Oil edmonton's re investing final aug13

PROPERTY OF STEP AHEAD INVEST 2013

OIL … EDMONTON’S REAL ESTATE INVESTING

FOUNTAIN OF YOUTH


THERE ARE 5 KEY STEPS TO REAL ESTATE PROFITS


5 KEY STEPS TO REAL ESTATE PROFITS

Drives Population Growth - Immigration

IntraProvincial Foreign

Drives the Economy & GDP GrowthIncreased Jobs Increased Wages

Alberta Oil Reserves Attracts Investment Infrastructure/Operations

Step 1

Step 2

Step 3


OIL DRIVES REAL ESTATE PROFITS

Results in Real Estate Profits

Positive Cash Flow Appreciation/Principle Pay Down

Higher Real Estate PricesHomes Apartments

Increased Rental DemandHigher Rents Lower Vacancies

Step 4

Step 5

Profits


WHY IS OIL SO IMPORTANT TO THE WORLD?

Before we can look at the 5 key steps to profitable real estate investing, we must first determine how important oil is to the world

We will look at which countries have oil, the world demand for oil and finally the world supply of oil



Oil provides over 1/3 of the worlds energy requirements everyday

Oil is the world’s transit fuel

Approximately 90% of every barrel of oil is consumed through transportation

Cars

Trucking

Rail

Air

Shipping



Food Consumption

For every 1 calorie of food that you eat …

10 calories of fossil fuels are used to process & transport it to your table

Energy from Oil is Unique vs. Other Sources

Natural gas has only 2/3 the energy of oil

Oil has two times the energy of coal

Inexpensive Energy Source

Oil does not spoil

Can be stored easily … not like electricity

Has an established world wide infrastructure

Easily moved through pipelines, trucks, rail and tankers


CAN ALTERNATIVE ENERGY REPLACE OIL?

Electricity – Wind, Solar, & Battery

No infrastructure set up to handle the demand as a transportation fuel

Electricity is extremely difficult and costly to store

Natural Gas

Infrastructure is the biggest hurdle and will take decades to become a reliable alternative

Alberta has one of the largest natural gas reserves as well

Coal

Does not have energy equivalent to compete with oil

Primarily used for electricity

40% of the world’s electricity comes from coal and 75% is for

China

Coal is 20% dirtier than oil and 2 times more than

Natural Gas

Alberta also has large coal reserves to supply the world


SUMMARY OF ALTERNATIVE ENERGY

Most alternatives fuels don’t have the cost and energy advantages of oil

It will take trillions of dollars to build out the infrastructure for alternatives

This will take several decades if it started now and will require both a national and international energy plan

None of this has been started or is even being discussed

It will take a major crisis before governments around the world turn this into a reality


WHAT COUNTRIES HAVE THE OIL?


WORLD OIL RESERVES ALBERTA 3RD LARGEST


81% OF WORLD OIL INVESTMENT IS RESTRICTED


ALBERTA HAS 55% OF THE INVESTIBLE OIL

Canada has 56% of the worlds only investible oil

Alberta 171


WORLD OIL RESERVES

Alberta has the 3rd largest proven reserves in the world at 171BB (Billion Barrels)

They have mined only 3BB since the start of mining in the oil sands

Alberta has total reserves of over 2 Trillion Barrels which include all 3 categories of (proven, probable and additional probable)

This is more than all other countries proven reserves combined

81% of the worlds known reserves are owned by their respective governments

Canada has 56% of the investible reserves with Alberta controlling 55%

Companies can not or will not invest in government owned reserves for fear of nationalization like what has happened in Russia and Venezuela

Triple digit oil prices will shift the economic and political power from the major oil consuming countries to the major oil exporting countries

As oil shortages begin to appear, countries will begin to hoard oil creating even more of a supply issue


Requires significantly more energy to mine and refine

Oil Sands takes 1 BTU to produce 3 BTU

Alberta and Venezuela have the largest reserves

All deep water drilling and new shale plays are consider non-conventional

Requires very little processing

Takes 1 BTU of energy to produce 100 BTU’s

OPEC is the largest supplier

US is the second largest producer but consumes 100%

TWO MAJOR CLASSIFICATIONS OF OIL

Conventional Non-Conventional


WORLD OIL SUPPLY VS. OIL DEMAND

Oil Shortfall?


100% INCREASE IN WORLD CAPITAL SPENDING ON OIL PROJECTS

$300B

$600B


WORLD OIL SUPPLY IS FLAT DESPITE $300B SPENDING INCREASES


WORLD OIL PRODUCTION FALLING SHORT

Production of transportation fuels for the last 12 years has remained very tight within a 5% range

Despite higher oil prices over the last decade, this has not produced additional production

Capital spending has doubled for exploration from $300B to $600B to deliver the same

This is why oil cost $100/b and is rising

It is estimated that if China and India continue to grow their imports at current rates it will cause the world to run out of available oil for export before 2030

In time nearly every country in the world will become a net importer of oil including Saudi Arabia

This leaves Alberta in a very powerful position


ALBERTA OIL OUTPUT GROWING WHILE OTHERS ARE IN DECLINE

Alberta has 98% of Canada’s Oil


THE WEALTH SHIFT IS STARTING


WHERE IS THE DEMAND FOR OIL COMING FROM?


WORLD OIL CONSUMPTION


BRIC COUNTRIES OIL CONSUMPTION EQUALED THE US IN 2011


BY 2040 CHINA’S ENERGY USE WILL BE DOUBLE US


WORLD OIL DEMAND CONTINUES TO GROW Despite a slow down in the industrialized world emerging market growth is

more than off-setting the decline

Emerging market demand is growing at 10%/yr.

The greatest demand is coming from Asia and the Middle East

Many of the top exporters are seeing continued domestic demand erode their exports and will become net importers in the near future

BRIC countries are growing at 20% - 30%

Much of the growth is coming from

additional vehicles on the road

There are 42 gallons of gas in 1 barrel of oil

There are 159 liters of gas in 1 barrel of oil


CARS PUTTING THE STRAIN ON OIL


CHINA THIRST FOR OIL

China is the largest auto market in the world 50% larger than the USA

1000 new cars are going on the road on Beijing road system each day Car ownership is 1/10th of the USA with massive upside potential

Sold 18M cars in 2011 and expected to

grow to 35M by 2020 Sells more cars than any country in the

world Gas is subsidized by the government


OTHER OIL DEMAND PRESSURES

Saudi Arabia

Population continues to grow consuming more and more gas at a growth rate of 5%/yr

Saudi Arabia and most of the OPEC countries subsidize gasoline

Currently burning over 1mb/d of oil to run desalination plants

The large demand for water is causing their aquifers to dry up and therefore the number of plants continue to grow

India

Sells 11M cars per year and growing

Gasoline is also subsidized

Japan

Nuclear power represented 1/3rd of all their energy needs until it was shutdown

Oil had represented 50% of their needs but has now become a growing part of their needs since the nuclear issue

Countries are terrified to cut their fuel subsidies for fear of riots


OIL COST TO THE WORLD IS GROWING

Year Oil Brent Price World Oil Bill

2000 76mb/d $28.50 $791B

2010 87mb/d $79.50 $2.5T

2011 90mb/d $100.00 $3.0T

2015

There are 2B people not currently consuming oil and gas There is a tremendous wealth transfer taking place in the world

Cash is moving from the oil consuming countries to the oil producing countries like Russia, Venezuela and Canada/Alberta


IS THERE AN OIL SUPPLY SHORTFALL?


IS SAUDI ARABIA RUNNING OUT OF OIL?


HOW RELIABLE IS OPEC AND SAUDI ARABIA?

OPEC/Saudi Arabia

2/3rds of the worlds exportable oil comes from the 12 member states which equals about 30mb/d

Saudi Arabia represents about a 1/3rd or 10mb/d


THE ONCE GREAT SAUDI ARABIA OIL FIELDS

5 oil fields represent 90% of their production

Ghawar is the largest and oldest currently producing 60% of the country’s output

It has produced over 55 BB to-date

It was founded in 1940 which is over 70 years ago

Safaniya and Abqaiq make up two of the other fields and were found at about the same time

There have been no significant oil field discoveries in Saudi Arabia to compare with Ghawar

All other fields are much smaller


DO THEY HAVE WHAT THEY SAY THEY HAVE?

Saudi Arabia states that they have about 260BB of proven reserves

This has not and cannot be verified

1979 was the last time an independent party audited their reserves and they said

110BB proven reserves

66BB probable reserves

69BB additional probable

Total 245BB

No company was allowed into SA after 1979


THE BIG COVER UP

In 1982 OPEC including SA stopped reporting their reserves

8 years later SA changed their reporting to 260BB proven reserves from 110BB

All the probable and possible reserves were moved to proven

The world only uses proven to determine reserves

There was never any announcement of any new oil fields found

They are extracting about 3BB/yr. and since 1980 they have extracted between 90-100BB of oil … yet their total reserves have not changed???


THE BIG COVER UP These fields have been aggressively mined and their life expectancy

has been significantly shortened because they are pumping water into them to maintain pressure

The 1979 projections had these fields starting to decline by the 1990’s

Saudi Arabia and OPEC do not want the world to know the true numbers because they would lose control and influence in the world


BIG COVER UP

It is suspected that Venezuela and other nationally controlled reserves are also being fudged to protect influence

Remember if Alberta combined all 3 types of reserves they would have over 2 Trillion Barrels of oil


USA TO BE ENERGY INDEPENDENT … REALLY?


USA TO BE NET EXPORTER OF OIL IN FUTURE

Largest consumer of oil in the world at about 19mb/d

Currently the second largest producer of oil in the world

Produce 8 - 9mb/dNo oil is exported and they import 8 – 10mb/dReached peak oil in 1970 and oil production has been

declining ever since until the recent shale oil discovery


SHALE OIL TO GIVE U.S. OIL INDEPENDENCE … NOT!

The recent shale oil discoveries in the US have been known for several decades

It was never mined because it requires over $75/b to mine cost effectively

It is forecasted that under the best case scenario all shale reserves combined will produce 3mb/d by 2020

If we assume no decline in their current production

(Unrealistic – Peak Oil 1970) they would be

producing up to 12mb/d

This is significantly short of their

current 17 – 19bb/d requirement


EIA FORECAST FOR OIL SUPPLY & DEMAND

Demand

60mb/d


PROJECTED OIL SHORTFALL

The EIA projects the decline of all known oil projects US shale boom is projected to peak at only 3mb/d (million, barrels/day)

Production to slip from 85mb/d of crude oil to just 45mb/d between 2012 and 2030

IEA forecasted in 2010 that 80% of the oil fields operating today won’t be producing in 25 yrs.

Total oil supply is declining at about 4mb/d per year

2030 is only 17 years away

The projected shortage is compounded by the fact that oil companies don’t talk about their oil reserve shortages because that lowers their valuations


WE NOW KNOW HOW IMPORTANT OIL IS!

Cheap Oil Expensive Oil

Abundance Shortage


STEP 1 - OIL ATTRACTS INVESTMENT





Step 1

Step 2

Step 3


MINING ALBERTA’S BLACK GOLD


WHERE ARE THE OIL SANDS?


TOTAL INVESTMENT IN ALBERTA CONTINUES TO GROW

2013 Over $70B in Total


HISTORICAL OIL & GAS INVESTMENT IN ALBERTA

$48.1B


PROJECTED INVESTMENT IN OIL & GAS

Oil & Gas investment remains at nearly $50B out to 2016 and will stay the same or increase as new projects are announced in the future


OIL SANDS - ONLY CAPEX INVESTMENT GROWING


ALBERTA OIL IS REFINED IN ALBERTA AND US

Bitumen (Oil Sands) after it is refined is of higher quality than Saudi Arabian oil and trades at a premium

Operating expenditures alone on oil and gas are approximately $20B/yr. and growing


OIL PRICES ARE FORECASTED TO INCREASE

Higher Oil Prices Drives Investment


ALBERTA OIL PRODUCTION FORECASTED TO DOUBLE

6.5mb/d

3mb/d


WHO ARE ALBERTA’S OIL CUSTOMERS?


ALBERTA IS THE LARGEST SUPPLIER TO U.S.


CANADA IS THE ONLY COUNTRY GROWING EXPORTS TO U.S.

U.S. needs the Keystone Pipeline


THE U.S. WILL CONTINUE TO NEED OUR OIL


PIPELINE IS THE MAJOR MEANS OF TRANSPORTATION

There are 4 key major pipelines being proposed to accommodate the oil sands growth

1. Keystone pipeline to US Gulf (800kb/d – 900kb/d)

1. Requires presidential approve and is expected 2013 – 2014

2. Northern Gateway pipeline (800kb/d – 900kb/d)

1. Provides access to the west coast and the Asian market

2. Currently under environmental review and expected decision by 2015

4 MAJOR PIPELINES PROPOSED

3. Eastern Pipeline to Canada’s east coast (850kb/d – 1,200,000kb/d)

1. Eastern Canada imports 700kb/d of oil

2. Will allow Canada to become truly energy independent

3. Provides access to Europe

4. Completion expected by 2017

4. Trans Mountain Pipeline Expansion to Canada’s west coast

5. Expansion from 300kb/d to 890kb/d

6. Access to Asia and US by ship


Keystone

East Coast

Gateway

Trans Mountain


ALBERTA INVESTMENT SUMMARY

We have demonstrated the world’s need for oil for many years to come

Alberta will be one of the only places in the world to supply that oil … tremendous wealth and influence transfer

This will attract continued investment into Alberta and Edmonton economy for many decades to come

Edmonton is the hub that services the oil and gas industry


STEP 2 – OIL INVESTMENT DRIVES THE ECONOMY





Step 1

Step 2

Step 3


ALBERTA GDP GROWING AT STEADY RATE

Growth Rate at 3% to 4%


CALGARY AND EDMONTON GDP HAS FASTEST GROWTH


GDP GROWTH DRIVES JOB AND WAGE GROWTH

The tremendous investment into Alberta is creating continued job growth and very low unemployment which in turn drives rents up and vacancies down

Some forecasts project that Alberta will create over 20k new jobs per year


ALBERTA HISTORICAL EMPLOYMENT & UNEMPLOYMENT RATE

Employment

Unemployment


ALBERTA’S POSITIVE QUARTERLY EMPLOYMENT GROWTH

TOTAL OIL SANDS EMPLOYMENT IMPACT



ALBERTA CONSTRUCTION JOBS FORECAST


ALBERTA PROJECTED TO HAVE VERY LOW UNEMPLOYMENT


ALBERTA WAGES ARE INCREASING


ALBERTA HAS HIGHEST WEEKLY EARNINGS


EDMONTON ALSO SEEING THE JOB AND WAGE GROWTH


EDMONTON NUMBER OF EMPLOYED GROWING


EDMONTON QUARTERLY NUMBER OF JOBS GROWING


EDMONTON UNEMPLOYMENT RATE DECLINING


JOBS DRIVE IMMIGRATION & POPULATION GROWTH


STEP 3 – POPULATION GROWTH





Step 1

Step 2

Step 3


ALBERTA POPULATION GROWTH CONTINUES


QUARTERLY ALBERTA POPULATION GROWTH


ALBERTA LEADS CANADA IN GROWTH


JOBS ATTRACT POPULATION GROWTH

Consecutive Quarters of Growth


TREND FOR POPULATION GROWTH TO CONTINUE

ALBERTA PROJECTED POPULATION GROWTH


ALBERTA PROJECTED POPULATION TO DOUBLE IN 15 YEARS



EDMONTON IS BENEFITING FROM ALBERTA NET MIGRATION


POPULATION GROWTH INCREASES THE DEMAND FOR HOUSING


STEP 4 – INCREASED RENTAL DEMAND





Step 4

Step 5

Profits


EDMONTON RENTAL RATES CONTINUE TO INCREASE


EDMONTON VACANCY RATES FALLING & BELOW 4%

4% Balanced Market


Q2 2013 VACANCY AT 1.2% - WELL BELOW FORECAST OF 2.3%


LOW VACANCIES AND HIGHER RENTS PUSHES REAL ESTATE PRICES HIGHER


STEP 5 – HIGHER REAL ESTATE PRICES





Step 4

Step 5

Profits


EDMONTON HOME PRICES SHOWING SOLID GROWTH


MULTI-FAMILY SALES PRICE/DOOR INCREASING


WHY INVEST IN EDMONTON?


REFINERY ROW RIPPLE EFFECT


ONE OF THE BEST PLACES TO INVEST IN THE WORLD

Edmonton is the major hub that supports the oil and gas industry

Fort Saskatchewan is one of the major refining locations for petrochemicals and is supported by Edmonton

Most of the fabrication for the oil sands is done in Edmonton

The massive gas plays in Northern BC and Alberta are supported by Edmonton

Alberta/Edmonton is economically and politically stable

Has the lowest cost of living with no sales taxes and one of the highest per capita incomes

The province supports real estate investors and has the least amount of rent controls in the country

There is no land transfer tax in Alberta

Alberta is one of the only world jurisdictions that still has a AAA rating

A KPMG study once found that Edmonton was the 2nd most diversified economy in all of North America


OIL + REAL ESTATE = PROFITS





Step 4

Step 5

Profits


AN INVESTMENT OF A LIFE TIME

Alberta has been blessed with what the world needs

Oil, Gas and Coal

Mining these resources will provide the fuel needed to drive real estate for many more decades to come

Remember … 4 green houses equals one big red hotel

So what are you waiting for … Invest in Alberta Real Estate Now!

Oil edmonton's re investing final aug13

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