Spot AECO $Cdn/GJ. ARC Oil Sands Producers Equity Index Daily Index Values; Rolling 24-Month History. 3 4 Daily Index Values; Rolling 24-Month History

Transcription

1 November 15, Chart Watch Visit for more information on this publication and the Institute The CAD has fallen to its lowest since Feb OPEC Production hit a new record high in Oct US crude oil stocks rose by. MMB last week Warm weather has weakened winter gas prices US gas storage surpassed Tcf Spot WTI Crude $US/B 3.1 Edmonton Light $US/B Spot Henry Hub Spot AECO $Cdn/GJ Spot AECO Basis Currency $US/$Cdn â 39. â.3 â.5 â. â.73 â ARC Canadian Oil & Growth Equity Index 3 Daily Index Values; Rolling -Month History ARC Oil Sands Producers Equity Index Daily Index Values; Rolling -Month History 7,, 5,, 3,, 1, Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1 Nov-1 The ARC CDN Oil & Growth Index measures the performance of junior oil and gas producers that are not included in larger exchange indices., ARC Financial Corp.,, 1, 1, 1, 1, 1,, Nov-1 Mar-15 Jul-15 Oct-15 Feb-1 Jun-1 Oct-1 The ARC Oil Sands Index measures the performance of six oil sands producers., ARC Financial Corp. Indexed to Jan Oil & Service Equities Year-to-Date 5 Daily Index Values; Indexed to January Baker Hughes and General Electric announced a... Philadelphia Oil & Service PSAC Cana dian In dex...merger of their oil and gas businesses. The merger will create the nd largest oilfield services......company in the world. $US/$Cdn $ $1. $.95 $.9 Canadian Currency Exchange Daily Close Values; Rolling -Month History The CAD has fallen almost two cents since the election. The USD has been gaining against most currencies......since the election, with the dollar spot index hitting the highest since February The performance of Canadian oil and gas service equities are plotted in tandem with the corresponding US index., Petroleum Services Association of Canada $.5 $. $.75 $.7 $.5 Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1 Nov-1 Much of Canada s oil and gas production is sold in US dollars. As such, the exchange rate significantly impacts corporate revenues and profits. Please see Advisories and Disclaimers at the end of the publication for important cautionary advisory and disclaimer language 1

2 November 15, Crude Oil 7 WTI Crude Oil Price and Differential to Brent US Crude Oil Futures Near-Month WTI and Brent Differential; Rolling 1-Month History WTI ($US/B) 5 3 WTI fell $1./ B after the US election last week. WTI Dif f to Brent ($US/B) WTI Diff WTI 5 3 WTI $US/B 55 5 West Texas Intermediate (WTI) to 1 December 1 futures are now trading ~$7.3/ B over spot. The recent price drop was mostly at the front end of the curve......with the long end remaining relatively steady. July 3, Nov-15 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 North American crude oil prices can sometimes disconnect from global prices depending on regional supply and demand dynamics. Forward prices for WTI are plotted against months in the calendar year. Years are distinguished by color and symbol coding. Canadian Heavy Oil Price Differential to WTI Western Canadian Select (WCS) Differential; Rolling 1-Month History 9 1 WCS ($US/B) 5 3 The election of Donald Trump boosts the chances that......keystone XL will eventually be built. The line would connect more CND heavy oil to the USGC. WCS Dif f to WTI ($US/B) WCS Diff. WCS 1 Nov-15 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Canadian heavy crude oil differentials are becoming less volatile with growing access to new markets via pipeline and rail Canadian Light Crude Oil Price Differential to WTI WTI and Edmonton Light differential; Rolling 1-Month History Edm. Light ($US/B) 5 Edm. Light Diff. Edmonton L ight Edm. Light Dif f to WTI ($US/B) Increased...Syncrude 3 volumes from upgrader have CNRL Horizon contributed to and the... wider diffs. Oct-15 Dec-15 Feb-1 Apr-1 Jun-1 Aug-1 The differential should reflect the transportation cost from Alberta to Cushing. Greater discounts can result from infrastructure or refinery outages Ratio of Long to Short Contracts - WTI Managed Money - Futures and Options 11 1 Long:Short 7 The CFTC reported that the managed money group......increased its This move will short position by not yet reflect 1% in the wk the US election ending Nov. results. 1 1 Total US Oil Production Monthly; 1 to Present Offshore Oil Production Onshore Oil Production US crude oil production rose in August by 51 MB/d. This was the result of an MB/d gain in offshore prod. Onshore production fell by 37 MB/d. Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1 This represents the relative bullishness of money managers on the price of oil in the United States., U.S. Commodity Futures Trading Commission The advancement of drilling and completion methods boosted US crude oil production, prior to the downturn in prices., U.S. Energy Information Administration

3 November 15, Crude Oil Alberta Oil Production Monthly; Conventional and Oil Sands Upgraded Oil Sands Non-Upgraded Oil Sands Conventional. Jul-11 Jul-1 Jul-13 Jul-1 Jul-15 Jul-1 Most of Canada s oil production comes from Alberta; split between oil sands and conventional production. Source: Alberta Energy Regulator Global Oil Supply-Demand Balance Quarterly; Rolling 1-Year History oil demand growth is expected to come in Similar growth at 1.. is expected in 17. This compares to growth of 1. in. Oversupply Shortfall Negative numbers indicate a global crude shortfall, while positive numbers indicate an oversupply. Source: International Energy Agency OPEC Oil Production Monthly; Rolling -Month History According to the IEA, OPEC crude output... in rose by.3... October to a record Production in Nigeria and Libya recovered modestly, and... Iraq production reached a new all-time high. July 3, Sep-11 Sep-1 Sep-13 Sep-1 Sep-15 Sep-1 OPEC s production levels relative to its sustainable and spare capacity influences global crude prices. Source: Petroleum Intelligence Weekly US Crude Oil Imports Oct production was 1.3 over Oct of last year. Prior to the downturn, growing domestic supply was displacing crude oil imports. Crude oil imports for the current year are in blue. 17 US Weekly Crude Oil Imports from Canada Pipeline, Tanker and Barge Crude Imports; Rolling -Month History 1 US Exports of Crude Oil and Refined Products Weekly Data; 13 to Present Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1 Crude oil imports from Canada are taking market share from overseas imports US crude oil exports rose to ~9 MB/d in September. Crude Oil Refined Products Canada took the largest share of crude oil imports at 3 MB/d.. Jan-13 Jul-13 Jan-1 Jul-1 Jan-15 Jul-15 Jan-1 Jul-1 The US exports more refined products than crude oil. If/when tight oil growth resumes, most export growth should come from crude oil exports. 3

4 November 15, Crude Oil 19 US Crude Oil Stocks MMB Crude oil stocks rose by. MMB Storage is currently more than last week. 3 MMB over last year. % US Refinery Utilization Rates (%) July 3, 35 3 US crude oil stock levels can affect crude oil prices. Stock levels for the current year are represented by the blue line. 5 Refinery utilization is rising as we exit turnaround season. 75 Refinery utilization rates change the supply of refined products, impacting price. Utilization for the current year is blue. Total Weekly US Petroleum Supplied 1 1 Colonial Pipeline s Line 1 restarted early last week. The pipe carries 1. of gasoline from the US Gulf......Coast to the Northeastern US US Motor oline Consumption Petroleum supplied represents the total consumption of petroleum products in the US. Consumption for the current year is in blue oline consumption accounts for almost half of all oil use in the US. oline consumption for the current year is represented by the blue line. US Oil Drilling Activity Baker Hughes Horizontal Oil Rig Counts; 1 to Present 3 # of Oil Rigs - Play Lev el Total US (Right-Axis) Permian Eagle Ford Bakken # of Oil Rigs - Total 1 The total US oil rig count rose by 1 two last week. 1 The Eagle Ford saw the largest 1 gain; up by three rigs. 1 Jan-1 Jul-1 Jan-15 Jul-15 Jan-1 Jul-1 Tracking US oil drilling by major play provides insight into the composition of US oil supply and growth trends. Source: Baker Hughes % of Edm. Light 1% 1% 1% 1% % % % % % Daily NGL Prices as a % of Edmonton Light Propane & Butane Spot Prices at Edmonton, AB Cond ensate Butane (Spot) Propa ne (Spot) Propane prices have been strengthening relative to......edmonton Light, with the ratio currently sitting close to......a two year high. -% Oct-1 Feb-15 Jun-15 Oct-15 Feb-1 Jun-1 Oct-1 Natural gas liquids have become critical contributors to producer s cash flow. Prices are influenced by the price of oil as well as local supply and demand., ARC Financial Corp.

5 November 15, Natural 5 Near-Month North American Natural Prices Daily Prices; Rolling 1-Month History $3.5 $3. $ $. $ $1. $.5 7 AECO $C/GJ Henry Hub Differential $. Nov 13 Feb 11 May 1 Aug 1 Nov Near-month prices at AECO track Henry Hub prices, the exchange rate and the cost of transportation. Local factors can also affect price. Long:Short Henry Hub closed the week at $./ MMBtu. This is down $.7/MMBtu from the peak four weeks ago. Ratio of Long to Short Contracts Henry Hub Managed Money Futures and Options The bullish view on gas continues to moderate due to warm temps. The long:short ratio fell again in the week ending Nov US Natural Futures Nymex (Henry Hub) to 1 Canadian Natural Futures AECO Hub (Bloomberg Estimate) to 1 July 3, 3.75 Winter prices have 3.5 experienced significant...drops, largely 1 due to warmer than expected 3.5 weather. Forward contract prices are plotted against months in the calendar year. Years are distinguished by color and symbol coding. $C/GJ 17 futures 3.75 are now averaging below 17 1 due to......softer winter 3.5 prices. For most 1 of this year the curve has been backwardated, with stronger pricing in 17 than 1.. Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1.5 This represents the relative bullishness of money managers on the price of natural gas in the United States. Source: U.S. Commodity Futures Trading Commission AECO forward prices mimic Henry Hub futures plus a differential Global Natural Prices Japanese LNG, UK NBP, Henry Hub; Average Monthly Prices 9 3 US Coal and Natural Power Generation Cost Converted to a $/MWh Equivalent Japanese LNG UK NBP Henry Hub Nov-11 Nov-1 Nov-13 Nov-1 Nov-15 International natural gas prices strongly impact the economics of proposed LNG projects., Japanese Ministry of Economy, Trade and Industry $US/MWh $5 $ $3 $ $1 Coal and natural gas prices have begun to...recent weeks converge in... in terms of the cost to generate electricity. Appalachian Coal $ Henry Hub This graph illustrates when it may be economic to begin coal-gas switching in power generation. Average power plant efficiencies are assumed. 5

6 November 15, Natural 31 Closing Closing Spot Spot Prices Prices at at North North American American Natural Natural Hubs Hubs Superimposed on Relative Pipeline Flows Superimposed on Relative Physical Volumes Traded July 3, AECO US$1.75 Kingsgate US$1.75 Malin US$1.7 Stanfield US$1.7 Opal US$1.7 San Juan Ventura US$1.9 \ Chicago US$. Waddington US$ Dawn US$.3 Boston US$. TGP Zone - Marcellus US$1.7 Socal US$.5 US$1.73 Permian US$1.7 Henry Hub US$.3 All prices in North America has an integrated natural gas market. Prices are determined by regional supply and demand, and pipeline flows. Pipeline Flows Out of Western Canada Daily; 3 33 US Natural Exports Excluding Canada Daily; 1 11 Pipeline flows out of Western Canada are now ~. Bcf/d. This is around. Bcf/d below the level at the start of the yr The ability of gas producers to move gas out of the WCSB to eastern markets and the US is a major factor in local natural gas prices. Source: Various Pipeline Companies US natural gas exports have recovered now that the......sabine Pass LNG facility has come back online.. Between exports to Mexico and LNG shipments, the US is growing as a natural gas exporter. Robust US supply growth has driven this trend. Source: Bentek

7 November 15, Natural 3 35 HDDs US Weekly Heating Degree Days Source: NOAA Heating degree days are currently similar to levels. Warmer than expected weather is dampening demand Week US Total Natural Demand Daily; July 3, Weekly natural gas demand is directly tied to the weather. The current year is in dark blue. Source: National Oceanic and Atmospheric Administration Total US demand fluctuates between Bcf/d in the summer and over 1 Bcf/d in the winter. Weather is the most important driver of consumption. Source: Bentek Total US Dry Natural Production 3 37 Daily Western Canadian Production Estimated Using Major Pipeline Receipts Natural gas production has In the last 3 been relatively weeks demand stable recently. has averaged 71 Bcf/d. 13 This is ~3 Bcf/d below the level of production in February. 5 US production started ramping up in late 7 and continues to grow year over year. Source: Bentek This includes receipts on the TCPL, Alliance, WestCoast and Trans pipelines. Source: Various Pipeline Companies Weekly US Natural Storage Net Change Weekly Injection or (Withdrawals); 9 to Current 3 39 Bcf (5) (1) (15) () (5) (3) Warm weather is pushing back the start of winter......withdrawal season, which could inflate storage further. (35) Tcf Total Working Natural in US Storage The storage surplus to the 5 year average grew to 19 Bcf. This was the first weekly rise in the surplus since April. 1 Total gas in storage passed Tcf for the nd time in history..5 Weekly gas storage reports provide a snapshot of supply and demand. Current year changes are represented by the blue line. The EIA reports changes in US natural gas inventories held in underground storage facilities on a weekly basis. 7

8 November 15, Natural and Other Indicators Alberta Natural Demand 1 TransCanada Intra-AB Deliveries; Current Year and Historical Tracks Warmer than expected weather has moderated......alberta gas demand. demand is still tracking over historical averages so far. Bcf Western Canadian Natural Storage Levels Weekly; Current Year and Historic Tracks Western...week, and is Canadian storage now almost contracted Bcf below the slightly last... peak in Sept. 1 July 3, Alberta natural gas demand has grown steadily in recent years, largely driven by new oil sands projects coming on line. Source: TransCanada Pipelines Canada s natural gas storage level provides a good metric if the country is well stocked. Abnormally high or low storage can affect the basis. Weekly Canadian Oil and Drilling Activity Baker Hughes Average Rig Counts; Rolling -Month History 3 US Drilling Activity Baker Hughes Horizontal Rig Counts; 1 to Present # of Rigs Oil Rigs Rigs According to the CAODC, aprx. 3% of the rig This compares fleet is active. to 5% and 3% at this time in 1 and. # of Rigs - Play Lev el Marcellus Haynesville Eagle Ford The natural gas rig count fell # of Rigs - Total slightly last The trend is still week. upwards, with 35 gains in of the last 11 weeks. 3 Total US (Right Axis) Nov-1 Mar-15 Jul-15 Nov-15 Mar-1 Jul-1 Unlike US drilling activity, Canadian rigs are dispatched seasonally. Capital allocation by operators is driven by views of future oil and gas prices. Source: Baker Hughes Jan-1 Jul-1 Jan-15 Jul-15 Jan-1 Jul-1 Tracking US gas drilling by major play provides insight into the composition of US gas supply and growth trends. Source: Baker Hughes Alberta Crown Land Sales Excluding Oil Sands Year-over-Year; Cumulative 5 Canadian Cumulative Well Completions Current Year vs Years Prior $ Billions The AB government brought in just $3. million......in it s Nov 9 land sale Land prices are an important component of F&D costs. In Alberta, sales of petroleum and natural gas rights are held every two weeks. Source: Alberta Department of Energy Well Completions (s) Overall completions are lagging last year by ~% Week Relative year-over-year drilling activity is highlighted in this chart. Cumulative well completions for the current year are shown in blue. Source: Daily Oil Bulletin/JWN 1

9 $C 75.7 Billion November 15, Canadian Industry Metrics Estimated Capital Flow in the Canadian Oil and Economy for Industry Revenue, Cash Flow, Reinvestment, Drilling Activity and Production $C 3.9 per BOE Oil & Prices E&P Revenue G&A Royalties & Taxes Cash $C 19. Flow Billion Foreign Investment and Capital Outflow Dividends and Distributions Debt, Equity July 3, CAPPs latest forecast of capital expenditures......has 17 conventional capex rising 3.1%....compared to. Oil sands capex is expected to decrease..7 Million BOE/day Production Volume Reserve Additions Capital Flow in the Canadian Oil and Economy 3,5 Wells Drilling Activity Operating Expenditures Service Sector Revenue CAPEX Exploration & Development Land, Acquisitions $C 35.7 Billion Canadian Industry Statistics: Historical Data and Forecast Canadian Industry Metrics P rice P ro ductio n Vo lume C apital Inflo w R einvestment D rilling Well Split Average Price Edmonton Par AECO Conv. Liquids Bitumen + Synthetic Natural Total Volume Total Revenue After-tax Cash Flow Conv. Oil and Oilsands Reinvest Ratio Wells Compl. Avg Rig Utiliz. Oil Wells Wells $/BOE $C/B $C/GJ Average M BOE/d Average M BOE/d M BOE/d M BOE/d (@ :1) (@ :1) $C millions $C millions $C millions $C millions x:1 #/ Year % % % ,77 1,199,1,7 19,7 5,95 31,1 1,5. 19,1 3% % % ,99 1,7,7 5, 15,5 3,55 3,93 1, ,77 1% 3% 5% , 1,331,51 5,3 9,57 3,,335 11,7.91,3 5% 1% 51% ,3 1,3,3 5, 11,5 3,59 35, 17, ,119 % 5% % ,73 1,,3 5,7 115,9 53,,139, ,7 5% 9% 31% ,95 1,73,37 5, ,39,9 39,733 7, ,7 % 3% 17% ,3 1,9,33,3 1,77 5,711 3,15 3, ,71 % % 1% ,,13,5,9 19,53 71,,7 33, , 5% 7% % ,93,373,79,35,17,775 3,551,9.1 5,39 % 9% 31% e ,9,393,11,7 75, 19,9 19,9 1, ,5 1% 55% 5% Advisories and Disclaimers: This document is provided for informational purposes only and none of the information contained herein is intended to provide, nor should be construed as, investment, financial, legal or other advice and should not be relied upon as such. Certain of the information and data contained herein has been obtained or prepared from publicly available documents and other sources prepared by third parties, and ARC has relied upon such information and data. ARC does not audit or independently verify such information and data and ARC makes no representations or warranties as to the accuracy or completeness of such information and data nor the conclusions derived therefrom. This document has been published on the basis that ARC shall not be responsible for, and ARC hereby expressly disclaims any responsibility or liability for, any financial or other losses or damages of any nature whatsoever arising from or otherwise relating to any use of this document. Certain information contained herein may constitute forward-looking information and forward-looking statements" (collectively, "forward-looking statements") under the meaning of applicable Canadian securities laws. Forward-looking statements include estimates, plans, expectations, intentions, opinions, forecasts, projections, guidance or other statements that are not statements of fact, including but not limited to global and industry economic conditions and policies, production, demand and commodity prices. Although ARC believes that the assumptions underlying and expectations reflected in such forward-looking statements are reasonable, it can give no (and does not give any) assurance that such assumptions and expectations will prove to have been correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors outside of ARC's control that may cause actual results to differ materially from those expressed herein. Neither ARC nor any of its affiliates undertakes any obligation to publicly revise such forward-looking statements to reflect subsequent events or circumstances, except as required by law. 9