3rd Annual Regional Energy Forum

Global Coal Markets & U.S. LNG Opportunities

Frostburg, Maryland November 6, 2015

Energy Demand

Global Coal Markets

Overview

»Coking Coal demand is declining

»Thermal Coal demand is growing but at a reduced rate

»Lingering oversupply

»Coking Coal prices are down 26% YTD and at their lowest levels since 2004

»Supply cuts needed to balance the market

»Headwinds facing U.S.A. suppliers 3

Global Coal Markets

»Coal demand is declining

»China’s economic slowdown is more severe than anticipated, resulting in reduced demand for imported coal

»Combined with Chinese protectionism, China is no longer the clearing house for surplus coal

»Unfortunately, increased demand from Non-China, mainly India, not enough to absorb reductions coming from China

»Additional demand destruction coming from China in the form of increased steel and met coke exports

4

Global Coking Coal Markets

Global Coking Coal Markets

YoY H1 2015 Apparent Steel Consumption by Region

Negative 3% world apparent steel consumption growth

Europe USA Japan Korea China India Brazil Russia ASEAN Africa World

-15%

-10%

-5%

0%

5%

10%

15%

Global Coking Coal Markets Seaborne Coking Coal Demand Growth

2010 to 2014

7

2014 first decline in Seaborne coking coal demand since financial crises and 2015 will record another decline

Global Coking Coal Markets Seaborne Coking Coal Supply

2010 to 2015

8

Percentage Seaborne Coking Coal Market By Region

Region 2010 2011 2012 2013 2014 2015

Australia 60 53 55 57 61 65

USA 18 24 23 19 17 15

Canada 10 11 11 11 10 08

Other 12 12 11 13 12 12

Global Coking Coal Markets Seaborne Coking Coal Supply Growth

2010 to 2015

9

Between 2011 and 2015 Australia supply expected to increase by 57 MMT or 43%

Global Coking Coal Markets

6 Month 2015 Seaborne Coking Coal Supply Growth

10

USA still second largest exporter but losing market share

Exports 1H 15 1H 14 Change

Australia 91 90 1

USA 22 27 -5

Canada 14 15 -1

Russia 7 6 1

Other 8 7 1

Total 142 145 -3

Global Coking Coal Markets 6 Month 2015 Seaborne Coking Coal Imports

11

Total imports down 5.5 MMT but Chinese imports alone down 9.5 MMT or 31%

Global Coking Coal Markets China Coking Coal Imports

12

2014 Chinese imports down 13 MMT

Global Coking Coal Markets 9 Month 2015 China Coking Coal Imports

13

9 month Chinese imports down 8 MMT or 18%. Annualized at -14 MMT or 22%

Coking Coal Imports (Mmt)mmt 2014 2015 Period %Δ Period ΔtJanuary 5.70 4.01 -29.65% -1.69February 3.54 3.96 11.86% 0.42March 3.73 2.90 -22.25% -0.83April 6.47 3.70 -42.81% -2.77May 5.88 1.88 -68.00% -4.00June 5.72 5.08 -11.14% -0.64July 5.05 6.66 31.87% 1.61August 3.84 4.15 8.14% 0.31

September 4.50 3.96 -11.98% -0.549M 44.42 36.30 -18.28% -8.12

Total Annualized Difference62.40 48.40 -14.00

-22.4%

Global Coking Coal Markets

Benchmark – Coking Coal

14

Oct-Dec Coking Coal Benchmark set at $89/MT, down another $4.00 and lowest price since Fiscal Year 2004.

Global Coking Coal Markets Benchmark – Coking Coal

15

In AUD$ terms, Australian suppliers achieved a price increase

Global Coking Coal Markets

»Lingering oversupply

»Supply continues to outpace demand

» Surplus coking coal produced in the Pacific market finding its way into the Atlantic market

»How are Atlantic buyers behaving• Increasing spot purchases• Spot inquiries increasingly non-U.S.A. sourced

»U.S.A. Producers losing market share• Expect export decline of 9 - 10 MMT

16

Global Coking Coal Markets

8 Month 1996 - 2015 US Coking Coal Exports

17

YTD Aug-96

YTD Aug-97

YTD Aug-98

YTD Aug-99

YTD Aug-00

YTD Aug-01

YTD Aug-02

YTD Aug-03

YTD Aug-04

YTD Aug-05

YTD Aug-06

YTD Aug-07

YTD Aug-08

YTD Aug-09

YTD Aug-10

YTD Aug-11

YTD Aug-12

YTD Aug-13

YTD Aug-14

YTD Aug-15

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

US Coking Coal Exports (MT)

Coking

Global Coking Coal Markets

»Met Coal prices are at their lowest levels since 2004

»October – December benchmark set $4 lower at US$89

»Market appears stabilized at current levels and expected to trade in a narrow range in the short term before gradually recovering next year

»Prices also influenced by a period of “cost deflation”•Productivity improvements•US$ strength •For Australian suppliers $89 = $124

› Over the last 12 months AUS$ declined from US$0.88 to US$0.72 18

Global Coal Pricing

U.S. Coal Exports – How prices affect volumes

»U.S. coal companies respond to market prices

»Seaborne coking coal currently at 2004 price

levels

»Seaborne thermal coal currently at 2004 price

levels

20

Year Total Exports (MT)-ex Canada

2014 83.2 million

2013 106.9 million

2012 114.1 million

2009 53.6 million

2005 45.3 million

Global Coking Coal Markets

»Supply cuts needed to balance the market»Current pricing is not sustainable but regrettably needed to

stimulate supply cuts

»Capital expenditures undergoing significant adjustments • Capex down approximately 60% from peak

»25-30 million tons of coking coal production cuts announced since 2014, but market still over supplied • The load of these supply cuts has largely been with USA suppliers

21

Global Thermal Coal Markets

Global Thermal Coal Pricing

Global Coal Markets

2015 – Headwinds For U.S.A. Suppliers:

»Non-U.S.A. suppliers setting the market prices

»Appreciation in the US$ providing non-U.S.A. producers the opportunity to maintain or reduce prices

»While Governmental policies in other countries supporting domestic coal industries, not the case in the U.S.A.

»New supplies from Colombia, Mozambique and Russia entering the market

24

Coal Summary - Conclusion

»Coking coal demand no longer growing

»Chinese protectionism hindering demand

» “Cost deflation,” driven by US$ strength, lower oil prices (lower mining and sea freight cost) and productivity improvements has lowered the cost curve

»Prices and cost curve continue to move lower, looking to find equilibrium

»Current stage of cycle: moving from meaningful price decline to stabilization at low levels until more supply cuts are implemented

»More aggressive production cuts are needed before we see an improvement in market prices

»Expecting only moderate price support in the near term25

US Shale Gas Total Resources

26

Map: Courtesy of Schlumberger

Note: ARI estimates U.S. shale oil resources at 48 billion barrels and U.S. shale gas resources at 1,161 trillion cubic feet.

Source: USA: EIA and USGS; Other basins: ARI.

US Natural Gas Production Forecast

27

U.S. dry natural gas production

Tcf

Source: EIA, Annual Energy Outlook 2015

Associated with oil

Coalbed methane

Tight gas

Shale gas

AlaskaNon-associated offshore

Non-associated onshore

ProjectionsHistory Bcfd70.4 Bcf/d (’14)

28

US Northeast Gas Production Growth

29

Marcellus/Utica Shale Gas Reserves

Wet Gas

Dry Gas

Wet Gas

Dry Gas

Marcellus Gas Reserves

Proved 64.9 Tcf (EIA)

Technically Recoverable

141 Tcf (USGS)

Source: Consol Energy/ Energy Information Agency, U.S. DOE/

U.S. Geological Survey

1 Trillion cf Gas 20 Million ton LNG≃

Oil

Wet Gas

Dry Gas

Utica Gas Reserves

Proved No official EIA data.Extensive development since 2010.

Technically Recoverable

38 Tcf (USGS)

782 Tcf (West Virginia Univ.)

Marcellus/Utica

Utica

Marcellus

30

Productivity Changes in US Shale

Productivity Enhancement MCF per day per Rig

Marcellus

Utica

Source: Energy Information Agency, U.S. Department of Energy

Breakeven Decrease over Years

1 MCF (1000 CF) 1.03 mmBtu≃

31

Breakeven Price of US Shale

Eagle

Ford

US Maps

US Regional Breakdown

Marcellus

Utica

Bakken

Niobrara

Haynesville

Eagle Ford

Permian

US Pipelines - Marcellus/Utica to Gulf

US Shale Gas Region

33

Pipeline Expansion for Marcellus/Utica

To Gulf Coast fo

r LNG

Source: IHS

8.6 Bcf/d

11.1 B

cf/d

10.2

Bcf

/d

2.5 Bcf/d

32.4

1 Bcf/d Gas 7 Million ton/yr LNG≃

34

US Gas Hub Price Basis Spreads

Sabine Pass

Cove Point

Henry Hub PriceUSD/mmBtu

Basis spread is the difference in regional gas hub prices from Henry Hub Basis reflects pipeline capacity utilization into a gas market or from a gas supply region Gas flow from Marcellus/Utica to Gulf Coast with pipeline expansion keeps the basis of

Appalachian region below zero

35

Marcellus Basis to HH: Historical Trend

Marcellus regional hub pricing locations

36

Historical US Natural Gas Prices

37

HH Price Forecast

Source: JP Morgan

Source: Macquarie

Source: Platts

38

Global Gas Trade Flows (bcm)

39

LNG Export Capacity Growth 2005-2020

40

LNG Export Facilities under construction

41

LNG – Global demand forecast

42

LNG – Imports by country

43

LNG – current market demand is not sufficient to absorb new supply

44

LNG – another oversupplied market

Credits» John T. Boyd Company

» BP

» Financial Times

» Goldman Sachs Research

» IHS

» International Energy Agency

» International Monetary Fund

» Macquarie Research

» McCloskey Group

» Platts

» SSY Research

» T. Parker Host

» World Steel Dynamics45

Contact Info

Ernie Thrasher

Xcoal Energy & ResourcesPhone: +1 (724) 520-1630E-mail: xcoal@xcoal.comWeb: www.xcoal.com

46