1. Energy Prospectus Group
Today’s topics:
IEA’s “Oil Market Report”
What will balance the global oil market?
OPEC + Russian Agreement to FREEZE
How much oil will Iran bring to mkt?
U.S. Natural Gas Market
Houston American Energy
John Boylan, CEO

2. DMS Publishing, LLC dba Energy Prospectus Group
EPG newsletters, company profiles, forecasts, presentations and the information contained on our website are strictly the opinion of the publishers and are intended for informational purposes only. Readers are encouraged to do their own research and due diligence before making any investment decisions. The publishers will not be held liable for any actions taken by the reader. Although the information in the newsletters, company profiles, & this presentation have been obtained from resources that the publishers believe to be reliable, we do not guarantee its accuracy.
Please note that the publishers may take positions in companies profiled or discussed in this presentation.

3. Energy Prospectus Group Founded in 2001
Join today: $350/year
Get credit for the cost of today’s luncheon
Mission is to help our members make money
Newsletter, Company Profiles & Forecasts
Model Portfolios for Growth & Income
Luncheons and Networking Events
InvestFest Conference in San Antonio this week
Join today and get credit for today’s luncheon

4. Oil is VERY IMPORTANT
Crude oil is relatively unique as an asset class because it is a depleting resource that is:
Directly related to standard of living
Consumed in enormous volumes
Each day the global economy uses about 95 million bbls of liquid fuels
Demand is expected to SPIKE to 96.5 million bbls per day in the 3rd quarter
Constant renewal of supply requires ongoing investment of LOTS OF CAPITAL
We have already consumed the low hanging fruit

5. IEA: Oil Market Report Global Market heading back to balance
Oversupply of 1.5 MM bbls per day today will shrink to near zero by the 3rd quarter
Big spike in demand coming in Q3
OPEC production down 90,000 BOPD in Feb
OECD inventories down in Feb., but floating storage has increased
Non-OPEC production is falling
OPEC supply disruptions + Iran growth is slow
Nigeria, Iraq and Libya have real problems

6. OPEC: Supply Risks are real

7. IEA: Oil Market Report U.S. production to fall 530,000 BOPD in 2016
Brazil & Columbia also on decline
Total Non-OPEC decline estimated at 750,000 BOPD (up from 600,000 in February report)
“Clear signs that market forces are working their magic and higher cost producers are cutting output.”
OPEC / Russia agreement to freeze production will have little real impact

8. IEA: Oil Market Report
Iran will only increase production by 300,000 barrels per day this year.
“It is clear that Iran will need billions of dollars of investment to reach their production potential and let's face it, with prices this low and major oil companies cutting spending, the cash just is not there. We believe this is a historic time to position for an energy sector recovery Bust cycles do not last forever.”
– Phil Flynn, PRICE Futures Group

9. Demand for oil is “Relentless”

10. Demand for Gasoline Increasing in United States

11. Demand for Gasoline Increasing even faster outside the U.S.

12. IEA: Conclusion
“…we present an essentially unchanged picture for the overall oil supply/demand balances. For the first half of 2016, the implied surplus of supply over demand remains high at 1.9 mb/d in 1Q and 1.5 mb/d in 2Q. To the extent the oil price is forward-looking, comfort will be taken from our view that in the second half of 2016 the gap between supply and demand narrows significantly to 0.2 mb/d in both 3Q and 4Q.”

13. Oil Prices Heading Up

14. Oil Price Forecast

15. Oil Price Forecast Oil Prices used in EPG Forecast models
1st Quarter $30
2nd Quarter $35
3rd Quarter $40
4th Quarter $50
$60
Natural Gas: $1.70 to $2.70 for 2016

16. U.S Active Rig Count

17. Four Oil Basins have accounted for 95% of U.S. Oil Production Growth

18. The Permian Basin is the only area not on decline at 12/31/2015

19. Drilling Activity Outside of the U. S
Drilling Activity Outside of the U.S. Major oil projects all over the world have been cancelled, which puts future supply at risk 22 Major Oil Projects have been cancelled

21. Natural Gas
Crude oil is priced and traded on a GLOBAL MARKET Natural gas is priced and traded on REGIONAL MARKETS

22. U.S. Gas Market will be tighter in 2016

23. Natural Gas Demand Ramping Up

24. What happens next?
Oil & Gas Prices: The fundamentals will win out in the long run, but in the short run they are frequently trumped by emotions (and speculative traders)
Investors are always looking ahead:
Rapidly dropping active rig count
Shrinking oil production + increasing demand
Whenever you see everyone agreeing that one course is certain, you should take time to consider the fact that they might be wrong, especially if “everyone” is being lead by Goldman Sachs

25. John P. Boylan President & CEO