Current edition contains:

EUROPE ON THE BRINK OF COLLAPSE

1
Why we believe there is more downside for Euro and European stocks.
UPDATE ON OIL AND A CALL FOR USD 60 / BARREL
2
Can Chinese demand outweigh drop in OECD consumption?
THE CASE OF UNDERVALUED ASIAN CURRENCIES
3
Korean Won offers great value.
BIG BRANDS SEEM TO BE CHEAP
4
What happens to large caps when trust comes back?
IMPORTANCE OF NATURAL GAS ON THE RISE
5
We like E&P natural gas companies.

GLOBAL MACRO STRATEGY

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investment newsletter 2/2010 www.atwel.com 1 | page

1) EUROPE ON THE BRINK OF COLLAPSE

February is in the full swing and we are releasing the second edition of our investment newsletter. Greece was
definitely the amplifier of the recently ongoing correction in the overbought market. Who follows our
recommendation is well aware that we have been calling for cheaper Euro for well some time. But that is just how
the market works. For years, a problem can be neglected, brushed aside as inconsequential, and then, one day, for
whatever reason, the collective market decides to fix its gaze on a given issue. At that point, the issue can become a
problem, then morph into a crisis and finally end up as a cataclysm. Shortly said, a lot of debt has to be rolled over in
next few quarters and we can hardly see yields going down without some assistance from Germany.

Typically when countries get into debt crisis, the austerity package that inevitably has to happen, never happens
alone. You either have to devalue currency, bring interest rates down very quickly, monetize the debt by central
bank or you need a financial bailout, a package that gives you time to implement changes without blood running in
the streets. As you know, the first three options do not exist, so Germany or IMF must step in. Without such
package, we believe internal devaluation to the extent of 20-30% would prove to be unbearable to the citizens of
Greece and Spain, especially with demonstrations already planned in Greece. Not even mentioning Portuguese
socialists in the Parliament already suggesting increasing government spending, and the pain has not even begun.
The role of Germany has yet to play out as we have some first signs of help. But will Germany open its pocketbook
this time without any ramifications and strings connected? As Stratfor pointed out recently, such loans may be
conditioned by Germany effectively receiving much more control over state finances of individual PIGS countries.
We are not sure whether these countries will like it or not and whether Germany has enough financial power to bail
everyone out, especially if you consider that we are not talking about PIGS alone, Belgium and France are a just
marginally better story. And time is running out. Until we see some credible plan, we advise you not to touch Euro,
nor European stocks with a ten foot long stick. Not mentioning that any rating cut from Moody's or S&P would now
cause a further sell-off.

Now let us revise the simple facts. Euro has been overvalued on a PPP basis for a very long time. German banks are
the biggest holder of PIGS debt, therefore we see little probability of outright default as it would ripple through the
entire European financial system. Bailing out Greece will mean further hit to public finances of the strong states, but
it will be done. Greece is now paying 5% for money at real terms ( and it will slip into deflation soon ). These levels
are unsustainable as interest for debt is larger than growth, thus sending Greece into debt spiral. Any bailout in
terms of loans from Germany is oxymoronic as the level of debt far exceeds the capacity of Greece to service the
debt. The easiest adjustment solution thus rests on the side of weaker Euro.

investment newsletter 2/2010 www.atwel.com 2 | page

 Greece - 2Y bond yield
%
7

1
02/2009 05/2009 08/2009 11/2009 02/2010

Greece - 2Y bond yield

investment newsletter 2/2010 www.atwel.com 3 | page

2) UPDATE ON OIL AND A CALL FOR USD 60 / BARREL

To us, it seems like there are two worlds out there. The world of physical demand for oil and the world of traders at
Nymex. As a matter fact, one could bluntly say so about most commodities. But words aside, let us dig directly into
oil fundamentals.

First, we believe we have just gone through peak demand for oil in OECD countries. Chevron, Valero, and Shell,
representing major refinery companies in US, have all been shutting down production capacities in the magnitude of
500.000 barrels/day during past few months. And the reasoning is quite simple, these companies just can not make
any money at 70 USD/barrel, it is just too expensive.

WTI Crude 1st Generic Futures

US$/barrel
90

80

70

60

50

40
04/2009 07/2009 10/2009 01/2010

WTI Crude 1st Generic Futures

To give you precise numbers, US refinery capacity of 2009 ended at 79.8%, its lowest point of the year and the
lowest point since 2001. This implies that the demand for crude oil is very strong in the futures market, yet very
weak in the physical market. And if we look into recent numbers from January 2010, refinery utilization has been
hitting new lows.

Refinery capacity utilization

percentage points
100

95

90

85

80

75

70

65
WEEK 1 WEEK 6 WEEK 11 WEEK 16 WEEK 21 WEEK 26 WEEK 31 WEEK 36 WEEK 41 WEEK 46 WEEK 51

2010 2009 Avg Min Max

investment newsletter 2/2010 www.atwel.com 4 | page

To put it simply, refineries are ultimately the natural demand side for crude oil as they process the crude oil into
heating oil, diesel, and gasoline. If refineries were to operate at profitable margins with oil at 70 USD/barrel, the US
motorists would have to cope with gasoline prices well north of 3 USD per gallon (compared to 2.7 USD per gallon as
a national average, also let us remind you of the pain motorists were going through in 2008, having to cut on
consumption as prices were not affordable). Yet high inventory and low capacity utilization do not seem to be
bothering the crude oil markets. Which means that the big question, as always, is whether the desire of investors to
own futures will keep growing this year.

What guides investors to keep on accumulating crude oil positions at prices that are detrimental to an economic
recovery? Why do Wall Street bankers show more will to own crude oil than Chevron, the second largest refiner in
the country? Today, much of the bull case basically rests on the emerging markets story. Especially China's record
crude import numbers for December, standing at 5 million barrels a day.

China Crude Oil Imports

millions barrels per day
5

China crude oil imports

But despite its own bout of freezing cold temperatures and blizzards, China was actually a net exporter of fuel oil for
the month. Meanwhile crude oil imports are up a hefty +13.9%. So the Chinese data must be understood in the
reality of a changing oil infrastructure, where the super majors are expanding their refinery capacity to ultra-modern
complexes, with refinery margins guaranteed by the state. It is hard to say final demand in China is strong, rather
price subsidy has moved 180 degrees, from the consumer to the producer, with the final product being stored up.

But no matter whether the product is stored up for later consumption or for strategic reserves, the question is
whether the China's apparently insatiable demand for crude will more than offset the OECD's oil demand decline.
We think there are reasons to believe that China will skip certain stages in its oil development in the same way as it
skipped certain stages in its industrial development.

Chinese gasoline and diesel demand grew by an average of +240.000 barrels/day in the past decade. If this growth
were to be maintained, then by the end of 2020 China will consume twice as much as it did on transport demand in
December 2009 - or a cumulative 4.6 million barrels a day of combined gasoline and diesel. However most do not
expect this exponential growth will continue, as alternatives come online and China's GDP growth rate slows (10%
growth rate is already inflationary and 8% seems to be the new normal for the next decade). If growth is maintained
at +240.000 barrels a day, then we can anticipate China's demand to reach a cumulative 2.6 Mbd by 2020.

investment newsletter 2/2010 www.atwel.com 5 | page

The question therefore is whether the decline in OECD countries will be large enough to mitigate China's rise in
demand. The gas-guzzling US has the most room to cut gasoline consumption as it currently stands for 20% of world
oil consumption. Assuming the American fleet and car usage does not expand any further than the current levels, the
tighter standards should, in principle cut consumption by -350.000 barrels a day annually. But this does not stop here
because the EU has set a goal of reducing oil consumption by a further-20% by 2020, which is another decrease of -
156.000 barrels a day of gasoline and diesel for the rest of the world, taking us to just over -500.000 barrels a day
between the EU and the US (to a cumulative usage of about 5 million barrels per day) by the end of decade. This is
more than double a baseline increase by China to 2.6Mbd cumulative and even offsets the most bullish scenario of
4.6Mbd cumulative. So in a worst-case scenario, efficiency gains in the US and EU will totally offset China's demand,
and at the best-case scenario, there may very well be a good amount of spare supply for other parts of the world
seeing rising demand.

Assuming the East will make up for the West's declines is like saying, "here we will give you our old technology while
we ejnjoy the new." As we do know that China is seeking breakthroughs in transport efficiency. It has already started
at the truck and coach level (which would remove a substantial amount of diesel demand).

investment newsletter 2/2010 www.atwel.com 6 | page

3) THE CASE OF UNDERVALUED ASIAN CURRENCIES

In the last edition, we advised you to position yourself in the long USD/JPY trade. So far, it has not been much fun,
especially due to correction / panic in the markets and liquidation of EUR/JPY carry trades (who wants to own any
Euros now after all). But we still believe this trade has ample of reasons to be repeated over 2010, and to add into
position after MA200 gets crossed from the downside.

Now suggesting the idea of going long KRW/JPY, you may want to think we are trying to trying to pull the rabbit out
of the hat for the second time. Though this time, the point of story is not rooted in one currency swapping its carry
trade status with the other one. We rather look at KRW/JPY trade through the lens of PPP valuation and dynamism in
the international trade.

a) Adjusted PPP is saying a screaming buy

For those of you being familiar with PPP, and Balassa-Samuelson effect, feel free to skip this paragraph. Using PPP,
FEER, and other models, most seem to point to chronically undervalued currencies Yet already in 1964, Balassa and
Samuelson presented an economic model (today know as the Balassa-Samuelson effect) to explain this
phenomenon. Less developed country currencies are normally undervalued in terms of purchasing power parity with
rich countries. Services and wages are cheap in poor countries and expensive in rich countries, while prices for
internationally traded goods are roughly equalized. When the productivity in traded goods rises (while productivity
growth in services in limited - think of all the barbers, public transportation), more income is generated and spent on
services. The price ratio of non-traded to traded goods will rise and real exchange rate will appreciate. Hence part of
undervaluation in less developed countries simply results from productivity factors and market forces that make
non-traded goods relatively cheap. With the rise in productivity (think of GDP per capita), the price level of services
rises and PPP slowly equals out.

We modeled this relationship by plotting all inputs into a single chart as we used historical data from about 10
countries across the world in various stages of development during past 15 years. And it delivered quite a nice result.

Deviation of PPP implied FX rates y = 0,7445ln(x) - 7,7304

percentage points R² = 0,7242
100%

50%

0%

-50%

-100%

-150%

-200%

-250%

-300%
0 10 000 20 000 30 000 40 000 50 000 60 000

Deviation from PPP Japan Korea Fair value of FX rate (adjusted PPP model)

As you can see on the chart above, we compared the level of GDP per capita in PPP prices on the x-axis to the ratio of
spot rate divided by PPP on the y-axis. Generally speaking, the less developed a country is, the cheaper the services
are thus the more undervalued the currency in relationship to PPP seems to be.

investment newsletter 2/2010 www.atwel.com 7 | page

Now to give you a hint of how South Korea was coping with its development, we plot only data of Korea to the very
same chart. Using the adjusted PPP model, you can see that before 1997, Korea was positioned well above the black
line that means clear overvaluation compared to the fair value of FX rate. Then in late 1997, it devalued massively,
gained competitive advantage in goods exchange, and proceeded in slow adjustment of its currency afterwards.

Deviation of PPP implied FX rates - Korea

percentage points
100%
Korea before Asian crisis,
50% about 20% overvalued
0%

-50%

-100% Korea after subprime crisis,

-150%
about 30% undervalued

-200% Run on currency, late 1997

devaluation, 40% underval.
-250%

-300%
0 10 000 20 000 30 000 40 000 50 000 60 000

Korea Log (Adjusted PPP FX rate)

If you want to compare the same development of JPY, see the chart below. Japan has been doing slowly adjusting
towards its fair value over the passage of time as it was deflating its way out of massive overvaluation.

Deviation of PPP implied FX rates - Japan

percentage points y = 0,7445ln(x) - 7,7304
R² = 0,7242
100%

50%

0%

-50%

-100%

-150%

-200%

-250%

-300%
0 10 000 20 000 30 000 40 000 50 000 60 000

Japan Log (Adjusted PPP FX rate)

Yet now comes the interesting part. We modified the charts a bit to show you the actual level of
under/overvaluation, i.e. the distance of each point from the line on the KRW/JPY currency pair.

investment newsletter 2/2010 www.atwel.com 8 | page

 KRW/JPY

15

14

13

12

11

10

5
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

KRW/JPY

Deviation from fair value

percentage points
0%

-10%

-20%

-30%

-40%

-50%

-60%

-70%

-80%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Deviation from fair value

It is worth noticing that the last time KRW was so undervalued, it took almost six years for deviations to normalize.
This time, we believe the process will take much shorter time as investors will be more intensively looking to the
East, where the growth is.

b) Staying away from math, what does the real world have to say

In one of our free newsletters, we mentioned Korea is gaining market share across the world in almost every
industry as well as climbing up the value chain. For instance, Hyundai has grabbed a lot of attention from US
customers due to aggressive pricing. Quality issues of Toyota and Honda may benefit this trend even further. To give
other example, Korean energy companies are emerging in the nuclear power plants construction field, being able to
offer about 20% cheaper technology than its French competitors. Korea is also one of few countries being able to run
a positive trade balance with China.

All in all, we have seen a lot of evidence in the real world of increased competitiveness in Korea. With inflationary
pressures slowly creeping up (now standing at 3.1% measured in CPI terms), Bank of Korea will have soon enough
evidence for letting the currency appreciate bit faster or rising the interest rates despite the pressure from the
Ministry of Finance.

investment newsletter 2/2010 www.atwel.com 9 | page

 Korea, FX reserves Pace of accumulation Pace of accumulation
bn USD 2005-2008 2009
280

260

240

220

200

180

160

FX reserves

Just to conclude, we want to make sure everyone understands the risks of the trade. One really needs decent global
growth for this theme to play out as Korean companies operate with double leverage. First the companies generally
use a lot of financial leverage as they borrow in US dollars, thus a strengthening dollar index is kind of hindrance
now. And secondly, most Korean companies are oriented towards manufacturing where operating leverage is the
key. Every uptick in capacity utilization generates disproportionately larger stream of profits, thus a strong growth in
world economy and global trade is crucial. In the environment of looming fiscal crisis in Eurozone, timing and
cautiousness of this trade is the key.

investment newsletter 2/2010 www.atwel.com 10 | page

4) BIG BRANDS SEEM TO BE CHEAP

Recently, a compelling research piece from our friends in Asia came across our desk. And interestingly, the main
point of the paper revolves around trust.

As the paper states, trust is a key factor in consumer choice and investor confidence. Unfortunately, in 2009, trust
levels in the ability of businesses "to do what is right" hit all time lows, particularly in developed countries. This
correlates well with the performance of stock indices around the world. In fact, as of the end of 2009, just 38% of
people surveyed by Edelman (leading PR company in US) expressed confidence in the business in general (down
from 58% in 2008). This is quite important, especially in light of other statistics that showed 91% of respondents
prefer to purchase products from what they deem to be trustworthy company and 77% of them will actually avoid
buying anything from a company they do not trust. This is quite important because intangibles such as "trust" and
overall brand image can dramatically affect the bottom line (think of GM and Chrysler losing to Ford due to
acceptance of bailout money or recent woes of Toyota and immediate drop in its stock value).

Simply said, consumers have serious doubts about the trustworthiness of US corporations, which in turn is affecting
how much investors are willing to pay for these companies. We fully acknowledge that it is hard to judge the true
causality (does lack of trust cause drop in market prices or does falling stock market and layoffs cause loss of trust in
companies?), but after going through the process of thinking about what role intangibles such as trust and brand
play within the value of a company, two ideas popped out.

a) Intangible assets are increasingly the best income-producing assets, yet they are nowhere to be found in
corporate accounts.

According to research from trio of authors Corrado, Hulten, and Sichel (http://www.nber.org/papers/w11948), the
amount of economic growth attributable to intangible investment moved to parity with tangible investment in the
period of 1995-2003. Yet, investments in intangibles are typically not capitalized by corporates. Skills to create new
products, accumulated knowledge, expenses spent on brand, these figures are find to in balance sheets as assets.

Authors estimate that in 2003, $3.6 trillion of intangible capital stock in the US was excluded from business equity
due to how intangible investments are accounted for (expensed) under the predominant GAAP and IFRS financial
reporting regimes. So if intangible investment is not treated like tangible investment on an accounting basis, despite
it is at least as big of a contributor to growth, then assessing the value of a company with large intangible assets is
rather difficult.

By capitalizing intangible investments, and thereby creating an asset on the balance sheet, adjusting net income and
equity, and modifying the cash flow statement to reflect the intangible assets that make up the knowledge capital of
a firm, we are looking at a more appropriate set of financial metrics. Ultimately, these adjustments produce what is a
more accurate picture of the intangible-intensive company: one that has higher net income, higher operating cash
flows, more assets and higher equity, better profitability ratios, improved solvency ratios, and higher liquidity ratios.

b) In an age when no-one trusts corporate management any more there is a little chance for intangibles to be valued
anywhere close to their true worth. And of course, this is where the opportunity lies today.

A recent theme is that the current market hic-cups may be linked to a very important shift in leadership within the
markets. Indeed, the most recent investment cycle was dominated by wild swings in commodity producers (i.e.
undifferentiated products) and financials. But these sectors are now coming under pressure and it is our contention

investment newsletter 2/2010 www.atwel.com 11 | page

that companies that have devoted considerable energy to differentiate themselves via intangibles, such as
trustworthy brands, will once again start to outperform.

Because trust is in short supply today, intangible assets can be picked up for cheap by investors willing to dig deeper
into quarterly statements. Moreover, if continued globalization leads to the increased significance of brand
perception, then valuations could rebound all the more.

Due to the size of our office, we are not capable of going through balance sheet of every company and capitalize
intangible expenses. Yet we are able to execute following straightforward exercise. If we assume that companies
with high proportion of intangibles are built upon knowledge and streamlined innovative processes, we should not
be far away from truth to expect that these companies achieve high return on equity, whilst having a low volatility
within financial statements. These companies should be top performers in their segments, have a high degree of
R&D and/or a very valuable brands. It would not be too surprising to see these companies capitalize on globalization
and thus either grow their revenues or operating incomes at a significant pace.

Translating this logic into a numerical form, we ran an appropriate screener looking for suitable candidates.
Operating margins and return on equity higher than 15%, year over year growth in operating income, positive
operating cash flow, and enterprise value to free cash flow of at least 10. The final condition was market cap of at
least USD 2 billion and market bottom-up analyst seeing upside value in the company of at least 10%. As you know
we stay away from banks, so we excluded them from our screener.

We received about 80 potential candidates and what a surprise, most of them were true multinationals and
companies with some of the most valuable brands. For us, it makes a deep sense to overweight the multinationals in
portfolios as you get very cheap call option on world's growth, yet you stick with these super-strong balance sheets
in the volatile times of debt deflation.

investment newsletter 2/2010 www.atwel.com 12 | page

Underneath, we present a short list of companies matching our criteria. We hope it may serve you as a pool of stocks
to think about, especially in terms of your overall portfolio risk.

Operating EV/T12M Revenue

Short Name ROE PE WACC Upside Beta
margin FCF growth y/y
3M COMPANY 22% 28% 17 9,2 14,41 19% 0,87 78%
ALTERA CORP 33% 27% 25 9,8 15,78 20% 1,36 38%
ALTRIA GROUP INC 32% 93% 11 6,9 18,84 15% 0,65 13%
AMGEN INC 32% 21% 12 7,3 9,98 22% 0,62 8%
APPLE INC 30% 32% 20 10,3 14,50 29% 1,37 52%
CISCO SYSTEMS 24% 15% 21 10,3 15,75 19% 0,98 34%
COACH INC 36% 39% 18 13,4 10,14 15% 0,98 9%
COCA-COLA CO 25% 30% 18 8,1 20,71 16% 0,82 27%
COGNIZANT TECH 18% 23% 27 11,7 21,28 14% 1,39 17%
COLGATE-PALMOLIVE 23% 94% 18 8,3 15,67 11% 0,51 42%
ESTEE LAUDER 20% 22% 20 9,8 13,07 10% 0,49 68%
GILEAD SCIENCES 54% 49% 16 8,7 15,65 18% 0,74 55%
GOOGLE INC-CL A 37% 20% 26 10,7 17,01 28% 0,83 33%
HANSEN NATURAL 30% 25% 28 9,7 18,79 12% 0,88 14%
IBM 22% 74% 12 9,0 9,95 17% 0,96 10%
JOHNSON&JOHNSON 21% 27% 14 8,1 13,48 14% 0,74 16%
MASTERCARD INC 39% 54% 20 11,1 19,98 25% 1,31 8%
MATTEL INC 21% 23% 15 10,2 11,40 18% 1,24 80%
MCDONALDS CORP 30% 33% 16 7,6 20,34 10% 0,65 17%
MEDTRONIC INC 32% 17% 14 8,5 16,77 13% 1,03 11%
MICROSOFT CORP 45% 41% 15 9,5 11,52 24% 1,01 44%
MSCI INC-A 37% 21% 35 11,0 25,28 21% 1,05 45%
ORACLE CORP 39% 23% 17 8,7 13,26 23% 0,99 14%
PEPSICO INC 15% 41% 16 8,0 21,48 18% 0,85 68%
PHILIP MORRIS 37% 96% 15 8,5 16,88 13% 1,11 11%
PRICELINE.COM 27% 46% 34 8,7 20,27 15% 0,94 57%
PROCTER & GAMBLE 22% 20% 16 7,6 14,75 13% 0,70 15%
SIGMA-ALDRICH 24% 23% 17 9,4 15,52 23% 1,03 19%
STERICYCLE INC 27% 23% 24 7,6 22,37 22% 0,78 30%
TEXAS INSTRUMENT 30% 15% 19 10,0 14,39 18% 1,11 191%
VARIAN MEDICAL S 22% 27% 17 11,2 17,76 18% 0,65 21%
VIACOM INC 27% 21% 11 9,9 24,07 22% 1,02 130%

investment newsletter 2/2010 www.atwel.com 13 | page

5) IMPORTANCE OF NATURAL GAS ON THE RISE

For some time, we have held shares of Southwestern Energy, which is a company focused on natural gas exploration,
development and production. Recently, we were asked by our client what is our opinion of Chesapeake Energy Corp.,
yet another natural gas E&P company, so it became our intent to write a piece on natural gas in general as most
stocks in this sector are highly correlated and they seem to us a bit undervalued .

a) Natural gas vs. oil

From a geopolitical point of view, we have a hard time identifying too many reasons why US should keep sending
hundreds of billions to Middle East when it sits on piles of natural gas, quite a clean resource which is easy to
process. We can easily imagine a scenario where natural gas plays much more important role in energy policy of US
and production of natural is materially increased.

b) Short term effects on stock price

Value of a typical natgas production company is a function of volume extracted, price of natgas and extraction costs.
As we mentioned above, we see a clear long term positives for growth in volume. Extraction costs should be rising
only very modestly. Price of natural gas should be reflecting marginal cost of production, but in a short term, it can
be wildly affected by speculation.

In the past couple of months, we experienced an overcapacity shock (well, it is more appropriate to say under-
capacity in storage as there were realistic fears there would be no free storage left). Despite having natural gas
stockpiles dropping now, it is purely a seasonal factor. From a long-term view (2001-2008), stockpiles are at its
peaks, no matter how cold weather the northern hemisphere is experiencing. It is a reflection of a too strong
production or exceptionally weak demand. As the heating season is approaching to its end (March/April), it is
necessary for the manufacturing sector in US to pick up the slack, otherwise, the price of natgas would drop and
create a downward pressure of the companies involved with natgas production. As we can see from ISM surveys,
manufacturing is doing better, whilst services sector finds itself in a malaise. And we should not forget tightening
across emerging markets, troubles in Europe, and strengthening US dollar putting pressure on commodities.

Taking a look through a three year investment perspective prism, we think it makes every sense to start building
positions now. Yet with the near term pressures, we could imagine a bit lower prices, so any purchases should be
phased out over several months period until we get a clearer picture of natural gas stockpiles going down. Still, from
a long term perspective, current prices of natural gas producer companies seem attractive.

investment newsletter 2/2010 www.atwel.com 14 | page

 US, Natgas storage data
bln cubic feet
4 000

3 500

3 000

2 500

2 000

1 500

1 000

500
WEEK 1 WEEK 6 WEEK 11 WEEK 16 WEEK 21 WEEK 26 WEEK 31 WEEK 36 WEEK 41 WEEK 46 WEEK 51

2010 2009 Avg Min Max

3) Current events

Not too long ago, Exxon Mobile acquired XTO, which was quite a significant acquisition. Looking at the multiples it
was willing to pay, following conclusions arise:

XTO proved reserves 13.9 Tcfe

Enterprise value of XTO implied by transaction USD 51 mld
(0.7 Exxon share per 1 XTO share + USD 10bn of XTO debt)
XTO EV / proved reserves 3.67 USD / Tcfe

Looking over the universe of natural gas producer stocks, there generally seems to be about 30% upside. We would
definitely consider buying some strong natural gas companies that could become targets of acquisition from
companies like Exxon, Chevron on BP. Specifically speaking, we would take a closer look into companies like
Anadarco, Chesapeke Energy Corp. and Southwestern Energy.

investment newsletter 2/2010 www.atwel.com 15 | page