Re: hobby jan-mar structure

Gary,

We are still in the determination phase as far as what we are willing to
sell. Obviously, we would like to sell as close to the 10 yr average as
possible. However, given the recent warmth of the past few winters and the
forecsts, this is probably an unrealistic goal. I will get back to you by
the end of the week with an acceptable target.

Thanks,

Eric
x30977

From: Gary Taylor 10/16/2000 02:59 PM

To: Eric Bass/HOU/ECT@ECT
cc:
Subject: hobby jan-mar structure

Eric,

I've put a Jan-Mar Hobby $10,000/$2 million swap offer in the market of 635
HDDs. 635 is the 10 year average. Given the forecasts for normal to warm in
the Gulf area this winter - with particular emphasis on warmth in the Jan-Mar
period - I anticipate that bids will come back, initially, around 560 - and
that we might be able to sell a swap around 585. As a frame of reference,
last year (2000) came in at 412.5 HDDs and 1999 came in at 429.5 HDDs.

What kind of number are you looking for - do you want to leave an order with
me where you'd be willing to sell the swap?

If you're interested in buying an option, perhaps you'd like to put a bid out
on the following structure:

Hobby
Jan-Mar
$15,000/HDD
$2,700,000 Limit
560 strike (1/2 standard deviation from the 10 year average)

I imagine you could get this option for approx. $750,000. The same option
with a $2,000,000 limit would go for about $100,000 less.

Let me know your thoughts.

Regards,
Gary
x31511