/ECT@ECT cc: Jeffrey A Shankman/HOU/ECT@ECT, John L Nowlan/HOU/ECT@ECT, Mike McConnell/HOU/ECT@ECT Subject: Re: tax structure pre-pays in the north sea In addition to this business below there is a very good chance that we are going to get a short of 1.4 mil bbls per year of low sulfur fuel oil barges for 2001-2004. We think this will be a good deal for us to get on the books since the bulk of the hedging interest that the continental gas desk is bringing to us is customers looking to buy fuel to hedge natural gas prices. Continental gas are anxious to close this deal because the gas contract is well in the money and would like to book this deal for this quarter. There are var issues that need to be considered though so we need to address this at the beginning of the week. Thanks Chris. Chris Mahoney 10/16/2000 11:03 PM To: Jeffrey A Shankman/HOU/ECT@ECT, John L Nowlan/HOU/ECT@ECT, Mike McConnell/HOU/ECT@ECT cc: Subject: tax structure pre-pays in the north sea corporate finance in London (primarily Chris Harris) has been looking for about 6 months into approaching the small north sea producers to do pre-pay purchase contracts that would enable the producers to significantly reduce their tax liability to the uk government. These producers (talisman, kerr mcgee, lasmo, hess, enterprise, and a couple of others) are currently paying some 65-70% of the value of crude oil back to the government and they feel the cost savings to the producers is something on the line of 25% after financing costs for the pre-pay. I have asked them to do a presentation to you, as if you were one of the producers, for how this structure would work. Can you advise when you would be free for this? The volumes could be large (potentially upto 25 million bbls) and there is considerable basis risk in hedging these physical volumes. we are looking into the price that we could bid them for their physical oil that covers the basis risk. It would be nice to try to combine this with some long- term gas supply contract on the continent that would require us to be buying fuel and gasoil as the hedge and we are approaching some of the large natural gas buyers in continental europe to see if the recent spike in oil prices has encouraged more hedging. please let me know your thoughts on this and when/if you could be free for a presentation from chris harris. thanks, chris.
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