September 19th, 2017

Havar Blakset – Partner Rystad Energy

• Independent energy database & advisory firm

established 2004

• Headquartered Oslo, Norway with offices in major

oil & finance hubs globally.

• Vendor of business intelligence databases for the

global oil & gas industry

• A leading energy advisor within E&P,

MIDSTREAM and OFS strategy, market analysis

and business development

• Publishing a number of industry reports on high

impact topics

Introduction to Rystad Energy – an energy database and advisory firm

Source: Rystad Energy

2

Online, global

E&P and oilfield

service databases

Strategy advisory,

market analysis,

business

development

Standardized and

tailor-made

research reports

Our approach and heritage: A bottom-up database of ~65.000 upstream oil and gas projects

4

Rystad Energy UCube

A microcosmos of the

upstream oil and gas industry

-4

-3

-2

-1

0

1

2

3

4

1980 1985 1990 1995 2000 2005 2010 2015

0

20

40

60

80

100

120

140

160

2017 OPEC cutting growth, Non-OPEC/shale oil is responding immediately to the cuts

Source: Rystad Energy UCube

5

Change in liquids production year on yearMillion bbl/d

OPEC

Non-OPEC

Historical oil price (Brent*), 1980-2017

Dollar per barrel, real December 2017

Brent oil price

(right axis)

2008

Financial crisis

OPEC cut supply

~1.8 mmbbl/d in

2009 to strengthen

oil price

D2000/2001

Dot-com & 911

OPEC cut supply

~365 kbbl/d in 2001 &

~1.6 mmbbl/d in 2002

C1998

Asian crisis

OPEC cut supply

~1.5 mmbbl/d in 1999

to rebalance the

market

1986

OPEC production increase

Saudi Arabia led the

production increase after

several years of reduction

and lost market share

A B

OPEC decided

against cutting

supply at Nov

27, 2014

meeting

1.

2.

…Non-opec is

stabilizing the

market, the

largest cut

since 1992

3.

…and instead

started a volume

war

4.

… shale oil

expanding,

no Y/Y cut

from OPEC

Despite no Y/Y cut from OPEC, the OPEC communication maters and moves the market

Source: Bloomberg, Rystad Energy research and analysis

ICE Brent crude front month contract price and OPEC policy announcements (2015-to-date)USD per bbl

6

0

10

20

30

40

50

60

70

80

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

OPEC meeting

No deal, but agree

to monitor market

closely

OPEC meeting

No policy

change

OPEC

reintroduce

target range

OPEC/non-

OPEC status

meeting in

Kuwait

JMCC

recommends 6-

month cut

extensionOPEC meeting

Cuts extended 9

months

OPEC boosts

production

Production freeze

agreement

announced (KSA,

RU, QA, VZ)

Doha

production

freeze talks

end without

agreement

KSA announces

producer talks

in Sep-16

Non-OPEC

meeting, no

commitment

made

OPEC meeting

Target cuts

introducedNon-OPEC

agreement

Nigeria

production cap

agreed

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

86

88

90

92

94

96

98

100

102

1Q-15 2Q-15 3Q-15 4Q-15 1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18

Implied stock chg, rhs

Implied stock chg (US shale at 40 USD), rhs

Supply (63 USD WTI 2018)

Demand

Supply (US shale at 40 USD)

March 2017 - OPEC needed to continue the cuts, if not 2014/15 all over again, 40 USD/bbl not

clearing the market

Note: The 1Q drop in global supply in 2017 and 2018 is partly driven by the ~400 kbbl/d seasonal drop q/q in biofuels production in Brazil.

Source: Rystad Energy research and analysis

World liquids supply and demand, quarterly

Million bbl/d Million bbl/d

7

ForecastHistorical

NormalNormal

But are the OPEC

cuts large enough?

Spending vise the cycle turned in 2016

Source: Rystad Energy UCube

9

- 250

- 200

- 150

- 100

- 50

0

50

100

150

200

1980 1985 1990 1995 2000 2005 2010 2015

Change in upstream capex budgets, year-over-year

Billion USD real terms

-25%

-24%

+2%

0

1000

2000

3000

4000

5000

6000

7000

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17

DUCs (RHS)

Spudded Wells (LHS)

Completed Wells (LHS)

Driven by shale oil – already more then a doubling in spudded wells

Source: Rystad Energy NASWellCube

US shale oil activity (LHS) and associated DUC inventory (RHS)

Number of wells Number of wells

10

More completed than

spudded

More spudded than

completed. Delays due to

bottlenecks and price

expectations OFS

1.

Main driver for shale comeback – significant reduction in breakevens and oil price above 45

*Does not include test activity, where well was shut-down after completion

Source: Rystad Energy NASWellCube Premium

Average wellhead breakeven oil price, by play and spud year*USD/bb

11

0

10

20

30

40

50

60

70

80

90

100

2010 2011 2012 2013 2014 2015 2016

Bakken

Eagle Ford

Niobrara

Permian Delaware

Permian Midland

Average

1.

Source: Rystad Energy research and analysis, EIA

US crude oil and lease condensate production forecast, August 2017Million bbl/d

12

8.5

9.0

9.5

10.0

10.5

11.0

11.5

Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18

Rystad Energy Aug 17 (50 USD/bbl 2017; 55 USD/bbl 2018)

Rystad Energy Sept 17 (50 USD/bbl 2017; 55 USD/bbl 2018)2

Rystad Energy Sept 17 (forward curve)

EIA (Aug17)

ForecastHistory

Impact from Harvey

Total US supply up by 1.0 mbbl/d Dec17 vs Dec16 – first time EIA is overestimating1.

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

82

84

86

88

90

92

94

96

98

100

102

1Q2011 1Q2012 1Q2013 1Q2014 1Q2015 1Q2016 1Q2017 1Q2018

Implied stock change, rhsTotal SupplyTotal Demand

4Q 4Q 4Q 4Q

Opec

cuts

Stock draws through 1Q 18, OPEC will need to continue the cuts 2H 18 due to US shale surge

13

Source: Rystad Energy research and analysis, IEA OMR

World liquids supply and demand, quarterly

Million bbl/d

NormalNormal

14

Oslo, Stavanger, Singapore, Dubai, Moscow, London, New York, Houston, Rio

Consulting: strategy, market studies, DD, macro

Databases: E&P, Oil Service, Carbon Footprint

Havar BlaksetPartnerNew York

Main: +1 646 774 2943

Mobile: +1 917 254 5938

200 Park Avenue, 17th Floor New York, USA

www.rystadenergy.com