El Paso Presentation Introduction of Schlumberger Business Consulting (SBC) Capabilities

1. El Paso Presentation Introduction of Schlumberger Business Consulting (SBC) Capabilities • Lisa Stewart, President Production & Non- Regulated Operations • Jeff Sherrick, Sr. VP Production & Non- Regulated Services Current plan is to have a discussion – not present a deck. This deck is to organize our thoughts. Vic Joyce – Global Account Director Bob Peterson – Improve Production Efficiency Saheed Kenku – Improve Capital Allocation Marty Stetzer – Reserves Management Improvement

2. Management Team Focus at El PasoKey points from June 29 analyst presentation • Increase production efficiency • Maximize value from existing property base • Increase production but not capex • Improve capital allocation process • Lower exploration risk and improve predictability • Instituting standardized risk assessment • Revise Reserves Management Process • Improve reliability of estimates • Accurate information for planning and reporting Vic… Suggest you speak to this topic Discuss credentials from Schlumberger Business Consulting (SBC) to help El Paso “Deliver the Plan.”

3. SBC provides our clients with: • 1. Deep industry and consulting experience… 50+ staff in NSA, 110+staff worldwide • 2. Structured methodologies to define key steps needed for business improvement • 3. Use of end-to-end workflow templates, best practices and benchmarks • 4. Change management skills • 5. Program and project management tools • 6. Experience and citations to help define (and implement) a unique Kerr-McGee solution • Across SLB competencies • Incorporating third parties where appropriate • Leveraging Kerr-McGee best practices, culture and initiatives Marty or Vic can speak to this topic and introduce who’s next and what they will cover SBC Capabilities Introducing Schlumberger Business Consulting (SBC) “Schlumberger Information Solutions (SIS) announced creation of Schlumberger Business Consulting (SBC), focused exclusively on the growing demand for optimization of upstream oil and gas industry operations. SBC offers a unique combination of domain knowledge, global reach and experienced consultants targeting E&P operational processes. SBC works with E&P companies in strategy implementation, organizational efficiency and technology strategies to help enhance core operational processes within these organizations and to gain productivity through appropriate workflow redesign enabled by information technology (IT).” Press release LONDON, April 14, 2004 –

4. Bob’s topic. He would expect to use one of the three attached case studies Improve Production Efficiency El Paso: Highlights - Talking PointsPlan to start with pure production efficiency questions and then end on capital efficiency) • High grading of portfolio and most effective capital allocation is top priority, with goal of establishing more predictable cash flow • Cost leadership on production is also a strategic priority • How is EP going to achieve its 8% improvement (from .70 to .65/Mcfe) • What combination of cost reduction and efficiency improvements? • Are compressors, labor, chemicals the right targets- how well thought out is the plan for achieving these goals? • Does the plan have the right mix of work process change and technology enablers? • Is the plan aggressive enough- are you satisfied that you are capturing all of the low-hanging fruit? • What is your plan for maximizing the value of field logistics, e.g. keeping your 14 rigs busy? • How do you plan to exploit well surveillance? • Pump-off controllers, more efficient de-watering, etc? • Do you have a complementary plan to ‘change the work’? • Production organization issues • Have you thought through best practices re. An asset-based organization? • What is your plan to decrease time to 1st production • Have you worked out the processes for asset and central organization interaction • (For us, Schlumberger)- where do we want to get started?

5. Situation: Develop and implement an intelligent well advisory system pilot on a subset of newly completed remotely monitored wells that will aid engineering and operations personnel in predicting and averting significant well failures. Well performance is extremely troublesome in the heavy oil environment. Complexity: New well settling-in period is the most problematic period in a well’s life. Large production gains and service cost reductions can be achieved by cutting settling-in period in half. Deep operator heuristic knowledge must be codified. The right predictive tools must be calibrated to the heavy oil well failure modes. Business process change is critical to delivering estimated gains. Solution design: An integrated intelligent well advisory system solution utilizing artificial intelligence, codified operator knowledge, and portal alarming technologies should deliver: - 3 - 7% increase in average oil production - 6 - 10% reduction in total per unit costs Additional benefits include improved data management, knowledge sharing and technology transfer Bob’s case study 1 handout Well 1 Well 200 Based on advice from IWAS, control room operators will close the loop back to the wellhead Case Study 1 – Technology first, then process improvement Canadian Heavy Oil ProducerExpects to increase production by 5%+ through use of an intelligent well advisory system This project has completed the pilot phase; validating predictive concepts and core operational process changes on a set of approximately 200 wells for 6 months. Validated concepts will now be scaled across 2500+ heavy oil wells in the business unit.

6. Bob’s case study 2 handout ETL Batch Real-time SCADA data Financial data Warehouse Processes Integration Broker? ODS Engineering, Preventative maintenance, HSE, and Energy Management Knowledge base Reports Web Pages PC DBMS Spreadsheets Case Study 2 – Process first then technology Canadian SBU of Super MajorImproving operational integrity assurance (OIA); plant reliability gains of 0.5% anticipated • Situation: • Long-term lowest-cost IT strategy has ‘starved’ gas fields and plants. How the Work Gets Done” process improvement initiatives reaching availability and reliability limits. Business Unit Management asking “Where can we get the biggest gain for IT investment in gas plants?” Western Canadian plant judged as global best-practice process model. Operational Integrity Assurance initiative expected to yield next round of improvements. • Complexity: • Gas fields/plants at different stages of process discipline and IT maturity. Business Unit desires best-in-class and best-in-maintenance operations. Core plant applications confusion Operator Training System (OTS), best-practice database, at limits of functionality. • Solution Design: • Interview cross-section of operational and support personnel to ID pain points and potential pilots. Focus on cost/benefit analysis of information access bottlenecks. Design pilot to deliver information to “Smart Operator” in one minute or less. Current status- validating operational pain points and beginning design of a pilot project to improve the effectiveness of operator plant and field rounds using hand-held computers

7. Situation: The continued drive for reserve replacement requires a more rapid development and turnaround of reservoir models and development scenarios. The current data sharing architecture does not adequately support the efficient flow, tracking, storage and sharing of development information. Complexity: The current working environment is not conducive to collaboration and exchanging viewpoints on the reservoir modeling process. The reservoir models are often complex and currently utilize linear development work flows with data flowing from one discipline to another. Solution Design: Replace the linear workflow environment with a collaborative process framework which utilizes a visualization environment for development teams involved in the reservoir modeling, well planning and design and executing of development scenarios. Bob’s case study 3 handout Case Study 3 – Collaboration across process Major International Offshore ProducerIncrease reserves and production through improved collaboration and management of work processes, with focus on creating a continuous- improvement environment for scenario development, execution, and uncertainty assessment. This project has currently completed the initial evaluation. Approval has been given to proceed with the initial work process analysis for a collaborative work environment.

8. Saheed’s topic Improve Capital Allocation Process El Paso: Capital Allocation/Portfolio Summary GOM S. LA 2003 Allocation = 12% 2004 Allocation = 28% * 2005 Allocation = 28% * International South Texas Reward Arklatex 2003 Allocation = 55% 2004 Allocation = 40% * 2005 Allocation = 44% * 2003 Allocation = 33% 2004 Allocation = 32% * 2005 Allocation = 28% * CBM and Rockies Low Medium High Risk * Estimate Note: Excludes corporate and other general capital items

9. Potential projects can be viewed (with uncertainty) for combined portfolio (e.g. cash flow, production, capital, etc.) Probability of Achieving Goals Is a 54% chance of achieving your goals acceptable? How can you adjust your portfolio to improve this? Or are your goals unrealistic? Portfolio Solution Complexity Note: All the El Paso team has had the Rose & Associates training Even with the Best of Efforts, Corporate Performance Goals May Be Missed

10. Marty’s topic. What Lisa told the audit committee Corporate Reserves Committee Regional Operations Reserves and Evaluation Group Board of Directors Outside Reservoir Engineering Firm Revise Reserves Management Process El Paso: Enhanced Controls on Reserve Booking • In restructuring our reserve booking process, we implemented the following changes: • Centralized reserves and evaluation group to estimate and report reserves • Regional operations will supply data • Corporate reserves committee to oversee reserve bookings and interface with the Board of Directors • The Audit Committee will engage an outside reservoir engineering firm to complete year- end audit

11. Plan to use this slide as a handout. And tell Lisa we can help get a management process in place to ensure her team is implementing what she told to the audit committee. Establish Field Production Volumes (well-by-well) 1 Estimate Recoverable Reserves (by Field) 2 4 • Report Reserves • Operational • Compliance Potentials Operational Reserves Report (3P-2P-1P) Technical Volumes Volumes External Internal Technical Volumes SEC / other Guidelines SEC / other Reporting Volumes Define Reserve Opportunities Portfolio 3 8 • Manage Financials • Revenue • DD & A + PPE • Division of Int. • JVs Historic Lifting Costs, Prices, and Interests Pro Forma Financials Perf Metrics Economic Cases (Compliance and Operational) Bases & Assumptions Results Annual Planning Cycle Develop & Document Strategy (e.g., R/P vs. Cash Flow) 5 DevelopCorporate Plan 6 • Manage Portfolio Project • AFE’s • Budget 7 Year 1 Long Range Plan Bases &Assumptions Technical Commercial Reporting & Compliance Integrated workflow approach recommended E&P Reserves Management Workflow Process integrity is needed across the workflow…

12. Set Strategy and Vision Marty or Vic topic AcquireProspect ExploitProspect DevelopProspect ProduceProspect AbandonProspect • Portfolio Focus • Asset Life Cycle Summing up SBC Upstream SolutionsRelate to ElPaso organization and responsibilities • E&P Senior Team • Manage the Business Reserves Mgmt Process Business Planning Process Capital Allocation Process • SLB Key Citations • Domain Expertise Production Efficiency – Husky Oil Capital Planning - Anadarko Reserves Management – Kerr McGee

13. Vic Wrap-up topic. Thank You What’s next???