UBS Grass Roots Conference Oil and Gas Opportunities in Canada Rob Hossack Managing Director Praxair Canada, Inc. February 9, 2006 Page 1
Forward Looking Statements This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management s reasonable expectations and assumptions as of the date the statements are made, but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; the degree of inflation in wages and other compensation; the ability to attain expected operational efficiencies; changes in foreign currencies and interest rates; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; the impact of changes in financial accounting standards; the impact of tax and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of litigation; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward looking statements. The Company assumes no obligation to update or provide revisions to any forward-looking statements in response to changing circumstances. Page 2
Profitable Growth Business Model 2005 Sales Growth vs Competitors Focus on 11 core geographies - Optimize co-product economics - Leverage regional density Praxair 7% 8% 16% Fuel growth platforms - Refinery hydrogen - Enhanced oil and gas recovery - China, India - Healthcare - Electronics Drive operational excellence Praxair -4% 1% 2005 OP Growth vs Competitors 16% 14% - Applications growth - Pricing, contracting - Six Sigma, productivity -2% 5% 11% Page 3
Diverse End Markets 2005 Sales $7,656 MM End Markets Sales Growth Healthcare 11% Manufacturing 21% Food & Bev 7% Energy 12% Electronics 7% Chemicals 11% Aerospace 3% Metals 16% Energy Healthcare Metals Other Chemicals Electronics Manufacturing Aerospace Other Food & Bev 12% 0% 5% 10% 15% 20% 25% CAGR 2001-2005 Customer diversity delivers growth and stability Page 4
Terms of Trade Drive Return on Capital On-Site/Pipeline Supply - 26%* 15 year take or pay contracts Escalation formulas Electricity/Gas, Inflation, Currency exposure Price recovers fixed and capital costs Merchant Liquid Supply - 30%* 5 year requirements contracts Sourced as by-product from on-site Limited distribution range 200/250 miles Packaged/Medical Gases - 33%* Cylinder and equipment rental 40% gases revenues under contract Sourced as by-product from bulk % of 2005 Sales of $7,656MM Pricing leverage small fraction of customers costs Page 5
Unrivalled Canadian Network 2005 Sales $770 MM 40%+ market share 16% average annual OP growth since 2002 1,500 employees Onsite and Bulk Gases - 45 production plants - 2,000 customer locations - 300 distribution vehicles - 4 pipeline enclaves Packaged Gases - 120 branches - Over 200,000 customers British Columbia Alberta Manitoba Vancouver Fort Sask. Elk Falls Saskatchewan Selkirk Crofton Edmonton Prentiss Regina Brandon Atmospheric Plants CO 2 Plants H 2 Plants Specialty Gas Plants Packaged Gases Distributors Helium Transfill Dry Ice Quebec Maritimes Ontario Thunder Bay Pointe-Aux- Saint John Trembles Contrecoeur Maitland Clarkson Montreal Sarnia Scarborough Chatham Oakville Sales growing to $1 Billion by 2008 Page 6
Canadian Oil and Gas Industry Canada is the world s 3 rd largest natural gas producer - Represents 25% of North American natural gas production and growing Canada is the world s 9 th largest crude oil producer - Moving up the list quickly with oil sands production increasing Northern Canada, 70 Tcf Western Canadian Gas Resources Conventional and New Sources WCSB Conventional Gas PRODUCED to date, 146 Tcf Canada is the largest supplier of energy to the United States Coalbed Methane 167 Tcf WCSB Conventional Gas REMAINING 144 Tcf Source: Alberta Energy & Utilities Board / National Energy Board, CERI Strong demand & high prices driving energy related opportunities Page 7
Gas Well Fracturing Stimulation High pressure N2 or CO2 cracks the reservoir formation to allow gas to flow more freely to the wellhead ALBERTA Coalbed Methane (CBM) wells have multiple coal seams requiring 5 to 10 times more N2 to fracture than conventional shallow gas wells Grande Prairie Fort McMurray Alberta s Horseshoe Canyon is current area of focus Edmonton Drilling activity in Mannville formation expected to gain momentum within 1-2 years Praxair N 2 Praxair CO 2 Mannville Formation Horseshoe Canyon Calgary Medicine Hat *Includes JV CBM sales drilling is driving exponential growth in N2 demand Page 8
Fracturing Forecast Natural Gas prices above $4/MMBtu will sustain drilling/fracing 7000 6000 Coalbed Methane Wells Drilled in Western Canada by Year Potential to exceed 60,000 wells in Horseshoe Canyon, requiring over $1.0B of N2 5000 4000 3000 2000 1000 Oil well service companies investing in new fracing crews and equipment 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: CAPP & FirstEnergy Sustained activity levels for the next 10 years Page 9
Praxair Canada Oil Well Service Business Over 60% N2 market share Broad market coverage - 15 of 20 service companies contracted with Praxair Expanding N2 production capacity from 500TPD to 2700TPD Expanding service offerings - filling, transportation & logistics, storage and equipment repair Praxair best positioned - Location - Expertise - Relationships Grande Prairie Praxair N2 Praxair CO2 Praxair Service Locations Cochrane Fort Saskatchewan Red Deer Prentiss 2005 revenues of $260 million in North America growing 25% p.a. Page 10
Canadian Tar Sands 175 B barrels of proven reserves (second only to Saudi Arabia) Current production of 1.1 MMBbl/d projected to grow to over 3.0 MMBbl/d by 2015 Over 1.0B SCFD of additional H2 will be required for upgrading bitumen by 2010 2012 Proposed gasification projects will create large oxygen requirements Bitumen produced will be increasingly upgraded outside Ft. McMurray in Canada and US Bitumen Resources Peace River Region Cold Lake Mining 113 201 Insitu 1188 Athabasca Peace River Region ALBERTA Edmonton Calgary Ft. McMurray Athabasca Region Cold Lake Region Significant amounts of H2 and O2 will be required Page 11
Praxair Canada Edmonton Infrastructure Over 50 km of existing pipeline infrastructure serving multiple customers Pipeline system located in close proximity to most proposed project locations Praxair s Edmonton Pipeline System Fort Saskatchewan River Redwater 7.5 km Scotford Large fully integrated air separation plant and pipeline complex 3 km Fort Saskatchewan 14 km Strong local operations expertise Refiners more willing to outsource hydrogen requirements 1.8 km 3.2 km 23 km 2.6 km Edmonton AEF Praxair well positioned for future H2, O2 and N2 opportunities Page 12
Enhanced Oil Recovery (EOR) Potential to recover billions of barrels of oil N2 and CO2 injection are proven EOR methods ALBERTA Demand drivers - High oil prices - Global supply and demand - Depleting conventional production - Kyoto Protocol Recent projects - Pemex Samaria (Mexico) - Occidental Petroleum (USA) Grande Prairie Oil Fields Oil Sands Praxair N2 Praxair CO2 Edmonton Calgary Fort Saskatchewan Cochrane Prentiss Fort McMurray Medicine Hat Praxair has 30 years of experience with EOR Page 13
Multiple Growth Opportunities Oil and gas well fracturing Oil and gas well services H2 and O2 for upgrading and refining CO2 and N2 for Enhanced Oil Recovery Packaged gases for new construction and ongoing maintenance of facilities Pipeline purging, leak detection services Praxair Canada well positioned for energy market growth Page 14
Principles of Sustainability Governance and Integrity Foster a culture of integrity and accountability throughout the company through rigorous compliance with all laws, and by establishing and following effective corporate governance practices. Customer Commitment Continuously develop new products and applications that help our customers improve their productivity, energy efficiency and environmental performance. Provide the highest levels of service, reliability and quality to our customers. Environmental Responsibility Continue to improve the efficiency of energy consumption. Reduce the intensity 1 of air emissions, including greenhouse gases. Employee Safety and Development Maintain a safe work environment with a goal of zero accidents. Provide training and career opportunities that allow employees to develop to their fullest potential. Increase the diversity of our workforce so that it is more representative of the communities in which we operate. Community Support Help to improve the welfare and future of the communities in which we operate by sharing our knowledge, expertise and resources related to environmental protection, and community health, safety and security. Financial Performance Continuously improve our financial performance and provide attractive returns to our shareholders. Generate operating cash flow to reinvest in business growth and pay dividends. 1 Intensity is per-unit-of-production measure Page 15