Changing Oil and Gas Landscape

Changing Oil and Gas Landscape John Paisie President jpaisie@stratasadvisors.com TEL +1.713.260.4628 / MOBILE +1.832.517.7544 www.stratasadvisors.com UPSTREAM MIDSTREAM DOWNSTREAM FUEL & TRANSPORT

Who We Are Stratas Advisors is a global consulting and advisory firm that covers the full spectrum of the energy sector and closely linked industries The world s leading businesses, governments and institutions turn to us for data, analysis and insight (IOCs, NOCs, independents, energy consumers and financial entities) We help our clients achieve tangible results through informed strategic decision-making and implementation planning Key differentiators include Global coverage with deep local knowledge Integrated analysis across the entire energy value chain, including macro-level analysis (geopolitics, macro-economics, policies and regulations) Our research and consulting staff comprises professionals located on the ground in key global energy market centers Combined, our team brings over 500 years of combined energy industry expertise, including www.stratasadvisors.com Technical (Petroleum Engineers, Geologists, Process Engineers) Economists Political Scientists Financial Analysts Stratas Advisors. All rights reserved. 2

Dedicated Teams for Each Segment Strategic insights across the energy value chain Upstream Midstream Downstream Fuel & Transport Drill down with a groundlevel look at the fields, wells and companies involved in E&P. Move confidently in new frontiers that are being shaped by changing supply/ demand dynamics coupled with investments in pipeline, rail and ship logistics. Thrive in an environment where crude oil supply dynamics and product demand trends are structurally evolving. Accelerate innovation with a comprehensive understanding of policies pertaining to petroleumbased fuels, biofuels and other alternative fuels. Stratas Advisors. All rights reserved. 3

What We Offer Helping clients achieve tangible results Services Consulting Advisory An innovative online portal of data, information and insights across the oil & gas value chain and macro-level issues that includes GIS mapping and interactive data tools A full range of consulting support, allowing you to gain an external perspective on strategic matters and to respond proactively by implementing the appropriate initiatives for success Customized retainer arrangements with access to senior Stratas Advisors staff who will answer your questions about: Macro-level developments Energy markets Industry events and trends Investment risks and opportunities Stratas Advisors. All rights reserved. 5

Service Matrix Macro Upstream Midstream Downstream Fuel & Transportation Stratas Energy Perspectives Enhanced Shale Service North American Shale-Related Infrastructure Global Refining & Products Global Fuel Specifications Long-term Price Forecasting StratasScope North American Midstream (Oil, Natural Gas, NGLs) North American Refining & Products Global Alternative Fuels Short-term Price Forecasting Global Hydrocarbon Supply Global Natural Gas Outlook Base Petrochemicals Global Biofuels Assessment Global Heavy Crude Outlook Global LNG Catalyst Market Outlook Global Biofuels Outlook Global Upstream Projects Analytics Global NGLs Outlook Global Syngas Conversion Global Transport Fuel Outlook Global Automotive Stratas Advisors. All rights reserved. 6

Examples of Consulting Offerings External Assessment Opportunity Assessment Competitive Assessment Market Studies Client-Focused Strategic Alignment Communication Management Strategic Initiatives Value Management Portfolio Management Organization Development Performance Improvement Programs Risk Management Transaction Support Supply Chain Energy Supply Stratas Advisors. All rights reserved. 7

Examples of Advisory Retainers Macro-Level Providing coverage of the geopolitical issues, economic trends and policy and regulatory developments that will shape the future environment Energy Markets Providing integrated coverage of the energy markets including crude oil, oil products, natural gas, NGLs, coal and renewables (prices) Competitive Assessment Providing a forward-looking assessment of the competitive landscape of the oil & gas sector across the entire value chain from a global and regional perspective including comparisons of strategy, structural positioning and financial performance Transactions & Investment Analysis Providing analysis of transactions and capital investments associated with the oil & gas sector across the entire value chain from a global and regional perspective In addition to the above retainers, Stratas Advisors can develop a retainer that is customized for a client s specific needs Stratas Advisors. All rights reserved. 8

Agenda Item Introduction and Key Themes Time slot 8:30 9:00 A Assessment of Hydrocarbon Supply and Crude Markets 9:00 9:45A Assessment of Transport Sector 9:45 10:30A Break 10:30 11:00 A Outlook for Refining 11:00 11:45A Outlook for Fuel Specifications 11:45 12:15P Lunch Assessment of NGLs and Feedstocks 12:15-1:15P 1:15-1:45P Outlook for Petrochemicals 1:45 2:30P Opportunities and Challenges Facing GCC-based refiners and Final Remarks 2:30 3:00P Stratas Advisors. All rights reserved. 9

Major Themes

Changing Energy Mix Shale North America and beyond Non-shale growth areas, declining areas Natural gas new importance Clean sources of energy increased focus Alternative fuels transportation & nontransportation Source of marginal production across time horizons Supply/Demand Dynamics Stratas Advisors. All rights reserved. 12

GDP Forecast 2016 Total GDP: 76.24 trillion USD 2035 Total GDP: 123.47 trillion USD Middle East, 2.25, 2.9% Russia & CIS, 2.12, 2.8% North America, 18.66, 24.5% Africa, 2.37, 3.1% Asia, 24.58, 32.2% Middle East, 3.76, 3% Russia & CIS, 3.22, 2% North America, 27.05, 22% Africa, 4.63, 4% Asia, 48.69, 39% Latin America, 5.65, 7.4% Europe, 20.61, 27.0% Latin America, 9.42, 8% Europe, 26.71, 22% Source: Stratas Advisors, 2010 prices and exchange rates Stratas Advisors. All rights reserved. 13

MMBD Oil Demand by Region 140 120 100 80 60 40 20 0 2016 2025 2035 Africa Asia Europe Latin America Middle East North America Source: Stratas Advisors Global oil demand is expected to continued to increase Asia will represent the overwhelming portion of future demand growth Demand in North America and Europe is expected to decline Stratas Advisors. All rights reserved. 14

BCFD Natural Gas Demand by Region 450 400 350 300 250 200 150 100 50 0 2016 2025 2035 Africa Asia Europe Latin America Middle East North America Source: Stratas Advisors Global demand for natural gas is expected to continued to increase Asia will represent the overwhelming portion of future demand growth Stratas Advisors. All rights reserved. 15

Shifting Energy Flows Differing rates of economic growth Shifting focus from Atlantic Basin to Pacific Basin Expanding role of US as an energy supplier Geopolitics OPEC, Russia, Middle East, China/US Bottlenecks, dislocations and investment needs Stratas Advisors. All rights reserved. 16

MBD MBD US Crude Production / Exports US crude oil production is forecasted to increase from 9.4 MMBD to 13.6 MMBD by 2027 16,000 14,000 12,000 10,000 Crude Production 8,000 6,000 4,000 2,000 4000 3500 3000 2500 2000 Crude Exports 0 20172018201920202021202220232024202520262027 Source: Stratas Advisors Simultaneously, US crude exports are forecasted to increase from 728 MBD to nearly 3.4 MMBD by 2027 1500 1000 500 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Source: Stratas Advisors Stratas Advisors. All rights reserved. 17

Intensifying Regulatory Environment Upstream- Related Standards Tightening Fuel Specifications The expansion and the impact will ebb and flow Regulations, however. will continue to impact future supply and demand GHG Subsidies and Mandates Stratas Advisors. All rights reserved. 19

Evolving Transportation Sector Common Drivers Electrification Digitization Autonomous Efficiency Clean Light-Duty Size of fleet, Powertrain Heavy-duty and Off-Road Still dependent on diesel Marine IMO, Shipping Patterns Rail Freight, Passengers Aviation Number of flights, Point-to-Point Stratas Advisors. All rights reserved. 20

MMBD Importance of Transportation 120 Oil Demand 100 80 60 40 20 0 2015 2035 Transportation Other Source: Stratas Advisors The portion of oil demand in 2015 represented by the transportation sector was 57% By 2035 the portion of oil demand represented by the transportation is forecasted to still remain around 60% Stratas Advisors. All rights reserved. 21

Conclusions

Scenario Narratives Upside Case: Shifting to a New Global Framework Technology / carbon reduction focus Reference Case: Muddling Through Business as usual / focus on efficiency Downside Case: Breakdown into Multi-Polarization Energy Security Focus Stratas Advisors. All rights reserved. 23

Scenario Inputs Relative Impact of Factors Factor Reference Upside Downside GDP Growth Moderate Strong Weak Technology penetration Power-focused; efficiency gains strong but new tech minimal on transportation Aggressive penetration of renewables and EVs; strong efficiency gains Moderate, but based on energy security, not carbon Geopolitical stability Regional conflicts Focus on global cooperation Trade wars, conflict ridden Policy Limited meaningful action; some countries take action Widespread carbon-reduction focus Energy-security focused Stratas Advisors. All rights reserved. 24

$/BBL (nominal) Oil Price Outlook Brent Crude 140 120 Business as usual increasing demand with cost inflation 100 80 60 Demand weak; price oscillates as OPEC invests to suppress new investment and gain share 40 20 0 2010 2015 2020 2025 2030 2035 Upside Case Downside Case Reference Case Demand pops on strong growth, but wanes as fracking spreads and world moves away from CO 2 Stratas Advisors. All rights reserved. 25

$/MMbtu (nominal) Natural Gas Price Outlook Henry Hub 10 9 8 7 6 5 4 3 2 1 0 2010 2015 2020 2025 2030 2035 Upside Case Downside Case Base Case Strong gas demand as world becomes more CO2 focused; price increases temper as fracking spreads Exports drive greater demand both through LNG and pipeline setting marginal price Price remains US centric as trade is stymied and carbon reduction remains of minimal concern Stratas Advisors. All rights reserved. 26

Looking Forward Hydrocarbons will remain an important part of the energy mix Geopolitics Economic growth Tensions Climate and Environment Volatility, Cyclicality and Uncertainty Tomorrow will not be the same as today Stratas Advisors. All rights reserved. 27

Strategic Implications

Need to Take a Strategic Approach Understand your portfolio of businesses within the context of current environment and future environment Invest only in assets and positions for which structural advantages can be established structural disadvantages cannot be overcome through improving operations Consider opportunities across time horizons and in terms of materiality and the organizational capabilities required for success Assess current and future risk factors and the ability to manage and the impact on ability to drive risk-adjusted returns Utilize a comprehensive business model that links forward-looking strategies with capabilities, assets and external network to drive value for all stakeholders Stratas Advisors. All rights reserved. 29

Portfolio Assessment Value SBU 3 SBU 2 SBU 4 Positive SBU 1 Historical SBU ROI relative to cost of capital Negative Value destroying business unit Value creating business unit Capital invested Size of bubble indicates revenue Shareholder value Key Questions Which business units are creating shareholder value? Which business units are destroying shareholder value? Was the historical capital allocation effective in creating optimal value? Has there been over-investment in some of the mature business units Have growth opportunities been adequately supported? No growth/decline Growth Past growth in SBU asset base Stratas Advisors. All rights reserved. 30

Structural and Operational Factors Upstream Midstream Processing Distribution Conversion Level of profitability Level of profitability Level of profitability Level of profitability Level of profitability Structural factors Competitive landscape Hydrocarbon balance Quality characteristics Production profile Storage capacity and location Shipping assets Integration with processing Complexity Scale Location Feedstock Regional balances Terminal assets Network density Complexity Scale Location Feedstock Operational factors F&D costs Replacement costs Lifting costs Equipment restraints Cost structure Operational flexibility Utilization Energy costs Overhead Network efficiencies Cost structure Inventory management Operational flexibility Pricing policies Throughputs Clients Invest only in assets and positions for which structural advantages can be established structural disadvantages cannot be overcome through improving operations Stratas Advisors. All rights reserved. 31

Opportunity Screening Size of bubble = return on man-hours Sector Opportunities Low Medium High Color of bubble = Level of current capabilities Have current capabilities Average Annual CAPEX (Billion USD) 10.0 8.0 6.0 4.0 2.0 0.0 Short term strategic Short term niche Long term strategic Long term niche Some current capabilities Little or no capabilities today SHORT TERM CAPTURE Short term opportunities ( 2 years) LONG TERM CAPTURE Long term opportunities (3+ years) Consider opportunities across time horizons and in terms of materiality and the organizational capabilities required for success Stratas Advisors. All rights reserved. 32

Comprehensive Business Model Strategic Intent Leverage points Aspirations and goals Strategic priorities Performance requirements Capital intensity Value Proposition Core Capabilities Skill levels Key processes Supporting tools Organization scope External Network Suppliers Partners Alliances Asset Portfolio Tangible Intangible Value chain positioning Customers Other stakeholders Relationships Scope of offerings Geographic coverage Strategic flexibility Key differentiators Internal and external alignment Financial metrics Operational metrics Unique opportunities Utilize a comprehensive business model that links forward-looking strategies with capabilities, assets and external network to drive value for all stakeholders Stratas Advisors. All rights reserved. 34

Stratas Advisors, a Hart Energy company, is a global consulting and advisory firm that covers the full spectrum of the energy sector and related industries. We can help you develop a deeper understanding of the developments that are shaping the future of oil & gas. Our support includes customized consulting that is focused on a client s specific strategic objectives, competitive challenges and asset base. Additionally, we offer support through subscription services and comprehensive market studies UPSTREAM MIDSTREAM DOWNSTREAM FUEL & TRANSPORT 1616 South Voss Road Suite 675 Houston, TX 77057 United States TEL +1.713.260.6426 stratasadvisors.com Bogotá Brussels Denver Houston London Melbourne Mexico City New Delhi New York San Diego São Paulo Singapore W ashington, D.C.