Calculation of 3% Hedge

Attached is the spreadsheet Eric and I have used to determine the quantity of MMBTU's that need to be sold to Barclay's to account for unwinding 3% of the total KCS hedges.

We calculated 3% of the hedged MMBTU's in the small VPP, 3% of the hedged MMBTU's in the large VPP, and 3% of the hedged oil MMBTUE to come up with the total MMBTUE that will be sold to Barclay's. The oil MMBTUE's have been included in the large VPP gas hedge.

Additionally, as has been widely discussed, the actual financial volumes hedged are slightly less than the actual physical volumes due to the fact that the payout on some of the properties was paid at less than 100% of index. This lower payout % was compensated for when booked by applying that same % to the volumes at full index price, thus resulting in an exact match on the cash flows hedged. Our calculation of the total gas hedged volumes as a percentage of total physical volumes is on the "Support" page Cell S2 and came to 99.4% (FYI). In any case, by applying a 3% multiplier to the hedged volumes (hedged at the full index price), we can determine the quantity of MMBTU's that will make up 3% of the cash flow hedge.

Please let me know if you have any questions or comments.

Thanks,

Charlie