March 5, 2014

Volume 9, Issue 10

Go To ESI Website

A Week in Review

EIA Storage Report

Week Ending 2/21/14 (in Bcf)

+ Injection Total (Withdrawal) Inventories This Year - 95 1,348 Last Year - 165 2,253 5-Year Avg. - 125 2,059

Initial estimates for tomorrow’s weekly storage report for the week ending February 28 ranges from 130-155 Bcf. However, next week’s re-port for the week ending March 7 could be as high as 200 Bcf.

Source: Energy Information Administration

Natural Gas Drilling Rig Report

Week Ending 2/28/14

+ / - Active Rigs This Year - 7 335 Last Year - 85 420

The rig count has bounced up and down over the past few weeks, but higher prices should eventually lead to a noticeable rebound.

Source: Baker Hughes

NYMEX Expiration Information

02/14 NYMEX Expiration: Price: $5.557 per MMBtu 03/14 NYMEX Expiration: Price: $4.855 per MMBtu 04/14 NYMEX Expiration: Thursday, March 27

© Copyright 2014 Energy Solutions, Inc.

Weather Map Color Code

Blue Colors (B): Below normal temperatures

Orange/Red Colors (A): Above normal temperatures

No Color (N): Normal Temperatures

No Color (EC): Equal chance of above normal or below normal

NOTE: Temperature extremes go from lighter (slight variance) to darker

(extreme variance)

Weather Map Color Code

Blue Colors (B): Below normal temperatures

Orange/Red Colors (A): Above normal temperatures

No Color (N): Normal Temperatures

No Color (EC): Equal chance of above normal or below normal

NOTE: Temperature extremes go from lighter (slight variance) to darker

(extreme variance)

National Weather Service Forecast for March 10 - 14, 2014

Issued 3/4/14

On Wednesday, February 26, the March 2014 natural gas NYMEX

contract expired at $4.855 per MMBtu, down $.241 per MMBtu from

Tuesday’s settlement. On Thursday, the April 2014 natural gas NY-

MEX contract made its front-month debut, and it was a relatively quiet

trading day compared to the week before. The Energy Information

Administration (EIA) reported a storage withdrawal of 95 Bcf for the

week ending February 21. This was within the range of expectations,

and the April 2014 natural gas NYMEX contract slipped $.030 per

MMBtu to settle at $4.511 per MMBtu. On Friday, the April 2014

natural gas NYMEX contract gained $.098 per MMBtu to end the

week at $4.609 per MMBtu. Meanwhile, physical prices in the Mid-

west climbed to $18-$47 per MMBtu as traders scrambled to buy

weekend gas in the face of lingering bitter cold. Friday’s price gains

on the NYMEX were retraced on Monday, as the April 2014 natural

gas NYMEX contract slipped $.117 per MMBtu to settle at $4.492 per

MMBtu. But momentum again reversed. The April 2014 natural gas

NYMEX surged $.175 per MMBtu higher on Tuesday, settling at

$4.667 per MMBtu. Currently, a major concern is storage. Ending

inventories are projected to be 700-900 Bcf. When some storage

fields get drawn too low, they are at risk of filling with water. That

situation has already occurred at a couple of fields in the Midwest.

Market Highlights:

Natural gas production in the Lower

48 states has continued to surge

higher. However, those gains may not

be as visible over the next few months

because of weather-related well freeze

-offs. Meanwhile, storage inventories

are expected to be the lowest since

2003 on March 31, 2014. This puts

added pressure on summer refilling,

and that added pressure is likely to

keep support under summer prices.

March 5, 2014 Page 2a

Pricing Analysis: “At a Glance”

NOTES: “Actions to Consider” is a reference to assist buyers in the proactive purchasing of natural gas. Recommendations are designed to help buyers

more comfortably wait out periodic price rallies. Overall, The Advisor supports purchasing in layers to spread out risks associated with natural gas price volatil-ity. The timing of a purchase and the percentage of volumes to be tied to a buying target must be determined by the buyer. Energy Solutions, Inc. does not

promote overbuying and an indication to “complete” or “finish” purchasing infers the purchase of no more than 75% of a business’ projected natural gas usage into the future to allow for usage fluctuations. Companies can adjust this percentage based on their individual operations. “Actions to Consider” provides

references to low-risk, medium-risk and high-risk buyers. Low-risk buyers are very budget conscious and risk-adverse; high-risk buyers strive to attain the lowest possible prices, and medium-risk buyers find a compromise between low-risk and high-risk buyers.

Actions to Consider: No Change from Last Week

Click here for the complete definition of low-risk, medium-risk and high-risk categories

NOTE: Current fundamentals of a widening year-over-year inventory deficit and below-normal temperatures for much of March do not bode well for price weakness. If storage injections are robust in the second quarter, the potential for natural gas futures prices to fall below $4 per MMBtu by Q3 2014 is real. However, if storage injections are below-average and summer temperatures are above-average, the speculative sector will remain

entrenched in the natural gas market, and will most likely cause a great deal of price volatility.

APR-JUN 2014: Low-risk and medium-risk clients should consider additional price protection at $4.50 per

MMBtu. This is a protective purchase because of lingering cold and lower-than-average storage inventories. High-

risk clients should wait to see what type of weather actually materializes. This timeframe settled at $4.617 per

MMBtu on 3/4/14.

JUL 2014-DEC 2014: Low-risk and medium-risk clients should consider the purchase of 25%-35% of their pro-

jected natural gas needs at a weighted average NYMEX price of $4.50 per MMBtu, or alternatively, buy individual

months if those months fall below $4.50 per MMBtu. This timeframe settled at $4.633 per MMBtu on 3/4/14.

JAN-MAR 2015: Low-risk and medium-risk clients should consider the purchase of 25%-35% of their projected

natural gas needs at a weighted average NYMEX price of $4.70 per MMBtun (low-risk) and $4.50 per MMBtu

(medium-risk), respectively. This timeframe settled at $4.735 per MMBtu on 3/4/14.

LONG-TERM: Energy Solutions, Inc. believes that prices beyond 2015 are undervalued, and therefore offer some

good buying opportunities for companies looking to buy further into the future. JAN-DEC 2015: This timeframe settled at $4.244 per MMBtu on 3/4/14.

JAN-DEC 2016: This timeframe settled at $4.290 per MMBtu on 3/4/14. JAN-DEC 2017: This timeframe settled at $4.165 per MMBtu on 3/4/14.

JAN-DEC 2018: This timeframe settled at $4.124 per MMBtu on 3/4/14.

April 2014

3/4/14/14 Settlement: $4.667/MMBtu

NYMEX Expiration: Thursday, March 27

Below-normal temperatures continue to

hover over the eastern half of the nation,

but below-normal in the month of March

is considerably more mild than below-

normal in the month of January. As winter

winds down, temperature-related price

moves should become less pronounced.

All eyes will remain on storage levels. At

this point, ending inventories are projected

to be between 700-900 Bcf. This is going

to continue to provide support to summer

natural gas prices. If anything, conditions

indicate a bias to the upside.

Beyond April 2014

This winter has resulted in 6 of the 19 largest weekly stor-

age withdrawals recorded over the past 20 years. Until this

year, the most record withdrawals ever recorded in a single

year was two. Storage injections will need to be very robust

in early spring. At this point in time, the market is presum-

ing that storage inventories will be refilled. Since that pre-

sumption is already likely built into prices, a significant

price decline is not anticipated. If anything, it is believed

that the need to refill storage has created a floor under sum-

mer natural gas prices, preventing the potential for sub-$4

pricing. Alternatively, if storage injections do not start out

very robust at the start of the season, there is a strong possi-

bility of a price move higher. Basically, the pace of injec-

tions in the spring will set the tone for summer prices.

March 5, 2014 Page 3a

NYMEX Pricing Data: Forward Price Curves

This graph illustrates the daily settlement of forward natural gas NYMEX contract settlements yesterday and how

those prices compare to where those contract months were trading 1 week, 1 month, and 1 year ago.

Jan-15 $4.813 Jan-16 $4.396 Jan-17 $4.421 Jan-18 $4.470

Feb-15 $4.758 Feb-16 $4.369 Feb-17 $4.394 Feb-18 $4.438

Mar-15 $4.635 Mar-16 $4.309 Mar-17 $4.334 Mar-18 $4.371

Apr-14 $4.667 Apr-15 $4.046 Apr-16 $3.974 Apr-17 $3.989 Apr-18 $4.006

May-14 $4.583 May-15 $3.999 May-16 $3.982 May-17 $4.000 May-18 $4.021

Jun-14 $4.600 Jun-15 $4.011 Jun-16 $4.003 Jun-17 $4.025 Jun-18 $4.044

Jul-14 $4.634 Jul-15 $4.030 Jul-16 $4.026 Jul-17 $4.053 Jul-18 $4.072

Aug-14 $4.622 Aug-15 $4.034 Aug-16 $4.039 Aug-17 $4.068 Aug-18 $4.087

Sep-14 $4.586 Sep-15 $4.015 Sep-16 $4.034 Sep-17 $4.066 Sep-18 $4.089

Oct-14 $4.593 Oct-15 $4.035 Oct-16 $4.059 Oct-17 $4.094 Oct-18 $4.121

Nov-14 $4.630 Nov-15 $4.086 Nov-16 $4.126 Nov-17 $4.176 Nov-18 $4.215

Dec-14 $4.733 Dec-15 $4.256 Dec-16 $4.284 Dec-17 $4.346 Dec-18 $4.400

Forward Natural Gas NYMEX Settlement Prices on 3/4/14

$3.7500

$3.9500

$4.1500

$4.3500

$4.5500

$4.7500

$4.9500

$5.1500

Ap

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Jun

-14

Au

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4

Oct

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De

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4

Feb

-15

Ap

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5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

De

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6

Feb

-17

Ap

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7

Jun

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Oct

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Forward Natural Gas NYMEX Price Comparison: Yesterday, Last Week, Last Month, and Last Year

3/4/14

2/25/14 (1 week ago)

2/4/14 (1 month ago)

3/4/13 (1 year ago)

March 5, 2014 Page 4a

Weekly Fundamental Changes

This data documents the percentage change in gas supply, gas consumption, and temperatures for 2/19/14-2/26/14 compared to the same week in 2013 (labeled last year) and the week of 2/12/14-2/19/14 (labeled last week).

Historical National Weather Service Forecast Comparisons

The following weather maps reflect the weather forecasts for the data on the left.

Weather Map Color Codes Blue Colors (B): Below normal temperatures

Orange/Red Colors (A): Above normal temperatures

No Color (N): Normal Temperatures

No Color (EC): Equal chance of above normal or below normal

NOTE: Temperature extremes go from lighter (slight variance) to darker (extreme variance)

This Year: Feb. 19-26, 2014

Last Week: For Feb. 12-19, 2014

Issued 2/11/14

Last Year: Feb. 19-26, 2013

Issued 2/11/13

Issued 2/4/14

March 5, 2014 Page 5a

March 2014 Expiration Highlights

Historical Natural Gas NYMEX Expiration Prices

Quick March Expiration Recap

The last month of trading for the March 2014 natural gas NYMEX expiration was a roller coaster ride. It made its

front-month debut on January 30, opening at $5.467, but hit a low of $4.900 per MMBtu that same day. It rallied to

$5.737 per MMBtu on February 5, but then fell to a low of $4.563 per MMBtu by February 10. It traded in the mid-$4’s for four days and then staged a three-day rally, reaching a high of $6.40 per MMBtu on February 20. It

reached a high of $6.493 per MMBtu on February 24, and then tumbled precipitously to expire at $4.855 per

MMBtu on February 26.

Last Three Days of

Trading for

March 2014

2/27/14: $4.855 (Expiration)

2/26/14: $5.096

2/25/14: $5.445

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

JAN $6.213 $11.431 $5.838 $7.172 $6.136 $5.814 $4.216 $3.084 $3.354 $4.407

FEB $6.288 $8.400 $6.917 $7.996 $4.476 $5.274 $4.316 $2.678 $3.226 $5.557

MAR $6.304 $7.112 $7.547 $8.930 $4.056 $4.816 $3.793 $2.446 $3.427 $4.855

APR $7.323 $7.233 $7.558 $9.578 $3.631 $3.842 $4.240 $2.191 $3.976

MAY $6.748 $7.198 $7.508 $11.280 $3.321 $4.271 $4.377 $2.036 $4.151

JUN $6.123 $5.925 $7.591 $11.916 $3.538 $4.155 $4.326 $2.429 $4.148

JUL $6.976 $5.887 $6.929 $13.105 $3.949 $4.717 $4.357 $2.774 $3.707

AUG $7.647 $7.042 $6.110 $9.217 $3.379 $4.774 $4.370 $3.010 $3.459

SEP $10.847 $6.816 $5.430 $8.394 $2.843 $3.651 $3.857 $2.634 $3.566

OCT $13.907 $4.201 $6.423 $7.472 $3.730 $3.837 $3.759 $3.023 $3.498

NOV $13.832 $7.153 $7.269 $6.469 $4.289 $3.292 $3.524 $3.471 $3.497

DEC $11.180 $8.318 $7.203 $6.888 $4.486 $4.267 $3.364 $3.696 $3.818

$1.500

$2.000

$2.500

$3.000

$3.500

$4.000

$4.500

$5.000

$5.500

$6.000

$6.500

$7.000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

$ / M

MB

tu

Historical NYMEX Expiration Prices: 2010 - 2014

2014

2013

2012

2011

2010

5-Year Avg.

3-Year Avg.

March 5, 2014 Page 6a

NYMEX Pricing Data

Daily Trading Data: Highs and Lows

Weekly NYMEX Data

The above chart shows the NYMEX daily settlement

for the next 12 consecutive months in comparison to

settlement prices last week. The Weekly Change

column indicates the change from last week to this

week. The chart on the right provides NYMEX strip

prices based on the specified settlement date. A strip

price is the simple average of several months. For

example, the 3-Month strip price is the April 2014,

May 2014, and June 2014.

This chart reflects the daily trading range of the front-month natural gas NYMEX contract

for the past ten trading days. The Daily Open indicates the price of the contract when the

trading day began. The Daily High and Daily Low represent the daily trading range. The

Daily Settlement, also referred to as the closing price, represents the price at the end of the

trading day.

Contact Information

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Phone: 608-848-9589 Fax: 608-848-6256

Email: request@energysolutionsinc.com

The Weekly Advisor is published 48 times per year by Energy

Solutions, Inc., and is a value-added service provided to

subscribers of our monthly publication, The Monthly Advisor.

An annual subscription to The Advisor is available for $695 via e-

mail. In addition to weekly and monthly editions and Fast Facts,

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Pricing and Storm Alerts.

© Copyright 2014. All rights reserved.

This publication can be redistributed to

other employees of the subscribing

company. Redistribution to non-

company employees, independent/

outside contractors, affiliates, custom-

ers or consultants is expressly prohib-

ited.

The information contained herein ulti-

mately relates to the cost and pricing of

physical natural gas supplies. Past

results are not necessarily indicative of

future results. There is no guarantee

that the information contained herein

will result in profitable trades. No such

guarantee can be given nor should be

implied. The information provided

herein should not be construed as an

offer to buy or sell futures, options or

commodities. While such information

is taken from select sources which

Energy Solutions, Inc. believes to be

reliable, Energy Solutions, Inc. has not

verified such information and makes no

representation or warranty as to, and

will not be responsible for, its accuracy

or completeness. The information,

views and opinions contained herein are

presented for the convenience of the

reader and are provided on the condi-

tion that errors or omissions therein, or

reliance thereon, shall not be made the

basis of a claim, demand or cause of

action. The views and opinions ex-

pressed herein are for informational

purposes only, are in no way guaran-

teed, are expressed as of a specific time

and are subject to change at any time

without notice.

NYMEX

Contract

Trading

Trading

Date

Daily

Open

Daily

High

Daily

Low

Daily

Settlement

Mar 2014 02/19/14 $5.565 $6.275 $5.560 $6.149

Mar 2014 02/20/14 $6.095 $6.400 $5.882 $6.064

Mar 2014 02/21/14 $6.068 $6.308 $5.880 $6.135

Mar 2014 02/24/14 $6.300 $6.493 $5.380 $5.445

Mar 2014 02/25/14 $5.464 $5.492 $4.788 $5.096

Mar 2014 02/26/14 $4.957 $5.005 $4.660 $4.855

Mar 2014 02/27/14 $4.522 $4.567 $4.441 $4.511

Apr 2014 02/28/14 $4.480 $4.658 $4.451 $4.609

Apr 2014 03/03/14 $4.690 $4.736 $4.463 $4.492

Apr 2014 03/04/14 $4.499 $4.676 $4.490 $4.667

Front-Month $4.667

05/14-10/14 $4.603

11/14-3/15 $4.714

04/15-10/15 $4.024

3-Month $4.617

6-Month $4.615

12-Month $4.655

18-Month $4.444

24-Month $4.393

36-Month $4.309

48-Month $4.275

60-Month $4.261

May-Dec 14 $4.623

Jan-Dec 15 $4.227

Jan-Dec 16 $4.133

Jan-Dec 17 $4.164

Jan-Dec 18 $4.195

NYMEX Strip Prices

(Settlement on 3/4/14)NYMEX NYMEX NYMEX WeeklyMonth 3/4/14 2/25/14 Change

04/14 $4.667 $4.691 ($0.024)

05/14 $4.583 $4.565 $0.018

06/14 $4.600 $4.583 $0.017

07/14 $4.634 $4.618 $0.016

08/14 $4.622 $4.606 $0.016

09/14 $4.586 $4.576 $0.010

10/14 $4.593 $4.590 $0.003

11/14 $4.630 $4.636 ($0.006)

12/14 $4.733 $4.746 ($0.013)

01/15 $4.813 $4.839 ($0.026)

02/15 $4.758 $4.791 ($0.033)

03/15 $4.635 $4.669 ($0.034)