1. 2016 Brooks Case Competition Battling the Oil ‘Death Spiral’ Team 7: Johanan Tai, Xin (Kathy) Zhang, Kevin Wang

2. Overview Part I: Industry Outlook ❖Fitting the Oil Price Trend to a distribution ❖Traditional versus Horizontal Tracking Analysis ❖Saudi Arabia Strategy & Effectiveness Part II: Firm Analysis ❖ConocoPhillips & Antero Resources ❖Firm Strategies & Recommendation ❖Overall Investment Attractiveness

3. Oil Prices Fitted to a Lognormal Distribution ❖Similar to stock in the sense that prices can’t be negative ❖Right skewed distribution ❖Lognormally distributed for both 2 yr and 5 yr ❖Annualized Parameters: Alpha and sigma

4. Lognormal Data ❖Based on rate of change on a daily basis ❖Continuously Compounded RoC ❖2 year had higher volatility ❖Significance of forward vs backward looking

5. Breakeven Analysis ❖Assumptions: inelastic supply existent platforms mainly variable costs HorizontalVertical Price/barrel34.01 VC/barrel13.6040%22.1165% BOPD8040

6. Breakeven Analysis ❖Other factors: Horizontal ---more initial and storage costs ---pollution ---more time and water ---hydraulic fracturing

7. Saudi Arabia’s Role in OPEC ❖2nd largest Country in terms of Reserves (~268 Billion Barrels) ❖Largest OPEC producer (11.62M Barrels/day) ❖Strategy: Refusal to give up market share against the US ❖Belief: US has high production cost compared to Saudi Arabia "The Hidden Agenda Behind Saudi Arabia's Market Share Strategy | OilPrice.com." OilPrice.com. N.p., n.d. Web. 19 Feb. 2016.

8. How Successful are they? ❖US output growth in 2015 outpaced Saudi Arabia and other oil producers ❖US has higher delta in production rates ❖US companies have high debt and fixed costs "The Hidden Agenda Behind Saudi Arabia's Market Share Strategy | OilPrice.com." OilPrice.com. N.p., n.d. Web. 19 Feb. 2016.

9. Revenue Mix ❖Antero Resources ❖ConocoPhillips

10. Antero Resource Strategy & Recommendation ❖Currently one of main shale oil players ➢Shale drawbacks/costs ❖Experienced a 93% increase in production of NGL ❖Price per Mcfe increased from $4.31 to $4.73 ❖NG uses and potential future in North America

11. ConocoPhillips Strategy & Recommendation ❖Operations in 27 countries ❖Large majority of US energy market ❖Current cuts and losses ❖Best course of action: short hedging

12. Financial Ratio Analysis of ConocoPhillips/Antero