1. ANALYSIS OF CHANGING GAS HUB LIQUIDITY RESULTING FROM SURGE IN MARCELLUS/UTICA SHALE GAS PRODUCTION Bradford Leach, Benjamin Schlesinger, Ph.D. and John A. Neri, Ph.D. IAEE-USAEE North American Conference Pittsburgh – October 28, 2015

2. Shale gas production has increased quickly in North America, undercutting costlier gas. 2 Source: EIA, BSA; state abbreviations indicate primary state(s); shale data re-aggregated in 2015..

3. Marcellus/Utica shales are now supplying about 1/4 US market. Natural Gas Supplies (Dry) Potential Produc- tion, Bcm Est. Recover- able, Tcm Yamal310-35016.7 Bovanenkovo (alone) 2204.9 Marcellus/ Utica 197 (Sept. 2015) 12.8 Qatar159 (2013)25.1 3 Source: EIA, Drilling Productivity Report, September 2015; resource data from http://www.eia.gov/analysis/studies/usshalegas/ (Northeast excl. Antrim); Yamal data from Gazprom, http://www.gazprom.com/about/production/projects/mega-yamal/, incl. explored and provisionally estimated; Qatar data from EIA, BP 2015 statistical review.http://www.eia.gov/analysis/studies/usshalegas/http://www.gazprom.com/about/production/projects/mega-yamal/

4. Crude oil to Henry Hub gas price margins have tightened, but remain significant. 4 Source: BSA 2015, from CME-NYMEX settlements at Closing 11 Sept. 2015.

5. The US is now building 67 mtpa of LNG export capacity, but how much will actually flow? US regulators have approved ‘a ton’ of LNG exports: DOE – 102.2 mtpa of non-FTA exports approved, plus FTA FERC – 77.5 mtpa of export plant approved At this point, the market, not regulators, will decide, based on global forces, price, diversity. 5 Source: BSA 2015, from BP 2014 Statistical Review.

6. Market expectations of oil price uncertainty have increased in recent months. 6

7. Shale gas production has reduced spot gas prices at most North American hubs. 7 Alberta, US$2.65 Rockies, $3.12 Southern California Gas, $3.27 Source: BSA 2015, January 2015 hub prices from Platts Inside FERC’s Gas Market Report; note: Dominion refers to Dominion Appalachia (South Point), New England refers to Tennessee Gas Pipeline, Zone 6.. New England, $11.67 Henry Hub, $3.19 Dominion Hub, $1.75 So. Texas, $3.08 WINTER 2015

8. Marcellus/Utica hub prices are deeply depressed – starved for demand. 8 Alberta, US$2.18 Rockies, $2.47 Southern California Gas, $2.71 Source: BSA 2015, September 2015 hub prices from Platts Inside FERC’s Gas Market Report; note: Dominion refers to Dominion Appalachia (South Point), New England refers to Tennessee Gas Pipeline, Zone 6.. New England, $2.54 Henry Hub, $2.64 Dominion Hub, $1.16 So. Texas, $2.56 SUMMER 2015

9. Federal GOM Gas Production, Bcf/d

13. Changing deal counts – Gulf versus Marcellus/Utica

14. Contact Info: bradleach@energyadvisoryservices.net 203-501-7445 Ben Schlesinger bschles@bsaenergy.com 301-951-7266 www.bsaenergy.combradleach@energyadvisoryservices.netbschles@bsaenergy.com

15. Benjamin Schlesinger and Associates, LLC The Bethesda Gateway 3 Bethesda Metro Center, Suite 700 Bethesda, MD 20814 Phone: (301) 951-7266 Fax: (301) 951-3381 Visit us at www.BSAenergy.com 15