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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 fiveyear 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 longterm 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 directuse 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? In issuing and making this publication available, AGA is not undertaking to render professional or other services for or on behalf of any person or entity. Nor is AGA undertaking to perform any duty owed by any person or entity to someone else. Anyone using this document should rely on his or her own independent judgment or, as appropriate, seek the advice of a competent professional in determining the exercise of reasonable care in any given circumstances. The statements in this publication are for general information and represent an unaudited compilation of statistical information that could contain coding or processing errors. AGA makes no warranties, express or implied, nor representations about the accuracy of the information in the publication or its appropriateness for any given purpose or situation. Information on the topics covered by this publication may be available from other sources, which the user may wish to consult for additional views or information not covered by this publication. Copyright 2009 American Gas Association. All rights reserved. www.aga.org