FUND MANAGEMENT FIRM BULLISH ON INVESTMENT IN ENERGY RELATED SECURITIES

Consolidation, Sustained Prices, and a Strengthening Economy Are Key Factors to Continued Growth and Higher Returns

NEW YORK, NY, May 4, 2004 — For the first time in many years a secular case for energy investment can be made, says top fund managers at ELCO Management Company, LLC, a New York-based investment advisory and fund management firm. According to ELCO, several factors are responsible for continued growth and investment in the sector, such as:

• Energy related consolidation activity is accelerating. During the last quarter, Kerr McGee announced its intention to merge in an all-stock transaction valued at $3.4 billion including assumed debt. Based on closing prices the previous day, the premium was 11%. Additionally, Encana announced that it was acquiring Tom Brown in a $2.7 billion cash transaction, which represented a 24% premium to the prior day’s closing price. ELCO expects consolidation to continue, as companies are rich with cash.

• Energy prices should remain at above historic levels. Limited supplies of natural gas coupled with growing demand, some of which is inelastic, should maintain a firm price structure. Canadian gas exports, which account for about 17% of the total U.S. demand, are at a peak and not expected to continue to increase. LNG (liquefied natural gas) imports will help to offset some demand, but will not become meaningful until 2007-2008. U.S. oil refining capacity is very tight, while environmental restrictions limit the mining of coal.

“Energy commodities have the price wind at their backs and are likely to trade significantly higher than the 1980-2000 trading range while the current price for oil and natural gas has not been seen for over a decade,” said Dan Tulis, senior portfolio manager at ELCO Management. “Producer cash flow should continue to increase and encourage capital spending for additional capacity. As a result, energy investments should outperform in this environment and generate excitement as investor confidence in the higher prices and overall outlook solidifies.”
Other key factors that will spur investment in the energy sector include:

• Weather conditions throughout the U.S. are favorable to energy stocks. Conditions in the West and East Coast are such that there appears very little extra margin if the summer weather turns very hot for prolonged periods. ELCO expects to see higher natural gas and power prices in this eventuality. Upward price spikes can serve as a catalyst to bolster energy and merchant power stocks.

• Energy stocks have historically outperformed the overall stock market during periods of rising interest rates. Should interest rates rise, energy stocks will remain one of the best groups to own. A study of 11 tightening periods since 1954, places the sector as the second best performer of all S&P 500 industry groups six months after the first Federal Reserve tightening and the top performer three months after the first rate rise.

“The energy sector is already gaining increased media focus and investor interest,” said Paul Elliot,” managing member and senior portfolio manager at ELCO Management. “It is also encouraging that investors including KKR, Warren Buffet, Lazard Freres and Blackstone are interested. Moreover, as the economy expands, and manufacturing levels increase, natural gas, oil, coal and electricity usage will expand.”

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About ELCO Management, LLC
Established in 1995 and based in New York, ELCO Management (www.elcomanagement.com) offers investment solutions to high net worth individuals and institutions. ELCO also manages two highly specialized energy funds: the ELCO Energy Fund, L.P. and the ELCO Select Fund L.P.