OGIB INTERIM BULLETIN #666- June 1st, 2018 PORTFOLIO SALES. EXITING THE PERMIAN TRADE yes, all of it OTHER MISCELLANEOUS TRADES

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1 OGIB INTERIM BULLETIN #666- June 1st, 2018 PORTFOLIO SALES EXITING THE PERMIAN TRADE yes, all of it OTHER MISCELLANEOUS TRADES LOTS GOING ON (in my head I mean). I m selling some stock today for a few reasons 1. I like having a lot of cash, and I ve spent a lot lately 2. The portfolio has a lot of different stocks in it and I want to get that # smaller 3. A couple stocks have done really well and taking profits is not a bad thing 4. A couple stocks have NOT done well, despite the main catalyst that I bought the stock for having already happened 5. There is a fundamental change happening in the oil markets right now that isn t being completely appreciated the WTI/Brent spread and the accompanying Permian discount None of these trades are any reflection of the businesses, but are a combination of macro trends and technicals in their stock chart. Heavy Oil Trade I sold all 20K of my Athabasca at $1.74 for a 52% gain or 60 cents a share. GREAT TRADE in just a few weeks...and I may buy this back but two technical things and one macro thing is giving me pause any time a stock has a huge fast run like that, I like to take at least partial profits once the stock has two days under its 10 day moving average (dma). That s happened and its RSI Relative Strength Index is struggling at 50. Macro the Street is now modelling that heavy oil diffs (diffs=discount) to WTI are peaking now and will head back to $20. (I will have a lot more to say about this).

2 This company is still a cash cow and at some point I buy this back, but for now I sit and wait. PERMIAN TRADE Here s the set up for this Permian trade the blunt truth is that the Permian mania is over now and this meme will overtake everything for a short time. Taking a big step back, WTI is now trading at $11/b discount to Brent. You will read lots of news stories about this over the weekend, and they are almost all BS. This is simple. WTI production is growing-it s basically the only place in the world where oil production is growing. Simple supply-demand says the more supply, the lower the price. Brent supply is not growing. Brent demand is growing. Simple supply-demand says the more demand, the higher the price. It s that simple folks. Talk about term structure and flows of hedging and spec positions whatever. Everyone has to get paid so think up something, Mr. Journalist. Refineries in the US are geared to heavy/mid-grade crudes, and WTI is light oil. (So this is great news for continued refinery trade.) Then on top of that the Permian growth has now hit the same egress limits Canada is going through too much production, not enough pipe. Permian crude is now $12/b less than WTI, which is $11/b less than Brent. Heavy oil in Canada is even worse ($15/b diff to WTI) and the Bakken went to $20+ for a short time in 2012/13. So these stocks are taking prices that $23-$25/b less than GeoPark and Parex in the international world. Increased Permian pipe won t happen to a large degree until Q4 2019, and the Street is now modelling that the Midland diff goes to $20 next year. A huge amount of investment capital has gone into the Delaware in the last 18 months and now a good chunk of it will start to leave.

3 In our CONVERSATIONS group, and again at the Calgary Conference yesterday, Nathan Weiss outlined how price realizations are going down in the Permian, vs. up in other oily basins. So here s what I sold: I sold my last 5000 shares of Lilis Energy (LLEX-NASD) at $5.85 for a $3.05 profit or 110%. Their last mid-stream deal was AWESOME, but there is about 153 million shares out now. I sold my Pro-Petro (PUMP-NYSE) at $15.81 for a $1.25/share loss. Again, this company is doing great but the Street is selling it off as the momentum money leaves the Permian. I really like this company--the growth in production in the Permian is very good for this stock...but the Market is throwing out everything Permian right now and while it's a good company, it's not my high conviction purchase like VNOM. And yes folks, that means I m selling my baby, the Big Winner of the last 7 months Viper Energy (VNOM-NASD). I sold it moments ago at $ Truly, I should only sell half, but once I start selling...this may not

4 be the right decision here. But the gap down today must be respected. I still think this can be a $45 stock this year or next, but for now I m waiting on the sidelines. I will update the portfolio this weekend but gains here ranged from 50-95% between the various purchase points. COBALT I bought Cobalt 27 (KBLT-TSXv) because streaming deals (streaming essentially = royalty) trade at good premiums, the Street supports them and they can continue to accretively buy new streams. I have used the idea to buy stock in the Market on a day a company announces a financing several times (think VNOM initial purchase at $15.50 last year), and did so with KBLT at $ While the stock has not slipped below its $11.30 financing price, it hasn t moved up since its big announcement of a streaming deal with an existing producer. Maybe I m being impatient here at this stage, but with the major catalyst now complete and cobalt price and demand still being great what will move the stock? The entire EV trade has been much weaker than I expected this year, given how strong commodity pricing has remained. And as I ve said many times, once I get in a selling mood, sometimes I can t stop. Kind of like drinking good red wine for me. The next macro catalyst for cobalt which I think will come this year is when the industry supply chain starts to buy into cobalt, like it did with lithium this time last year. That was a big catalyst for the lithium stocks in fact, it was their blow-off top and I do expect that to happen with cobalt this year but I can wait for that in cash. I think it s fair to argue that unless the stock drops below the $11.30 financing price, this is the bottom so why sell and sometimes life isn t fair. The chart is actually OK, with rising MACD and a flat price chart. OTHER MISCELLANEOUS SALES Sometimes I forget about stocks like Cortex Business Solutions

5 CBX. Good company but ZERO liquidity, not appropriate for what I m doing, and my 2000 shares sold out of the portfolio today at $3.65 for 55% gain but barely worth mentioning. I sold my last bit of Ikkuma yesterday at 34 cents. I should connect with Tim but just onto other things. I have a lot more things to share all about the Calgary conference especially. But I wanted to get these trades out asap. -Keith