FYI


Randy

-----Original Message-----
From: jdietert@simmonsco-intl.com [mailto:jdietert@simmonsco-intl.com]
Sent: Monday, April 29, 2002 6:29 AM
To: Sales_Trading@simmonsco-intl.com
Subject: DYN ($15/sh): Upcoming Bank Facility.


SUMMARY:  We expect DYN to continue to decline until it hits break-up value
(we estimate low double digits) or we get a positive data point to support
the stock.  We believe potential data points that will likely move the
stock include news associated with the renegotiation of its $1.2B bank
facility (potentially out today), positive comments from DYN's 1Q02
earnings call (Tuesday morning), a response from CVX (timing uncertain),
results of the SEC inquiry (uncertain), or comments from Moodys (not likely
this week and probably not next).  We believe DYN has slightly better than
50/50% chance of being successful renegotiating its bank facility, although
the rate may be higher, and the total amount may be slightly lower.  We
expect this to stabilize the stock.  We are optimistic that the 1Q02
earnings call could provide support as well.  While we believe a decline to
the low teens is a distinct possibility, we believe long-term investors
should be buying the pain today.  We plan to tighten our break-up analysis
after the release of the 1Q02 earnings and balance sheet information.
BANK FACILITY:  DYN has a $1.2B bank facility that expires Wednesday
(5/1/02).  Bank commitments were due on Friday.  We expect commitments to
be less than the current $1.2B.  The Japanese banks, which we believe
provided $300MM originally, are not likely to participate in this round
(apparently, they have been cutting back across many sectors).  We are
expecting DYN to be successful renegotiating its bank facility, albeit at
high rates and potentially for a lower aggregate amount (maybe in the $0.8B
to $1B range).  DYN's currently has access to $1.7B in liquidity, this
could decline to $1.3B to $1.5B if the bank facility is reduced as we
expect.  In the event of a Moody's downgrade, that could trigger a
requirement of roughly $1B in collateral for existing transactions, making
liquidity tight.
COUNTER-PARTY ACTIVITY:  We believe risk-adverse counter-parties (including
producers, utilities, and utility-based marketing companies) are scaling
back business with DYN.  Generally speaking, we believe the more
established marketing & trading companies are balancing their netting
agreements, but are continuing to do business with DYN.  We believe DYN was
forced to post collateral on incremental deals earlier in the year when
Moody's placed them on negative watch.  Since Moodys has once again placed
DYN on negative watch, it is likely that they are being forced to post
collateral on incremental deals again.  However, since Moodys has not yet
downgraded DYN to below investment grade, we do not believe it has
triggered collateral requirements for existing agreements.  This
counter-party activity is similar to what Enron and MIR experienced.
However, we expect the DYN experience to be very similar to the MIR
experience.  Both MIR and DYN have substantial natural gas production
contractual commitments and equity owned power generation that helps them
meet contractual sales commitments.  MIR has proven that while a junk
rating does squeeze margins, it does not immediately shut down an
asset-backed business the way it does a pure trader (Enron).
MOODYS REVIEW:  We are expecting Moodys to sit on its current position for
a few weeks.  DYN plans to meet with Moodys later this week or next.  We do
not sense immediate urgency by Moodys to downgrade to junk.  We expect the
rating agency to perform further analysis after receiving additional
information from DYN.  Bottom line, we do not expect Moodys to provide a
positive or negative catalyst in the near-term (next week or so).
SEC INQUIRY:  We would be surprised to see the SEC find anything illegal
associated with the Alpha transaction, especially since its accounting arm
has already determined that the reclassification of cash flows was
sufficient to appropriately account for the transaction.  Perhaps the SEC
will require more discussion of the transaction, but we would be surprised
to see much more.


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