Presented by Midwest Energy Logistics October 10, 2013
Table of Contents Goals of Risk Management Program Hedging Results Summary Looking Ahead 2Midwest Energy Logistics - October 10, 2013
Goals of Risk Management Risk Management = Hedging = Forward Fixed Pricing Trading known for unknown Insurance against worst case scenarios Budget sensitive Making informed decisions Most commodities are weather sensitive, natural gas is extremely weather sensitive Getting beyond media bias and buyer bias 3Midwest Energy Logistics - October 10, 2013
Our Strategy The Hedging Committee evaluates the current market conditions using outside experts and then pursues a risk management plan based on several key factors: Budgets Stability/Insurance Value Premium reduction Dollar cost averaging 4Midwest Energy Logistics - October 10, 2013
Our Track Record Thus Far Midwest Energy Logistics - October 10, 20135
Hedges in Place June 12 – Oct 13 $3.444 NYMEX Avg. $3.559 Schools Avg. ($135,670) Loss vs. Market Nov 13 – June 15 $4.006 NYMEX Avg. $3.908 Schools Avg. $301,394 Gain vs. Market Midwest Energy Logistics - October 10, 20136
Our Current Positions Midwest Energy Logistics - October 10, 20137
Hedge Results Per School Year July 12- June 13 $3.405 NYMEX Avg. $3.523 Schools Hedge and Open Avg. July 13- June 14 $3.78 NYMEX Avg. $3.76 Schools Hedge and Open Avg. July 14- June 15 $4.082 NYMEX Avg. $3.987 Schools Hedge and Open Avg. Midwest Energy Logistics - October 10, 20138
Planning For Weather Surprises Midwest Energy Logistics - October 10, 20139
Forecasting the Future If you want a 98% probability prediction then… If we experience a warm winter the price will go down and the schools will consume less If we experience a cold winter the price will go up and the schools will consume more Now back to the real world, assuming normal weather, MEL believes futures prices will increase to the $ $5.00 range during Midwest Energy Logistics - October 10,
Why is MEL So Bullish - #1 Producer Cost is Higher Than the Current Market Price Midwest Energy Logistics - October 10,
Why is MEL So Bullish - #2 The Export Market is About to Take Off Midwest Energy Logistics - October 10, Potentially 20 Bcf per day could be exported from North American terminals by At least 10 Bcfd is likely Plus new pipelines to Mexico would increase exports another 2 Bcfd Plus reversal of Canadian pipelines could new another 5 Bcfd in exports
Why is MEL So Bullish - #3 Producers Arent Drilling for Natural Gas on Purpose Anymore Midwest Energy Logistics - October 10, Producers are looking for oil and natural gas liquids The three big liquids fields are the Bakken (ND), Eagle Ford (TX), and Utica (OH) Gas from oil wells is referred to as associated gas The only profitable dry gas field appears to be the Marcellus (PA/WV)
Why is MEL So Bullish - #4 The US is Not The Only Game in Town Anymore Midwest Energy Logistics - October 10,
Thank You Mark Jergens Midwest Energy Logistics, LLC (614) Midwest Energy Logistics - October 10,