1. Price reporting in a changing marketplace
Euan Craik, CEO Americas

2. Outline Who is Argus? Why is Argus growing so fast?
Politics & price-reporting agencies
How does Argus report a market?
What’s new?

3. Who is Argus? “The up and coming vendor” — major investment bank
London
Houston
Washington
New York
Portland, OR
Calgary
Santiago
Singapore
Tokyo
Beijing
Sydney
Dubai
Moscow
Kiev
Astana
“The up and coming vendor”
— major investment bank
All energy commodities, all energy markets
Over 275 employees
Over 60 publications
Founded in 1970
US crude & products since 1986
Owned by family of founder & employees
UK limited company

4. Energy price reporting agencies
Global/universal
Platts
Argus
Regional
Opis
RIM
Specialist
ICIS
McCloskey
Natural Gas Intelligence
Exchanges
ICE
Nymex

5. What does Argus do? Shed light on non-transparent markets
Market data vendor

7. What has changed? (Why has Argus grown?)
Politics: A raft of issues have impacted on the business of price-reporting
Sarbanes-Oxley, FERC price reporting guidelines, CFTC and FERC investigations
Price-reporting agencies have changed methodologies in response
Technology
Easier to gather comprehensive transactional data

8. The challenge of regulation
Post-Enron, regulatory bodies on warpath against market manipulation:
CFTC: Prosecutes false reporting to index publishers
FTC: Prosecutes distribution of knowingly misleading information or intentional omissions
Efforts redoubled since $147 oil, financial crisis and election of Obama
How to report prices in opaque markets in a way that is transparent and replicable?
How to guard against manipulation?

9. Compliance
Our clients care about compliance, about staying out of trouble, so we do too
Ethics policy
Enforced editorial policies
Monitoring and audit controls
Compliance officer
Confidentiality

10. Methodology wars Intelligent assessments Transaction-based prices:
Market-on-close
All day transactions
Volume-weighted average
High, low, mean

11. Case Study: Argus crude

12. Volume-weighted indices
Date
Crude
Trade Month
Basis
Differential Price ($/bl)
Volume (b/d)
(Price)*(Volume)/Total Volume
19-Oct-09
Mars
November
November WTI
-3.80
2,000
-3.75
1,000
-3.70
3,733
Total Volume:
19,733
Argus Mars Differential:
-3.74
November WTI Formula Basis:
79.61
Argus Mars Price:
75.87 12

13. How does Argus get the deals?
Refiners, producers, traders submit lists of deals including price, volume, counterparty
Brokers cooperate on the request of their customers.
Companies cooperate because they need a total market index that is reputable and reflects actual trade
Even though voluntary, Argus gets about 95% of all transactions in crude 13

14. How does Argus ensure the accuracy of the deals?
Deals are analyzed, scrubbed, and confirmed
Argus reserves the right to throw out deals if they cannot be confirmed, or seem anomalous
Escalating review process
Argus compliance program
Written procedures and regular internal audit 14

15. Argus includes the entire market
Argus is a total market index. All bona fide deals done on all platforms, and all done in the open market
Platts window
HoustonStreet
Cannot game Argus by trading on one system to the exclusion of another 15

16. 16

17. What’s new?

18. Argus new developments
The Argus Sour Crude Index (ASCI™)
US clean products
Jet fuel
Canadian crude
European products and biofuels
API coal indices
North American gas and power
Biomass

19. Argus Sour Crude Index (ASCI™)
Adoption by Saudi Aramco and Kuwait for all exports to the US. Iraq expected to follow
Prompted by dislocation between inland light sweet WTI and sour crude at the US Gulf Coast
ASCI has potential to be used for broad sweet/sour financial hedging in the Americas
Interest in Latin America and as far away as China

20. ASCI vs WTI 20

21. US clean products
East of the Rockies, refiners representing about half the market are moving all internal and external pricing onto Argus for gasoline, diesel, heating oil and jet fuel
A second-tier of passive firms is consolidating the shift
New wave of sales to smaller marketers and distributors
Why the change? Methodology:
entire day of deals done, at differentials to the Nymex settlement

22. Jet fuel
Jet fuel is a huge market for PRAs, because no refiners operate airlines
Jet fuel is globally negotiated, so change in one region affects another
Leading European airlines pushing to change contracts to Argus globally
US refiners continue to push US airlines to use Argus with some success
Spot trade in the US is frequently transacted at Argus prices

23. Canadian crude Canada is the largest exporter of crude to the US
Crude market indexation is in disarray with competing exchange and brokerage indices
With support from key players, Argus is emerging as an indexation solution

24. European products and biofuels
Argus has long been the benchmark for gasoline swaps in northwest Europe
Adoption of Argus Eurobob (ethanol blendstock) to replace unleaded barges will broaden and deepen usage in Europe, Russia and Africa
Argus the leading benchmark for biodiesel swaps in Europe

25. Coal
API 2 (fob northwest Europe) is the benchmark for most Atlantic Basin trade
API 4 (fob South Africa) is benchmark for coal moving east to Asia
API 6 (for Australia) recently launched
US domestic coal

26. North American Natural Gas & Power
Argus strong in European gas & power
Major gap in North American portfolio
September ’09
Launched natural gas service
Acquired power market service
Ferc compliant in both markets
Major sales and marketing offensive

27. What does the future hold?
Filling gaps
Asia-Pacific
Latin America
Beyond petroleum
Natural gas
Coal
Renewables
Beyond energy?
Metals, agriculture, chemicals
Beyond the spot market
Forward curves?

28. Thank you for your attention