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	TBP SPEECH ANNUAL SHAREHOLDERS MEETING APRIL 28, 1982

WEDNESDAY

I. I WOULD LIKE TO QUICKLY COVER FINANCIAL AND OPERATING RESULTS FOR 1981 AND THE FIRST QUARTER OF 1982.

A. THEN, I WILL BRIEFLY DESCRIBE SOME OF MESA'S DRILLING ACTIVITY OF SPECIAL INTEREST.

B. I WILL CONCLUDE WITH SOME OBSERVATIONS ABOUT THE CURRENT STATUS AND FUTURE OF THE PETROLEUM INDUSTRY AND THE COMPANY'S MANAGEMENT PHILOSOPHY.

II. FINANCIAL AND OPERATING REVIEW

A. (REVENUES - 10 YRS. - SLIDE 1) TOTAL REVENUES FOR 1981 WERE $408 MILLION, A 10% INCREASE OVER $372 IN 1980.

1. OIL AND GAS REVENUES INCREASED 27% TO $366 MILLION COMPARED TO $288 MILLION IN 1980.

B. (REVENUES 1ST QUARTER 1981 VS. 1982 - SLIDE 2) IHE NOMINAL $3.8 MILLION DECREASE IN OIL AND GAS REVENUES DURING THE FIRST QUARTER RESULTED PRIMARILY FROM REDUCED PIPELINE DEMAND FOR NATURAL GAS.

1. ALSO, THE 1981 FIRST QUARTER INCLUDED $6.2 MILLION OF TERTIARY INCENTIVE REVENUES WHICH WERE NOT REALIZED IN 1982.

C. (NET PRODUCTION - 10 YRS, - SLIDE 3) NET DAILY OIL AND CONDENSATE PRODUCTION FOR 1981 WAS 8,481 BARRELS COMPARED TO 8,296 IN 1980. A SLIGHT INCREASE PRIMARILY RESULTING FROM INCREASED PRODUCTION IN THE ROCKY MOUNTAIN DIVISION.

1. NET DAILY NATURAL GAS PRODUCTION FOR 1981 WAS 282 MILLION CUBIC FEET COMPARED TO 290 IN 1980 WHILE NGL PRODUCTION FOR '81 WAS 1,947 COMPARED TO 2,022 BARRELS I N 1980. THE DECREASES IN GAS AND NGL WERE DUE TO LOWER PIPELINE TAKES I N THE HUGOTON FIELD.

2. THE DECREASES IN 1980 RESULTED FROM MTR DISTRIBUTION.

D. (PRODUCTION - 1ST QUARTER 1981 VS. 1982 - SLIDE 4.) THE TEMPORARY OVERSUPPLY OF NATURAL GAS WAS REFLECTED IN REDUCED PIPELINE TAKES FROM THE GULF OF MEXICO AND THE HUGOTON FIELD WITH CORRESPONDING DECREASES IN GAS, NGL AND CONDENSATE PRODUCTION DURING THE QUARTER.

E. (CUMULATIVE PRODUCTION VS. RESERVE ADDITIONS - SINCE 1973 - SLIDE 5) MESA HAS CONSISTENTLY REPLACED ITS PRODUCTION WITH NEW RESERVES.

1. RESERVES AT YEAR-END 1981 WERE 27.5 MILLION BARRELS OF OIL, CONDENSATE AND NGL AND 919 BILLION CUBIC FEET OF GAS, INCREASES OF 10% AND 7% RESPECTIVELY, OVER 1980.

2. TOTAL ADDITIONS TO LIQUIDS RESERVES WERE 6.2 MILLION BARRELS, REPRESENTING 163% OF 1981 LIQUIDS PRODUCTION OF 3.8 MILLION BARRELS.

3. ADDITIONS TO GAS WERE 163 BILLION CUBIC FEET, REPRESENTING 158% OF 1981 PRODUCTION OF 103 BILLION CUBIC FEET.

F. (GAS PRICES - 10 YRS. - SLIDE 6) MESA'S AVERAGE U.S. GAS PRICES IN 1981 WERE $2.31 PER MCF, A 22% INCREASE OVER $1.89 IN 1980.

G. (NGL PRICES - 10 YRS. - SLIDE 7) MESA'S AVERAGE U.S. NATURAL GAS LIQUIDS PRICE WAS $19.29 PER BARREL IN 1981, A 2% INCREASE OVER $18.97 IN 1980.

H. (OIL AND CONDENSATE PRICES - 10 YRS. - SLIDE 8) THE COMPANY'S AVERAGE PRICE FOR U.S. OIL AND CONDENSATE IN 1981 WAS $35,59, A 47% INCREASE OVER $24.15 IN 1980.

I. (FIRST QUARTER PRICES 1981 VS, 1982 - SLIDE 9) MESA'S AVERAGE PRICES FOR THE FIRST QUARTER OF 1982 PROVIDES A VIVID EXAMPLE OF HOW SUPPLY AND DEMAND CAN WORK IN A FREE MARKET.

1. AVERAGE NATURAL GAS LIQUIDS PRICES DECREASED BY 20% IN THE FIRST QUARTER OF 1982 COMPARED TO THE FIRST QUARTER IN 1981, AND AVERAGE OIL AND CONDENSATE PRICES HAD A LIMITED INCREASE OF LESS THAN 1%.
A. BOTH ARE DECONTROLLED AND SUBJECT TO SUPPLY AND DEMAND.

2. HOWEVER, AVERAGE NATURAL GAS PRICES INCREASED 24% DURING THE 1982 FIRST QUARTER. THE PRICES FOR MOST NATURAL GAS ARE STILL CONTROLLED BY GOVERNMENT REGULATIONS.

J. (OIL AND GAS EXPENDITURES - SLIDE 10) WE SPENT APPROXIMATELY $420 MILLION IN 1981 COMPARED TO $397 IN 1980 - BOTH VERY SUBSTANTIAL.

1. OUR ESTIMATED 1982 BUDGET IS $325 MILLION, STILL VERY LARGE COMPARED TO OTHER COMPANIES. YOU CAN SEE THE REDUCTIONS IN EXPENDITURES FOR EXPLORATORY DRILLING IN 1982.

2. BY NO MEANS ARE WE REDUCING THE IMPORTANCE OF EXPLORATION, WE ARE PRIMARILY ALTERING THE TIMING ON A NUMBER OF PROJECTS.

K. (UNDEVELOPED ACREAGE - 10 YRS, - SLIDE 11) AS YOU CAN SEE, UNDEVELOPED ACREAGE CONTINUES TO BE AN IMPORTANT ASSET—TOTAL U.S. NET UNDEVELOPED ACREAGE AT YEAR END 1981 WAS 1.6 MILLION ACRES.

1.TOTAL NET ACREAGE FOR 1981 INCREASED TO 3.1 MILLION ACRES FROM 1.8 MILLION IN 1980, PRIMARILY DUE TO LARGE ACREAGE POSITIONS ACQUIRED AND EARNED IN AUSTRALIA.

L. (DRILLING ACTIVITY - 10 YRS, - SLIDE 12) MESAS 1981 NET DRILLING ACTIVITY REACHED A RECORD LEVEL OF 181.4 NET WELLS COMPARED TO 116.0 IN 1980.

1. MESA IS CONTINUING TO EMPHASIZE ITS EXPLORATORY AND DEVELOPMENT DRILLING ACTIVITY AS EVIDENCED IN THE LATEST DRILLING REPORT.
A. THE COMPANY IS CURRENTLY PARTICIPATING IN 92 WELLS OF WHICH 62 ARE OPERATED BY MESA.

III. (U.S. MAP - SLIDE 13) I WOULD LIKE TO BRIEFLY REVIEW JUST A FEW OF OUR WELLS OF SPECIAL INTEREST.

A. (GULF COAST OFFSHORE - SLIDE 14) IN THE MIOCENE "BIG HUM" TREND, DRILLING CONTINUES ON BRAZOS A-7 (MESA 50%), A PREVIOUSLY ANNOUNCED GAS DISCOVERY, AND TESTING IS UNDERWAY ON BRAZOS A-39 (MESA 50%).

1. (PHOTO OF A-7 - SLIDE 15) ON A-7, WELL NO. 2 IS DRILLING BELOW 12,200 FEET TOWARD A 14,000-FOOT OBJECTIVE.
A. THE WELL IS BEING DRILLED FROM A 4-WELL PLATFORM INSTALLED OVER WELL NO. 1—THE DISCOVERY.

2. (STRUCTURE MAP OF A-7 - SLIDE 16)

3. (PHOTO OF A-39 - SLIDE 17) SEVERAL GAS-BEARING SANDS ARE BEING TESTED ON WELL NO. 1 ON A-39.

B. (TEXAS/NEW MEXICO - SLIDE 18) IN PECOS COUNTY, TEXAS, THE CERF RANCH No. 1-9 (MESA 16.3%) CONTINUES DRILLING, AND IN EASTERN NEW MEXICO, MESA IS ACTIVELY DRILLING IN THE PECOS SLOPE AREA.

1. (PHOTO OF CERF RANCH - SLIDE 19) THE CERF RANCH WELL IS DRILLING IN DESOLATE SURROUNDINGS BELOW 28,200 FEET TOWARD A 29,500-FOOT ELLENBURGER OBJECTIVE.
A. IF PRODUCTIVE, THE CERF RANCH WILL BE THE DEEPEST PRODUCTION IN NORTH AMERICA.

2. (PHOTO OF PECOS SLOPE - SLIDE 20) IN EASTERN NEW MEXICO, MESA. HAS FOUR RIGS CURRENTLY DRILLING IN THE PECOS SLOPE WHERE IT OWNS AN INTEREST IN APPROXIMATELY 788,000 ACRES.
A. MESA HAS DRILLED 165 PERMIAN ABo FORMATION GAS WELLS IN THE AREA SINCE 1979, EIGHTY-THREE ARE CURRENTLY ON PRODUCTION AT A COMBINED DAILY RATE OF 23.7 MILLION CUBIC FEET OF GAS. WE PLAN TO DRILL 94 MORE ABO WELLS DURING 1982.

C. (OKLAHOMA -SLIDE 21) MESA IS CURRENTLY DRILLING SIX WELLS IN WESTERN OKLAHOMA TO OBJECTIVES BELOW 15,000 FEET.

1. (PHOTO OF WELLS IN N.E. VAYFIELD - SLIDE 22) FIVE OF THESE WELLS ARE IN BECKHAM COUNTY, OKLAHOMA, AND INCLUDE TWO 26,000-FOOT HUNTON FORMATION TESTS.
A. THESE WELLS ARE ALL WITHIN THREE MILES OF THE PREVIOUSLY ANNOUNCED CROOK NO. 1-32 (MESA 63.5%) MORROW GAS DISCOVERY
B. (BACKGROUND INFORMATION ON EACH WELL) COX NO. 2-34 (MESA 57.2%) - 26,000 FOOT HUNTON TEST. DRILLING BELOW 17,000. FT. TIPTON No. 2- 29 (MESA 51.2%) - 26,000-FOOT HUNTON TEST. DRILLING BELOW 21,200 FEET. MANDRELL No, 1-30 (MESA 12%) - 20,000-FOOT MORROW-SPRINGER DEVELOPMENT WELL. DRILLING BELOW 17,100 FEET. KEATHLEY No. 1-31 (MESA 10.1%) - 20,000-FOOT MORROW-SPRINGER DEVELOPMENT WELL. DRILLING BELOW 5,200 FEET. BENTON No. 1-21 (MESA 18,7%) - 20, 000FOOT SPRINGER TEST, DRILLING IN A SIDETRACKED HOLE AT 7,750 FEET. GHOLSTON No. 1-15 (MESA 18.7%) - CUSTER COUNTY 20,000-FOOT SPRINGER TEST, DRILLING BELOW 17,700 FEET.

D. (WYOMING - SLIDE 23) IN THE OVERTHRUST BELT, THE CHAMPLIN 404 Amoco "C" No. 2 (MESA 27%), A 15,500-FOOT NUGGET TEST IN UINTA COUNTY, WYOMING, IS DRILLING BELOW 10,000 FEET. 1. THIS DEVELOPMENT WELL IS LOCATED IN THE LARGE ANSCHUTZ RANCH EAST FIELD. 2. MESA OWNS A SIMILAR INTEREST IN AN ADJACENT DRILLING UNIT TO THE SOUTH AND A 65% INTEREST IN 640-ACRES 1 1/2 MILES NORTHEAST OF THE WELL.

E. (MAP OF AUSTRALIA - SLIDE 24) THOUGH ONLY A SMALL PORTION OF OUR BUDGET IS EXPENDED IN AUSTRALIA, WE ARE EARNING INTERESTS IN A LARGE AMOUNT OF ACREAGE, AT YEAR END, THE COMPANY HAD EARNED AN AVERAGE 23% IN 6.5 MILLION ACRES; IS CURRENTLY EARNING AN 18.5% AVERAGE INTEREST IN 19.8 MILLION ADDITIONAL ACRES; AND HAS APPLICATIONS PENDING FOR A 33.3% AVERAGE INTEREST IN ANOTHER 7 MILLION-ACRES. 1. TO DATE, ONE DISCOVERY HAS BEEN MADE—THE WAGGAMBA No. 1 (MESA 10%), A GAS DISCOVERY IN THE SURAT BASIN OF QUEENSLAND IN EASTERN AUSTRALIA. 2. (PHOTO OF YARDIE EAST No. 1 - SLIDE 25) OFFSHORE WESTERN AUSTRALIA, THE YARDIE EAST N0. 1 (MESA 5%) IS BEING DIRECTIONALLY DRILLED TO AN OFFSHORE OBJECTIVE FROM AN ONSHORE LOCATION.

F. (MESA LOGO -SLIDE 26) END OF SLIDES - LIGHTS WILL -COME ON SLOWLY.

IV. TURNING TO CORPORATE MATTERS, MESA RECENTLY RECEIVED A RULING FROM THE INTERNAL REVENUE SERVICE CONCERNING THE MESA ROYALTY TRUST. THE RULING STATED THAT THE TRUST IS A GRANTOR TRUST AND NOT AN ASSOCIATION TAXABLE AS A CORPORATION. HOWEVER, THE RULING HELD THAT MUCH OF THE ROYALTY INCOME WAS TAXABLE TO MESA.

A. IN AN ATTEMPT TO AVOID PROTRACTED AND COSTLY LITIGATION, WE BEGAN DISCUSSIONS WITH THE IRS TO EXPLORE THE POSSIBILITY OF QUICKLY RESOLVING THE TAX ISSUES IN A MANNER THAT WAS MUTUALLY AGREEABLE.

B. SOME PROGRESS HAS-BEEN MADE IN THESE TALKS, BUT TO DATE WE HAVE NOT REACHED A DEFINITVE AGREEMENT. AT THIS TIME, THE MATTER IS UNDER CONSIDERATION BY THE NATIONAL OFFICE OF THE IRS IN WASHINGTON.

C. SHOULD THIS ISSUE NOT BE SETTLED ADMINISTRATIVELY WITH THE IRS, THE COMPANY WILL SEEK RESOLUTION THROUGH LITIGATION. THE COMPANY'S LEGAL COUNSEL HAS EXPRESSED ITS OPINION THAT THE COMPANY WOULD PREVAIL IN ANY SUCH LITIGATION.

V. I WOULD LIKE TO CONCLUDE MY PRESENTATION TODAY BY DISCUSSING THE STATUS OF THE PETROLEUM INDUSTRY IN TODAY'S ECONOMIC ENVIRONMENT AND MANAGEMENT'S PHILOSOPHY CONCERNING FUTURE DIRECTION OF THE COMPANY.

A. THE PETROLEUM INDUSTRY REMAINS THE STRONGEST ECONOMIC ENTITY IN AMERICAN INDUSTRY.

B. HOWEVER, THE INDUSTRY HAS NOT ESCAPED THE GENERAL ECONOMIC DECLINE RESULTING FROM CONTINUED HIGH INTEREST RATES - CURRENTLY AT 16.5% - CAUSED PRIMARILY BY HUGE GOVERNMENT DEFICITS.

1. IN ADDITION, THE PETROLEUM INDUSTRY HAS HAD TO FACE:
A. THE HIGH COST AND POOR QUALITY OF EQUIPMENT AND SERVICES.
B. THE TEMPORARY OVERSUPPLY OF NATURAL GAS AND CRUDE OIL.
C. A DECLINE IN WORLD OIL PRICES FROM A HIGH OF APPROXIMATELY $40 PER BARREL IN EARLY 1981 TO THE CURRENT PRICE OF APPROXIMATELY $33.

C. THESE FACTORS HAVE CAUSED THE INDUSTRY'S STOCK PRICES, INCLUDING MESA'S, TO PERFORM BELOW THE GENERAL MARKET IN RECENT MONTHS.

1. THIS DECLINE IN STOCK PRICES REFLECTS MORE OF A SHORT-TERM OUTLOOK THAN A GENERAL WEAKNESS IN THE INDUSTRY, PARTICULARLY AS IT RELATES TO GAS PRODUCERS.

2. STOCK PORTFOLIO MANAGERS, HARD PRESSED TO SHOW A PROFIT AMID THE WEAKNENING STOCK MARKET, HAVE BEEN SELLING OFF SHARES IN PETROLEUM - COMPANIES PURCHASED EARLIER AT VERY LOW PRICES.
A. BECAUSE OF THE GREAT APPRECIATION OF OIL AND GAS STOCKS, SUCH AS MESA, IN RECENT YEARS, THESE SHARES COULD STILL BE SOLD AT A PROFIT DESPITE THE MARKET'S DECLINE.

3. HOWEVER, PRICES FOR OIL AND GAS STOCKS SEEM TO BE STABALIZING AS THE MARKET HAS BEGUN TO RECOGNIZE THE STRONG ASSET VALUES WHICH THE INDUSTRY REPRESENTS.

D. THE NATION'S BASIC ENERGY NEEDS THAT BROUGHT PRIOR GROWTH TO THE INDUSTRY HAVE NOT CHANGED.

1. THE NATION STILL IMPORTS 35% OF ITS CRUDE OIL REQUIREMENTS.

2. THE CURRENT OIL AND GAS OVERSUPPLY IS ONLY TEMPORARY.
A. SUPPLY AND DEMAND HAVE ALREADY CAUSED CRUDE OIL PRICES TO BEGIN STABILIZING.

E. HOWEVER, ANY REBOUND IS LIKELY TO BE PRECEDED BY A DIFFICULT PERIOD OF ADJUSTMENT FOR THE INDUSTRY INCLUDING:

1. SALES
2. MERGERS
3. SPIN-OFF OF ASSETS

F. EXCELLENT OPPORTUNITIES ARE AVAILABLE FOR COMPANIES WHICH HAVE PROPERLY ANALYZED AND PREPARED FOR THE CURRENT BUSINESS CLIMATE.

1. MESA'S 1982 CAPITAL BUDGET OF $325 MILLION, THOUGH SUBSTANTIAL, WAS REDUCED FROM 1981 LEVELS IN ANTICIPATION OF CURRENT CONDITIONS.

G. MESA WILL USE THIS UNIQUE ECONOMIC ENVIRONMENT AS A SPRINGBOARD TO TAKE ADVANTAGE OF ACQUISITION, FINANCIAL AND OPERATIONAL OPPORTUNITIES WHILE PURSUING SELECTIVE EXPLORATION OF QUALITY PROSPECTS.

1. THE COMPANY HAS A HISTORY OF "ZIGGING" WHILE 200 OTHERS "ZAG", SUCH AS IN CANADA AND IN THE NORTH SEA.

2. WE WILL BE MAKING INNOVATIVE ADJUSTMENTS DESIGNED TO HELP INCREASE THE MARK5T VALUE OF OUR SHAREHOLDERS' INVESTMENT.

VI. I WILL NOW BE PLEASED TO ANSWER ANY QUESTIONS. (YOU SHOULD ANTICIPATE TWO QUESTIONS FROM THE FLOOR. BE SURE AND REPEAT EACH QUESTION ASKED FROM THE FLOOR:

A. CAROLYN CONNELLY: WHAT ARE THE CHANCES OF GETTING FULL DECONTROL OF NATURAL GAS?

B. LARRY ROTH: DOES MESA INTEND TO CONTINUE BUYING COMMON STOCK IN OTHER OIL AND GAS COMPANIES, EITHER FOR INVESTMENT PURPOSES OR ACQUISITIONS?

1. (BACKGROUND INFORMATION FOR ANSWER) MESA'S CONTINUING POLICY OF INVESTING IN UNDERVALUED OIL AND GAS SECURITIES YIELDED A $22 MILLION PRE-TAX GAIN OR $16 MILLION AFTER-TAX DURING THE FIRST QUARTER FROM THE SALE OF 920,300 SHARES OF SUPRON COMMON STOCK.
A. THIS GAIN BY ITSELF PROVIDED THE SUBSTANTIAL PORTION OF MESA'S PRE-TAX CARRYING COSTS FOR ALL THE COMPANY'S MARKETABLE SECURITIES OF $8 MILLION DURING THE FIRST QUARTER OF 1982 AND $26 MILLION FOR THE YEAR ENDED DECEMBER 31, 1981.

2. THE COMPANY'S POLICY IS NOT TO REVEAL SECURITY HOLDINGS EXCEPT THOSE FILED WITH THE SEC.
A. THESE INCLUDE:
(1) CITIES SERVICES - 4.1 MILLION SHARES OR 5.3%
(2) EQUITY - 632,000 SHARES OR 5.4%
(3) SUNLIGHT - 540,'680 SHARES OR 16.1%
(4) LOUISIANA LAND - 215,000 SHARES OR 1/2 OF 1%

3. WE WILL CONTINUE-TO IDENTIFY UNDERVALUED COMPANIES FOR INVESTMENT AND/OR ACQUISITION POSSIBILITIES.

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