NATURAL GAS MARKET INDICATORS

AMERICAN GAS ASSOCIATION

UPDATE: APRIL 30, 2009

Reported Prices – some commodities technical analysts believe that when natural gas
acquisition prices at Henry Hub break through the $3.50 per MMBtu mark they will go
to $2.75, then meet a resistance point. Well, prices have broken through, however,
whether they go to $2.75 or some other place remains a mystery to this analyst. The reasoning
behind this view is that compared to demand expectations domestic production is strong and the
specter of a flood of LNG imports this summer remains in play. The debate over expectations for
gas acquisition prices will likely be overcome by actual events. Said another way, we will know
what natural gas prices will be this summer – in October.

Weather – during 2007 and 2008, natural gas utilized for power generation began its upswing
into the summer cooling season in about mid-May. It remains to be seen whether that demand
inflection point will be influenced by a comparatively slower economy and be pushed closer to
the start of June this year or if average temperatures will overcome all other influences and be
the driving force as we transition toward summer.

Working Gas in Underground Storage – underground storage operators have initiated the 2009
net injection season in earnest and at 1,741 Bcf the national working gas inventory remains well
above the five-year average and last year’s pace. For the week ending April 17, 2009, working
gas is 35.8 percent above the volume from one year ago and 22.7 percent higher than the five-
year average. Since only about 2.0 Tcf will be required to push storage to “full” over the next
185 days and there are questions about whether some of the daily average requirement will come
in the form of LNG (or not), it is difficult to imagine that without a significant weather-induced
demand for power generation or a strong hurricane-induced supply disruption that the market
may be anything except awash in gas supply for summer, 2009.

Natural Gas Production – some natural gas producers have indicated production shut-ins due to
falling prices and many have announced drilling budget reductions, which have been validated
by the drop in rig activity since last summer. Yet, natural gas production prior to extraction
losses in the United States remains strong compared to recent history, according to Bentek
Energy, LLC. Domestic production averaged about 56.2 Bcf per day for the first three weeks of
April compared to 55.6 Bcf per day for all of March 2009. Apparently, market observers and
players will have to wait a little longer to see reductions in domestic production as a result of the
current economic downturn.

Rig Counts – after six years of first quarter growth in U.S. drilling activity over prior year-end
data the string has finally been broken. The downward trend in drilling and well completions
continues as the total U.S. rig count has slipped below 1,000 for the first time since April 2003,
as outlined in the Baker-Hughes report for the week ending April 17, 2009. With 975 domestic
rigs operating, gas-directed activities represent 760 of the total rigs working today or about 78
percent of all activity.
Pipeline Imports and Exports – pipeline imports from Canada have fallen from an average of
7.9 Bcf per day in January 2009, to 6.6 Bcf per day during the first three weeks of April. The
16.5 percent decrease in pipeline imports originating in Canada coincides, of course, with falling
U.S. demand requirements. To the south, U.S. net exports to Mexico averaged about 0.7 Bcf per
day during March 2009 but have fallen to under 0.6 Bcf per day for the first three weeks of
April.

LNG Markets – reality seems to be catching up to some predictions as the United States may
become a primary Atlantic Basin LNG import market this spring and summer. Increasing
imports seem to have taken hold in the United States during April, as average daily volumes
have risen from about 1.0 Bcf per day to 1.5 Bcf per day during the month. Over the past 30
days, LNG imports have been as high as 1.9 Bcf on a daily basis. Waterborne Energy sees an
average import level of above 2.0 Bcf/day this May, and, if Nigerian production restarts, the
possibility of 80 Bcf (2.6 Bcf/day) of imports next month. The Energy Information
Administration, writing in their Short-Term Energy and Summer Fuels Outlook, forecasts 480
Bcf of LNG imports throughout 2009, or just under 1.5 Bcf per day. This represents a 36%
increase over 2008 levels. European markets are saturated, making the United States the best
Atlantic Basin import location this year. Vaporization capacity on the U.S. West Coast may get a
utilization boost from the Gazprom/Shell deal that will see Russian LNG moving into the United
States via the Costa Azul import terminal. Globally, India is emerging as a spot market player
and is expected to increase spot LNG imports from last year, and China has begun signing long-
term LNG import contracts, while Japanese and Korean interest remain flat or declining.

Natural Gas Market Summary – natural gas cash and prompt-month prices have been
reasonably stable for the past month (about $3.50 per MMBtu), while analysts debate market
expectations for the summer. What seem to be agreed upon by many analysts are stubbornly
solid domestic production, a strong underground storage position and an uptick in LNG imports
on the supply-side along with an economy that is not yet ready to support a surge in large volume
customer demand. What makes the current situation more interesting is that it comes at a time
when congress is beginning the debate on energy policy and climate change – and what of that
debate. There are constant reminders of wind and renewable energy opportunities for the future
whether the average citizen is reading the paper or listening to the radio on the way to work.
However, where is natural gas in the debate? Expanding natural gas in home and business direct-
use applications, in transportation and even in power generation would significantly reduce the
nation’s carbon footprint. Technologies for producing, delivering and using the fuel efficiently
are here today – are her now – with no heroic assumptions necessary. Where is reliable and
secure natural gas in the national debate?

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