EXHIBIT 99(b)(2)
[LOGO OF PETRO APPEARS HERE]
Materials Prepared for Discussion
Board of Directors Meeting
October 6, 1998
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
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PROJECT INTENSE HEAT
Table of Contents
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TABLE OF CONTENTS: SECTION
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Transaction Summary........................................... 1
Pro Forma Analysis............................................ 2
Unit Reference Value Analysis................................. 3
Historical and Pro Forma MVE and MVC Comparison............... 4
Discounted Cash Flow Analysis................................. 5
Relative Contribution Analysis................................ 6
Net Asset Value Analysis...................................... 7
Comparable Company Trading Analysis
Energy and Fuel Marketing and Distribution Companies.......... 8
Propane Master Limited Partnerships........................... 9
Comparable Transactions Analysis.............................. 10
Merger Premiums Analysis...................................... 11
Price and Volume Data......................................... 12
LOGO PETRO Project Intense Heat
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Transaction Summary
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Dain Rauscher Wessels Page 1
LOGO PETRO Transaction Summary
Summary of Proposed Terms
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PROJECT INTENSE HEAT
Summary of Proposed Terms
(In thousands, except as otherwise indicated)
Pro Forma Star Units
Historical -------------------------------------------------------------
Petro Common Sr Sub Jr Sub GP
Petro Shareholders (A only) Common Units Units Units Units
- ------------------------------------------- ---------- ------------ ------------ ------------ ------------
Class A 12,918 -- 1,688 --
Petro Shareholders (excluding A only)
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Class A (to receive Sr Sub Units) 8,258 -- 1,079 --
Class A & C (to receive Jr Sub Units) 5,386 -- -- 578 279
Class B 11 -- -- -- --
--------- ---------- ---------- ---------- ----------
Total Petro Shareholders (excluding A only) 13,655 1,079 578 279
--------- ---------- ---------- ---------- ----------
Total Petro Shareholders 26,573 2,766 578 279
========= ========== ========== ========== ==========
Existing Star Public Unitholders -- 3,832 -- -- --
New Star Units
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Debt and Preferred Stock Exchange -- 104 -- -- --
Public Offering -- 6,375 -- -- --
---------- ---------- ---------- ----------
Pro Forma Star Units Outstanding -- 10,311 2,766 578 279
========== ========== ========== ==========
General Assumptions
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Exchange Ratio (Petro Share / Star Unit) -- -- 0.13064 0.15913 0.15913
Star Historical MQD $2.200
Star Pro Forma MQD $2.300
GP Interest 2.0%
Pro Forma Star Units
---------------------------------------------------------------- GP
Total DPUs Total Units Fully-Diluted Incentive
Petro Shareholders (A only) Units (Sr Sub) (incl. DPUs) Ownership Distributions
- ------------------------------------------- ---------- ------------ ------------ ------------ -------------
Class A 1,688 423 2,111 14.2% 46.6%
Petro Shareholders (excluding A only)
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Class A (to receive Sr Sub Units) 1,079 271 1,349 9.1% 29.8%
Class A & C (to receive Jr Sub Units) 857 215 1,072 7.2% 23.7%
Class B -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Petro Shareholders (excluding A only) 1,936 486 2,422 16.3% 53.4%
---------- ---------- ---------- ---------- ----------
Total Petro Shareholders 3,624 909 4,533 30.5% 100.0%
========== ========== ========== ========== ==========
Existing Star Public Unitholders 3,832 -- 3,832 25.8% --
New Star Units
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Debt and Preferred Stock Exchange 104 -- 104 0.7% --
Public Offering 6,375 -- 6,375 43.0% --
---------- ---------- ---------- ---------- ----------
Pro Forma Star Units Outstanding 13,934 909 14,843 100.0% 100.0%
========== ========== ========== ========== ==========
General Assumptions
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Exchange Ratio (Petro Share / Star Unit) -- -- -- -- --
Star Historical MQD
Star Pro Forma MQD
GP Interest
DPU Distribution Pro rata distribution of Sr Sub Units based upon Petro pro
forma ownership of total Star Units issued to Petro. Up to
303,000 DPUs can be earned each year if Petro provides
$0.50 per Unit accretion to Star, up to a maximum of
909,000 DPUs.
GP Incentive
Distributions Pro rata distribution based upon Petro pro forma ownership
of total Star Units issued to Petro.
Petro Debt &
Preferred Exchange Petro will issue to holders of certain Petro debt and
preferred stock 3.37 shares of Petro Junior Convertible
Preferred Stock for each $1,000 in principal or
liquidation value. Each share of Petro Junior Convertible
Preferred Stock will be exchangeable into 0.13 Star Common
Units.
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Dain Rauscher Wessels Page 2
LOGO PETRO Project Intense Heat
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Pro Forma Analysis
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Dain Rauscher Wessels Page 3
LOGO PETRO Pro Forma Analysis
Petro Summary Historical Financial Data
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PETROLEUM HEAT AND POWER CO., INC.
Summary Historical Financial Data
(In thousands, except as otherwise indicated)
At or for the Year Ended December 31,
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INCOME STATEMENT DATA 1993 1994 1995 1996
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Net Sales $538,526 $546,677 $609,507 $608,161
Gross Profit (after direct delivery expense) 141,815 150,701 185,048 147,671
EBITDA (1) 48,436 55,387 56,753 42,070
EBITDA (including SGU Distributions) (1) 48,436 55,387 56,753 46,383
EBIT 13,772 22,992 17,710 12,125
Net Income (Loss) before Extraordinary Items (7,564) (3,611) (22,043) (21,901)
Net Income (Loss) (8,431) (4,265) (23,479) (28,315)
Net Income (Loss) to Common (11,798) (7,776) (26,742) (30,704)
Cash Flow (Loss) to Common 25,971 28,905 16,028 8,764
Less: Maintenance Capex (2) 3,000 3,000 3,000 3,000
Free Cash Flow (Loss) 22,971 25,905 13,028 5,764
PER SHARE DATA
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Earnings (Loss) per Share before Extra Items ($0.50) ($0.33) ($1.00) ($0.95)
Earnings (Loss) per Share ($0.54) ($0.36) ($1.06) ($1.20)
Cash Flow (Loss) per Share $1.19 $1.32 $0.63 $0.34
Free Cash Flow (Loss) per Share $1.06 $1.18 $0.51 $0.23
Dividends Paid per Share $0.53 $0.55 $0.60 $0.60
Weighted Average Shares Outstanding 21,755 21,897 25,324 25,593
BALANCE SHEET DATA
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Working Capital $16,694 $28,345 $65,408 $18,093
Total Assets 256,589 397,174 357,241 275,025
Total Debt (including short-term) 213,344 315,562 341,430 316,384
Preferred Stock (including current maturities) 25,000 20,834 16,667 12,500
Total Stockholders' Equity (Deficiency) (61,964) (66,176) (100,903) (145,733)
Total Capitalization 176,380 270,220 257,194 183,151
FINANCIAL RATIO DATA
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Interest Expense $22,156 $25,282 $41,084 $34,669
EBITDA to Interest Expense 2.2 x 2.2 x 1.4 x 1.2 x
EBITDA (including SGU Distributions) to Interest Expense 2.2 x 2.2 x 1.4 x 1.3 x
Total Debt to EBITDA 4.4 x 5.7 x 6.0 x 7.5 x
Total Debt to EBITDA (including SGU Distributions) 4.4 x 5.7 x 6.0 x 6.8 x
Total Debt to Total Capitalization 121.0% 116.8% 132.8% 172.7%
Total Debt & Preferred to Total Capitalization 135.1% 124.5% 139.2% 179.6%
At or for the Year Ended December 31, 1997
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INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total
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Net Sales $248,095 $87,972 $50,788 $161,286 $548,141
Gross Profit (after direct delivery expense) 72,443 17,793 4,161 43,990 138,387
EBITDA (1) 47,147 (6,945) (20,908) 16,716 36,010
EBITDA (including SGU Distributions) (1) 48,524 (5,568) (19,532) 18,093 41,517
EBIT 39,796 (14,380) (28,362) 9,210 6,264
Net Income (Loss) before Extraordinary Items 33,388 (27,454) (40,316) 11,483 (22,899)
Net Income (Loss) 33,388 (27,454) (40,316) 11,483 (22,899)
Net Income (Loss) to Common 32,492 (28,375) (42,177) 10,517 (27,543)
Cash Flow (Loss) to Common 39,328 (17,035) (30,400) 7,000 (1,107)
Less: Maintenance Capex (2) 750 750 750 750 3,000
Free Cash Flow (Loss) 38,578 (17,785) (31,150) 6,250 (4,107)
PER SHARE DATA
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Earnings (Loss) per Share before Extra Items $1.26 ($1.09) ($1.61) $0.40 ($1.06)
Earnings (Loss) per Share $1.26 ($1.09) ($1.61) $0.40 ($1.06)
Cash Flow (Loss) per Share $1.53 ($0.66) ($1.16) $0.27 ($0.04)
Free Cash Flow (Loss) per Share $1.50 ($0.69) ($1.19) $0.24 ($0.16)
Dividends Paid per Share $0.08 $0.08 $0.08 $0.08 $0.30
Weighted Average Shares Outstanding 25,759 25,935 26,147 26,359 26,050
BALANCE SHEET DATA
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Working Capital $78,544 $54,179 $5,414 $12,436 $12,436
Total Assets 296,338 259,761 223,918 247,846 247,846
Total Debt (including short-term) 297,888 291,654 291,472 294,348 294,348
Preferred Stock (including current maturities) 42,500 42,500 38,334 36,656 36,656
Total Stockholders' Equity (Deficiency) (116,158) (145,848) (189,361) (177,033) (177,033)
Total Capitalization 224,230 188,306 140,445 153,971 153,971
FINANCIAL RATIO DATA
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Interest Expense $8,805 $8,344 $8,432 $8,232 $33,813
EBITDA to Interest Expense -- -- -- -- 1.1 x
EBITDA (including SGU Distributions) to Interest Expense -- -- -- -- 1.2 x
Total Debt to EBITDA -- -- -- -- 8.2 x
Total Debt to EBITDA (including SGU Distributions) -- -- -- -- 7.1 x
Total Debt to Total Capitalization 132.8% 154.9% 207.5% 191.2% 191.2%
Total Debt & Preferred to Total Capitalization 151.8% 177.5% 234.8% 215.0% 215.0%
LTM
Fiscal 1998 Ended
---------------------------- June 30,
INCOME STATEMENT DATA Q1 Q2 1998
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Net Sales $183,139 $66,227 $461,440
Gross Profit (after direct delivery expense) 63,483 14,081 125,715
EBITDA (1) 40,733 (6,355) 30,186
EBITDA (including SGU Distributions) (1) 42,154 (4,934) 35,781
EBIT 33,318 (13,432) 734
Net Income (Loss) before Extraordinary Items 26,978 (22,974) (24,829)
Net Income (Loss) 26,978 (22,974) (24,829)
Net Income (Loss) to Common 25,415 (23,939) (30,184)
Cash Flow (Loss) to Common 32,165 (12,857) (4,092)
Less: Maintenance Capex (2) 750 750 3,000
Free Cash Flow (Loss) 31,415 (13,607) (7,092)
PER SHARE DATA
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Earnings (Loss) per Share before Extra Items $0.96 ($0.90) ($1.14)
Earnings (Loss) per Share $0.96 ($0.90) ($1.14)
Cash Flow (Loss) per Share $1.21 ($0.48) ($0.15)
Free Cash Flow (Loss) per Share $1.18 ($0.51) ($0.27)
Dividends Paid per Share
Weighted Average Shares Outstanding 26,564 26,571 26,410
BALANCE SHEET DATA
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Working Capital $40,653 $23,139 $23,139
Total Assets 248,777 229,120 229,120
Total Debt (including short-term) 287,010 286,978 286,978
Preferred Stock (including current maturities) 36,819 36,854 36,854
Total Stockholders' Equity (Deficiency) (151,137) (175,066) (175,066)
Total Capitalization 172,692 148,766 148,766
FINANCIAL RATIO DATA
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Interest Expense $8,275 $8,210 $33,149
EBITDA to Interest Expense -- -- 0.9 x
EBITDA (including SGU Distributions) to Interest Expense -- -- 1.1 x
Total Debt to EBITDA -- -- 9.5 x
Total Debt to EBITDA (including SGU Distributions) -- -- 8.0 x
Total Debt to Total Capitalization 166.2% 192.9% 192.9%
Total Debt & Preferred to Total Capitalization 187.5% 217.7% 217.7%
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(1) EBITDA excludes non-recurring expenses.
(2) Petro provided estimate for maintenance capital expenditures.
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Dain Rauscher Wessels Page 4
LOGO PETRO Pro Forma Analysis
Star Gas Summary Historical Financial Data
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STAR GAS PARTNERS, L.P.
Summary Historical Financial Data
(In thousands, except as otherwise indicated)
At or for the Year Ended September 30,
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INCOME STATEMENT DATA 1993 1994 1995 1996
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Sales $ 143,216 $ 128,040 $ 104,550 $ 119,634
Gross Profit (after delivery and branch expense) 23,103 27,957 19,668 26,327
EBITDA 19,437 21,946 13,541 19,870
EBIT (30,313) 8,907 3,468 10,062
Net Income (Loss) (47,049) (1,404) (6,169) 2,593
Limited Partners' Interest in Net Income (Loss)
Cash Flow (Loss) 4,271 11,966 5,626 13,083
Maintenance Capex 4,688 5,419 7,988 5,332
Distributable Cash Flow (Loss) (417) 6,547 (2,362) 7,751
PER UNIT DATA
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Net Income (Loss) per Unit
Cash Flow (Loss) per Unit
Distributable Cash Flow (Loss) per Unit
Cash Distributions per Unit $1.17 (1)
Weighted Avg. Limited Partner Units Outstanding
BALANCE SHEET DATA
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Working Capital (Deficit) $1,976 ($486) $7,546
Total Assets 147,608 155,393 156,913
Total Debt (including short-term) 74,929 2,137 87,350
Cumulative Redeemable Preferred Stock 8,264 8,625 --
Total Partners' Capital 44,328 44,305 61,398
Total Capitalization 127,521 55,067 148,748
FINANCIAL RATIO DATA
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Interest Expense $16,479 $10,497 $8,549 $7,124
EBITDA to Interest Expense 1.2 x 2.1 x 1.6 x 2.8 x
Total Debt to EBITDA 3.4 x 0.2 x 4.4 x
Total Debt to Total Capitalization 58.8% 3.9% 58.7%
At or for the Year Ended September 30, 1997
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INCOME STATEMENT DATA Q1 Q2 Q3 Q4 Total
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Sales $ 50,876 $ 46,442 $ 20,078 $ 17,763 $ 135,159
Gross Profit (after delivery and branch expense) 12,001 12,019 1,744 757 26,521
EBITDA 10,402 9,725 253 (677) 19,703
EBIT 7,816 7,095 (2,400) (3,213) 9,298
Net Income (Loss) 5,892 5,325 (4,143) (5,062) 2,012
Limited Partners' Interest in Net Income (Loss) 5,774 5,218 (4,060) (4,960) (1,972)
Cash Flow (Loss) 8,650 8,049 (1,245) (2,430) 13,024
Maintenance Capex 2,517 1,271 666 825 5,279
Distributable Cash Flow (Loss) 6,133 6,778 (1,911) (3,255) 7,745
PER UNIT DATA
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Net Income (Loss) per Unit $1.10 $0.99 ($0.77) ($0.94) $0.37
Cash Flow (Loss) per Unit $1.61 $1.50 ($0.23) ($0.45) $2.42
Distributable Cash Flow (Loss) per Unit $1.14 $1.26 ($0.36) ($0.61) $1.44
Cash Distributions per Unit $0.55 $0.55 $0.55 $0.55 $2.20
Weighted Avg. Limited Partner Units Outstanding 5,271 5,271 5,271 5,271 5,271
BALANCE SHEET DATA
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Working Capital (Deficit) $12,428 $14,583 $9,684 $3,319 $3,319
Total Assets 168,485 158,678 153,767 147,469 147,469
Total Debt (including short-term) 91,850 85,000 85,000 85,000 85,000
Cumulative Redeemable Preferred Stock -- -- -- -- --
Total Partners' Capital 64,332 66,699 59,598 51,578 51,578
Total Capitalization 156,182 151,699 144,598 136,578 136,578
FINANCIAL RATIO DATA
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Interest Expense $1,848 $1,771 $1,671 $1,676 $6,966
EBITDA to Interest Expense -- -- -- -- 2.8 x
Total Debt to EBITDA -- -- -- -- 4.3 x
Total Debt to Total Capitalization 58.8% 56.0% 58.8% 62.2% 62.2%
LTM
Fiscal 1998 Ended
---------------------------------- June 30,
INCOME STATEMENT DATA Q1 Q2 Q3 1998
- ------------------------------------------------ ----------- ----------- ----------
Sales $ 41,844 $ 37,884 $ 16,243 $ 113,734
Gross Profit (after delivery and branch expense) 10,041 12,736 1,187 24,721
EBITDA 8,672 11,287 (415) 18,867
EBIT 5,847 8,381 (3,328) 7,687
Net Income (Loss) 3,707 6,363 (5,235) (227)
Limited Partners' Interest in Net Income (Loss) 3,633 6,236 (5,130) (221)
Cash Flow (Loss) 6,690 9,421 (2,179) 11,502
Maintenance Capex 2,085 943 797 4,650
Distributable Cash Flow (Loss) 4,605 8,478 (2,976) 6,852
PER UNIT DATA
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Net Income (Loss) per Unit $0.66 $1.00 ($0.82) ($0.04)
Cash Flow (Loss) per Unit $1.20 $1.48 ($0.34) $1.94
Distributable Cash Flow (Loss) per Unit $0.82 $1.33 ($0.47) $1.16
Cash Distributions per Unit $0.55 $0.55 $0.55 $2.20
Weighted Avg. Limited Partner Units Outstanding 5,474 6,228 6,228 5,800
BALANCE SHEET DATA
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Working Capital (Deficit) $10,475 $14,841 $4,242 $4,242
Total Assets 179,451 178,308 173,265 173,265
Total Debt (including short-term) 96,000 96,000 96,950 96,950
Cumulative Redeemable Preferred Stock -- -- -- --
Total Partners' Capital 71,883 74,751 66,020 66,020
Total Capitalization 167,883 170,751 162,970 162,970
FINANCIAL RATIO DATA
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Interest Expense $2,086 $1,875 $1,873 $7,510
EBITDA to Interest Expense -- -- -- 2.5 x
Total Debt to EBITDA -- -- -- 5.1 x
Total Debt to Total Capitalization 57.2% 56.2% 59.5% 59.5%
Note: Financial data prior to December 20, 1995 reflects operations of the
Predecessor Company.
(1) Includes two quarters of distributions and a pro rata distribution of
$0.0725 per Unit for the period December 20, 1995 to December 31, 1995.
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Dain Rauscher Wessels Page 5
LOGO PETRO Pro Forma Analysis
Pro Forma Unit Coverage Analysis
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PROJECT INTENSE HEAT
Pro Forma Unit Coverage Analysis
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
--------------------------------------------------------------------
15 Year Weather Case
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Estimated Normalized
Pro Forma EBITDA 1998E 1998E 1999E 2000E 2001E 2002E
- ------------------------------------------ --------- --------- --------- --------- --------- ---------
Star $ 18,781 $ 20,731 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 44,749 46,094 49,605 52,824 55,897
Synergies 500 500 500 500 500 500
--------- --------- --------- --------- --------- ---------
Pro Forma EBITDA $ 56,911 $ 65,980 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Distributable Cash Flow
- ------------------------------------------
Pro Forma EBITDA $ 56,911 $ 65,980 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Interest Expense (27,722) (27,722) (28,186) (29,479) (31,065) (32,560)
Maintenance Capex (6,210) (6,210) (6,298) (6,419) (6,541) (6,667)
Other (525) (525) (525) (525) (525) (525)
--------- --------- --------- --------- --------- ---------
Distributable Cash Flow $ 22,454 $ 31,523 $ 34,617 $ 38,147 $ 41,091 $ 43,976
Weighted Average Units Outstanding
- ------------------------------------------
Common Units 10,311 10,311 10,682 11,260 11,676 12,111
Senior Subordinated Units (incl. DPUs) 2,766 2,766 2,766 3,069 3,372 3,675
Junior Subordinated & General Partner Units 857 857 857 857 857 857
--------- --------- --------- --------- --------- ---------
Total Weighted Average Units Outstanding 13,934 13,934 14,305 15,186 15,905 16,643
Distributable Cash Flow per Unit
- ------------------------------------------
Common Units $ 2.18 $ 3.06 $ 3.24 $ 3.39 $ 3.52 $ 3.63
Senior Subordinated Units (incl. DPUs) $ 1.72 $ 2.41 $ 2.57 $ 2.66 $ 2.73 $ 2.79
Junior Subordinated & General Partner Units $ 1.61 $ 2.26 $ 2.42 $ 2.51 $ 2.58 $ 2.64
--------- --------- --------- --------- --------- ---------
Total Units Outstanding $ 1.61 $ 2.26 $ 2.42 $ 2.51 $ 2.58 $ 2.64
Distributions per Unit
- ------------------------------------------
MQD per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Indicated Distribution per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.40 $ 2.40 $ 2.50
MQD Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.39 x 1.41 x 1.47 x 1.53 x 1.58 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.10 x 1.12 x 1.16 x 1.19 x 1.21 x
Junior Subordinated & General Partner Units 0.73 x 1.03 x 1.05 x 1.09 x 1.12 x 1.15 x
--------- --------- --------- --------- --------- ---------
Total Units 0.73 x 1.03 x 1.05 x 1.09 x 1.12 x 1.15 x
Indicated Distribution Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.39 x 1.41 x 1.41 x 1.47 x 1.45 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.10 x 1.12 x 1.11 x 1.14 x 1.11 x
Junior Subordinated & General Partner Units 0.73 x 1.03 x 1.05 x 1.05 x 1.08 x 1.06 x
--------- --------- --------- --------- --------- ---------
Total Units 0.73 x 1.03 x 1.05 x 1.05 x 1.08 x 1.06 x
Projected for the Year Ended September 30,
---------------------------------------------------------------------
30 Year Weather Case
---------------------------------------------------------
Estimated Normalized
Pro Forma EBITDA 1998E 1998E 1999E 2000E 2001E 2002E
- ------------------------------------------ --------- --------- ---------- ---------- ---------- ----------
Star $ 18,781 $ 22,135 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Petro 37,630 46,900 48,881 53,536 57,814 61,900
Synergies 500 500 500 500 500 500
--------- --------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 69,535 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Distributable Cash Flow
- ------------------------------------------
Pro Forma EBITDA $ 56,911 $ 69,535 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Interest Expense (27,722) (27,608) (28,857) (31,150) (33,254) (35,120)
Maintenance Capex (6,210) (6,210) (6,273) (6,393) (6,516) (6,641)
Other (525) (525) (525) (525) (525) (525)
--------- --------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 35,192 $ 38,217 $ 41,997 $ 45,585 $ 49,218
Weighted Average Units Outstanding
- ------------------------------------------
Common Units 10,311 10,311 10,311 10,357 10,550 10,874
Senior Subordinated Units (incl. DPUs) 2,766 2,766 2,766 3,069 3,372 3,675
Junior Subordinated & General Partner Units 857 857 857 857 857 857
--------- --------- ---------- ---------- ---------- ----------
Total Weighted Average Units Outstanding 13,934 13,934 13,934 14,284 14,780 15,407
Distributable Cash Flow per Unit
- ------------------------------------------
Common Units $ 2.18 $ 3.41 $ 3.71 $ 4.05 $ 4.32 $ 4.53
Senior Subordinated Units (incl. DPUs) $ 1.72 $ 2.69 $ 2.92 $ 3.13 $ 3.27 $ 3.38
Junior Subordinated & General Partner Units $ 1.61 $ 2.53 $ 2.74 $ 2.94 $ 3.08 $ 3.19
--------- --------- ---------- ---------- ---------- ----------
Total Units Outstanding $ 1.61 $ 2.53 $ 2.74 $ 2.94 $ 3.08 $ 3.19
Distributions per Unit
- ------------------------------------------
MQD per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Indicated Distribution per Unit $ 2.20 $ 2.20 $ 2.30 $ 2.50 $ 2.70 $ 2.90
MQD Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.55 x 1.61 x 1.76 x 1.88 x 1.97 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.22 x 1.27 x 1.36 x 1.42 x 1.47 x
Junior Subordinated & General Partner Units 0.73 x 1.15 x 1.19 x 1.28 x 1.34 x 1.39 x
--------- --------- ---------- ---------- ---------- ----------
Total Units 0.73 x 1.15 x 1.19 x 1.28 x 1.34 x 1.39 x
Indicated Distribution Coverage per Unit
- ------------------------------------------
Common Units 0.99 x 1.55 x 1.61 x 1.62 x 1.60 x 1.56 x
Senior Subordinated Units (incl. DPUs) 0.78 x 1.22 x 1.27 x 1.25 x 1.21 x 1.17 x
Junior Subordinated & General Partner Units 0.73 x 1.15 x 1.19 x 1.18 x 1.14 x 1.10 x
--------- --------- ---------- ---------- ---------- ----------
Total Units 0.73 x 1.15 x 1.19 x 1.18 x 1.14 x 1.10 x
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Dain Rauscher Wessels Page 6
Pro Forma Analysis
Pro Forma Credit Analysis
PROJECT INTENSE HEAT
Pro Forma Credit Analysis
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
------------------------------------------------------------------
15 Year Weather Case
Estimated ----------------------------------------------------
Pro Forma EBITDA 1998E 1999E 2000E 2001E 2002E
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
Star $ 18,781 $ 23,032 $ 24,465 $ 25,898 $ 27,331
Petro 37,630 46,094 49,605 52,824 55,897
Synergies 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Distributable Cash Flow
- ------------------------------------
Pro Forma EBITDA $ 56,911 $ 69,626 $ 74,570 $ 79,222 $ 83,728
Interest Expense (27,722) (28,186) (29,479) (31,065) (32,560)
Maintenance Capex (6,210) (6,298) (6,419) (6,541) (6,667)
Other (525) (525) (525) (525) (525)
---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 34,617 $ 38,147 $ 41,091 $ 43,976
Fixed Charges
- ------------------------------------
Interest Expense $ 27,722 $ 28,186 $ 29,479 $ 31,065 $ 32,560
Lease and Rental Expense 5,281 4,676 4,058 3,642 3,541
---------- ---------- ---------- ---------- ----------
Total Fixed Charges $ 33,003 $ 32,862 $ 33,537 $ 34,707 $ 36,101
Pro Forma Balance Sheet Data
- ------------------------------------
Working Capital $ 7,177 $ 7,177 $ 7,177 $ 7,177 $ 7,177
Total Assets 376,824 379,732 379,450 373,923 363,512
Total Long-Term Debt 314,234 329,549 351,798 372,734 393,010
Total Partners' Capital (Deficit) (37,889) (55,252) (84,504) (117,291) (154,104)
Total Capitalization 276,345 274,297 267,294 255,443 238,906
Pro Forma Credit Analysis
- ------------------------------------
Interest Coverage Ratio (1) 2.05 x 2.47 x 2.53 x 2.55 x 2.57 x
Fixed Charge Coverage Ratio (2) 1.72 x 2.12 x 2.22 x 2.28 x 2.32 x
Total Debt to Total Capitalization 113.7% 120.1% 131.6% 145.9% 164.5%
Total Debt to EBITDA 5.52 x 4.73 x 4.72 x 4.70 x 4.69 x
Total Debt to Distributable Cash Flow 13.99 x 9.52 x 9.22 x 9.07 x 8.94 x
Projected for the Year Ended September 30,
------------------------------------------------------------------
30 Year Weather Case
Estimated ----------------------------------------------------
Pro Forma EBITDA 1998E 1999E 2000E 2001E 2002E
- ------------------------------------ ---------- ---------- ---------- ---------- ----------
Star $ 18,781 $ 24,491 $ 26,029 $ 27,566 $ 29,104
Petro 37,630 48,881 53,536 57,814 61,900
Synergies 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Pro Forma EBITDA $ 56,911 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Distributable Cash Flow
- ------------------------------------
Pro Forma EBITDA $ 56,911 $ 73,872 $ 80,065 $ 85,880 $ 91,504
Interest Expense (27,722) (28,857) (31,150) (33,254) (35,120)
Maintenance Capex (6,210) (6,273) (6,393) (6,516) (6,641)
Other (525) (525) (525) (525) (525)
---------- ---------- ---------- ---------- ----------
Distributable Cash Flow $ 22,454 $ 38,217 $ 41,997 $ 45,585 $ 49,218
Fixed Charges
- ------------------------------------
Interest Expense $ 27,722 $ 28,857 $ 31,150 $ 33,254 $ 35,120
Lease and Rental Expense 5,281 4,676 4,058 3,642 3,541
---------- ---------- ---------- ---------- ----------
Total Fixed Charges $ 33,003 $ 33,533 $ 35,208 $ 36,896 $ 38,661
Pro Forma Balance Sheet Data
- ------------------------------------
Working Capital $ 7,177 $ 7,177 $ 7,177 $ 7,177 $ 7,177
Total Assets 376,824 384,961 389,763 388,457 381,446
Total Long-Term Debt 314,234 348,066 379,371 405,538 430,848
Total Partners' Capital (Deficit) (37,889) (69,178) (103,669) (138,643) (178,219)
Total Capitalization 276,345 278,888 275,702 266,895 252,629
Pro Forma Credit Analysis
- ------------------------------------
Interest Coverage Ratio (1) 2.05 x 2.56 x 2.57 x 2.58 x 2.61 x
Fixed Charge Coverage Ratio (2) 1.72 x 2.20 x 2.27 x 2.33 x 2.37 x
Total Debt to Total Capitalization 113.7% 124.8% 137.6% 151.9% 170.5%
Total Debt to EBITDA 5.52 x 4.71 x 4.74 x 4.72 x 4.71 x
Total Debt to Distributable Cash Flow 13.99 x 9.11 x 9.03 x 8.90 x 8.75 x
- ---------------
(1) Interest coverage ratio is EBITDA divided by interest expense.
(2) Fixed charge coverage ratio is EBITDA divided by total fixed charges.
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 7
LOGO PETRO Project Intense Heat
- ------------------------------------------------------------------------------
Unit Reference Value Analysis
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 8
LOGO PETRO Unit Reference Value Analysis
Unit Reference Value Analysis Summary
- ------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis Summary
Dain
15 Year 30 Year Rauscher
Downside Weather Weather Wessels
Indicated Reference Values per Star Unit Case Case Case Case
- ---------------------------------------------------------- --------- --------- --------- ---------
Common Unit $ 20.75 $ 26.33 $ 31.55 $ 22.54
Senior Subordinated Unit $ 17.74 $ 26.90 $ 35.62 $ 22.76
Junior Subordinated / General Partner Unit $ 13.74 $ 20.78 $ 27.83 $ 17.73
Exchange Ratio (Petro Share / Star Unit)
- ----------------------------------------------------------
Senior Subordinated Unit 0.13064 0.13064 0.13064 0.13064
Junior Subordinated / General Partner Unit 0.15913 0.15913 0.15913 0.15913
Implied Reference Value per Petro Share Senior Subordinated Unit
- ---------------------------------------------------------- ----------------------------------------------
Implied Reference Value (excluding DPUs and GP Incentives) $ 2.32 $ 2.98 $ 3.80 $ 2.54
DPUs and GP Incentives Value -- 0.54 0.85 0.43
--------- --------- --------- ---------
Total Implied Reference Value $ 2.32 $ 3.51 $ 4.65 $ 2.97
========= ========= ========= =========
Implied Reference Value per Petro Share Junior Subordinated / General Partner Unit
----------------------------------------------
Implied Reference Value (excluding DPUs and GP Incentives) $ 2.19 $ 2.76 $ 3.57 $ 2.39
DPUs and GP Incentives Value 0.54 0.86 0.44
Total Implied Reference Value $ 2.19 $ 3.31 $ 4.43 $ 2.82
- ------------------------------------------------------------------------------
Dain Rauscher Wessels Page 9
LOGO PETRO Unit Reference Value Analysis
Unit Reference Value Analysis Discount Rate Assumptions
- ------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis Discount Rate Assumptions
15 Year 30 Year Dain Rauscher
Downside Case Weather Case Weather Case Wessels Case
-------------------- -------------------- -------------------- --------------------
Discount Bps Spread Discount Bps Spread Discount Bps Spread Discount Bps Spread
Rate to Common Rate to Common Rate to Common Rate to Common
-------- ---------- -------- ---------- -------- ---------- -------- ----------
Common Unit 11.30% -- 9.50% -- 9.00% -- 10.75% --
Senior Subordinated Unit
- ------------------------------------------
Senior Subordinated Unit Distributions 13.30% 200 bps 11.00% 150 bps 9.75% 75 bps 12.50% 175 bps
Petro Incentive Distributions (DPU) -- -- 13.00% 350 bps 12.50% 350 bps 14.25% 350 bps
GP Incentive Distributions -- -- 13.50% 400 bps 13.00 400 bps 14.75% 400 bps
Junior Subordinated / General Partner Unit
- ------------------------------------------
Junior Subordinated Unit Distributions 14.30% 300 bps 12.00% 250 bps 10.50% 150 bps 13.50% 275 bps
Petro Incentive Distributions (DPU) -- -- 13.00% 350 bps 12.50% 350 bps 14.25% 350 bps
GP Incentive Distributions -- -- 13.50% 400 bps 13.00% 400 bps 14.75% 400 bps
Dain Rauscher Wessels Page 10
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
-----------------------------------------------
15 Year Weather Case
-----------------------------------------------
Distributable Cash Flow 1999E 2000E 2001E 2002E
- ---------------------------------------------- --------- --------- --------- ---------
Distributable Cash Flow $34,617 $38,147 $41,091 $43,976
Indicated Distribution per Unit $2.30 $2.40 $2.40 $2.50
Cash Distributions
- ----------------------------------------------
Distributions to Unitholders $32,902 $36,447 $38,173 $41,608
GP Incentive Distributions 0 0 0 247
--------- --------- --------- ---------
Total Cash Distributions $32,902 $36,447 $38,173 $41,855
========= ========= ========= =========
Weighted Average Units Outstanding
- ----------------------------------------------
Common Units 10,682 11,260 11,676 12,111
Senior Subordinated Units (Incl. DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
--------- --------- --------- ---------
Total Units Outstanding 14,305 15,186 15,905 16,643
Splits
----------------------
Annual Unit. GP
GP Incentive Distributions Targets Target holders Incentives
- ---------------------------------------------- --------- --------- ----------
Minimum Quarterly Distribution $2,300 98% 2%
First Target Distribution $2,416 98% 2%
Second Target Distribution $2,844 85% 15%
Third Target Distribution $3,704 75% 25%
Thereafter -- 50% 50%
Cash Distributions prior to First Target
- ----------------------------------------------
Cash Distributed to Unitholders $32,902 $36,447 $38,173 $40,210
Allocation to Common Units 24,568 27,023 26,022 29,260
Allocation to Senior Subordinated Units 6,363 7,367 8,094 8,880
Allocation to Junior Subordinated Units 1,330 1,388 1,388 1,397
Allocation to General Partner Units 641 669 669 673
GP Incentive Distributions -- -- -- --
Total Cash Distributed 32,902 36,447 38,173 40,210
Cash Distributions First to Second Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $1,398
Allocation to Common Units 0 0 0 1,017
Allocation to Senior Subordinated Units 0 0 0 309
Allocation to Junior Subordinated Units 0 0 0 49
Allocation to General Partner Units 0 0 0 23
GP Incentive Distributions 0 0 0 247
Total Cash Distributed 0 0 0 1,645
Cash Distributions Second to Third Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
Cash Distributions Third to Thereafter Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
Projected for the Year Ended September 30,
-----------------------------------------------
30 Year Weather Case
-----------------------------------------------
Distributable Cash Flow 1999E 2000E 2001E 2002E
- ---------------------------------------------- --------- --------- --------- ---------
Distributable Cash Flow $38,217 $41,997 $45,585 $49,218
Indicated Distribution per Unit $2.30 $2.50 $2.70 $2.90
Cash Distributions
- ----------------------------------------------
Distributions to Unitholders $32,049 $35,709 $39,905 $44,680
GP Incentive Distributions 0 212 714 1,451
--------- --------- --------- ---------
Total Cash Distributions $32,049 $35,921 $40,646 $46,131
========= ========= ========= =========
Weighted Average Units Outstanding
- ----------------------------------------------
Common Units $10,311 10,357 10,550 10,874
Senior Subordinated Units (Incl. DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
--------- --------- --------- ---------
Total Units Outstanding 13,934 14,284 14,780 15,407
Cash Distributions prior to First Target
- ----------------------------------------------
Cash Distributed to Unitholders $32,049 $34,510 $35,708 $37,223
Allocation to Common Units 23,715 25,023 25,489 26,272
Allocation to Senior Subordinated Units 6,363 7,416 8,148 8,880
Allocation to Junior Subordinated Units 1,330 1,397 1,397 1,397
Allocation to General Partner Units 641 673 673 673
GP Incentive Distributions -- -- -- --
Total Cash Distributed 32,049 34,510 35,708 37,223
Cash Distributions First to Second Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $1,200 $4,197 $6,594
Allocation to Common Units 0 870 2,996 4,654
Allocation to Senior Subordinated Units 0 258 958 1,573
Allocation to Junior Subordinated Units 0 49 164 248
Allocation to General Partner Units 0 23 79 119
GP Incentive Distributions 0 212 741 1,164
Total Cash Distributed 0 1,412 4,938 7,758
Cash Distributions Second to Third Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $863
Allocation to Common Units 0 0 0 609
Allocation to Senior Subordinated Units 0 0 0 206
Allocation to Junior Subordinated Units 0 0 0 32
Allocation to General Partner Units 0 0 0 16
GP Incentive Distributions 0 0 0 288
Total Cash Distributed 0 0 0 1,150
Cash Distributions Third to Thereafter Target
- ----------------------------------------------
Cash Distributed to Unitholders $0 $0 $0 $0
Allocation to Common Units 0 0 0 0
Allocation to Senior Subordinated Units 0 0 0 0
Allocation to Junior Subordinated Units 0 0 0 0
Allocation to General Partner Units 0 0 0 0
GP Incentive Distributions 0 0 0 0
Total Cash Distributed 0 0 0 0
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 11
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Projected Indicated Distribution per Unit and Cash Distributions per Unit Class
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
-----------------------------------------------------------
15 Year Weather Case
-----------------------------------------------------------
Common Unit Cash Distributions 1999E 2000E 2001E 2002E
- ------------------------------------------------- --------- --------- --------- ---------
Cash Distributions prior to First Target $24,568 $27,023 $28,022 $29,260
Cash Distributions First to Second Target 0 0 0 1,017
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $24,568 $27,023 $28,022 $30,277
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average units Outstanding 10,682 11,260 11,676 12,111
Senior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $6,363 $7,367 $8,094 $8,880
Cash Distributions First to Second Target 0 0 0 309
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $6,363 $7,367 $8,094 $9,169
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 2,766 3,069 3,372 3,675
Junior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $1,330 $1,388 $1,388 $1,397
Cash Distributions First to Second Target 0 0 0 49
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $1,330 $1,388 $1,388 $1,446
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 578 578 578 578
General Partner Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $641 $669 $669 $673
Cash Distributions First to Second Target 0 0 0 23
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $641 $669 $669 $697
Total Cash Distributions per Unit $2,300 $2,400 $2,400 $2,500
Weighted Average Units Outstanding 279 279 279 279
GP Incentive Distributions
- -------------------------------------------------
Cash distributions prior to First Target - - - -
Cash Distributions First to Second Target 0 $0 $0 $247
Cash Distributions Second to Third Target 0 0 0 0
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $0 $0 $0 $247
Total Cash Distributions per unit (Sr, Jr & GP) $0.000 $0.000 $0.000 $0.054
Weighted Average Units Outstanding (Sr, Jr & GP) 3,624 3,927 4,230 4,533
- ----------------------------------------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
-----------------------------------------------------------
30 Year Weather Case
-----------------------------------------------------------
Common Unit Cash Distributions 1999E 2000E 2001E 2002E
- ------------------------------------------------- --------- --------- --------- ---------
Cash Distributions prior to First Target $23,715 $25,023 $25,489 $26,272
Cash Distributions First to Second Target 0 870 2,996 4,654
Cash Distributions Second to Third Target 0 0 0 609
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $23,715 $25,893 $28,486 $31,535
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average units Outstanding 10,311 10,357 10,550 10,874
Senior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $6,363 $7,416 $8,148 $8,880
Cash Distributions First to Second Target 0 258 958 1,573
Cash Distributions Second to Third Target 0 0 0 206
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $6,363 $7,674 $9,106 $10,659
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 2,766 3,069 3,372 3,675
Junior Subordinated Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $1,330 $1,397 $1,397 $1,397
Cash Distributions First to Second Target 0 49 164 248
Cash Distributions Second to Third Target 0 0 0 32
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $1,330 $1,446 $1,562 $1,677
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 578 578 578 578
General Partner Unit Cash Distributions
- -------------------------------------------------
Cash Distributions prior to First Target $641 $673 $673 $673
Cash Distributions First to Second Target 0 23 79 119
Cash Distributions Second to Third Target 0 0 0 16
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $641 $697 $752 $808
Total Cash Distributions per Unit $2,300 $2,500 $2,700 $2,900
Weighted Average Units Outstanding 279 279 279 279
GP Incentive Distributions
- -------------------------------------------------
Cash distributions prior to First Target - - - -
Cash Distributions First to Second Target $0 $212 $741 $1,164
Cash Distributions Second to Third Target 0 0 0 288
Cash Distributions Third to Thereafter Target 0 0 0 0
--------- --------- --------- ---------
Total Cash Distributions $0 $212 $741 $1,451
Total Cash Distributions per unit (Sr, Jr & GP) $0.000 $0.054 $0.175 $0.320
Weighted Average Units Outstanding (Sr, Jr & GP) 3,624 3,927 4,230 4,533
- ----------------------------------------------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 12
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Cumulative Incremental DPU per Unit Calculation
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Cumulative Incremental DPU per Unit Calculation
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
------------------------------------------
15 Year Weather Case
------------------------------------------
Units to Receive DPUs 1999E 2000E 2001E 2002E
- ---------------------------------------------- ----------- --------- --------- ----------
Senior Subordinated Units (Includes DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
- ---------------------------------------------- ----------- --------- --------- ----------
Total Units 3,624 3,927 4,230 4,533
Cumulative Incremental DPU per Unit
- ----------------------------------------------
DPUs Distributed 0 303 303 303
DPU per Outstanding Unit 0.000 0.084 0.077 0.072
- ------------------------------------------------------------------------------------------------
Cumulative incremental DPU per Unit 0.000 0.084 0.167 0.251
- ------------------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------
30 Year Weather Case
------------------------------------------
Units to Receive DPUs 1999E 2000E 2001E 2002E
- ---------------------------------------------- ----------- --------- --------- ----------
Senior Subordinated Units (Includes DPUs) 2,766 3,069 3,372 3,675
Junior Subordinated Units 578 578 578 578
General Partner Units 279 279 279 279
- ---------------------------------------------- ----------- --------- --------- ----------
Total Units 3,624 3,927 4,230 4,533
Cumulative Incremental DPU per Unit
- ----------------------------------------------
DPUs Distributed 0 303 303 303
DPU per Outstanding Unit 0.000 0.084 0.077 0.072
- ------------------------------------------------------------------------------------------------
Cumulative incremental DPU per Unit 0.000 0.084 0.167 0.251
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 13
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Unit Reference Value Analysis
(Downside Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Unit Reference Value Analysis (Downside Case)
Downside Case
-----------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Common Unit (1) 1998E 2000E 2001E 2002E Value (2) NPV Discount (3) NPV
- ----------------------------------------- ------- ------- ------- ------- ----------- ------- -------------- --------
Cash Distributions $2.30 $2.30 $2.30 $2.30 $20.36
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 11.30% $2.18 $1.96 $1.76 $1.58 $13.27 $20.75 -- $20.75
- ------------------------------------------------------------------------------------------------------------------------------------
Senior Subordinated Unit
- -----------------------------------------
Cash Distributions $2.30 $2.30 $2.30 $2.30 $17.30
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 13.30% (200 bps spread to Common) $2.16 $1.91 $1.68 $1.49 $10.50 $17.74 -- $17.74
- ------------------------------------------------------------------------------------------------------------------------------------
Junior Subordinated/General Partner Unit
- -----------------------------------------
Cash Distributions $2.30 $2.30 $2.30 $2.30 $18.09
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------------------
NPV @ 14.30% (300 bps spread to Common) $2.15 $1.88 $1.65 $1.44 $9.43 $16.55 17.0% $13.74
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------
(1) Common Unit discount rate is derived by using the appropriate rate to
calculate a net present value equal to the 09/25/98 closing price of
$20.75.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(3) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 14
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (15 Year Weather Case)
15 Year Weather Case
--------------------------------------------------------------------------------------
Projected for the Year Ended September 30, Terminal Total
----------------------------------------------------
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- --------------------------------- ------- ------- ------- ------- ----------- ---------
Cash Distributions $2.30 $2.40 $2.40 $2.50 $26.32
Period 0.50 1.50 2.50 3.50 4.00
- --------------------------------------------------------------------------------------------------------------------------------
NPV @ 9.50% $2.20 $2.09 $1.91 $1.82 $18.30 $26.33
- --------------------------------------------------------------------------------------------------------------------------------
- --------------
(1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based
upon the growth rate in distributions in the 15 year weather case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 15
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (15 Year Weather Case)
15 Year Weather Case
-------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ----------------------------------------------- ------- ------- ------- ------- ----------- --------
Cash Distributions $2.30 $2.40 $2.40 $2.50 $22.73
Period 0.50 1.50 2.50 3.50 4.00
NPV@ 11.00% (150 bps spread to Common) $2.18 $2.05 $1.85 $1.74 $14.97 $22.79
Deferred Participation Unit (DPU)
- -----------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.20 $0.40 $0.63 $4.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (350 bps spread to Common) $0.00 $0.17 $0.30 $0.41 $2.96 $3.83
GP Incentive Distributions
- -----------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.05 $0.40
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.03 $0.24 $0.28
- ---------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.18 $2.22 $2.14 $2.18 $18.17 $26.90
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 16
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated/General Partner Unit Reference Value Analysis
(15 Year Weather Case)
15 Year Weather Case
----------------------------------------------------------------------------------------
Projected for the Year Ended September 30, Terminal Total Liquidity Adjusted
-------------------------------------------
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value(1) NPV Discount (2) NPV
- ------------------------------------------- ----------- -------- -------- ---------- -------- ------ ------------ --------
Cash Distributions $2.30 $2.40 $2.40 $2.50 $20.83
Period 0.50 1.50 2.50 3.50 4.00
NPV @12.00% (260 bps spread to Common) $2.17 $2.02 $1.81 $1.68 $13.24 $20.93 17% $17.37
Deferred Participation Unit (DPU)
- -------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.20 $0.40 $0.63 $4.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (350 bps spread to Common) $0.00 $0.17 $0.30 $0.41 $2.96 $3.83 17% $3.18
GP Incentive Distributions
- -------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.05 $0.40
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.03 $0.24 $0.28 17% $0.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.17 $2.19 $2.10 $2.13 $16.44 $25.04 17% $20.78
- ------------------------------------------------------------------------------------------------------------------------------------
- ---------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 17
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (30 Year Weather Case)
30 Year Weather Case
----------------------------------------------------------------------
Projected for the Year Ended September 30
------------------------------------------- Terminal Total
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- -------
Cash Distributions $2.30 $2.50 $2.70 $2.90 $32.22
Period 0.50 1.50 2.50 3.50 4.00
- ----------------------------------------------------------------------------------------------------------------------
NPV @ 9.00% $2.20 $2.20 $2.18 $2.14 $22.83 $31.55
- ----------------------------------------------------------------------------------------------------------------------
- -------------------
(1) Common Unit discount rate is a Dain Rauscher Wessets assumed yield based
upon the growth rate in distributions in the 30 year weather case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 18
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (30 Year Weather Case)
30 Year Weather Case
----------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ----------------------------------------- ------- ------- ------- ------- ----------- --------
Cash Distributions $2.30 $2.50 $2.70 $2.90 $29.74
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 9.75% (75 bps spread to Common) $2.20 $2.17 $2.14 $2.09 $20.50 $29.10
Deferred Participation Unit DPU
- -----------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.21 $0.45 $0.73 $5.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (350 bps spread to Common) $0.00 $0.18 $0.34 $0.48 $3.63 $4.63
GP Incentive Distributions
- -----------------------------------------
Cash Distributions $0.00 $0.05 $0.18 $0.32 $2.46
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (400 bps spread to Common) $0.00 $0.04 $0.13 $0.21 $1.51 $1.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.20 $2.39 $2.61 $2.78 $25.65 $35.62
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 19
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated General Partner Unit Reference Value Analysis
(30 Year Weather Case)
30 Year Weather Case
---------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV Discount (2) NPV
- ------------------------------------------- ------- ------- ------- ------- ----------- ------- ------------ --------
Cash Distributions $2.30 $2.50 $2.70 $2.90 $27.62
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 10.50% (150 bps spread to Common) $2.19 $2.15 $2.10 $2.04 $18.53 $27.01 17% $22.42
Deferred Participation Unit (DPU)
- -------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.21 $0.45 $0.73 $5.82
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (350 bps spread to Common) $0.00 $0.18 $0.34 $0.48 $3.63 $4.63 17% $3.84
GP incentive Distributions
- -------------------------------------------
Cash Distributions $0.00 $0.05 $0.18 $0.32 $2.48
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.00% (400 bps spread to Common) $0.00 $0.04 $0.13 $0.21 $1.51 $1.89 17% $1.57
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.19 $2.37 $2.57 $2.74 $23.67 $33.53 17% $27.83
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro form a Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 20
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Common Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Common Unit Reference Value Analysis (Dain Rauscher Wessels Case)
Dain Rauscher Wessels Case
-------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------------- Terminal Total
Common Unit (1) 1999E 2000E 2001E 2002E Value (2) NPV
- ------------------------------ ------- ------- ------- ------- ----------- ---------
Cash Distributions $2.30 $2.30 $2.40 $2.40 $22.33
Period 0.50 1.50 2.50 3.50 4.00
- ------------------------------------------------------------------------------------------------------------------------
NPV @ 10.75% $2.19 $1.97 $1.86 $1.68 $14.84 $22.54
- ------------------------------------------------------------------------------------------------------------------------
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $2.40 for the years 1999E, 2000E, 2001E and 2002E, respectively.
(1) Common Unit discount rate is a Dain Rauscher Wessels assumed yield based
upon the growth rate in distributions in the Dain Rauscher Wessels case.
(2) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 21
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Senior Subordinated Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Senior Subordinated Unit Reference Value Analysis (Dain Rauscher Wessels Case)
Dain Rauscher Wessels Case
-------------------------------------------------------------------------
Projected for the Year Ended September 30,
---------------------------------------------- Terminal Total
Senior Subordinated Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- ---------
Cash Distributions $2.30 $2.30 $2.40 $2.40 $19.20
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 12.50% (175 bps spread to Common) $2.17 $1.93 $1.79 $1.59 $11.99 $19.46
Deferred Participation Unit (DPU)
- ------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.19 $0.40 $0.60 $4.23
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.25% (350 bps spread to Common) $0.00 $0.16 $0.29 $0.38 $2.48 $3.30
GP Incentive Distributions
- ------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.75% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
- -------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.17 $2.09 $2.08 $1.97 $14.47 $22.76
- -------------------------------------------------------------------------------------------------------------------------
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $2.40 for the years 1999E, 2000E, 2001E and 2002E, respectively.
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
================================================================================
Dain Rauscher Wessels Page 22
[LOGO OF PETRO(TM) APPEARS HERE]
Unit Reference Value Analysis
Junior Subordinated/General Partner Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Junior Subordinated General Partner Unit Reference Value Analysis
(Dain Rauscher Wessels Case)
Dain Rauscher Wessels Case
--------------------------------------------------------------------------------------
Projected for the Year Ended September 30,
------------------------------------------ Terminal Total Liquidity Adjusted
Junior Subordinated/GP Unit Distributions 1999E 2000E 2001E 2002E Value (1) NPV Discount (2) NPV
- ------------------------------------------ ------- ------- ------- ------- ----------- ------ ------------ --------
Cash Distributions $2.30 $2.30 $2.40 $2.40 $17.78
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 13.50% (276 bps spread to Common) $2.16 $1.90 $1.75 $1.54 $10.71 $18.06 17% $14.99
Deferred Participation Unit (DPU)
- ------------------------------------------
Cumulative Incremental DPU per Unit 0.000 0.084 0.167 0.251
Cash Distributions per Fractional Unit $0.00 $0.19 $0.40 $0.60 $4.23
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.26% (350 bps spread to Common) $0.00 $0.16 $0.29 $0.38 $2.48 $3.30 17% $2.74
GP Incentive Distributions
- ------------------------------------------
Cash Distributions $0.00 $0.00 $0.00 $0.00 $0.00
Period 0.50 1.50 2.50 3.50 4.00
NPV @ 14.75% (400 bps spread to Common) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 17% $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Present Value per Unit $2.16 $2.06 $2.04 $1.92 $13.19 $21.37 17% $17.73
- ------------------------------------------------------------------------------------------------------------------------------------
- -------------------
Note: Dain Rauscher Wessels Case assumes distributions of $2.30, $2.30, $2.40
and $240 for the years 1 999E, 2000E, 2001E and 2002E, respectively.
(1) Terminal value is calculated as a perpetuity by dividing 2002E distribution
by the discount rate.
(2) The Junior Subordinated and General Partner Unit discount is determined by
using a 20% liquidity discount for both Units and a 10% control premium for
a General Partner Unit. The weighted average based upon pro forma Unit
ownership is a discount of 17%.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 23
[LOGO OF PETRO(TM) APPEAR HERE]
Project Intense Heat
================================================================================
Historical and Pro Forma
MVE and MVC Comparison
================================================================================
Dain Rauscher Wessels Page 24
[LOGO OF PETRO(TM) APPEARS HERE]
Historical and Pro Forma MVE and MVC Comparison
Petro Historical and Pro Forma Adjusted MVE and MVC Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Petro Historical and Pro Forma Adjusted Market Value of Equity
and Market Value of Capitalization Summary
(In thousands, except as otherwise indicated)
Pro Forma Adjusted Market Value of Equity and
Market Value of Capitalization
Historical ----------------------------------------------
MVE & Common Sr Sub Jr Sub/GP Total Percent
Market Value of Equity MVC Units Units Units Units Change
- --------------------------------------------------------------- ---------- ---------- ---------- ---------- --------- ---------
Shares/Units Outstanding 26,573 -- 2,766 857 3,624
Valuation per Share/Unit (1) $1.875 $22,537 $22.762 $17.733
Market Value of Equity $49,824 -- $62,970 $15,199 $78,169 56.9%
Principal Amount of Debt estimated at 9/30/98 (pre-transaction)
- ---------------------------------------------------------------
11.96% Senior Notes $60,000 $60,000
14.10% Senior Notes 3,100 3,100
14.10% Subordinated Notes 3,100 3,100
10.13% Subordinated & Senior Subordinated Notes 50,000 50,000
9.38% Subordinated & Senior Subordinated Notes 75,000 75,000
12.25% Subordinated & Senior Subordinated Notes 81,250 81,250
8.00% Acq. & Other Notes 14,508 14,508
8.25% Existing Credit Facility 0 0
---------- ---------
Total Principal Amount of Debt $286,958 $286,958
Value of Preferred Stock estimated at 9/30/98 (2)
- ---------------------------------------------------------------
14.33% Preferred Stock $4,167 $4,167
12.88% Preferred Stock 30,000 27,600
---------- ---------
Total Liquidation Value of Preferred Stock $34,167 $31,767
Debt and Preferred Stock Exchange (Common Units Issued)
- ---------------------------------------------------------------
Common Units Issued in Exchange -- 104
Dain Rauscher Wessels Reference Value per Unit -- $22,537
Total Value of Units Issued -- $2,337 $2,337
Market Value of Capitalization
- ---------------------------------------------------------------
Total Value of Equity, Debt & Preferred $370,949 $399,231
Less: Excess Cash (pre-transaction) (20,000) (20,000)
---------- ---------
Market Value of Capitalization $350,949 $379,231 8.1%
========== =========
- --------------------
(1) Petro historical value per share is the closing market price one day prior
to announcement and the Star pro forma value per Unit is based on the Unit
Reference Value Analysis (Dain Rauscher Wessels Case), [See Unit Reference
Value Analysis Summary on page 9].
(2) Petro value for Preferred Stock is liquidation value estimated at September
30, 1998, except pro forma value for the 12.88% Preferred, which is 92% of
liquidation value.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 25
[LOGO OF PETRO(TM) APPEARS HERE]
Historical and Pro Forma MVE and MVC Comparison
Star Historical and Pro Forma Adjusted MVE and MVC Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Star Historical and Pro Forma Adjusted Market Value of Equity and Market Value
of Capitalization Summary
(in thousands, except as otherwise indicated)
Historical Market Value of Equity and
Market Value of Capitalization
----------------------------------------------------------------------
Common Sub Implied Total
Market Value of Equity Units Units GP Units Units
- ------------------------------------------ --------- --------- ---------- ----------
Units Outstanding 3,832 2,396 127 6,355
Valuation per Unit (1) $21,063 $14,744 $18,956
Market Value of Equity $80,706 $35,327 $2,409 $118,442
Market Value of Capitalization
- ------------------------------------------
Market Value of Equity $118,442
Total Debt (2) 110,080
Less: Excess Cash (2) (501)
----------
Market Value of Capitalization $228,021
==========
Pro Forma Adjusted Market Value of Equity and
Market Value of Capitalization
-------------------------------------------------------------
Common Sr Sub Jr Sub/GP Total Percent
Market Value of Equity Units Units Units Units Change
- ------------------------------------------- --------- -------- ----------- --------- -----------
Units Outstanding 10,311 2,766 857 13,934
Valuation per Unit (1) $22,537 $22,762 $17,733
Market Value of Equity $232,371 $62,970 $15,199 $310,540 162.2%
Market Value of Capitalization
- -------------------------------------------
Market Value of Equity $310,540
Total Debt (2) 314,234
Less: Excess Cash (2) (7,177)
----------
Market Value of Capitalization $617,597 170.9%
==========
- ---------------------
(1) Star historical value per Common Unit is the closing market price one day
prior to announcement, the Star value per Subordinated Unit is the value of
a Common Unit less a 20% liquidity discount and a 10% subordination
discount. The value of an implied General Partner Unit is the value of a
Common Unit less a 20% liquidity discount plus a 10% control premium. The
value of each pro forma Star Unit is based on the Unit Reference Value
Analysis (Dain Rauscher Wessels Case).
(2) Total debt and excess cash for historical is based on the Star September
30, 1998 estimated balance sheet and for pro forma is based on the Star
September 30, 1998 pro forma balance sheet.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 26
[LOGO OF PETRO(TM) APPEARS HERE]
Project Intense Heat
================================================================================
Discounted Cash Flow Analysis
================================================================================
Dain Rauscher Wessels Page 27
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Petro Stand-Alone Free Cash Flow Projections (Unlevered)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Stand-Alone Free Cash Flow Projections (Unlevered)
(In thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
------------------------------------------------------------------------------
15 Year Weather Case
Estimated -------------------------------------------------------------
1998E 1999E 2000E 2001E 2002E
---------- ---------- ---------- ---------- ----------
Volume (gallons) 355,157 369,707 356,249 343,852 332,333
Sales $475,541 $490,828 $477,965 $466,187 $455,287
Cost of Sales 318,900 328,642 318,786 309,754 301,400
---------- ---------- ---------- ---------- ----------
Gross Profit 156,641 162,186 159,179 156,433 153,887
Operating Expenses 119,011 118,794 117,410 116,196 115,118
---------- ---------- ---------- ---------- ----------
Heating Oil EBITDA 37,630 43,392 41,769 40,237 38,769
MLP Distribution 5,684 2,788 2,981 3,266 3,576
---------- ---------- ---------- ---------- ----------
Total EBITDA 43,314 46,180 44,750 43,503 42,345
Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Pretax Income (Loss) 14,604 22,680 25,250 28,003 30,845
Income Tax Expense 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Net Income 14,104 22,180 24,750 27,503 30,345
Plus: Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Cash Flow $42,814 $45,680 $44,250 $43,003 $41,845
========== ========== ========== ========== ==========
Less: Maintenance Capex (2,776) (3,000) (3,000) (3,000) (3,000)
---------- ---------- ---------- ---------- ----------
Free Cash Flow $40,038 $42,680 $41,250 $40,003 $38,845
========== ========== ========== ========== ==========
Projected for the Year Ended September 30,
------------------------------------------------------------------------------
30 Year Weather Case
Estimated -------------------------------------------------------------
1998E 1999E 2000E 2001E 2002E
---------- ---------- ---------- ---------- ----------
Volume (gallons) 355,157 380,161 366,323 353,575 341,730
Sales $475,541 $504,120 $490,912 $478,817 $467,624
Cost of Sales 318,900 337,106 326,993 317,724 309,151
---------- ---------- ---------- ---------- ----------
Gross Profit 156,641 167,014 163,919 161,093 158,473
Operating Expenses 119,011 121,466 120,052 118,810 117,707
---------- ---------- ---------- ---------- ----------
Heating Oil EBITDA 37,630 45,548 43,867 42,283 40,766
MLP Distribution 5,684 4,436 5,008 5,570 5,577
---------- ---------- ---------- ---------- ----------
Total EBITDA 43,314 49,984 48,875 47,853 46,343
Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Pretax Income (Loss) 14,604 26,484 29,375 32,353 34,843
Income Tax Expense 500 500 500 500 500
---------- ---------- ---------- ---------- ----------
Net Income 14,104 25,984 28,875 31,853 34,343
Plus: Depreciation and Amortization 28,710 23,500 19,500 15,500 11,500
---------- ---------- ---------- ---------- ----------
Cash Flow $42,814 $49,484 $48,375 $47,353 $45,843
========== ========== ========== ========== ==========
Less: Maintenance Capex (2,776) (3,000) (3,000) (3,000) (3,000)
---------- ---------- ---------- ---------- ----------
Free Cash Flow $40,038 $46,484 $45,375 $44,353 $42,843
========== ========== ========== ========== ==========
- ---------------------------------------------------------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 28
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Leveraged Weighted Average Cost of Capital Calculation
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Leveraged Weighted Average Cost of Capital Calculation
Risk Free Rate
--------
30-Year treasury bond yield (9/25/98) Risk Free Rate (Rf) 5.12%
--------
Expected Return on Equity Market
30-Year treasury bond yield (9/25/98) Rf 5.12%
Historical spread between equity returns and 30-year treasury bond yield (Ibbotson Associates) S 7.00%
--------
Expected Return on Equity Market (Rm) = Rf+S 12.12%
--------
Cost of Debt
Long-term debt interest rate (Petro Estimate) lr 12.00%
Corporate tax rate t 35.00%
--------
Cost of Debt (Cd) = lr*(1-t) 7.80%
--------
Unleveraged Beta
--------
Unleveraged beta (Dain Rauscher Wessels estimate) Unleveraged Beta (Ub) 1.25
--------
Leveraged Beta
Target long-term debt/total capitalization Td 60.00%
Target long-term equity/total capitalization Te 40.00%
Debt/equity ratio De 150.00%
--------
Leveraged Beta (B) = Ub*(1+(1-t)*De) 2.47
--------
Unleveraged Cost of Equity
Risk free rate Rf 5.12%
Expected return on equity market Rm 12.12%
Unleveraged beta Ub 1.25
--------
Unleveraged Cost of Equity = Rf+Ub(Rm-Rf) 13.87%
--------
Leveraged Cost of Equity
Risk free rate Rf 5.12%
Expected return on equity market Rm 12.12%
Leveraged beta B 2.47
--------
Leveraged Cost of Equity (Ceu) = Rf+B(Rm-Rf) 22.40%
--------
Leveraged Weighted Average Cost of Capital
Target long-term debt/total capitalization Td 60.00%
Target long-term equity/total capitalization Te 40.00%
Leveraged cost of equity Ceu 22.40%
Cost of debt Cd 7.80%
--------
Leveraged Weighted Average Cost of Capital (WACC) = (Td*Cd) + (Te*Ceu) 13.64%
--------
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 29
[LOGO OF PETRO(TM) APPEARS HERE]
Discounted Cash Flow Analysis
Petro Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO,. INC.
Stand-Alone Discounted Cash Flow Analysis (15 Year Weather Case)
(In thousands, except as otherwise Indicated)
Terminal
Projected for the Year Ended September 30, Value Total
---------------------------------------------------------------- @ 7.5 x Enterprise
1998E (1) 1999E 2000E 2001E 2002E EBITDA Value
----------- ------- ------- ------- -------- ---------- ---------
Unlevered Free Cash Flow $6,787 $42,680 $41,250 $40,003 $38,845 $317,588
Period 0.25 1.25 2.25 3.25 4.25 4.75
Discounted Cash Flow
- -----------------------------
@ 12.0% $6,597 $37,043 $31,966 $27,678 $23,997 $185,386 $312,667
@ 13.0% $6,583 $36,633 $31,333 $26,890 $23,107 $177,722 $302,268
- ---------------------------------------------------------------------------------------------------------------------------------
@ 14.0% $6,568 $36,232 $30,718 $26,131 $22,258 $170,438 $292,345
- ---------------------------------------------------------------------------------------------------------------------------------
@ 15.0% $6,554 $35,839 $30,120 $25,399 $21,447 $163,512 $282,871
@ 16.0% $6,540 $35,453 $29,539 $24,695 $20,672 $156,923 $273,822
Less: Total
Debt & Pref. Total
Plus: Total Equity
Working Equity Value Per
Capital (2) Value Share(3)
------------- --------- -----------
Unlevered Free Cash Flow
Period
Discounted Cash Flow
- ----------------------------
@ 12.0% ($301,125) $11,542 $0.43
@ 13.0% ($301,125) $1,143 $0.04
- --------------------------------------------------------------------------------
@ 14.0% ($301,125) ($8,780) ($0.33)
- --------------------------------------------------------------------------------
@ 15.0% ($301,125) ($18,254) ($0.69)
@ 16.0% ($301,125) ($27,303) ($1.03)
- -------------------
(1) 1998E results include only the last two quarters of the year.
(2) Total debt, preferred stock and working capital are estimated at
September 30, 1998.
(3) Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
================================================================================
Dain Rauscher Wessels Page 30
[LOGO OF PETRO APPEARS HERE] DISCOUNTED CASH FLOW ANALYSIS
Petro Stand-ALone Discounted Cash Flow Analysis
(30 Year Weather Case)
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC,
STAND-ALONE DISCOUNTED CASH FLOW ANALYSIS (30 YEAR WEATHER CASE)
(IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED)
LESS:TOTAL
TERMINAL DEBT & PREF TOTAL
VALUE TOTAL PLUS: TOTAL EQUITY
PROJECTED FOR THE YEAR ENDED SEPTEMBER 30, @ 7.5 X ENTERPRISE WORKING EQUITY VALUE PER
------------------------------------------------
1998E (1) 1999E 2000E 2001E 2002E EBITDA VALUE CAPITAL (2) VALUE SHARE(3)
-------- ------- ------- ------- ------- -------- ---------- ----------- ----- ---------
UNLEVERED FREE CASH FLOW $6,787 $46,375 $45,375 $44,353 $42,843 $347,573
PERIOD 0.25 1.25 2.25 3.25 4.25 4.75
Discounted Cash flow
- --------------------
@ 12.0% $6,597 $40,344 $35,162 $30,688 $26,467 $202,890 $342,148 ($301,125) $41,023 $1.54
@ 13.0% $6,583 $39,898 $34,466 $29,814 $25,486 $194,501 $330,748 ($301,125) $29,623 $1.11
- ----------------------------------------------------------------------------------------------------------------------------------
@ 14.0% $6,568 $39,461 $33,789 $28,972 $24,549 $186,529 $319,870 ($301,125) $18,745 $0.71
- ----------------------------------------------------------------------------------------------------------------------------------
@ 15.0% $6,554 $39,033 $33,132 $28,161 $23,655 $178,950 $309,484 ($301,125) $ 8,359 $0.31
@ 16.0% $6,540 $38,613 $32,493 $27,380 $22,800 $171,739 $299,565 ($301,125) ($ 1,560) ($0.06)
____________________
(1) 1998E results include only the last two quarters of the year.
(2) Total debt, preferred stock and working capital are estimated at September
30, 1998.
(3) Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 31
[LOGO OF PETRO APPEARS HERE] DISCOUNTED CASH FLOW ANALYSIS
Stand-Alone Discounted Cash Flow Analysis Matrix
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
STAND-ALONE DISCOUNTED CASH FLOW ANALYSIS MATRIX
(IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED)
TERMINAL VALUE MULTIPLES (EBITDA)
--------------------------------------------------------------------------
15 YEAR WEATHER CASE 30 YEAR WEATHER CASE
------------------------------------ ------------------------------------
DISCOUNTED CASH FLOW 6.5X 7.5X 8.5X 6.5X 7.5X 8.5X
- ------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
@ 12.0% ($0.50) $0.43 $1.36 $0.53 $1.54 $2.56
@ 13.0% ($0.85) $0.04 $0.93 $0.14 $1.11 $2.09
- --------------------------------------------------------------------------------------------------------------
@ 14.0% ($1.19) ($0.33) $0.52 ($0.23) $0.71 $1.64
- --------------------------------------------------------------------------------------------------------------
@ 15.0% ($1.51) ($0.69) $0.13 ($0.58) $0.31 $1.21
@ 16.0% ($1.81) ($1.03) ($0.24) ($0.92) ($0.06) $0.80
__________
Note: Per share numbers are based upon shares outstanding of 26,573.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 32
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
RELATIVE CONTRIBUTION ANALYSIS
- --------------------------------------------------------------------------------
Page 33
[LOGO OF PETRO APPEARS HERE] RELATIVE CONTRIBUTION ANALYSIS
(Not Adjusted for Pro Forma Unit Class Value
Difference)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
RELATIVE CONTRIBUTION ANALYSIS (NOT ADJUSTED FOR PRO FORMA
UNIT CLASS VALUE DIFFERENCE)
(in thousands, except as otherwise indicated)
Projected for the Year Ended September 30,
--------------------------------------------------------
Normalized 16 Yr. Weather
Star Stand-Alone Distributable Cash FLow 1998E 1999E
- ---------------------------------------------- -------------- --------------
EBITDA $ 20,731 $ 23,032
Interest Expense (7,662) (8,538)
Maintenance Capex (2,710) (2,657)
Other (25) (25)
-------------- --------------
Distributable Cash Flow $ 10,334 $ 11,812
Distribution to Star Common
- ----------------------------------------------
Cash Distribution to Star Common Units $ 8,430 $ 8,430
Distribution per Common Unit $ 2.20 $ 2.20
Weighted Avg. Star Common Units Outstanding $ 3,832 3,632
Distribution to Star Sub Units (Petro)
- ----------------------------------------------
Cash Distribution to Star Sub Units $ 1,904 $ 3,362
Weighted Avg. Star Sub Units outstanding 2,396 2,396
Cash Distribution per Star Sub Unit $ 0.79 $ 1.41
Petro Distributable Cash Flow
- ----------------------------------------------
EBITDA $ 44,749 $ 46,094
Pro Forma Synergies 500 500
Preferred Dividends (5,026) (4,432)
Interest Expense (31,444) (30,971)
Maintenance Capex (2,776) (3,000)
Taxes (500) (500)
-------------- --------------
Distributable Cash Flow $ 5,503 $ 7,691
Cash Distribution to Star Sub Units 1,904 3,382
-------------- --------------
Total Distribution Cash Flow $ 7,407 $ 11,073
============== ==============
Star Pro Forma Units Outstanding
- ----------------------------------------------
Star 3,832 3,832
Petro 3,624 3,624
-------------- --------------
Total Units 7,455 7,455
Star Relative Contribution
- ----------------------------------------------
Distributable Cash Flow Contribution 53.2% 43.2%
Percent of Pro Forma Units Received 51.4% 51.4%
Petro Relative Contribution
- ----------------------------------------------
Distributable Cash Flow Contribution 46.8% 56.8%
Percent of Pro Forma Units Received 48.6% 48.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 34
[LOGO OF PETRO APPEARS HERE] RELATIVE CONTRIBUTION ANALYSIS
(Adjusted for Pro Forma Unit Class Value Difference)
================================================================================
PROJECT INTENSE HEAT
Relative Contribution Analysis (Adjusted for Pro Forma Unit Class Value Difference)
(In thousands, except as otherwise Indicated)
Projected for the Year Ended September 30,
-----------------------------------------------------
Normalized 15 Yr. Weather
Star Stand-ALone Distributable Cash Flow 1998E 1998E
- ------------------------------------------------------- --------------- ------------------
EBITDA $20,731 $ 23,032
Interest Expense (7,662) (8,538)
Maintenance Capex (2,710) (2,657)
Other (25) (25)
-------------- ------------------
Distributable Cash Flow $10,334 $ 11,812
Distribution to Star Commmon
- -------------------------------------------------------
Cash Distribution to Star Common Units $ 8,430 $ 8,430
Distribution per Common Unit $ 2.20 $ 2.20
Weighted Avg. Star Common Units Outstanding $ 3,832 $ 3,832
Distribution to Star Sub Units (Petro)
- -------------------------------------------------------
Cash Distribution to Star Sub Units $ 1,904 $ 3,382
Weighted Avg. Star Sub Units Outstanding $ 2,398 $ 2,398
Cash Distribution per Star Sub Unit $ 0.79 $ 1.41
Petro Distributable Cash Flow
- -------------------------------------------------------
EBITDA $44,749 $ 48,094
Pro Forma Synergies 500 500
Preferred Dividends (5,028) (4,432)
Interest Expense (31,444) (30,971)
Maintenance Capex (2,778) (3,000)
Taxes (500) (500)
--------------- ------------------
Distributable Cash Flow $ 5,503 $ 7,691
Cash Distribution to Star Sub Units 1,904 3,382
--------------- ------------------
Total Distributable Cash Flow $ 7,407 $ 11,079
=============== ==================
Pro Forma Unit Class Value Adjustment
- -------------------------------------------------------
Pro Forma Senior Subordinated Units 2,766 2,766
Senior Subordinated / Common Unit Value Ratio (1) 1.01 1.01
Adjusted Senior Subordinated Units 2,794 2,794
Pro Forma Junior Subordinated & GP Units 857 857
Junior Subordinated & GP / Common Unit Value Ratio (1) 0.79 0.79
Adjusted Junior Subordinated & GP Units 674 674
Total Star Units Received by Petro (Value Adjusted) 3,468 3,468
Star Pro Forma Units Outstanding
- -------------------------------------------------------
Star 3,832 3,832
Petro (Adjusted) 3,468 3,468
--------------- ------------------
Total Units 7,900 7,300
Star Relative Contribution
- -------------------------------------------------------
Distributable Cash Flow Contribution 53.2% 43.2%
Percent of Pro Forma B Units Received 52.5% 52.5%
Petro Relative Contribution
- -------------------------------------------------------
Distributable Cash Flow Contribution 48.8% 58.8%
Percent of Pro Forma Units Received 47.5% 47.5%
_________________
(1) Value ratio is based on the Dain Rauscher Wessels Case.
- --------------------------------------------------------------------------------
Page 35
[LOGO PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
NET ASSET VALUE ANALYSIS
- --------------------------------------------------------------------------------
Page 36
[LOGO OF PETRO APPEARS HERE] NET ASSET VALUE ANALYSIS
Home Heating Oil Business Valuation
================================================================================
------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
Home Heating Oil Business Valuation
(in thousands, except as otherwise indicated)
Method 1 Method 2
- ------------------------------------------------- ------------------------------------------------
Petro 1998E Normalized EBITDA (1) $ 44,749 Petro 1998E Normalized Gallons 384,390
Mean EBITDA Multiple 4.2x Mean Acquisition Cost per Gallon $ 0.84
Total Enterprise Value $187,946 Total Enterprise Value $ 322,888
Petro Size Premium 10.0% Petro Size Premium 10.0%
Total Adjusted Enterprise Value $206,740 Total Adjusted Enterprise Value $ 355,176
Methodology Petro Methodology Petro
Acquisitions Acquisitions
1996-1997 1996-1997
Ten Largest Ten Largest
Method 3 Method 4
- ------------------------------------------------- ------------------------------------------------
Petro 1998E Forecasted Customers 335,000 Petro 1998E Normalized EBITDA (1) $ 44,749
Mean Acquisition Cost per Customer $ 1,194 Mean EBITDA Multiple 6.1x
Total Enterprise Value $399,990 Total Enterprise Value $272,969
Petro Size Premium 10.0% Petro Size Premium 10.0%
Total Adjusted Enterprise Value $439,989 Total Adjusted Enterprise Value $300,266
Methodology Petro Methodology Star Gas
Acquisitions Acquisitions
1996-1997 1994-1998
Ten Largest
Method 5 Method 6
- ------------------------------------------------- -------------------------------------------------
Petro LTM 6/30/98 EBITDA (1) $ 30,186 Petro LTM 6/30/98 EBITDA (1) $ 30,186
Mean EBITDA Multiple 11.4x Consolidator Growth Rate Factor 66.3
Total Enterprise Value $344,120 Petro EBITDA CAGR (2) 6.6%
Implied EBITDA Multiple 4.4x
Total Enterprise Value $132,818
Methodology Selected Energy Methodology Selected
Marketing & Industry
Distribution Consolidators
M&A Analysis
_________________
(1)Excludes Star Gas distributions.
(2)Petro EBITDA compound annual growth rate (CAGR) from 1999E to 2002E, assuming
15 year weather and $25.0 million of acquisitions per year.
- --------------------------------------------------------------------------------
________________________________________________________________________________
Page 37
[LOGO OF PETRO APPEARS HERE] NET ASSET VALUE ANALYSIS
NET ASSET VALUE SUMMARY
================================================================================
- --------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
NET ASSET VALUE SUMMARY
(In thousands, except as otherwise indicated)
HOME HEATING OIL BUSINESS METHOD 1 METHOD 2 METHOD 3 METHOD 4 METHOD 5 METHOD 6
- --------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Total Enterprise Value (See Previous Page) $ 206,740 $ 355,176 $ 439,989 $ 300,266 $ 344,120 $ 132,818
INVESTMENT IN STAR
- ---------------------------------------------------------
Total Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
Implied OP Units 127 127 127 127 127 127
Total Implied Units 2,523 2,523 2,523 2,523 2,523 5,523
Common Unit Price (one day prior to announcement) $ 21,063 $ 21,063 $ 21,063 $ 21,063 $ 21,063 $ 21,063
Structural Subordination Discount 15% 15% 15% 15% 15% 15%
Value per Unit $ 17.90 $ 17.90 $ 17.90 $ 17.90 $ 17.90 $ 17.90
Total Value of Investment in Star $ 45,173 $ 45,173 $ 45,173 $ 45,173 $ 45,173 $ 45,173
GROSS ASSET VALUE $ 251,913 $ 400,349 $ 485,162 $ 345,439 $ 389,293 $ 177,991
PRINCIPAL AMOUNT OF DEBT ESTIMATED AT 9/30/98
- ---------------------------------------------------------
11.96% Senior Notes $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
14.10% Senior Notes 3,100 3,100 3,100 3,100 3,100 3,100
14.10% Subordinated Notes 3,100 3,100 3,100 3,100 3,100 3,100
10.13% Subordinated & Senior Subordinated Notes 50,000 50,000 50,000 50,000 50,000 50,000
9.38% Subordinated & Senior Subordinated Notes 75,000 75,000 75,000 75,000 75,000 75,000
12.25% Subordinated & Senior Subordinated Notes 81,250 81,250 81,250 81,250 81,250 81,250
8.00% Acq. & Other Notes 14,508 14,508 14,508 14,508 14,508 14,508
8.25% Existing Credit Facility 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total Principal Amount of Debt $ 286,958 $ 286,958 $ 286,958 $ 286,958 $ 286,958 $ 286,958
LIQUIDATION VALUE OF PREFERRED STOCK ESTIMATED AT 9/30/98
- ---------------------------------------------------------
14.33% Preferred Stock $ 4,167 $ 4,167 $ 4,167 $ 4,167 $ 4,167 $ 4,167
12.88% Preferred Stock 30,000 30,000 30,000 30,000 30,000 30,000
---------- ---------- ---------- ---------- ---------- ----------
Total Liquidation Value of Preferred Stock $ 34,167 $ 34,167 $ 34,167 $ 34,167 $ 34,167 $ 34,167
PREPAYMENT PENALTIES & OTHER LIABILITIES
- ---------------------------------------------------------
Prepayment Penalties on Outstanding Debt (1) $ 22,957 $ 22,957 $ 22,957 $ 22,957 $ 22,957 $ 22,957
Other Long-Term Liabilities 10,711 10,711 10,711 10,711 10,711 10,711
Working Capital & Cash Escrow Adjustment (20,000) (20,000) (20,000) (20,000) (20,000) (20,000)
Liquidation Transaction Costs 5,000 5,000 5,000 5,000 5,000 5,000
---------- ---------- ---------- ---------- ---------- ----------
Total Prepayment Penalties & Other Liabilities $ 18,668 $ 18,668 $ 18,668 $ 18,668 $ 18,668 $ 18,668
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE ($87,880) $ 60,556 $ 145,369 $ 5,646 $ 49,500 ($161,802)
========== ========== ========== ========== ========== ==========
NET ASSET VALUE PER SHARE ($3.31) $ 2.28 $ 5.47 $ 0.21 $ 1.86 ($6.09)
========== ========== ========== ========== ========== ==========
TOTAL SHARES OUTSTANDING 26,573 26,573 26,573 26,573 26,573 26,573
___________
(1) Assumes all debt is prepaid at 108% of par.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 38
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE COMPANY TRADING ANALYSIS
Energy and Fuel Marketing and Distribution Companies
- --------------------------------------------------------------------------------
Page 39
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Equity to Latest Twelve Months Net
Income from Operations
================================================================================
[GRAPH APPEARS HERE]
___________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of equity for Petro is calculated using the closing market
price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 40
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Equity to Latest Twelve Months
Cash Flow
================================================================================
[GRAPH APPEARS HERE]
__________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of equity for Petro is calculated using the closing market
price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 41
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES Price to Book Value per Common Share
================================================================================
[GRAPH APPEARS HERE]
____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 42
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months Revenues
================================================================================
[GRAPH APPEARS HERE]
_____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 43
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
__________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement. Petro latest twelve months
EBITDA includes Star Gas distributions and excludes non-recurring expenses.
- --------------------------------------------------------------------------------
Page 44
[LOGO OF PETRO APPEARS HERE] ENERGY AND FUEL MARKETING AND DISTRIBUTION
COMPANIES
Market Value of Capitalization to Latest Twelve
Months EBIT
================================================================================
[GRAPH APPEARS HERE]
_________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Market value of capitalization for Petro is calculated using the closing
market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 45
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE COMPANY TRADING ANALYSIS
Propane Master Limited Partnerships
- --------------------------------------------------------------------------------
Page 46
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Percentage of 52 Week High Common Unit Price
================================================================================
[GRAPH APPEARS HERE]
__________
Note: Market data as of 9/25/98.
Source: Factset Data Systems.
(1) Percentage of 52 week high one day prior to announcement of merger on August
13, 1998.
- --------------------------------------------------------------------------------
Page 47
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Current Yield
================================================================================
[GRAPH APPEARS HERE]
____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Star Gas yield based on annual distribution of $2.20 per Unit.
________________________________________________________________________________
Page 48
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Historical Yields
[GRAPH APPEARS HERE]
________
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 49
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Historical Yields vs. 10-Year Treasury
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems and publicly available information.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 50
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Yield Spread To Treasury
================================================================================
[GRAPH APPEARS HERE]
_________________
Source: Factset Data Systems and publicly available information.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
________________________________________________________________________________
Page 51
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Capitalization/(1)/
================================================================================
[GRAPH APPEARS HERE]
________________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems, publicly available information and Petroleum Heat
and Power Co., Inc.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordination discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas historical is calculated based upon the definition
above using the closing market price one day prior to announcement. The
adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value
Analysis (Dain Rauscher Wessels Case), [See Unit Reference Value Analysis on
page 9].
- --------------------------------------------------------------------------------
Dain Rauscher Wessels Page 52
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Capitalization/(1)/ to
Latest Twelve Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
___________________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordination discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas is calculated based upon the definition above
using the closing market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 53
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Adjusted Market Value of Equity/(1)/ to Latest
Twelve Months Flow from Operations
================================================================================
[GRAPH APPEARS HERE]
_______________
Note: Market data as of 9/25/98.
Source: Factset Data Systems and publicly available information.
(1) Adjusted Market Value of Equity (MVE) is defined common units multiplied by
current common unit price, plus subordinated units multiplied by current
common unit price less a 20% liquidity discount and a 10% subordination
discount, plus implied GP units multiplied by current common unit price less
a 20% liquidity discount plus a 10% control premium.
(2) Adjusted MVE for Star Gas is calculated based upon the definition above
using the closing market price one day prior to announcement.
- --------------------------------------------------------------------------------
Page 54
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Adjusted Market Value of
Capitalization/(1)/
================================================================================
[GRAPH APPEARS HERE]
_____________
Note: Market data as of 9/25/98.
Source: Factset Data Systems, publicly available information and Petroleum Heat
and Power Co., Inc.
(1) Adjusted Market Value of Capitalization (MVC) is defined as adjusted market
value of equity (common units multiplied by current common unit price, plus
subordinated units multiplied by current common unit price less a 20%
liquidity discount and a 10% subordinated discount, plus implied GP units
multiplied by current common unit price less a 20% liquidity discount plus a
10% control premium) plus book value of total debt, less cash and
equivalents in excess of a 1.0 working capital ratio.
(2) Adjusted MVC for Star Gas historical is calculated based upon the definition
above using the closing market price one day prior to announcement. The
adjusted MVC for Star Gas pro forma is based upon the Unit Reference Value
Analysis (Dain Rauscher Wessels Case). [See Unit Reference Value Analysis on
page 9].
- --------------------------------------------------------------------------------
Page 55
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Total Book Capitalization
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma total debt to total book capitalization for Star Gas is estimated
at September 30, 1998.
- --------------------------------------------------------------------------------
Page 56
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months EBITDA to Interest Expense
(Interest Coverage)
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma EBITDA to interest expense for Star Gas is estimated for the year
ended September 30, 1998.
- --------------------------------------------------------------------------------
Page 57
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Total Debt to Latest Twelve Months EBITDA
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information and Petroleum Heat and Power Co., Inc.
(1) Pro forma total debt to EBITDA for Star Gas is estimated at and for the year
ended September 30, 1998.
- -------------------------------------------------------------------------------
Page 58
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Profitability Margins
================================================================================
[GRAPH APPEARS HERE]
______________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 59
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Retail Gallons
================================================================================
[GRAPH APPEARS HERE]
________________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 60
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Sales Percentage by Customer
Type
================================================================================
[GRAPHS APPEARS HERE]
______________
Source: Publicly available information
- --------------------------------------------------------------------------------
Page 61
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Operating Results per Retail
Gallon
================================================================================
[GRAPH APPEARS HERE]
_______________
Source: Publicly available information
- --------------------------------------------------------------------------------
Page 62
[LOGO OF PETRO APPEARS HERE] PROPANE MASTER LIMITED PARTNERSHIPS
Latest Twelve Months Operating Results per Branch
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Publicly available information.
- --------------------------------------------------------------------------------
Page 63
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
COMPARABLE TRANSACTIONS ANALYSIS
- --------------------------------------------------------------------------------
Page 64
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
Selected Energy Marketing & Distribution Merger &
Acquisition Transactions
(1994 - Present)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
SELECTED ENERGY MARKETING & DISTRIBUTION MERGER & ACQUISITION TRANSACTIONS
(1994 - PRESENT)
TRANSACTION TRANSACTION
ENTERPRISE ENTERPRISE
DATE VALUE (1) VALUE/LTM
EFFECTIVE ACQUIROR NAME TARGET NAME ($ MIL.) EBITDA
- ------------- ------------------------------------ --------------------------------------- ----------- -----------
05/31/94 Valero Energy Corporation Valero Natural Gas Partners, LP. $ 665.6 14.6x
07/01/94 Associated Natural Gas Corporation Grand Valley Gas Company 53.8 7.3x
07/13/94 K N Energy, Inc. American Oil and Gas Company 410.9 10.9x
12/15/94 Panhandle Eastern Corp. Associated Natural Gas Corporation 750.7 9.6x
03/14/95 Natural Gas Clearinghouse Trident NGL Holding, Inc. 719.3 9.8x
06/15/95 LG&E Energy Corporation Hadson Corporation 143.0 11.9x
08/05/97 El Paso Natural Gas Company Eastex Energy, Inc. 35.6 NM
04/15/97 PacifiCorp Holdings, Inc. TPC Corporation 388.7 13.4x
11/18/97 Enron Corp. Enron Global Power & Pipelines L.L.C. 829.1 14.3x
03/06/98 Kinder Morgan Energy Partners, LP. Santa Fe Pacific Pipeline Partners, L.P. 1,464.9 10.9x
-----------------------------------------------------------------------
MEAN $ 566.2 11.4x
MEDIAN 565.1 10.9x
HIGH 1,464.9 14.6x
LOW 35.6 7.3x
-----------------------------------------------------------------------
PENDING STAR GAS PARTNERS, L.P. PETROLEUM HEAT AND POWER CO., INC. (2) $ 379.2 10.6x
TRANSACTION TRANSACTION
TRANSACTION TRANSACTION EQUITY EQUITY
ENTERPRISE EQUITY VALUE/ VALUE/
DATE VALUE/LTM VALUE LTM NET LATEST
EFFECTIVE EBIT ($ MIL.) INCOME BOOK VALUE
- ------------- ----------- ----------- ----------- ------------
05/31/94 21.4x $ 230.4 55.3x 4.3x
07/01/94 10.9x 56.7 26.5x 3.5x
07/13/94 20.5x 302.1 54.8x 1.6x
12/15/94 15.2x 577.5 19.5x 2.8x
03/14/95 18.2x 333.7 50.3x 1.4x
06/15/95 NM 143.0 NM NM
08/05/95 NM 34.2 NM 2.2x
04/15/97 23.3x 241.4 47.9x 2.5x
11/18/97 14.3x 865.3 15.4x 2.5x
03/06/98 13.0x 1,163.1 21.3x 4.3x
-----------------------------------------------------------
17.1x $ 394.7 36.4x 2.8x
16.7x 271.8 37.2x 2.5x
23.3x 1,163.1 55.3x 4.3x
10.9x 34.2 15.4x 1.4x
-----------------------------------------------------------
PENDING NM $ 78.2 NM NM
-----------------------------------------------------------
________________
Source: Securities Data Company, publicly available information and Petroleum
Heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price
plus total debt and preferred stock, less cash and equivalents, excluding
fees and expenses. The stock is valued using the closing price on the last
full trading day prior to announcement.
(2) Petro market value of capitalization and market value of equity are based
on the Unit Reference Value Analysis (Dain Rauscher Wessels Case). (See
Unit Reference Value Analysis Summary on page 9). LTM EBITDA includes Star
Gas distributions and excludes non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 65
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
Petro Acquisitions Summary
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Petro Acquisitions Summary
(Dollar and gallon amounts in thousands, except per gallon and
per customer amounts)
Mean Mean
Total Total Target LTM EBITDA Total Acquisition Total Acquisition
----------------------
Companies Acquisition Mean Gallons Cost Customers Cost
Petro 1996 - 1997 Acquisitions Acquired Costs EBITDA Multiple Acquired per Gallon Acquired per Customer
------------------------------ --------- ----------- --------- --------- -------- ---------- -------- ------------
Ten Largest 10 $ 33,465 $ 7,848 4.2 x 40,446 $ 0.84 31,358 $ 1,194
Excluding Ten Largest 14 8,629 2,064 4.1 x 13,730 0.55 14,224 630
Petroleum Heat and Power Co., Inc.
----------------------------------------------------------------------------------------------------------------------------------
Normalized 1998E EBITDA $334,058 (1) $44,749 (2) 7.5 x 384,390 $ 0.87 335,000 $ 997
LTM 6/30/98 EBITDA 334,058 (1) 30,186 (2) 11.1 x
----------------------------------------------------------------------------------------------------------------------------------
_______________
Source: Petroleum Heat and Power Co., Inc.
(1) Acquisition cost is based on the Pro Forma Market Value of Capitalization
Analysis (Dain Rauscher Wessels Case), (See Petro Historical and Pro
Forma MVE and MVC Summary on page 25) less Petro's investment in Star.
The value of Petro's investment in Star is the closing market price of a
Star Common Unit one day prior to announcement less a structural
subordination discount of 15% multiplied by Petro's total implied Star
units.
(2) EBITDA excludes Star Gas distributions and non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 66
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1996 - 1997 Petro Acquisitions (Ten Largest)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1996 - 1997 PETRO ACQUISITIONS (TEN LARGEST)
(Dollar and gallon amounts in thousands, except per gallon and per
customer amounts)
TOTAL TARGET LTM EBITDA TOTAL ACQUISITION TOTAL ACQUISITION
ACQUISITION (PRO FORMA PETRO OWNERSHIP) GALLONS COST CUSTOMERS COST
---------------------------
DATE COMPANY ACQUIRED COSTS EBITDA MULTIPLE ACQUIRED PER GALLON ACQUIRED PER CUSTOMER
- ---------- ----------------------- ----------- ---------- ------------ -------- ----------- ---------- ------------
02/01/96 Seaman $ 7,134 $1,552 4.6x 7,522 $0.95 7,806 $ 914
01/11/96 Garrison 5,242 1,154 4.5x 5,925 0.88 6,575 797
01/19/96 Cibro 4,368 1,087 4.0x 6,200 0.70 2,426 1,800
10/18/96 Bergen 3,202 718 4.5x 5,501 0.58 1,593 2,010
04/14/97 Mugullian Fuel 2,802 638 4.4x 3,000 0.93 2,570 1,090
04/01/96 McDowell 2,723 669 4.1x 2,675 1.02 2,305 1,182
08/29/97 Oil Burner Utility 2,633 603 4.4x 3,500 0.75 1,590 1,656
09/10/97 Romary 2,252 545 4.1x 2,348 0.96 2,210 1,019
09/29/97 T.W. Perry 1,619 439 3.7x 2,118 0.76 2,461 658
08/26/97 Bellomo 1,489 443 3.4x 1,657 0.90 1,822 817
----------------------------------------------------------------------------------------------------------------------
TOTAL $33,465 $7,848 -- 40,446 -- 31,358 --
MEAN 3,346 785 4.2x 4,045 $0.84 3,136 $1,194
WEIGHTED AVERAGE -- -- 4.3x -- 0.83 -- 1,067
MEDIAN 2,763 654 4.2x 3,260 0.89 2,366 1,055
HIGH 7,134 1,552 4.6x 7,622 1.02 7,806 2,010
LOW 1,489 439 3.4x 1,657 0.68 1,690 658
----------------------------------------------------------------------------------------------------------------------
_____________
Source: Petroleum Heat and Power Co., Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 67
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1996 - 1997 Petro Acquisitions (Excluding Ten
Largest)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1996 - 1997 PETRO ACQUISITIONS (EXCLUDING TEN LARGEST)
(Dollar and gallon amounts in thousands, except per gallon and per customer
amounts)
TOTAL TARGET LTM EBITDA TOTAL ACQUISITION TOTAL ACQUISITION
ACQUISITION (PRO FORMA PETRO OWNERSHIP) GALLONS COST CUSTOMERS COST
------------------------------
DATE COMPANY ACQUIRED COSTS EBITDA MULTIPLE ACQUIRED PER GALLON ACQUIRED PER CUSTOMER
- ---------- ------------------- ------------- ------------- -------------- ---------- ------------ ----------- --------------
11/24/97 Shreve $1,457 $ 300 4.9X 2,425 $ 0.60 2,782 $ 524
09/11/96 Flynn 1,038 232 4.5X 1,316 0.79 1,070 970
12/18/97 Genovese 1,011 281 3.6X -- -- 1,054 959
10/31/96 Hy-Test 813 177 4.6X 1,468 0.55 1,269 641
01/15/97 Oils Inc. 748 188 4.0X 1,189 0.63 826 905
10/01/97 Miltbrook 527 112 4.7X 908 0.58 900 588
07/10/97 Good 521 117 4.5X 1,200 0.43 1,559 334
12/26/96 Sherman 493 103 4.8X 564 0.67 475 1,037
12/30/96 Grasso 423 116 3.6X 1,118 0.38 1,080 392
05/14/97 Alderfer Heating 401 111 3.6X 787 0.51 740 542
12/27/96 Matco 368 97 3.8X 988 0.37 722 510
12/18/96 Dexter Bros. 332 99 3.4X 786 0.42 700 474
09/24/96 Farren 264 69 3.8X 481 0.55 520 507
10/18/96 Highstown 233 62 3.8x 500 0.47 527 443
------------------------------------------------------------------------------------------------------------------------
TOTAL $8,629 $2,064 -- 13,730 -- 14,224 --
MEAN 616 147 4.1X 1,066 $ 0.55 1,016 $ 630
WEIGHTED AVERAGE -- -- 4.2X -- 0.83 -- 607
MEDIAN 507 114 3.9X 998 0.55 863 633
HIGH 1,457 300 4.9X 2,425 0.87 2,782 1,037
LOW 233 62 3.4X 481 0.37 475 334
------------------------------------------------------------------------------------------------------------------------
____________
SOURCE: Petroleum Heat and Power Co. Inc.
- --------------------------------------------------------------------------------
Page 68
[LOGO OF PETRO APPEARS HERE] COMPARABLE TRANSACTIONS ANALYSIS
1994 - 1998 Star Gas Partners Acquisitions
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
1994 - 1998 STAR GAS PARTNERS ACQUISITIONS
(Dollar and gallon amounts in thousands, except per gallon and per customer
amounts)
Total
Acquisition Target LTM EBITDA
----------------------------
Date Company Acquired Costs EBITDA Multiple
- ---------- -------------------------------------- --------------- ------------ ------------
06/15/94 Loveland $ 700 $ 127 5.5x
11/24/94 Baystate 1,450 209 6.9x
09/12/95 Debolt 950 151 6.3x
03/22/96 Bob White L.P. Gas/Mitchell Bottle Gas 1,500 263 5.7x
07/22/96 Fuzzy Moore 850 147 5.8x
10/22/97 Pearl Gas Co. 24,127 3,288 7.3x
02/20/98 Tri-County Gas 550 108 5.1x
05/28/98 Knowles LP Gas 3,000 426 7.0x
05/28/98 Tioga Petroleum 1,200 257 4.7x
07/30/98 Lowe Bros & Dad, Inc. 3,750 602 6.2x
08/11/98 Myers Appliance 1,200 191 6.3x
-----------------------------------------------------------------------------------------
TOTAL $ 39,277 $ 5,769 --
MEAN 3,571 524 6.1x
WEIGHTED AVERAGE -- -- 6.8x
MEDIAN 1,200 209 6.2x
HIGH 24,127 3,288 7.3x
LOW 560 108 4.7x
-----------------------------------------------------------------------------------------
PETROLEUM HEAT AND POWER CO., INC.
-----------------------------------------------------------------------------------------
Normalized 1998E EBITDA $334,058 $44,749 (2) 7.6x
LTM 6/30/98 EBITDA 334,058 30,186 (2) 11.1x
-----------------------------------------------------------------------------------------
______________
Source: Star Gas Partners, L.P. and Petroleum Heat and Power Co., Inc.
(1) Acquisition cost is based on the Pro Forma Market Value of Capitalization
Analysis (Dain Rauscher Wessels Case), [See Petro Historical and Pro Forma
MVE and MVC Summary on page 25] less Petro's investment in Star. The value
of Petro's investment in Star is the closing market price of a Star Common
Unit one day prior to announcement less a structural subordination discount
of 15% multiplied by Petro's implied Star units.
(2) EBITDA excludes Star Gas distributions and non-recurring expenses.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 69
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
MERGER PREMIUMS ANALYSIS
- --------------------------------------------------------------------------------
Page 70
[LOGO OF PETRO APPEARS HERE] Merger Premiums Analysis
Selected Energy Industry Merger & Acquisition
Transactions (1994 - Present, Stock-for-Stock,
$100 - $500 million)
================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
PROJECT INTENSE HEAT
SELECTED ENERGY INDUSTRY MERGER & ACQUISITION TRANSACTIONS
(1994 - Present, Stock-for-Stock, $100 -$500 million)
Transaction Transaction
Enterprise Equity Premium No.
---------------------------
Date Value ($) Value For 1 Day 1 Week 4 Weeks
Announced Acquiror Name Target Name ($ Mil.) Share Prior Prior Prior
- --------- ------------------------------ ------------------------------ ----------- ---------- --------- -------- -------
03/24/94 K N Energy, Inc. American Oil and Gas Company $ 410.9 $ 11.05 4.0% 4.0% 5.2%
06/23/94 Drasser Industries, Inc. Wheatley TXT Corp. 173.8 14.70 25.1% 25.1% 32.1%
06/02/94 Ray McDermott S.A. Offshore Pipelines, Inc. 278.6 21.88 14.4% 15.1% 40.0%
06/13/94 Noble Drilling Corporation Chilee Offshore Drilling Company 200.2 5.25 5.0% 2.4% 23.5%
06/20/94 Kelley Oil Corporation Kelley Oil & Gas Partners Ltd. 101.7 5.64 -35.6% -32.7% -16.5%
03/10/94 United Meridian Corporation General Atlantic Resources, Inc. 182.3 16.50 -7.0% -9.6% 11.9%
03/13/94 BJ Services Company Western Company of North America 377.2 20.00 63.3% 73.9% 70.2%
03/20/94 Parker & Parlsey Petroleum Company Tide West Oil Company 141.0 14.24 -0.1% 21.2% 16.2%
11/30/94 National Energy Group, Inc. Alexander Energy Corporation 103.6 4.46 -28.6% -27.1% -23.2%
03/08/95 Moorco International Daniel Industries, Inc. 187.8 16.29 29.0% 22.9% 19.6%
05/03/95 Barnett Resources Corporation Plains Petroleum Company 299.6 30.23 34.3% 38.2% 39.0%
11/20/95 Tidewater, Inc. Homeback Offshore Services, Inc. 310.8 21.67 40.9% 40.9% 46.9%
01/25/95 ENSCO International, Inc. Dual Drilling (Mosvold Shipping) 224.7 14.22 8.9% 13.2% 23.7%
02/26/95 HS Resources, Inc. Tide West Oil Company 201.3 15.91 44.6% 44.6% 51.5%
06/17/97 Baker Hughes Incorporated Drilex International, Inc. 120.1 17.58 31.4% 37.9% 59.8%
08/10/97 Holburton Company Numar Corporation 341.6 39.62 90.9% 99.3% 95.7%
06/20/97 Forcenergy Inc. Convest Energy Corporation 102.0 9.44 11.1% 11.1% 18.9%
06/20/97 Forcenergy Inc. Edisio Resources Corporation 147.7 10.27 -6.6% -6.6% -0.4%
06/24/97 Louis Drayfus Natural Gas Company American Exploration Company 275.5 15.96 13.0% 15.0% 21.6%
06/30/97 Balco Oil & Gas Corporation Hugoton Energy Corporation 263.1 15.00 15.4% 20.0% 36.4%
07/07/97 Meridan Resource Corporation Caim Energy USA, Inc. 233.6 13.30 22.3% 29.0% 26.7%
11/13/97 Chesapeske Energy Corporation Hugoton Energy Corporation 377.0 13.33 7.7% 11.0% 26.9%
12/15/97 EVI, Inc. Christiana Companies, Inc. 214.7 34.74 -14.7% -16.5% -15.0%
03/12/98 El Paso Natural Gas Company Deep Tech International 375.4 14.00 8.7% 9.8% 15.5%
05/12/98 Lomak Petroleum, Inc. Domain Energy Corporation 151.9 9.36 -25.1% -30.0% -28.7%
06/13/98 MoMoRan Oil & Gas Company Freeport-MoMo Ran Sulphur, Inc. 124.2 12.50 14.9% 6.4% 4.2%
06/03/98 CFAS Energy Corporation Continental Natural Gas, Inc. 151.2 9.31 1.4% 26.3% 33.0%
08/10/98 R&B Falcon Corporation Cliffs Drilling Company 452.1 28.16 39.0% 41.2% 17.0%
09/14/98 TransMontalons Inc. Louis Dreyfus Energy Corp. 161.0 11.63 8.1% 7.5% -15.5%
-------------------------------------------------------------------------------------
Mean $ 230.5 14.3% 17.0% 21.9%
Median 201.3 11.1% 15.0% 21.6%
High 452.1 90.9% 99.3% 95.7%
Low 101.7 -35.6% -32.7% -28.7%
-------------------------------------------------------------------------------------
Petroluem Heat and Power Co., Inc. (Senior Subordinated Unit/Implied Reference Value
08/14/98 Parker & Parsley Premium Company per Petro Share) (2)
-------------------------------------------------------------------------------------
Implied Reference Value (including DPUs and GP
Incentives) $ 2.54 35.6% 62.7% 40.3%
DPUs and GP Incentive Value 0.43
--------
Total Implies Reference Value $ 2.97 58.6% 90.3% 64.1%
-------------------------------------------------------------------------------------
_______________
Source: Securities Data Company, publicly available information and Petroleum Heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and
equivalents, excluding fees and expenses.
The stock is valued using the closing price on the last full trading day prior to announcement.
(2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis (Dain
Rauscher Wessels Case), (See Unit Reference Value Analysis Summary on page 9)
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 71
[LOGO OF PETRO APPEARS HERE] MERGER PREMIUMS ANALYSIS
Selected Recent All Industries Merger &
Acquisitions Transactions
(1998 - Present, Stock-for-Stock, $100 - $500
million)
================================================================================
- --------------------------------------------------------------------------------
PROJECT INTENSE HEAT
Selected Recent All Industries Merger & Acquisition Transactions
(1998 - Present, Stock-for-Stock, $100 - $500 million)
Transaction Transaction Premium to:
Enterprise Equity -------------------------
Date Value Value Per 1 Day 1 Week 4 Weeks
Announced Acquired Name Target Name ($ mill.) Share Prior Prior Prior
- ----------- -------------------------------- ---------------------------- -------------- ------------ -------------------------
01/01/98 ConAgra Inc GoodMark Foods Inc $217.8 $28.58 54.5% 75.9% 69.4%
01/12/98 Mercantile Bancorp, St Louis, MO CBT Corp, Paducah Kentucky 275.8 34.36 3.3% 1.8% 19.5%
01/14/98 Suiza Foods Corp Continental Con Co Inc 330.5 40.65 45.8% 74.4% 71.2%
01/15/98 First Midwest Bancorp, IL Heritage Financial Services 405.8 32.61 7.8% 10.5% 31.1%
01/15/98 International Technology Corp OHM Corp 326.8 11.33 24.2% 45.1% 51.4%
01/26/98 USA Waste Services Inc TransAmerican Waste Industries 142.3 2.18 51.4% 36.6% 78.6%
02/02/98 BMC Software Inc BOS Systems Inc 306.9 45.00 23.3% 32.4% 42.9%
02/02/98 CompassBank, New Bedford, MA Sandwich Bancorp, Sandwich,MA 129.6 64.00 47.1% 48.8% 48.8%
02/02/98 Romac International Inc Source Services Corp 454.4 31.93 51.1% 56.7% 50.2%
02/02/98 Primus Telecomunicstions TresCom International Inc 134.7 10.30 25.2% 30.9% 51.5%
02/09/98 Kinross Gold Corp Amax Gold (Cyprus Amax Mineral) 365.5 2.90 -9.0% -1.3% 36.5%
02/17/98 Applied Graphics Technologies Devon Group Inc 474.4 60.08 29.2% 32.0% 37.9%
02/17/98 Bayou Steel Corp Northwestern Steel & Wire Co 239.7 4.00 10.3% -4.5% 20.6%
02/17/98 Cape Cod Bank & Trust, Hyannis Sandwich Bancorp, Sandwich, MA 121.4 60.00 20.2% 20.3% 37.9%
02/19/98 First Security Corp, Utah California State Bank 276.9 48.72 11.4% 14.0% 18.6%
02/19/98 PLATINUM Technology Inc Mastering Inc 198.7 12.50 31.6% 25.0% 33.3%
02/23/98 Network Associates Inc Trusted Information Systems 322.1 20.19 59.9% 84.6% 92.3%
02/24/98 Baxter International Inc Somatogen Inc 232.9 9.00 35.8% 39.8% 92.0%
02/25/98 BB&T Corp, Winston-Salem, NC Maryland Federal Bancorp Inc 243.6 37.05 16.7% 19.0% 22.5%
03/02/98 Unitrode Corp Benchmarq Microelectronics Inc 150.6 18.81 15.6% 14.0% 67.2%
03/02/98 Sunbean Corp Coleman Co Inc 333.0 30.14 44.4% 58.6% 121.2%
03/02/98 El Paso Natural Gas Co DeepTech International 375.4 14.00 8.7% 9.8% 15.5%
03/02/98 Slebell Systems Inc Scopus Technology Inc 490.7 22.39 58.5% 93.6% 100.1%
03/08/98 Protective Life Corp United Dental Care Inc 180.4 19.58 20.5% 49.2% 57.4%
03/09/98 Commercial Federal, Omaha, NE First Colorado Bancorp Inc, CO 449.5 25.54 -9.6% 0.2% 0.2%
03/13/98 St. Paul Bancorp Chicago, IL Beverly Bancorp, Tinley Park, IL 161.8 28.10 16.5% 17.4% 19.6%
03/16/98 PLATINUM Technology Inc Logic Works Inc 212.9 15.32 13.0% 36.2% 57.1%
03/24/98 Cognizant Corp Pharmaceutical Marketing Services 188.7 14.65 13.8% 22.1% 45.6%
03/24/98 Cognizant Corp Walsh International Inc 176.8 15.91 8.8% 36.8% 53.3%
03/25/98 Fidelity National Financial Matrix Capital Corp 193.1 27.95 45.2% 64.4% 74.7%
03/26/98 Aviation Sales Whitehall Corp 139.9 22.57 2.6% -2.9% 9.1%
03/27/98 ISP Holdings Inc Intl Speciality Products 324.5 18.25 4.3% 1.7% 14.5%
03/31/98 Union Planters Corp, Memphis, TN Ambanc Corp, Vincennes Indiana 210.8 30.10 3.8% 22.9% 20.4%
03/31/98 Hubco Inc, Mahwah, New Jersey Dime Financial Corp 214.0 38.25 6.3% 25.4% 22.9%
03/31/98 Hubco Inc, Mahwah, New Jersey IBS Financial Corp 242.4 20.73 3.6% 2.4% 16.0%
03/31/98 Omnicare Inc IBAH Inc 154.3 5.75 12.2% 61.4% 58.6%
04/06/98 FirstMerit Corp Security First Corporation 251.2 29.28 30.8% 30.8% 34.6%
04/06/98 Applied Power Inc Zero Corp 431.6 33.63 16.5% 18.0% 33.2%
04/09/98 Complete Business Solutions Claremont Technology Group Inc 282.5 27.00 21.3% 77.0% 118.2%
04/15/98 Giant Industries Inc Holly Corp 251.4 27.43 3.0% 2.5% -1.2%
04/16/98 Phoenix Technologies Ltd Award Software International 129.5 16.08 12.8% 21.3% 53.1%
04/17/98 Sterling Commerce Inc XcelleNet Inc 214.3 22.02 6.1% 12.5% 7.7%
04/27/98 Bright Horizons Holdings Inc Corporate Family Solutions Inc 127.0 23.69 -21.4% -22.3% -7.5%
05/12/98 Lomak Petroleum Inc Domain Energy Corporation 151.9 9.36 -25.1% -30.0% -28.7%
05/19/98 First Charter Corp, NC HFNC Financial Corp 240.2 13.97 -12.4% -12.7% -13.4%
05/19/98 Quantum Corp ATL Products Inc (???) 304.0 29.00 8.4% 19.0% 45.0%
05/28/98 Republic Security Financial First Palm Beach Bancorp Inc 295.0 55.05 50.8% 46.8% 45.1%
05/29/98 Pogo Producing Co Arch Petroleum Inc 114.0 2.47 0.1% 5.5% -3.5%
- --------------------------------------------------------------------------------
________________________________________________________________________________
72
[LOGO OF PETRO APPEARS HERE] Merger Premiums Analysis
Selected Recent All Industries Merger &
Acquisition Transactions (1998 - Present,
Stock-For-Stock, $100-$500 million)
================================================================================
PROJECT INTENSE HEAT
Selected Recent All Industries Merger & Acquisition Transactions
(1998-Present, Stock-for-Stock, $100-$500 million)
Transaction Transaction Preminum to:
Enterprise Equity ------------------------------
Date Value (1) Value For 1 day 1 week 4 weeks
Announced Acquiror Name Target Name ($ mill.) Shares prior prior prior
- ---------- ------------------- ----------------------- ----------- ---------- ------ ------- -------
06/02/98 State Financial Services Corp Home Bancorp of Elgin. Elgin, IL $134.0 $19.05 11.3% 11.3% 8.9%
06/04/98 PMC Commercial Trust Supertel Hospitality Inc 131.9 12.15 -6.5% 5.6% -4.7%
06/04/98 World Access Inc Telco Systems Inc 194.5 17.00 77.8% 65.9% 63.9%
06/12/98 Davel Communications Group Inc PhoneTel Technologies Inc 227.7 3.08 64.3% 69.9% 208.0%
06/18/98 Summit Bancorp, Princeton, NJ HSS Bancorp, Norwalk, CT 151.3 58.83 28.2% 36.8% 31.5%
06/22/98 Leaming Co Inc Broderbund Software Inc 424.3 20.00 21.2% 16.4% 19.0%
06/24/98 Mylan Laboratories Inc Penederm Inc 193.1 21.89 39.0% 39.5% 88.3%
06/29/98 Philadelphia Suburban Corp Consumers Water Co 465.6 30.46 25.6% 33.1% 42.5%
07/01/98 Metzler Group Inc Lecg Inc 294.4 21.98 46.5% 49.0% 41.8%
07/06/98 Davel Communications Group Inc Peoples Telephone Co Inc 114.5 5.86 87.5% 80.3% 118.0%
07/09/98 Zebra Technologies Corp Eltron International Inc 287.7 36.00 25.8% 34.6% 57.4%
07/16/98 First Commonwealth Financial Southwest National Corp, PA 269.8 88.63 61.1% 80.9% 77.3%
07/20/98 Richmond County Financial Corp Bayonne Bancshares New Jersey 177.7 19.03 11.1% 16.7% 18.9%
07/20/98 Santa Barbara Bancorp, CA Pacific Capital Bancorp, CA 291.4 62.40 27.4% 41.8% 45.1%
07/20/98 Peoples Heritage Fini Group, ME SIS Bancorp Inc, Springfield, MA 427.6 57.23 27.2% 34.7% 44.0%
07/23/98 HBO & Co IMNET Systems Inc 287.7 27.62 69.9% 74.0% 77.4%
07/23/98 Digital Microwave Corp Inova Corp 115.7 6.83 16.2% 36.5% 30.0%
07/31/98 Banknorth Group Inc Evergreen Bancorp Inc 313.1 34.43 24.1% 28.4% 19.7%
08/03/98 CMS Energy Corporation Continental Natural Gas, Inc. 151.2 9.31 1.4% 26.3% 33.0%
08/03/98 McMoRan Oil & Gas Co Freeport, McMoRan Sulphur Inc 124.2 12.50 14.9% 6.4% 4.2%
08/04/98 Public Storage Inc Storage Trust Realty 366.2 25.00 11.1% 8.1% 1.0%
08/07/98 City Holding Co, Charleston, WV Horizon Bancorp, Beckley WV 413.4 45.00 6.2% 8.4% 15.0%
08/10/98 R&B Falcon Corp Cliffs Drilling Co 452.? 28.16 39.0% 41.2% 17.0%
08/10/98 BB&T Corp, Winston-Salem, NC Scott & Stringfollow Financial 126.4 34.44 19.8% 28.7% 35.0%
08/24/98 Liberty Media (Tele-Commun) Tele-Commun Inti (Tele-Commun) 379.1 20.77 -1.1% -4.5% -9.9%
09/02/98 Sanmina Corp Altron Inc 195.3 12.39 16.6% 6.5% 7.7%
09/02/98 USWeb Corp CKS Group Inc 342.9 21.66 53.3% 30.3% 23.7%
09/02/98 Rent-Way Inc Home Choice Holdings Inc 231.4 13.60 7.2% 4.1% 7.7%
09/08/98 Sovereign Bancorp. PA Peoples Bancorp Inc, New Jersey 381.4 10.50 26.3% 44.8% 21.7%
09/09/98 First Consulting Group Inc Integrated Systems Consulting 110.4 13.67 33.7% 30.2% 12.7%
09/14/98 TransMontaigne Inc. Louis Dreyfus Energy Corp 161.0 11.63 8.1% 7.5% -15.5%
09/14/98 Qwest Commun Int Inc. Icon CMT Corp 190.6 12.00 65.5% 60.0% -4.0%
-----------------------------------------------------------------------------------------
Mean $253.8 23.2% 29.6% 38.5%
Medium 236.3 16.2% 28.6% 33.3%
High 490.7 87.5% 93.6% 208.0%
Low 110.4 -25.?% 30.0% -28.7%
-----------------------------------------------------------------------------------------
?? Star Gas Partners, LP. Petroleum Heat and Power Co, Inc. (Senior Subordinated Unit/Implied Reference Value per
Petro Shares)(92)
-----------------------------------------------------------------------------------------
Implied Reference Value (excluding DPUs and GP
Incentives) $2.54 35.6% 62.7% 40.3%
DPUs and GP Incentives Value 0.43
------
Total Implied Reference Value $2.97 58.6% 90.3% 64.1%
-----------------------------------------------------------------------------------------
__________________
Source: Securities Data Company, pubilcy available information and Petroleum heat and Power Co., Inc.
(1) Transaction Enterprise Value is defined as common equity purchase price plus total debt and preferred stock, less cash and
equivalent, excluding fees and expenses.
The stock is valued using the closing price on the last full trading day prior to announcement.
(2) The Senior Subordinated Unit Implied Reference Value per Petro share is based on the Unit Reference Value Analysis
(Dain Rauscher Wessel's Case), (See Unit Reference Value Analysis Summary on page 9)
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 73
[LOGO OF PETRO APPEARS HERE] PROJECT INTENSE HEAT
================================================================================
PRICE AND VOLUME DATA
- --------------------------------------------------------------------------------
Page 74
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
First Trading Day of Class A Common Shares (July
29, 1992) - Present Petro Weekly Stock Price/Volume
================================================================================
[GRAPH APPEARS HERE]
__________________
Source: Factset Data Systems and publicly available information.
- --------------------------------------------------------------------------------
Page 75
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
IPO (December 14, 1995) - Present Star Gas Daily
Unit Price/Volume
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems and Publicly available information.
- --------------------------------------------------------------------------------
Page 76
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
1997 - Present Relative Price Performance
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 77
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
Relative Price Performance Since Annoncement of
Merger (August 14, 1998)
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 78
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
Present Total Return/(1)/
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Total return is defined as compound return, with distributions reinvested on
ex-dates.
- --------------------------------------------------------------------------------
Page 79
[LOGO OF PETRO APPEARS HERE] PRICE AND VOLUME DATA
1997 - Present Total Return/(1)/
================================================================================
[GRAPH APPEARS HERE]
___________
Source: Factset Data Systems.
(1) Total return is defined as compound return, with distributions reinvested on
ex-dates.
(2) Peer group includes Amerigas Partners, Cornerstone Propane Partners,
Ferrellgas Partners, Heritage Propane Partners and Suburban Propane Partners
and excludes National Propane Partners.
- --------------------------------------------------------------------------------
Page 80