Quarterlymarketupdates q42015 Final

7/23/2019 Quarterlymarketupdates q42015 Final

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QUARTERLY MARKETUPDATES Q4 2015

November 3, 2015


2/96

This event is fully streamed. You will hear

audio via your media player only.At any point during the presentation, if you

have a question, please submit it on the left

side of your screen.

Questions will be answered following the

presentation. If we dont get to all

questions, we will follow-up via email.

A copy of todays presentation is available for

download in the Resource List located on the

right.

WEBINAR LOGISTICS


3/96

FUTURE WEBINARS

Platts Analytics

Bringing together all our analytical capabilities under a single portfolio Platts A

Strengthening our capabilities for you, our customers, and to showcase the full r

pricing, news, and analytical services we have to offer.

Look for more information, but the next Quarterly Market Updates webinar will tr

this new naming convention.


4/96

OUR SPEAKERSHenan XUEnergy Analyst Natural GasBentek Energy

David XuEnergy Analyst Crude Oil

Bentek Energy

Jennifer Van DinterManager, NGL Analytics and Consulting ServicBentek Energy


5/96

QUARTERLY MARKETUPDATES:

NATURAL GAS

Henan [email protected] Analyst
mailto:[email protected]:[email protected]


6/96

SUMMER RECAP

1.


7/96

SUMMER 15 VS. SUMMER 14

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Bcf/d

Source: Bentek Cell Model

Power Demand Bcf/d

Growth from 2014 3.99

Growth from 2012 0.26

Records Broken:

Power Burn 29.4 Bcf/d (June)Production 72.6 Bcf/d (April)

Mexican Exports 3.2 Bcf/d (July)*monthly average


8/96

POWER BURN CONTINUES TO TREND ABO

YEAR AVERAGE

-

2

4

6

8

10

Bcf/d

West Power Burn Demand

5 Year Range 2015 year-to-date

5 Year Average CellCast

-

5

10

15

20

25

Bcf/d

East Power Burn D

5 Year Range 20

5 Year Average Ce

-

5

10

15

Bcf

Midcontinent Power Burn Demand

5 Year Range 2015 year-to-date5 Year Average CellCast

0

2

4

6

8

10

12

14

$/MMBtu

Chicago Pri

Source: Bentek Power Burn


9/96

0

100

200

300

400

500

600

700

GWh/d

Midcon Wind Generation

MISO

SPP

ERCOT

2014 YTD Average

2015 YTD Average

230 MMcf/d gas equivalent stronger in 2015

$-$2.00$4.00$6.00$8.00

$/MMBtu

East Power Burn Deviations Normalized

Deviation from Normal Do

Henry Hub Cash

0

50

100

150

200

250

300

350

400

450

GWh/d

BPA and CAISO Hydro Gen

CAISO 2015

BPA 2015

Five Year Average

700 MMcf/d gas

equivalent over

summer

Temperature deviation from normal

Month Northwest Rockies Southwest

5 6.26 -0.59 -0.46

6 7.29 4.44 1.847 4.29 -2.53 0.66

8 2.88 0.58 2.52

9 -0.37 5.29 4.27

10 4.55 6.45 6.08

Source: Bentek Power Burn


10/96

EXPORTS TO MEXICO DRIVEN BY LNG IMPO

FALL-OUT

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Bcf/d

Exports to Mexico

5 Year Range 5 Year Average 2014

2015 CellCAST

Net Mexico expansion (1.1 Bcf/d) and

the adjoining Los Ramones Phase II

projects

- late 2015 and mid 2016

Roadrunner Phase I (0.17 Bcf/d)

- Q1 2016

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Jan Feb Mar Apr May Jun Jul Au

Bcf/d

Mexico LNG Imports

5 Year Range 2015 5 Year A

Source: Bentek Short Term Market Call

Southeast/Gulf/Texas Observer


11/96

LNG IMPORTS DISPLACED TO THE GLOBAL

MARKET

LNG Displaced to East

Asia

LNG DisplaA

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Bcf/d

Manzanillo LNG Imports

5 Year Range 2015 5 Year Average 2014

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Jan Feb Mar Apr May Jun Jul

Bcf/d

Altamira LNG Impo

5 Year Range 2015 5 Ye


12/96

CANADIAN IMPORTS STRONGER THAN 2014GIVEN STRONG PRODUCTION AND LESS INJEC

-200

-1000

100

200

300

400

500

600

Outflow to MiconMarket

Net Inflow fromNortheast

MMcf/d

Summer 2015 vs.

-400

-300

-200

-100

0

100

200

300

400

500

Demand Production Net Inflow Net Outflow Impliedstorage

MM

cf/d Summer 2015 vs. Summer 2014



13/96

HALF-CYCLE NATURAL GAS BREAK-EVEN

154%

63%

Utica Dry $2.94

Haynesville$3.07

Arkoma-Wood

$3.65

$2.11

Green River

$3.69

Dry Gas

Play

$4.66

$3.35Barnett

Fayetteville

$4.32 Piceance

$4.21$2.09Montney

Duvernay

October 2015 Price Assumptions: Gas = 12 month forward average curve for each regional pricing point (range $1.79 - $2.89/Mcf)

Oil = 12 month forward average WTI +/- differential (range $35.41- $50.87/barrel)NGLs = weighted average $/barrel, 12-mo forward average Mt. Belvieu prices (range $17.59 - $23.

Sourc


14/96

WHATS LIKELY TO HAPPEN THIS WINTER

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

$/MMBtu

Northeast v.s. West Canadian gas in the Midwest (Bentek's basisforecast)

Chicago -(Dominion+Transportation low) Chicago - (AECO+Transportation)

-800

-600

-400

-200

0

200

400

Outflow toMicon

Market

MMcf/d

Winter 2015-22014

400

450

500

550

600

650

MMcf/d

Niagara

Source: Bentek Mark


15/96

THE EFFECT OF FOREIGN EXCHANGE RAT

0

10

2030

40

50

60

70

80

0

0.2

0.40.6

0.8

1

1.2

1.4

1.6

10/1/2013

1/1/2014

4/1/2014

7/1/2014

10/1/2014

1/1/2015

4/1/2015

7/1/2015

RUB

CAD,

AUD

Foreign Exchange Rate

(Suppliers)

CAD/USD

AUD/USDRUB/USD

0.5

0.5

0.6

0.6

0.6

0.6

0.6

0

20

40

60

80

100

120

140

10/1/2013

1/1/2014

4/1/2014

7/1/2014

10/1/2014

1/1/2015

4/1/2015

7/1/2015

JPY,

MXN

Foreign Exchange

(Consumers)

Bad for the US!

Source: S&P Capital IQ


16/96

PRODUCTION CAME CLOSE TO LAST YEAR

LEVEL

56

58

60

62

64

66

68

70

72

74

76

Total US Production

2014

2015


-1.5

-1-0.5

00.5

11.5

22.5

33.5

Bcf/d

October 2015 vs. Octo

Sourc


17/96

WHERE IS IT HAPPENING?

0.0

0.20.40.60.81.01.21.41.61.82.0

Bcf/d

Northeast ToPR

Oct 2015 v

(400)

(350)

(300)

(250)

(200)

(150)

(100)

(50)

0

TX GulfCoast

Onshore East TXAnadarko

TX

MMcf/

d

Texas Top Declining PRAsOct 2015 vs. Oct 2014

(350)

(300)

(250)

(200)

(150)

(100)

(50)

0Haynesville

Fayetteville

LouisianaOffshore

MMcf/d

Southeast Top Declining PRAsOct 2015 vs. Oct 2014

Source: Bentek P


18/96

NORTHEAST PRODUCTION SET NEW RECO

0

5

10

15

20

25

Bcf/d

Northeast Production Driven by Growth inAppalachian Ohio

Northeast Production Sample_Production_App_OH

Record Daily Production: 21.1Bcf/d on Oct 1

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Flow to EastCanada

Flow to theMidwest

FlowSout

Bcf/d

Summer 15 vs. Sum



19/96

TAKEAWAY PROJECTS UTILIZATION

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Bc

f/d

REX East to West

Eureka HUnter / REX Cameron

RICE/REX GUNSLINGER

East Ohio - REX - Clarington

Seneca Plt

LEBANON HUB TO CHANDLERSVILLE-E2W

Capacity

81% utilized in

Oct 20151.1 Bcf/d of

growth

compare to Oct2014

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

0

50

100

150

200

250

300

350

400

450

9/1/2015 10/1/2015

MMcf/d

Uniontown to Gas City

Net Flows at Gas City

Capacity into PEPL

Capacity Util

0

100

200

300

400

500

600

MMcf/d TETCO MainF

Sarahsville

More th

MMcf/dgrowth

project

online

Source: Bentek NoReport


20/96

Northeast Expansion Projects

Project Name Est. ISD Capacity (MMcf/d)

TGP Broad Run Flexibility Project 11/1/15 590TETCO OPEN 11/1/15 550

NFG Northern Access 2015 Expansion 11/1/15 140

ANR Sulphur Springs Expansion 11/1/15 134

Transco Leidy 12/1/15 525

1,939

COMING EXPANSIONS TO BOOST PRODUC

1.7 Bcf/d of growth

from Oct to DecVS.

19.50

20.00

20.50

21.00

21.50

22.00

22.5023.00

10/1/2015 11/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/2016

Bcf/d

Northeast

49.50

50.00

50.50

51.00

51.50

10/1/201511/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/

Bcf/d

Rest of the US

Source: Bentek Northeast Expansion Report


21/96

WHAT HISTORY HAS TAUGHT US

20132014

NY-NJ

Expansion

Team South

0.0

0.2

0.4

0.6

0.8

Bc

f/d

TETCO NY-NJ Ex700 MMcf/

AGT to TETCO at Hanover

0.0

0.2

0.40.6

0.8

1.0

1.2

1.4

Bc

f/d

TETCO Team South300 MMcf/d

TETCO South at Berne Capacity

A WARM WINTER AND A NEAR CAPACITY


22/96

A WARM WINTER AND A NEAR-CAPACITY

STORAGE?

Source: NOAA, Customweather


23/96

BE MINDFUL ABOUT INVENTORY LEVELS

0

1

1

2

2

3

3

4

4

5

Tcf

Storage Inventory to end the

season at 3.9 Tcf

5-year range

5-year Average

2014

2015 0

50

100

150

200

250

300

350

400

Bcf

Salt Storage Inven

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

Jul-15 Aug-15 Sep-15 Oct-15

$/MMBtu

Benteksforecast as o2015

Source: Bentek Storage Report, Bentek

Market Call

REMINDERS FROM PIPELINES AND STORA


24/96

Columbia (TCO) would like to remind its customers that the storage bounce OFO (opera

orders) for operating areas 2, 4, & 8issued on March 24, 2015, is still in effectthe OFO w

effect until storage positions, market, and supply levels can accommodate incremental

impacted operating areas, which may be as late as November or DecemberDue to li

capacity, TCO is unable to accommodate the creation of transportation imbalances in th

bounceinto storage.

Dominion Transmission Due to current and anticipated system conditions, customers a

their requirement to monitor contractual storage entitlements, and take the necessary s

deliveries within those firm entitlements. Transportation customers and Title Transfer T

operators are likewise reminded of their requirement to equalize receipts and deliveries imbalances on DTI's system......

Southern star (producing region) Due to current system operating conditions with stora

capacity and the forecasted mild weather outlook, Southern Star requests that shippers

continue adhering to the following criteria..These restrictions are expected to remain

November 10, 2015

REMINDERS FROM PIPELINES AND STORA

FACILITIES


25/96

Texas Gas

Columbia Gulf

ANR

TETCO

Trunkline/Rover

Creole Trail

NGPL

Transco (Gulf Trace)

KM Louisiana

Sale and purchase agreement (SPA)

Take-or-pay structure

Fixed costs and receipts

Built into Chenieres financing

20-year term + 10-year options

Short-term contracts

Multi-year

Lower volumes Customized volume, pricing

Spot sales

Cheniere Marketing

Remaining capacity

Market prices

LNG CONTRACTS

FT capacity to Sabine Pass ~4.2 Bc

Upstream capacity

1.4 Bcf/d of gas supply already term

varying terms (1-7 year), $0.10 disco

average


26/96

CONTRACTSSPAS

0.758 0.483 0.483 0.483 0Bcfe/d

Cheniere Marketing and ENGIE (Oct 28, 2015)

5-Year LNG Sale and Purchase Agreement (SPA)

Ex-ship basis ("DES") primarily to the Montoir de Bretagne LNG regasificin France or to alternative delivery points as determined by ENGIE.

Delivery of up to 12 cargoes per year, or up to approximately 222 million

from 2018 to 2023.

Contract prices linked to Northern European indices.

Volumes will be sourced from Sabine Pass and Corpus Christi.


27/96

EDF:

Priced at Dutch TitFacility (TTF) index

Delivery ex-ship at

Also purchased LN

Christi facility as S

InterEnergy:

Non-binding supp

CONTRACTSSHORT TERM

Diversification for Cheniere as contracts are indexed to different

hubs

However Cheniere is taking on the spread risk between HH and

market hubs. Cheniere has retained cancellation options on the

EDF contract.


28/96

Panama Canal

Panamax restricts out 90% of 395 hull LNGC fleetNew Panamaxearly 2016

LNGCs will pass

Request for for Q-Flex (164 ft beam)

No Q-Max (180 ft beam)

Sabine-Neches Waterway

Channel Improvement to meet Panamax

4048 ft deep (Q-flex and Q-max: 39 ft draft)

Complete by 2028

PANAMA CANAL

Shipping cost to Asia can be

reduced by about $0.8/MMBtu


29/96

EUROPE A BETTER DESTINATION THIS W

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15

$/MMBtu

LNG Netbacks

Sabine Pass Tolling Fee Europe Asia (via PC) Asia

Source: Southeast/Gulf/Texas Observer,

Bentek Short Term Market Call


30/96

Seasonality of Asian and Eu

demand LNG dispatch based on mar

suppliers

Iterations of Henry Hub fore

dispatch until an equilibrium

LNG EXPORTS LONG TERM

0.0

1.02.0

3.0

4.0

5.0

6.0

7.0

8.0

9.010.0

02/01/16

06/01/16

10/01/16

02/01/17

06/01/17

10/01/17

02/01/18

06/01/18

10/01/18

02/01/19

06/01/19

10/01/19

02/01/20

06/01/20

10/01/20

Bcf/d

LNG Exports

Previous Forecast Current Forecast

Source: Bentek Long Term Market Call


31/96

FIVE YEAR OUTLOOK

2.


32/96

SUPPLY FORECAST

50

55

60

65

70

75

80

85

90

2015 2016 2017 2018 2019 2020

Bcf/d

Production

0

1

2

3

4

5

6

2015 2016 2017 2018 2019 2

Bcf/d

Imports

0

5

10

15

2015 2016 2017 2018

Bcf/d

Northeast Pipeline Expansion Project

Shippers By Year

Producer Power

LDC Marketer

LNG Uncommitted Capacity

62

%

60% 25%

80%held by

producers

Source: Bentek Cellcast, Bentek Lon

Term Market Call


33/96

DEMAND FORECAST

0

10

20

30

40

50

60

70

80

90

2015 2016 2017 2018 2019 2020

Bcf/d

Demand

Pipe Loss

ResComm Demand

Industrial Demand

Power Demand

0

2

4

6

8

10

12

14

2015 2016 2017 2018 2019 2020

Bcf/d

Exports

0

500

1000

1500

2000

2500

3000

3500

4000

4500

TWh

Load

Source: Bentek Cellcast, Bentek Long

Term Market Call


34/96

QUARTERLY MARKETUPDATES:

CRUDE OIL

David [email protected] Analyst Crude Oil


35/96

03 November 2015

Themes from Q3

Expect short term risks to suppress prices (China, Iran)

Debt levels and financial constraints increasingly play role in production

Non-OPEC supply risks overcorrection, will likely continue to help balance market

Fed rate hike continues to loom on the horizon, remains a big unknown to demand

speculation

Themes for Q4

Crude quality of glut shifts toward heavier grades, demand mismatch

Shale producers on the precipice of a deleveraging cycle

U.S. seen as global aggregate demand savior, importer of global deflation

Premature price rally will undo demand growth needed to balance market, revive s

An overdue price rally could leave market undersupplied for years ahead

KEY TAKEAWAYS FOR Q4

G O C


36/96

(0.50)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

MMbbl/d

EIA OPEC IEA

GLOBAL BALANCE

03 November 2015

Source: EIA, IEA, OPEC, Bentek Energy; Note: Assumes OPEC maintains Q3 15 production

unless forecasted by institution

Q PRICE MOVEMENTS AND Q FORECAST


37/96

03 November 2015 Source: Bentek Energy, Platts

Q3 PRICE MOVEMENTS AND Q4 FORECAST

$40

$50

$60

$70

$80

$90

$100

$110

$120

WTI Brent WTI Forecast Brent Forecast


38/96

CRUDE QUALITY MISMATCH

SECTION NO. 1

GLOBAL GROWTH REMAINS STAGNANT


39/96

03 November 2015 Source: CEIC Data, Bentek Energy; Note: 10-yr moving avg. real GDP growth

0%

2%

4%

6%

8%

10%

12%

1970 1975 1980 1985 1990 1995 2000 2005

Developed Economies Growth

France United States Germany United Kingdom Japan

GLOBAL GROWTH REMAINS STAGNANT

EMERGING MARKETS IN TURMOIL


40/96

03 November 2015 Source: CEIC Data

EMERGING MARKETS IN TURMOIL

-10%

-5%

0%

5%

10%

15%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Emerging Economics Growth

Brazil China Russian Federation India

DIMINISHING MARGINAL VALUE OF CREDIT


41/96

03 November 2015 Source: Federal Reserve, BIS

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

1980 1985 1990 1995 2000 2005

USD(trillions)

Total Credit to Private Non-Financial Sector Real U.S. GDP

DIMINISHING MARGINAL VALUE OF CREDIT

CHINESE DEVALUATION SETS OFF REBAL


42/96

03 November 2015 Source: Federal Reserve, CEIC data

6.05

6.10

6.15

6.20

6.25

6.30

6.35

6.40

6.45

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-

USD-RMB

CHINESE DEVALUATION SETS OFF REBAL

GLOBAL INDUSTRIAL RECESSION?


43/96

03 November 2015Sources: ISM, HSBC, Markit, JP Morgan Chase, National Bureau of Statistics of China,

China Federation of Logistics & Purchasing, JMMA, Statista, CEIC data

GLOBAL INDUSTRIAL RECESSION?

45

50

55

60

Aug '14 Sep '14 Oct '14 Nov '14 Dec '14 Jan '15 Feb '15 Mar '15 Apr '15 May '15 Jun '15 Jul '1

PMI(50-neutral)

U.S. Eurozone Japan China Russia Brazil Glob

MIDDLE DISTILLATE GLUT


44/96

660

670680

690

700

710

720

730

740

750

760

770

1Q2014 2Q2014 3Q2014 4Q2014 1Q2015

Barrels(millions)

OECD Middle Distallite Inventories

MIDDLE DISTILLATE GLUT

03 November 2015 Source: IEA

FUTURE PRODUCTION GROWTH SHIFTING


45/96

03 November 2015 Source: Bentek, Platts, EIA

0

100

200

300

400

500

600

Gulf of Mexico Western Canada Iran

Mbbl/d

2016 Potential Supply Additions

HEAVIER GRADES

U S LTO OFFSHORE PRODUCTION DECOU


46/96

03 November 2015 Source: EIA, DrillingInfo

U.S. LTO, OFFSHORE PRODUCTION DECOU

4.0

4.1

4.2

4.3

4.4

4.5

4.6

4.74.8

4.9

5.0

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

MMbbl/d

U.S. LTO Production (LHS) Gulf of Mexico Production (RHS)

CRUDE YIELDS


47/96

CRUDE YIELDS

03 November 2015 Source: Haverly, Platts, Bentek

0%

10%

20%

30%

40%

50%

60%

70%80%

90%

100%

WCS (21) Basrah Light(28.8 API)

Mars (29.2) WTI (37) LLS (38) Brent (38) Bakken (4

Residue (1000+) VGO (680-1000) Diesel (450-680) Kerosene (330-450) Naphtha (C5-330)

LIGHT-HEAVY SPREADS SHOULD REMAIN


48/96

03 November 2015 Source: Platts, Bentek

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15

LLS-Mars

LIGHT-HEAVY SPREADS SHOULD REMAIN

CRACKING MARGINS TIGHTEN


49/96

03 November 2015 Sources: Platts, Turner Mason

CRACKING MARGINS TIGHTEN

-$5.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

LLS Cracking Netback Margin Mars Cracking Netback Margin


50/96

SHALE DELEVERAGING

SECTION NO. 2

FREE CASH FLOW DOESNT LIE


51/96

03 November 2015Source: Capital IQ, Bentek; Note: U.S. E&P companies with market capitalization over

$50MM as of 11/2/2015

FREE CASH FLOW DOESN T LIE

-30-20-10

010203040506070

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014 2

USD(billions)

Cash Flow from Ops. Capital Expenditures Unlevered Free Cash Flow

ENERGY ISSUANCE


52/96

03 November 2015 Source: Capital IQ, Platts

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

USD(billions)

Debt Issuance (LHS) Equity Issuance (LHS) WTI (RHS)

ENERGY ISSUANCE

SHALE BOOSTED BY CREDIT CREATION


53/96

03 November 2015 Source: Capital IQ, EIA, Rigdata

$0

$50

$100

$150

$200

$250

$300

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q2201

USD(billions)

U.S. E&P Net Debt (LHS) Wells Drilled (RHS) U.S. Field Production (RH

SHALE BOOSTED BY CREDIT CREATION

REVOLVER RUNWAY


54/96

03 November 2015 Source: Capital IQ

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

USD(billions)

Revolver Drawdown Undrawn Revolving Credit

REVOLVER RUNWAY

WTI STRUCTURE OFFERS LITTLE HEDGINGOPPORTUNITY


55/96

03 November 2015 Source: Platts, ICE, Bentek

OPPORTUNITY

$40

$42

$44

$46

$48

$50

$52$54

$56

$58

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21Forward Month

7/31/2015 10/30/2015


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U.S.: GLOBAL IMPORTER OF

DEFLATION

SECTION NO. 3

INVENTORIES AT CUSHING EASING


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03 November 2015 Source: EIA

INVENTORIES AT CUSHING EASING

6.00

6.20

6.40

6.60

6.80

7.00

7.207.40

7.60

7.80

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15

MMbbl/d

Cushing Inventories (RHS) Lower 48 Production (LHS)

WTI-BRENT


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0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Jan-

11

Mar-

11

May-

11

Jul-

11

Sep-

11

Nov-

11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

MMbbl/d

U.S. LTO Production North Sea


WTI-BRENT SPREADS TIGHTEN


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03 November 2015 Source: Platts, Marketview, NYMEX

-$12.00

-$10.00

-$8.00

-$6.00

-$4.00

-$2.00

$0.00

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-1

Brent-WTI

LIGHT CRUDE IMPORTS ON THE RISE


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0%

5%

10%

15%

20%

25%

30%

Jan-

10

Mar-

10

May-

10

Jul-10

Sep-

10

Nov-

10

Jan-

11

Mar-

11

May-

11

Jul-11

Sep-

11

Nov-

11

Jan-

12

Mar-

12

May-

12

Jul-12

Sep-

12

Nov-

12

Jan-

13

Mar-

13

May-

13

Jul-13

Sep-

13

Nov-

13

Jan-

14

Mar-

14

May-

14

Jul-14

Sep-

14

Light Crude Imports as Percent of Total

WORLD LOOKS TO U.S. TO SUCK UP DEMA


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1

1.1

1.2

1.3

1.4

1.5

Jan-

13

Feb-

13

Mar-

13

Apr-

13

May-

13

Jun-

13

Jul-13

Aug-

13

Sep-

13

Oct-

13

Nov-

13

Dec-

13

Jan-

14

Feb-

14

Mar-

14

Apr-

14

May-

14

Jun-

14

Jul-14

Aug-

14

Sep-

14

Oct-

14

Nov-

14

Dec-

14

Jan-

15

Feb-

15

Mar-

15

Apr-

15

May-

15

EUR-USD

03 November 2015 Source: Federal Reserve, CEIC Data

STRONGER DOLLAR WEIGHS ON GROWTH


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03 November 2015 Source: Bureau of Labor Statistics, Federal Reserve

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Non-Farm Employment Additions (LHS) Trade Balance (RHS)


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DEMAND AND PRICESSECTION NO. 4

ENERGY INTENSITY OF GROWTH


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-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

WorldGDPtoOilDemandGrowth

03 November 2015 Source: IMF, EIA, Bentek Energy

LOW PRICES RESULT IN HIGHER DEMAND


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1.12% 1.32%0.87%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

2012 2013 2014

Oil Demand Growth Estimated Demand Growth from Inten

Estimated Demand Growth from Price Change World GDP Growth (adjusted for excha

03 November 2015 Source: IMF, IEA, Bentek Energy

PREMATURE RALLY JEOPARDIZES BALAN


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Price

03 November 2015

Demand Supply


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CONCLUSIONS

SECTION NO. 5

KEY TAKEAWAYS FOR Q4


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03 November 2015

Takeaways for Q4

Crude quality mismatch will put pressure on crude market in 2016

Shale producers on the precipice of a deleveraging cycle U.S. seen as global aggregate demand savior, importer of global deflation

Premature price rally will undo demand growth needed to balance market, revive s

An overdue price rally could leave market undersupplied for years ahead


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QUARTERLY MARKET

UPDATES:

NGLS

Jennifer Van Dinter, PhD, [email protected], NGL Analytics

KEY TAKEAWAYS


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NGL production continues to set new records and is expreach 4.4 MMb/d by 2020, representing a slower growth

compared to July. Northeast could be heavily reliant on export markets if a

Mariner East projects, including expansions, come to fru

Feedslate switching will start in 2017 to relieve pressuretightening ethane market.

Growing demand for propane in the domestic cracker phave a ripple effect; expect propane export volumes to sthrough 2020.

NGL PRICES HAVE DISCONNECTED FROM CRUDPRICES

Mont Belvieu NG


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0

50

100

150

200

250

300

Cents/gallon

Mont Belvieu NGL Prices

Ethane Propane

Butane Isobutane

Source: Platts; Prices un

0%

50%

100%

150%

Mont Belvieu NGa % of W

Ethane

Butane

THE ECONOMICS OF DEVELOPING NEW NGLASSETS ARE CHALLENGING


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($3)

($2)

($1)

$0

$1

$2$3

$4

$5

$/MMbtu

NGL Frac Spread by Region

Marcellus/Utica Rockies

Williston Eagle Ford

Plant Name Owner/

Operator

Region

Petersburg I/II Blue Racer Northeas

Buffalo* Martin Permian

TBD* Targa

Badlands

Williston

Knox ONEOK Anadarko

Demicks Lake ONEOK Williston

Bronco ONEOK Powder R

Cancelled & Delayed Proces

US NGL PRODUCTION CONTINUES TOREACH RECORD HIGHS


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0.0

1.0

2.0

3.0

4.0

Mb/d

NGL Production from gas plants

In 2013-2015, growth is driven by production growth i

rich plays such as the Eagle Ford, Wet Marcellus and

PRODUCTION GROWTH IS FINALLYREFLECTING LOWER COMMODITY PRICES

G i G


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S B k M k t C ll N th A i NGL 4Q2015

-

2.0

4.0

6.0

2011 2012 2013 2014 2015 2016 2017 2018

MMb/dNGL Production from Gas Plants

Forecast Comparison

4Q2015 Forecast 1Q2015 Forecast

NGL GROWTH DRIVEN BY KEY BASINS: EAGLEFORD

, MARCELLUS/UTICA, WILLISTON


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Marcellus

(Appalac

Williston

Permian

Eagle Ford

Anadarko

0.0

0.5

1.0

Eagle Ford Appalachia Williston Permian Anadarko

MMb/d

NGL production in selected basins(prior to ethane rejection)

2015 2020 Previous 2020 Forecast

Source: Bentek Market Call:

PROCESSING GROWTH MAINLY IN THE NORTHEAST, PERMAND ANADARKO

Processing


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Current US gas processing capacity

~ 87 Bcf/d and set to increase to

94 Bcf/d by end-2016Source: Bentek NGL Facilities Databank

Anadarko

10.99.8

g

(Bcf/d)2.01.4

Williston

Permian

10.88.8

Eagle Ford/

Texas Gulf Coast

10.710.7

SW Marcell

8.3

DJ

1.91.9

FRACTIONATION IN THE NORTHEAST IS ON TRASURPASS CONWAY


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Williston

SW Ma

Eagle Ford/

Gulf Coast TX

726 9

Current 20

Source: Bentek NGL Facilities Databank

Conway575 575

93 119

Current US fractionation capacity

~ 5.1 MMb/d and set grow by 21% to

6.0 MMb/d by end-2016

Fractionation

(Mb/d)

2 5323,152

NORTHEAST NOT LACKING FOR PROPOSEDTAKEAWAY PROJECTS


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Centennial (100 Mb/d)

EPD Connector (40-60 Mb/d)

WITH MARINER EAST EXPANSIONS,NORTHEAST COULD BE OVERBUILT


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0

500

1000

2011 2012 2013 2014 2015 2016 2017 2018 2019

Mb/d

Northeast C3+ Production, Pipeline Takeawa

PADD 1 C3+ Production Mariner East 1Mariner East 2 Mariner East 2XUTOPIA East UTOPIA West

S M k C ll N h A i NGL NGL F ili i D b k

THE STORAGE SURPLUS IS AN INDICATION OF SUPPLY OUTPACING DEMAND80

Total US Butane/ButyTotal US Propane/Propylene Stocks


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0

20

40

60

80

MMBbls

20

70

M

MBbls

0

20

40

60

MMBbls

Total US Ethane/Ethylene Stocks

0

10

20

30

MMBbls

Total US Pentane P

+8%

++54%

Eth l M i

ETHYLENE PRODUCTION MARGINS AND FEEDSOPTIMIZATION


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0

200

400

600

8001,000

1,200

Monthly

Average,

Mb/d

Feedsto

Ethane Propane Bu

-20

0

20

40

60

80

/lb

Ethylene ProductionMargin5-day moving average

Ethane Propane Butane Lt Naphtha

Source: Bentek Dail NGL Market Monitor Source: Jacobs C

525

LPG EXPORTS PEAKED AT 755 MB/D IN JULY2015

Propane and Butane Exports


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-

100200

300

400

500

600

700

800

Mb/d

Propane and Butane Exports

Propane/propylene exports Normal butane/butylene exports Isobutane/Isobu

2014 Avg: 497 Mb/d

Reco

2012 Avg: 197 Mb/d

Sour


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DEMAND OUTLOOK

THROUGH 2020

Exports required to

balance US NGL markets

PETROCHEMICALS AND EXPORTS WILL DRIVELONG-TERM NGL DEMAND GROWTH

NGL Demand ComponentsDemandSh


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-

1

2

3

4

5

6

MMb/d

NGL Demand Components

Petchem Exports Motor Gasoline

Res/Com Other

Share

20143.9 MMb/d

Gasolin15

Res/Com

14%

O

DemandShare

20204.8 MMb/d

Exports27%

Gasoline12%

Res/Com

10%

2 5MMb/d US Ethane Supply/Demand Balance

ETHANE REJECTION WILL DECLINE QUICKLYSTARTING IN 2017


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-

0.5

1.0

1.5

2.0

2.5

2012 2013 2014 2015 2016 2017 2018 2019 2020

US Ethane Supply/Demand Balance

Source: BentekMarket Call: North American NGLs 4Q2015

CAN FEEDSLATE SWITCHING SAVE THEETHANE MARKET?


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0

500

1,000

1,500

2,000

Mb/d

Ethane Cracker Demand

3Q2015 4Q2015

0

100

200

300

400

500

Mb/d

Propane Cracker

3Q2015 4

Source: Market Call: No

BENTEK IS TRACKING 16 PROJECTS TO BUILDGREENFIELD CRACKERS IN THE US

B dl d NGL ND


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Total Petrochemicals, TX

Williams Ge

Badlands NGL, ND

PTT Glob& Marub

ChevronPhillips

ExxonMobil

Dow Sasol

Odebrech

Braskem,

Air permitUnder

Formosa

Oxy

S

Applied for

Axiall &Lotte

6 unde 1 recei

4 subm

3 anno

2 smalleAnnounced

ADRIFT IN A SEA OF ETHANE: WATERBORNE ETHANEEXPORTS TO BEGIN IN 2015

Petchem

Petchem

Company Ship Owner


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Company

INEOS

Borealis

SABIC

Versalis

Reliance

Company

INEOS

Borealis

SABIC

Versalis

Reliance

Ship Owner

Evergas

Navigator Gas

Ocean Yield

NA

Mitsui

-

500

Mb/d

US Ethane

Ship

ETHANE REJECTION TO FALL SIGNIFICANTLY B2018 DUE TO INCREASED DEMAND

Ethane Reject


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-

100

200

300

400

500

600

Mb/d

Ethane Reject

Williston PADD

PADD 2 PADD Ethane rejection decreases first in areas

closest to market due to lower

transportation costs.Source: BentekMarket Call: North Americ

EXPORTS BECOME LARGEST SOURCE OF DEMAFOR PROPANE IN 2015

2 0MMb/d US Propane Supply/Demand Balance


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0.0

0.5

1.0

1.5

2.0

2012 2013 2014 2015 2016 2017 2018 2019 2020

US Propane Supply/Demand Balance


US WILL EXPORT NEARLY 25% OF BUTANE SUPBY 2020

Mb/d US Mixed Butanes Supply/Demand Balance


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0

100200

300

400

500

600

700

800

2012 2013 2014 2015 2016 2017 2018 2019 2020

Mb/d pp y


LPG EXPORT TERMINAL CONSTRAINTS TO BE

ALLEVIATED THIS YEAR

1 600LPG Exports vs. Export Terminal Capacity

C P j t N


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-

200

400

600

800

1,000

1,200

1,400

1,600

Mb/d

Mixed Butanes Exports

Propane Exports

Total US LPG Export Capacity

Source: Benteks Market Call: North American NGLs 4Q2015 BentekNGL Facilities Databank com an re ort

Company Project Name

Existing LPG Export Terminals

Enterprise Enterprise

Enterprise Enterprise Expansion I

Enterprise Enterprise Expansion II

Targa Galena Park

Targa Galena Park Expansion I

Targa Galena Park Expansion II

Sunoco Logistics Marcus Hook

Sunoco Logistics Marcus Hook Expansion I

DCP Midstream Chesapeake

Petrogas Ferndale

Sunoco Logistics Mariner South

Brownfield Expansions

Enterprise Enterprise Expansion III

Sunoco Logistics Marcus Hook Expansion II

Greenfield -- New Builds

Occidental Chemical Ingleside

Pembina West Coast Terminal

Phillips 66 Freeport LPG

Waterside Energy WA Storage & Transfer

DILUENT DEMAND DRIVES US NATURAL GASOLMARKET

600Mb/d US Natural Gasoline Supply/Demand Balance


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0

100200

300

400

500

600

2012 2013 2014 2015 2016 2017 2018 2019 2020Source: BentekMarket Call: North American NGLs 4Q2015

KEY TAKEAWAYS


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NGL production continues to set new records and is expreach 4.4 MMb/d by 2020, representing a slower growth

compared to July. Northeast could be heavily reliant on export markets if a

Mariner East projects, including expansions, come to fru

Feedslate switching will start in 2017 to relieve pressuretightening ethane market.

Growing demand for propane in the domestic cracker phave a ripple effect; expect propane export volumes to sthrough 2020.


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THANK YOU FOR JOINING US TODAY!


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Quarterlymarketupdates q42015 Final

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