QUESTION: Jeff and Gerald, I wanted you both to have the following information: (i) the legal/regulatory research questions that the Upstream Storage Group (Paul Bieniawski, Miguel Vasquez & Eva Rainer) have posed to LeBoeuf Lamb (law firm) and Brown Williams (rate consultant) and (ii) the two Reports produced in response to such questions. The Reports were delivered to the Storage Group personnel Friday, July 27, 2001, and were forwarded to me by Bob Neustaedter last Friday, August 3, 2001. The cost of this work was borne jointly by Jean Mrha's Upstream Group and the Regulatory Affairs Group; Donna Fulton, Sarah Novosel, and Bob Neustaedter are the Regulatory/Governmental Affairs individuals involved in retaining Brown Williams and in recommending Larry Acker at LeBoeuf to conduct the legal/regulatory research. I reviewed the engagement letters on behalf of the Regulatory Affairs Department. The combined cost of these reports is about $100,000. I've done the best I can to be sure that the Upstream Storage Group does not "overlook" the Legal Department as it forges ahead into a transactional arena fraught with significant regulatory and accounting risks and traps. Gerald, as you have become involved with the development scenarios that involve a compression component, I think it would be wise to become familiar with the contents of both the LeBoeuf Lamb and Brown Williams Reports. If either of you would like to discuss the legal, regulatory or political implications of the attached, please feel free to give me a call. Steve
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ANS: Upstream--Storage Group Legal & Regulatory Research

QUESTION: I have received questions about interpreting the ratio. Let me use yesterday's closing price. The merger probability is derived from a two scenario test, merger closure or merger non closure (there is also a competing offer scenario in reality). Let's use a closing DYN price of $46.20 yesterday (note I had a typo), at the exchange ratio, (not taking into account timing and dividends), this yields a merged ENE price of $12.40 ($46.20 * .2685). ENE closed at $10.00 yesterday. Thus if the market thought there was complete certainty of merger, the prices would converge at $12.40. Now comes the artful part, the non merger ENE price. I included another tab (Merger) to sensitize this. Say we pick an ENE price with no merger of $4.00. Looking at a deterministic probability, one can look at the distance (difference) in dollars to calculate the probability. For instance: ENE merged 12.40 ENE close 14-Nov 10.00 ENE no merger 4.00 Probability of merger = (1-((12.40-10.00) / (12.40 - 4.00))) or 71.4%. Said another way, there is a 71.4% chance of being worth $12.40 and a 28.6% chance of being worth $4.00, which yields a weighted price of $10.00 ($12.40 * 71.4%)+($4.00 * 28.6%). I also included a $1 distressed ENE price and a $7 previously observed low end ENE price as scenarios. Regards,
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ANS: Exchange ratio prices and probability

QUESTION: We have been asked to set this entity up for financial trading. It's part of our JV with Texaco. Hal Bertram (X31865) is a good contact person if you have questions about the Bridgeline companies. Thanks. Sara
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ANS:
Bridgeline Gas Marketing LLC