Fitch: Pricing for Oil & Natural Gas Likely to Stay High into the First Part of 2004 & Then Moderate.

Business Editors

CHICAGO--(BUSINESS WIRE)--Dec. 16, 2003

The Fitch Ratings' Rating Outlook for all elements of the North American oil and gas industry - including the upstream segment, the drilling and services segment and the downstream segment - is Stable, according to an outlook and review of the industry published today by the rating agency. Fitch has published several 2004 outlooks concerning various industries as well as other fixed-income sectors.

Fitch believes that crude oil will start to return to mean levels sometime later in 2004, dropping from the current $30.00 per barrel (bbl) level

to levels in the lower 20 per barrel range. This decrease will be driven largely by increasing Iraqi exports and non-OPEC production increases as well as Saudi reluctance to give up market share long-term. Fitch also expects natural gas prices will moderate sometime after the first quarter of 2004 - from over $5.44 per one thousand cubic foot (Mcf) for 2003 YTD to levels around the $4/Mcf range as current natural gas inventories should be more than adequate to meet peak winter consumption. Intermediate term (2005-2008), Fitch expects prices for U.S. natural gas to be usually in a range from $3.00/Mcf to $6.00/Mcf.

As a result of strength of high hydrocarbon prices over the last four years, most integrated and upstream company balance sheets and credit profiles are strong. Although Fitch expects some softening of oil and gas prices longer-term, realized prices should still remain relatively robust and resulting cash flow for companies should still be ample and provide for adequate credit protection.

The stable outlook for the drilling and services segment is driven primarily by the fact that integrated and upstream companies will always have to replace reserves to remain in business and that, as a consequence, there will always exist a base level of demand for drilling and services. The drilling and services segment is often more cyclical in nature than upstream companies, and, consequently, many companies carry little leverage.

The downstream segment, or refining and marketing, may experience slightly less volatility than in the past and have more pricing power going forward, as the low sulfur specifications for gasoline and diesel in the U.S. take effect and may result in some smaller U.S. refiners closing as well as a reduced level of product imports occurring over the next few years. Upside volatility has increased during recent years due to such things as refinery closings, different product specifications in certain regions of the U.S. during various times of the year and just-in-time inventory practices. An offsetting factor for this segment is the necessary capital that must be spent over the next couple of years to achieve the low sulfur product specifications in the U.S.

The outlook 'Pricing for Oil & Natural Gas Likely to Stay High into the First Part of 2004 and Then Moderate' can be found on Fitch's web site at 'www.fitchratings.com' by linking to the 'Corporate Finance' sector, clicking on 'Corporates' and then 'Special Reports'. Fitch will be maintaining a web page with a full list of 2004 outlook pieces that will be readily available on 'www.fitchratings.com'.