Four Time Periods

Notes:

• The next series of slides focuses on four historical time periods in more detail to better understand what has driven the differential in the past.

• The first time span begins after the large drop in crude oil prices in 1986 and goes through the Gulf War. Even ignoring the Gulf War time period, differentials were increasing through the late 1980’s.

• The second period goes from the Gulf War through 1995. Differentials fell considerably during this time.

• But in late 1994, the differentials turned around and began to increase again until 1997.

• We combined 1997 and 1998 because we feel that we will be seeing a downward trend in differentials as time moves on. We expect the recent upturn in the light-heavy differentials to be short-lived.