1. Introduction to Infield Systems
April 2013

2. Table of Contents Introduction to Infield Systems
Macro Market Overview
Commodity Price
Hydrocarbon Supply and Demand
Brent and WTI Spread
Administration

3. Introduction to Infield Systems
SECTION I
Introduction to Infield Systems

4. Geographic Locations Office Locations Key Global Personnel
A globally recognised oil & gas consultancy with a dedicated international team of cross-sector specialists
Office Locations
Key Global Personnel
Steve Adams (International Sales Manager)
Aberdeen
James Hall (Director)
London
Aberdeen
London
Quentin Whitfield (Director)
London
Gregory Brown (Consultant)
London
Houston
Luke Davis (Senior Analyst)
London
Singapore
Head Office
Ioanna Karra (Consultant)
London
Regional Office
JV/Representative Office
Edward Richardson (Analyst)
London
34 Energy Professionals covering all geographic regions
Source: Infield Systems

5. Oil and Gas Sector Exposure
Infield provides products and services across the full oilfield service and renewables supply chain
Sources: FMC, Infield Systems

6. Products & Services
A leading offshore oil and gas and associated services consultancy
Data, Reports & GIS Mapping
Business Strategy and Analysis
Transaction Services
Offshore specific data covering production infrastructure, rigs, specialist vessels, construction yards, contracts and OFS providers
Sector specific reports
GIS mapping services covering operational and forecasted production infrastructure
Market matching and market tracking – “Match & Track”
Complete market intelligence outsourcing
Bespoke sector services
Market entry strategy
Procurement strategy advisory – “Project Flow”
Ad-hoc sector analysis
Pre IPO due diligence
Market overview IPO
Debt financing analysis
Distressed asset purchases
Buy/sell side market due diligence
Opportunity identification
Source: Infield Systems

7. Products & Services – Market Reports
Infield publish a range of market reports covering various aspects of the O&G, renewables and associated marine industries
Regional Reports
Global Perspectives
Specialist markets
Arctic
Asia
Australasia
Latin America
Middle East
North America
Deepwater
Fixed Platforms
Floating Platforms
Pipe & Control Lines
FPSOs
Offshore Heavy Transport
Heavy Lift
LNG
Wind
ROVs
Construction Vessels
Subsea Well Intervention
The market update reports provide detailed information, analysis and insight into market trends over the next five years, which is presented in a manageable, clear and concise manner. The integration of the Offshore Energy Database, the Specialist Vessels Database, the construction and fabrication yards database, the drilling rigs database along with Infield's OFFPEX™ Market Modelling and Forecasting System means that each report contains uniquely detailed and up to-date analysis. Within each market update a five year forward forecast is provided with a five year history
Source: Infield Systems

8. SECTION II
Macro Market Overview

9. Short-term Oil Price Dynamics
Brent prices are set to exceed the $100 mark for the third consecutive year
Brent Annual Average Price
In spite of weak economic prospects in the Eurozone, and booming production in North America, we anticipate that Brent will continue to stay above $100/bbl throughout 2013
Infield expect a $114/bbl average in 2013 and $115 in 2014
Given the relatively low level of OPEC spare capacity and the instability in the MENA region, the risk to oil prices is skewed towards the upside
Without unexpected geopolitical tension and supply outages, Brent oil prices are likely to remain in a tight range between $100 and $120/bbl throughout 2013 and 2014
The European benchmark has been fluctuating within this narrow range since early 2011
This price band is high enough to support supply, but not too high to drag on an economic recovery
We believe that a $90/bbl floor would only be broken for short periods of time as low prices will likely spur supply responses from oil producing countries
Saudi Arabia could reduce supply to balance the market. The country produced a 30-year high of 10.1mbpd in June 2012 but has since reduced production to 9.4mbpd
In contrast, a period of sustained oil prices in excess of $120/bbl would have the potential to be met with demand responses
High prices could erode demand and OECD countries release their strategic petroleum reserves
Brent Trading Range
Source: Infield Systems, EIA

10. Long-term Oil Price Dynamics
We believe that supply and demand fundamentals are sufficient so as to support oil price appreciation in the long-run
Brent/WTI Price Forecast
Brent Price Momentum
We believe that Brent will continue its appreciation to reach $133/bbl, with a $6/bbl premium to WTI in 2020
The supply and demand fundamentals are sufficient so as support higher prices as unconventional developments are too small to meet oil demand from emerging markets and compensate the depletion of existing fields
However, after controlling a number of negative factors such as the shale revolution and a weaker Chinese market, our long run forecast deviates from the super-cycle momentum seen throughout the past decade
The commodity super-cycle was supported by increasing demand from China, depletion of existing reserves, and a long term appreciation of the US Dollar
The mid-run rebound from the lower extreme was driven by government support and flourishing liquidity
Short-run price spikes were driven by temporary factors
The oil glut scenario shows the unlikely case of sustained excess oil supply caused by unprecedented large-scale unconventional supply
Long-term Brent Price Scenarios
Sources: Infield Systems, BP

11. Global Oil Supply and Demand Balance
We anticipate that oil markets will be largely in balance by 2020, however, significant risks to supply implies a sustained premium in oil prices
Global Oil Supply and Demand Balance in 2020
We expect demand for oil to grow at an average of 1.5% between 2011 and 2015, and 1.6% between 2016 and 2020 to reach to 101.2mbpd by the close of the decade
Demand in emerging economies will remain robust, with an increase supported by higher income and transportation needs. Demand destruction in developed economies is overstated
Oil demand will also be supported by stronger global GDP growth in the next decade as forecast by the IMF
Unlike the notoriously volatile annual rate, the 5-year average GDP growth was stable over the past 40 years. Global oil demand growth in the same period was highly correlated with the GDP growth rate
On the supply side, our base case forecast anticipates that global oil production capacity will reach 101.5mbpd in 2020, creating a well balanced supply and demand dynamic
The forecast is based on the assumptions that oil prices will stay above $80/bbl, currently producing fields will deplete by 3mbpd (with EOR taken into account) over the next 8 years, and viable new projects go on-stream without severe delays
The high and low case scenarios each forecast a marginal excess supply, however this does not mean that oil price will experience a steady decline throughout the rest of the decade
A small supply excess will not affect Saudi Arabia’s role as the key swing producer, which could cut production levels to influence prices
In addition, should there be any major delays in key projects the sector could see a very tight supply and demand differential leading to significant pressure on prices
Global Oil Demand/Global GDP Growth Rate
Source: Infield Systems, IMF

12. Supply and Demand – New Supply Potential
Supply and demand fundamentals are strong enough to support oil price appreciate in the long-run
New Oil Project Sanction Price/Quantity
No Abundance of Oil
The development of shale oil in the US, oil-sands in Canada and ultra-deepwater all over the world has brought new hope on crude supply. However, we do not foresee an abundance of oil in the rest of the decade as new supplies are too small and too slow to satisfy demand growth from emerging economies
By 2015, shale oil is forecast to constitute only 3.2% of global supply, up from 1.8% in 2013
Although a large quantity of unconventional reserves exist in countries like Venezuela, Canada, and Argentina, it is unlikely to see large-scale development with meaningful supply in the near future
In addition, in the second half of the decade conventional non-OPEC supply will fall as their fields are increasingly mature, and OPEC spare capacity will drop as capacity growth will likely lag behind schedule
Oil Reserve Size / Production Rate
Sources: Infield Systems, Goldman Sachs, BP

13. Supply and Demand – Upside Pressures
The cost of production, and Middle Eastern fiscal budgets will support oil price appreciation in the long-run
Fiscal Budget Breakeven Oil Price in the Middle East
High Cost Supports Oil Price above $95/bbl
The average marginal cost of supply for the most expensive new oil projects has exceeded $95 a barrel
Canada's oil-sands need an oil price of $100/bbl to achieve an adequate return on capital
If oil price stays below $95 for a sustained period a number of marginal fields will be shut down, including supply from small U.S. shale oil producers
The average fiscal breakeven oil price across OPEC countries is likely to rise from $94 a barrel today to $109 by 2017
In addition, a lack of skilled workers and high labour costs are expected to increase further cost inflation and as such require even higher sanction prices for new projects
Production Cost Curve of Oil Related Resources
Sources: Infield Systems, Standard & Poor’s, IEA, EIA

14. Supply and Demand – Downside Pressures
A sustained oil price in excess of $120/bbl is self-destructive as it fosters disruptive supply and drags on the economy
High Oil Prices Support Unconventional Development
Sustained High Oil Price is Self-Destructive
A new oil industry (such as the Arctic) would likely emerge should there be a sustained period of oil price appreciation. The oil price surge in late ‘70s spurred shallow/medium-water drilling, high oil prices around the millennium created the deep-water sector, while the continued price increase has encouraged operators to drill ever deeper into the ultra-deep-water territory. This exploration has been supported by the requirement to replace depleted reserves, particularly conventional assets
Unconventional onshore oil activities, such as shale oil, oil-sands and heavy oil, are also fostered by this unprecedented $100/bbl high oil price environment in addition to the requirement to replace depleted production. Although these new oil resources are usually associated with higher marginal cost and longer development horizon, additional oil supply from these sectors will likely put some downside pressure on oil price
Sustained high oil prices above £120/bbl in could prove to be self destructive as they would threaten the fragile global economic recovery
High oil prices push up cost and shackle the growth potential of the world economy, which in turn causes oil price to decline
This is also reflected in the refining industry which is faced by declining margins on the back of a high oil price
Furthermore a high oil price would also encourage increased fuel efficiency and the development of alternative energy in the long-run
By 2020 the US have to use 2mbbl/d of ethanol by law. Governments across Europe and Asia amongst others have introduced schemes for renewable energies
Gas is increasingly used as transportation fuel driven by the wide oil-gas price gap. In addition, auto makers are increasingly focused on fuel efficiency
High Oil Prices Foster New Oil Industries
Sources: Infield Systems, BP

15. Brent and WTI Spread
A wide spread between Brent and WTI prices is likely to remain throughout 2013 and 2014 before gradually narrowing to about $6/bbl in 2020
Brent/WTI 52-week Spread
US Crude Oil Stock
OECD Europe Annual Oil Stock
Increasing pipeline capacity and rising rail shipments in recent months have helped shrink the oil-glut in Cushing and have brought the Brent/WTI spread down to about $16/bbl in March 2013 from $23/bbl in February. However, we anticipate that a spread of around $15/bbl is unlikely to narrow down in the near future
Brent is supported by a premium attached to the unstable MENA supply and increased demand for Brent grades from countries in Asia like South Korea and China
In contrast, WTI is supressed by high production from the Bakken oil shale formation, high stockpiles in Cushing and large-scale unconventional shale-oil development
Sources: Infield, EIA

16. SECTION III
Administration

17. Disclaimer
The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Infield Systems Limited as to the completeness, accuracy or fairness of any information contained in it, and we do not accept any responsibility in relation to such information whether fact, opinion or conclusion that the reader may draw. The views expressed are those of the individual contributors and do not represent those of the publishers.
Some of the statements contained in this document are forward-looking statements. Forward looking statements include, but are not limited to, statements concerning estimates of recoverable hydrocarbons, expected hydrocarbon prices, expected costs, numbers of development units, statements relating to the continued advancement of the industry’s projects and other statements which are not historical facts. When used in this document, and in other published information of the Company, the words such as "could," "forecast”, “estimate," "expect," "intend," "may," "potential," "should," and similar expressions are forward-looking statements.
Although the Company believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual results to differ from these forward-looking statements, including the potential for the industry’s projects to experience technical or mechanical problems or changes in financial decisions, geological conditions in the reservoir may not result in a commercial level of oil and gas production, changes in product prices and other risks not anticipated by the Company. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties.
© Infield Systems Limited 2013