February, Chart Watch ARC Energy Charts Visit for more information on this publication and the Institute 1 9 1 17 3 Equities have rallied following the correction New Chart: Canadian Petroleum by Rail New Chart: US Crude Oil Imports Crude oil inventories fell by 1. US gas production is near record highs Spot WTI Crude $US/B 3. á Edmonton Light $US/B Spot Henry Hub Spot AECO $Cdn/GJ Spot AECO Basis Currency $US/$Cdn 7. á. á 1.9.9 á.79 á á Indexed to 1 Months Ago 13 1 1 11 11 1 Broad Equity Markets Year-to-Date 1 Daily Index Values; Rolling 1-Month History The DJIA recovered by.1% from its February low. Shanghai Composite S&P/TSX Composite Dow Jones The index is still down by.9% from its high in January. Indexed to 1 Months Ago 11 1 Performance of Oil and Equities Year-to-Date Daily Index Values; Rolling 1-Month History 9 ARC Junior E&P Index S&P E&P S&P/TSX E& P Index E&P stocks also recovered more than the broad market from......their respective February lows. US and Cdn E&Ps are up by 7.1% and 7.% respectively. 1 9 9 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-1 Broad market indices are one the many vital signs measuring the health of the economy. Energy demand is a function of economic health., ARC Financial Corp. 7 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-1 Performance of Canadian and US oil & gas equities are compared against each other., ARC Financial Corp. Oil & Service Equities Year-to-Date 3 Daily Index Values; Rolling 1-Month History Canadian Currency Exchange Daily Close Values; Rolling -Month History Indexed to 1 Months Ago 1 1 Philadelphia Service Index PSAC Cana dian In dex Service cos also increased from February lows. US and Cdn service cos are up.% and.% respectively $US/$Cdn $.9 $. The USD has gained broadly against most currencies......on expectations of faster rate hikes. 1 $. $.7 $.7 The CAD hit $US.771 on Thursday; a low for. Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-1 The performance of Canadian oil and gas service equities are plotted in tandem with the corresponding US index., Petroleum Services Association of Canada $. Feb-1 Jun-1 Oct-1 Feb-17 Jun-17 Oct-17 Feb-1 Much of Canada s oil and gas production is sold in US dollars. As such, the exchange rate significantly impacts corporate revenues and profits. Please see Advisories and Disclaimers at the end of the publication for important cautionary advisory and disclaimer language ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts 1
February, Crude Oil WTI Crude Oil Price and Differential to Brent Near-Month WTI and Brent Differential; Rolling 1-Month History WTI ($US/B) 7 3 WTI rallied last week, closing Friday at $3.7/B. WTI Diff WTI Dif f to Brent ($US/B) 1 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-1 WTI WTI is trading at a discount of less than $/B to Brent......down from a discount of ~$7/B to start the year. North American crude oil prices can sometimes disconnect from global prices depending on regional supply and demand dynamics. 7 3 1 US Crude Oil Futures West Texas Intermediate (WTI) to WTI for delivery two years $./B below WTI $US/B from now is the spot price. trading 19 July 3, Forward prices for WTI are plotted against months in the calendar year. Years are distinguished by color and symbol coding. Backwardation is typically seen in tight markets. Canadian Heavy Oil Price Differential to WTI Western Canadian Select (WCS) Differential; Rolling 1-Month History 7 Canadian Light Crude Oil Price Differential to WTI WTI and Edmonton Light differential; Rolling 1-Month History WCS ($US/B) 3 TCPL s Russ Girling commented that pending the resolution......of a number of factors (land rights-of-way, contracting)... WCS Diff. WCS...construction on KXL could start in 19. He cautioned that the company will be methodical... WCS Dif f to WTI ($US/B) 3...about how it would define a Final Investment Decision. 1 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-1 Canadian heavy crude oil differentials are becoming less volatile with growing access to new markets via pipeline and rail. 3 1 1 Edm. Light ($US/B) 3 Edm. Light Diff. Edmonton L ight Enbridge expects that line 3 will be operating in 19. This should help to reduce the discounts for Cdn crude. Edm. Light Dif f to WTI ($US/B) 1 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 The differential should reflect the transportation cost from Alberta to Cushing. Greater discounts can result from infrastructure or refinery outages. 9 7 3 1 Canadian Rail Shipments of Petroleum Products Weekly; 1 to Present 9 1 Total US Oil Production Monthly; 1 to Present Railcars/Week 11 1 We have added a new chart. See Feb 7 th SnapChart. 1 1 Offshore Oil Production Onshore Oil Production 9 7 US production surpassed 1 for the first time......since 197 according to the US EIA. Production grew.3 in November to 1.. Production data for December will be released on Wednesday. Jan-1 Jul-1 Jan-1 Jul-1 Jan-17 Jul-17 Jan-1 As pipeline capacity becomes more constricted, shipments of petroleum products (especially crude oil) are expected to rise. Source: Canadian National Railway, Canadian Pacific Railway 1 11 1 13 1 1 1 The advancement of drilling and completion methods boosted US crude oil production, prior to the downturn in prices., U.S. Energy Information Administration ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts
February, Crude Oil Alberta Oil Production Monthly; Conventional and Oil Sands 11 1. 3. 3... 1. 1.. Upgraded Oil Sands Non-Upgraded Oil Sands Conventional The IEA in its latest oil market...oil production report forecasts of.1. Canadian... This represents a.3 year-over -year supply gain. 3 33 3 31 3 9 OPEC Oil Production Monthly; Rolling -Month History The latest IEA report put Jan Higher Nigerian OPEC production production at 3.1. offset output losses elsewhere This represents 137% compliance with the OPEC cuts. July 3,. Nov-1 Nov-13 Nov-1 Nov-1 Nov-1 Nov-17 Most of Canada s oil production comes from Alberta; split between oil sands and conventional production. Source: Alberta Energy Regulator Jan-13 Jan-1 Jan-1 Jan-1 Jan-17 Jan-1 OPEC s production levels relative to its sustainable and spare capacity influences global crude prices. Source: Petroleum Intelligence Weekly.. 1. 1... -. -1. -1. -. Global Oil Supply-Demand Balance Quarterly; 1 to Present 13 1 Assuming OPEC maintains its cuts and there are no other......major supply/ demand changes, the IEA expects that the oil... Shortfall...market will be balanced, and storage draws will be modest. Oversupply -. 1 11 1 13 1 1 1 Negative numbers indicate a global crude shortfall, while positive numbers indicate an oversupply. Source: International Energy Agency Long:Short 1 1 1 1 1 Ratio of Long to Short Contracts - WTI Managed Money - Futures and Options The ratio of long to short WTI contracts held by Managed......Money rose to the highest on record. The number of short contracts fell to their lowest on record Mar-1 Jun-1 Sep-1 Dec-1 Mar-17 Jun-17 Sep-17 Dec-17 This represents the relative bullishness of money managers on the price of oil in the United States., U.S. Commodity Futures Trading Commission 1 US Crude Oil Imports Weekly Data; 13 to Present 1 9 7 3 1 Other Imports Imports from Canada We have added a new chart showing crude oil imports......as a share of total US crude oil imports. Jan-13 Jan-1 Jan-1 Jan-1 Jan-17 Jan-1 Crude oil imports from Canada are taking market share from overseas imports. 1. 7.... 3.. 1. US Exports of Crude Oil and Refined Products Weekly Data; 13 to Present Crude Oil Refined Products YTD the US has been exporting 1. of crude With US refineries saturated, additional domestic light... This is up from. in the same time last year....crude production is expected to be exported.. Jan-13 Jan-1 Jan-1 Jan-1 Jan-17 Jan-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. ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts 3
February, Crude Oil 17 US Crude Oil Stocks 1 MMB Crude oil inventories drew by 1. MMB last week. There is typically storage gains at this time of year. 1 MMB 1,7 1, OECD Total Industry Oil Stocks Americas and Rest of OECD; 1 to Present OECD commercial stocks fell in December by. MMB. This was the steepest drop since Feb of 11. July 3, OECD Americas* 3 Inventories are now just 7 MMB over the -year average. 1, Other OECD Stocks ended the year MMB above the -year average. 3 US crude oil stock levels can affect crude oil prices. Stock levels for the current year are represented by the blue line. 1, Jan-1 Jan-13 Jan-1 Jan-1 Jan-1 Jan-17 Global oil stock levels can affect crude oil prices *Includes U.S. (~9%), Canada, Mexico and Chile. Source: International Energy Agency 19 % 1 9 US Weekly Refinery Utilization Rates (%) 1. 9. US Motor oline Consumption 9 9. Refinery utilization has been very high to start the yr. YTD utilization has been 91.1%, the highest since... YTD gasoline consumption has been up by.. 7 Refinery utilization rates change the supply of refined products, impacting price. Utilization for the current year is blue. 7. 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. 1 # of Oil Rigs - Play Lev el Total US (Right-Axis) 3 1 US Oil Drilling Activity Baker Hughes Horizontal Oil Rig Counts; 1 to Present Permian Eagle Ford Bakken Cana Woodford US drillers added 1 oil rig last week; for a total of 799. The count is now the highest since April of 1. More than half of the rigs are drilling in the Permian. # of Oil Rigs - Total 1 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Jul-1 Jan-17 Jul-17 Jan-1 1 1 1 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) YTD condensate This is higher prices have avg d than the 111% of avg of 17.%. Edmonton Light. Condensate......prices have been less affected than Edm. Light. -% Feb-1 Jun-1 Oct-1 Feb-17 Jun-17 Oct-17 Feb-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. Condensate still needs to be imported into the WCSB. ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts
February, Natural 3 Near-Month North American Natural Prices Daily Prices; Rolling 1-Month History $. $3. $3. $. $. $1. $1. $. Differential $. Feb May Aug Nov Feb Long:Short. 3. 3... 1. 1.. Henry Hub prices have fallen in recent weeks on more... AECO $C/GJ Henry Hub Near-month prices at AECO track Henry Hub prices, the exchange rate and the cost of transportation. Local factors can also affect price. Ratio of Long to Short Contracts Henry Hub Managed Money Futures and Options The ratio of long to short Henry Hub contracts fell last week....mild weather forecasts. Strong production and milder weather outlooks have......weakened investor sentiment, softening gas prices.. Mar-1 Jun-1 Sep-1 Dec-1 Mar-17 Jun-17 Sep-17 Dec-17 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.7.. US Natural Futures Nymex (Henry Hub) to July 3, Henry Hub futures for the 3. rest of the year are averaging... $US.7/ 19 MMBtu. 3. This is similar to the futures pricing in 19 3. and.. 1.7 1. 1. 1. Forward contract prices are plotted against months in the calendar year. Years are distinguished by color and symbol coding. Canadian Natural Futures AECO Hub (Bloomberg Estimate) to Summer 1 $C/GJ basis is trading at $1.7/.7 This is well MMBtu. above typical as 19. egress concerns continue to......weigh on. futures markets. AECO forward prices mimic Henry Hub futures plus a differential Global Natural Prices Japanese LNG, UK NBP, Henry Hub; Average Monthly Prices 7 1 1 1 1 1 UK NBP Japanese LNG prices in Jan averaged $11/ MMBtu. This was the highest since December 1. Japanese LNG Henry Hub Feb-13 Feb-1 Feb-1 Feb-1 Feb-17 $ $ $3 $ $1 US Coal and Natural Power Generation Cost Converted to a $/MWh Equivalent $US/MWh Henry Hub Appalachian Coal $ 1 13 1 1 1 International natural gas prices strongly impact the economics of proposed LNG projects., Japanese Ministry of Economy, Trade and Industry This graph illustrates when it may be economic to begin coal-gas switching in power generation. Average power plant efficiencies are assumed. ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts
February, Natural 9 A recently completed open season for gas delivery to the......empress/ McNeil Border will drive a $. billion......expansion to the NGTL system. Closing Closing Spot Spot Prices Prices at at North North American American Natural Natural Hubs Hubs Superimposed on Relative Pipeline Flows Superimposed on Relative Physical Volumes Traded July 3, Kingsgate US$.9 AECO US$1. Malin US$.3 Stanfield US$.7 Opal US$.3 San Juan Ventura US$.3 \ Chicago US$. Waddington US$. Dawn US$. Boston US$.1 TGP Zone - Marcellus US$1.99 Socal US$.7 All prices in US$. Permian US$.3 Henry Hub US$. The US FERC has granted ETP permission to recommence......drilling associated with the Rover pipeline, following......a halt of ~ weeks. Once completed the project......will bring 3. Bcf/d of gas to the US Midwest and Ontario. North America has an integrated natural gas market. Prices are determined by regional supply and demand, and pipeline flows. 3 31 1 11 1 9 7 Pipeline Flows Out of Western Canada Daily; Export volumes have been...flows to Dawn strong since the on November 1 st. start of LTFP... Exports since...up by 1. Bcf/d then have been... from the first 1 months of. 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 9.. 7.... 3.. 1. US Natural Exports Excluding Canada Daily; LNG exports...fallen in the from Cheniere s last two weeks. Sabine Pass facility have... Overall gas exports are still high; up 1. Bcf/ d YTD.. 1 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 ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts
February, Natural 3 33 HDDs 3 1 1 US Weekly Heating Degree Days Source: NOAA The latest NOAA to 1 day forecast is for warmer......than normal temperatures in the US Northeast, but... 1 7 1 13 1 19 31 3 37 3 9 Week...cooler temperatures on the rest of the continent. Weekly natural gas demand is directly tied to the weather. The current year is in dark blue. Source: National Oceanic and Atmospheric Administration 1 1 13 1 11 1 9 7 US Total Natural Demand Daily; YTD gas demand has been up 11. Bcf/d over last year. This has been supported by cold weather. July 3, 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 3 Daily Western Canadian Production Estimated Using Major Pipeline Receipts 7 7 7 US gas production is tracking near all-time highs. YTD gas production is up by.9 Bcf/d over last year. 13 17 1 1 1 13 US production started ramping up in late 7 and continues to grow year over year. Source: Bentek 1 This includes receipts on the TCPL, Alliance, WestCoast and Trans pipelines. Source: Various Pipeline Companies 3 37 Bcf 1 () (1) () (3) Weekly US Natural Storage Net Change Weekly Injection or (Withdrawals); 9 to Current The last storage draw came in at 1 Bcf. This was a slightly smaller storage draw than typical. () Tcf.. 3. 3... 1. 1. Total Working Natural in US Storage The storage deficit to the - year average is now 1 Bcf. Storage deficits this year are the lowest since 1 when... Henry Hub was trading around $/MMBtu.. 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. ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts 7
February, Natural and Other Indicators 3 39 TransCanada Intra-AB Deliveries; Current Year and Historical Tracks 7....... 3. 3. Alberta Natural Demand Weather so far this year in AB has been colder than normal. This has helped boost gas demand; up.7 Bcf/d YTD.. Alberta natural gas demand has grown steadily in recent years, largely driven by new oil sands projects coming on line. Source: TransCanada Pipelines Bcf 3 1 Western Canadian Natural Storage Levels Weekly; Current Year and Historic Tracks Unlike US gas storage, levels in W. Canada are Storage is above normal. currently. Bcf above the - year average. 1 July 3, This is despite high domestic demand and export flows. 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 1 US Drilling Activity Baker Hughes Horizontal Rig Counts; 1 to Present # of Rigs 1 1 YTD the gas rig count has averaged 11, down from... Rigs...11 in the same time last year. Oil Rigs The oil rig count is up by 1 rigs relative to last year. # of Rigs - Play Lev el 1 Total US (Right Axis) 1 1 Marcellus Haynesville Eagle Ford The US gas rig count rose slightly to 179 rigs. There are. times as many rigs targeting oil in the US as... # of Rigs - Total...there are targeting gas. 3 3 1 1 Mar-1 Jul-1 Nov-1 Mar-17 Jul-17 Nov-17 Jan-1 Jul-1 Jan-1 Jul-1 Jan-1 Jul-1 Jan-17 Jul-17 Jan-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 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 3 $ Billions. 3. 3... Total bonus payments at BC s Feb land sale were $.1 MM. Per hectare land values so far in have been similar to the......lows of 1 and 1. 1 11 1. 1 1. 13. 1. 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) 1 1 1 1 1 Canadian Cumulative Well Completions Current Year vs Years Prior YTD well completions are down 1% from last year. 11 1 1 11 1 1 31 3 1 1 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 1 1 ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts
February, Canadian Industry Metrics Estimated Capital Flow in the Canadian Oil and Economy for Industry Revenue, Cash Flow, Reinvestment, Drilling Activity and Production $C 3.73 per BOE Oil & Prices 7. Million BOE/day Production Volume $C 1. Billion E&P Revenue Capital Flow in the Canadian Oil and Economy G&A Royalties & Taxes Operating Expenditures Cash Flow $C.7 Billion Exploration & Development Foreign Investment and Capital Outflow CAPEX Dividends and Distributions Debt, Equity $C 3.7 Billion July 3, Reserve Additions 7,11 Wells Drilling Activity Service Sector Revenue Land, Acquisitions 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. Bitumen + Liquids 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 % % % 9.. 3.79 1, 1,331,1,3 9,7 3,,33 11,7.91,3 % 1% 1% 1.1 77. 3.79 1,3 1,3,3, 11, 3,9 3, 17,19 1.1 1,119 % % % 11.3 9. 3. 1,73 1,,3,7 11,9 3,,139,91 1.1 1,7 % 9% 31% 1..3.7 1,9 1,73,37,97 111,39,9 39,733 7,199 1.37 11,7 % 3% 17% 13.9 93.7 3.,3 1,9,33,3 1,77,711 3,1 3,9 1.3 11,71 % % 1% 1 1.3 9.7.3,,1,,99 19,71 7,1,7 33, 1.1 11, % 7% % 1 37.1 7.3. 1,93,3,, 93,1,99 31,9,99 1.9,3 % 9% 31% 1 3.3 3.9. 1,9,1,7,93,,7, 1, 1., 17% 7% 3% e 37.19..1 1,9,9,7 7,17 97,3 39,7 31,97 13, 1.1 7,7 % 7% 3% e 3.73 7..33 1,9,9,9 7, 1,, 31,179 1,19 1. 7,11 % 7% 3% 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. ARC Energy Research Institute. All Rights Reserved. ARC Energy Charts 9