Presentation To:CFA Society of Houston

April 4, 2012

Dan Pickering

The Energy MarketsSo Many Topics, So Little Time!

A Quick Update on Tudor, Pickering, Holt & Co.

22

Securities

Morning Note Every Day!

Expanding Coverage

-Majors

-Midstream

-International

Investment Banking Investment Management

High Profile Assignments

-Statoil/BEXP

-CNOOC/CHK

-Repsol/Armstrong Oil & Gas

-Technip/GLBL

Added Power Team

Launched long/short energy hedge fund in March 2011

Launched Long-Only energy fund in June 2011

Launched Market-Neutral energy fund in January 2012

TPH Partners Fund 2 in Q1/Q2 2012

Our Agenda Today

North American Natural Gas

Oil Markets

Liquids Markets

E&P and Overall Industry Implications

Q&A

3

4

Anything Could Happen In The Next Couple Of Years

North American Renaissance Unfolding

5

Visible Inventory Of Prospects

Natural Gas Finally Troughing

Oil Is A Global Market

Demand Will Recover

Efficiency Will Improve

US Natural Gas…More Than Just A Day Off

Bueller?...Bueller?...Bueller?...Bueller?

6

US Natural Gas…

TOO…MUCH…SUPPLY7

8

US Lower-48 Wet Gas Production

Source: EIA

40

45

50

55

60

65

70

75

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

bcf/

day

Unconventional Plays Popping Up Everywhere

9

The Culprit

Source: HPDI, RigData, TPH Estimates

10

0

5

10

15

20

25

12/99 12/00 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13

Nat

ural

Gas

Pro

duct

ion

(bcf

/d)

US Natural Gas Production From Shales

~24 bcf/day by YE 2013

Amplified By AssociatedGas From Liquids-Rich Plays

Where Are People Spending Their Capital?

11Source: RigData, TPH

0

50

100

150

200

250

300

350

400

450

500

Jan-

07

Apr-

07

Jul-

07

Oct

-07

Jan-

08

Apr-

08

Jul-

08

Oct

-08

Jan-

09

Apr-

09

Jul-

09

Oct

-09

Jan-

10

Apr-

10

Jul-

10

Oct

-10

Jan-

11

Apr-

11

Jul-

11

Oct

-11

Jan-

12

Grouped Shale Rig CountGroup A: Barnett, Fayetteville, Woodford

Group B: Eagle Ford, Haynesville, Marcellus

Barnett, Fayetteville, Woodford

Forget Gas…There’s Oil in Them Thar’ Hills

Source: Baker Hughes

12

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

U.S

. Lan

d R

ig C

ount

U.S. Land Rig Count by Hydrocarbon Target

Gas Oil

13

Barnett Activity – Where Is The Decline?

Source: HPDI, RigData, TPH Estimates

0

100

200

300

400

500

600

0

1

2

3

4

5

6

7

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Rig

Coun

t

Prod

ucti

on (b

cf/d

)

Barnett Gas Production

Historical Gas Production (bcf/d) Rig Count

14

This Will Help…Eventually

= Atlantic Basin LNG Trade

= Pacific Basin LNG Trade

Global LNG Routes

18

20

22

24

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

e

Resi

dent

ial a

nd C

omm

erci

al D

eman

d (b

cf/d

ay)

Residential and Commercial Demand

12

14

16

18

20

22

24

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

e

Elec

tric

al D

eman

d (b

cf/d

ay)

Electrical Demand

16

17

18

19

20

21

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

e

Indu

stri

al D

eman

d (b

cf/d

ay)

Industrial Demand

Natural Gas Demand

15Source: TPH Estimates, EIA

2012 Issues

• Weather Matters

• Electricity is Price Sensitive

• Industrial Will Grow Nicely Over Time

Industrial Electrical

Residential and Commercial

$(40)

$(20)

$-

$20

$40

$60

$80

$100

Gas

-Co

al S

prea

d ($

/MW

h)

Coal-to-Gas Switching

Coal favored

Gas favored

Gas – Coal Spread ($/MWh), 1999 - Present

16

Gas Storage – 45% Over Normal

17

0

1,000

2,000

3,000

4,000

1-Jan 2-Apr 2-Jul 1-Oct 31-Dec

Wor

king

Gas

, bc

f

Normal

Max

2012

Min

Gas Storage – A Scary Trajectory

18

2,450

+2,050 (400) 4,100

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Start of 2012 Summer

Normal injections Undersupply 2 bcf/day

Start of 2012 Winter

Gas

Sto

rage

Lev

els,

bcf

“Full”

19

Natural Gas Price History

$2

$4

$6

$8

$10

$12

$14

$/m

cf

20

Natural Gas Futures, Today vs. 1, 2 and 3-yrs ago

* As of Friday, March 30, 2012

$2

$3

$4

$5

$6

$7

$8

$9

$10

May

-12

May

-13

May

-14

May

-15

May

-16

May

-17

May

-18

May

-19

May

-20

May

-21

Nat

ural

Gas

, Fut

ures

Cur

ve,

$/m

cf

Current

1-yr ago

2-yrs ago

3-yrs ago

Futures, Are They Accurate?

21

-60%

-30%

0%

30%

60%

90%

120%

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11NYM

EX S

trip

, Pre

dict

ed -

Actu

al,

%

Strip Too High

(Strip Too Low)

22

Why $3/mcf Gas Can’t Be Sustained – 2010 Version

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Marcellus

Eagle Ford

Haynesville

Fayette

ville

 Shale

San Juan/ R

aton

Wind River

Woodford Co

nvArkoma

Unita

GOM Sh

elf

Other CO W

Y UT

Perm

ian NM

GOM Deepw

ater

Perm

ian Texas

California

Other NE KS

Barnett

Pinedale/ Jonah

Woodford Shale

Gulf Co

ast

Southeast U

SDJ Basin

E.TX

 / N. LA

Other TX & OK

Fayette

ville

 Conv

South Texas

Powder R

iver

Appalachia

Antrim

Anadarko

Piceance

Other ND SD

 MT

Gas P

rodu

ction (Bcf/d)

Breakeven Prices at 10%  BFIT IRR and Cumulative Production

2013 Est  Cum Production % of total

$5/mcf $8/mcf$6.50/mcf$6/mcf

$0 

$1 

$2 

$3 

$4 

$5 

$6 

$7 

$8 

$9 

Niobrara F

racture

Vertica

l Permian

Niobrara H

igh Re

sistivity

Mon

terey

Bakken

Wolfcam

p Midland

Utica C

onde

nsate

New

 Mexico

 Vertical

Bone

 Sprin

gEagle Ford Oil

California

Uinta Oil

Barnett Com

boMS Lime

DJ Basin

Eagle Ford Con

densate

Marcellus SW PA

GOM dee

p gas

Cleveland Tonkaw

aAv

alon

Wolfcam

p De

laware

Marcellus N

E PA

Anadarko

‐Woo

dford Wet

Haynesville Core

Marcellus C

entral

Barnett Core

Granite Wash

Anadarko

‐Woo

dford

Pine

dale

Fayetteville

Arkoma‐Woo

dford

Jonah

Haynesville Non

‐Core

Arkoma

Barnett N

on‐Core

South Texas

Powde

r River

Anadarko

Anadarko

‐Woo

dford Dry

Piceance

Eagle Ford Gas

East Te

xas C

onventional

Niobrara Low

 Resistivity

Appalachia Gas

Breakeven Ga

s Pric

e ($/m

cf)

Dry gasLow liquids gasHigh liquids gasOil

•Economics assume $100/bbl crude•Gas price required for 10% ATROR

Current Gas Prices

TPH Long‐term Gas Price

2012 Version – Basin Economics (Same Conclusion)

Source: TPH

• Gas prices aren’t sustainable below $3/mcf gas. Marcellus is the only onshore gas play that truly works.

• Most basins fall below $6/mcf gas, therefore, demand growth is needed to support our long-term gas price.

• Oil and liquids-rich plays lower the marginal cost of supply.

• Lower oil prices (we’re assuming $100/bbl) would increase the marginal cost

TPH Medium‐term Gas Price

Gas produced from oil and liquids-rich plays is ~17% of the total the gas stack. These plays account for ~35% of the gas growth going forward.

23

North American Oilpatch…A Real Industrial Business

24

Steve Austin Era (1985-2005)

-Mediocre Commodity Prices-Low Prospect Inventory-Blocking And Tackling-Production Declines

Bionic Man Era (2005-2025+)

-Decent Commodity Prices-High Prospect Inventory-Low Cost Of Capital-Production Growth

“A Man Barely Alive”

“The Six Million Dollar Man”

Caveat To Prior Slides

25

President Of “Waiting For Gas To Get Better” Club

Ted Smith - 2012

26

Oil/World - Plenty Of Big Picture Wildcards

European Debt Issues

Global Economic Health

Arab Spring Dynamics

Iran Tensions

Iraq Tensions

The “Thing” We’re Not Seeing…Yet

Handicapping All These Variables Is “Challenging”27

OECD Inventories – Reasonably Tight

28

2,200

2,400

2,600

2,800

3,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mil

lion

Bar

rels

2011

Max

Min

Norm

2012

China: Substantial Long-Term Growth

29

456789

10111213

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

mmb/d

China Oil Demand

Repeat '08 TPH IEA

We’ll Need More Crude from OPEC

30Source: TPH

25.0 

26.0 

27.0 

28.0 

29.0 

30.0 

31.0 

32.0 

33.0 

34.0 

35.0 

2007 2008 2009 2010 2011 2012 2013 2014 2015

Call on

 OPEC / OPEC Prod

uctio

n (M

MB/d)

Call on OPEC

Call on OPEC Call on OPEC (Forecast)

OPEC Prod History Last Reported OPEC Prod

OPEC Checking Under Couch Cushions For Beer Money

Since 2008, OPEC -2mmbbls/day:

□ Libya: -1.7 mmb/d

□ Venezuela: -0.5 mmb/d

□ Iran: -0.4 mmb/d

□ Angola: -0.3 mmb/d

□ UAE: -0.2 mmb/d

□ Kuwait: -0.1 mmb/d

□ Algeria: -0.1 mmb/d

□ Ecuador: -- mmb/d

□ Qatar: -- mmb/d

31Source: IEA, TPH

Iraq: +0.2 mmb/dNigeria: +0.4 mmb/d

Saudi Arabia: +0.3 mmb/d

Only OPEC growers

The Industry Is Globalizing

$100/bbl Oil = Big Money

Fewer Gunslingers

NOC’s Getting Smarter/Professionalizing

Asians Are For Real

North America Back On The Table

Still A Tough Business

No Longer Just An Oil Business

32

Consolidation…A Natural Evolution

COP buys BR…At The Top

XOM Buys XTO…A Signal

Asset Purchases

Lots Of Shale Joint Ventures

Integrated De-Consolidation(MRO, COP)

BHP Buys HK; Statoil Buys BEXP;KMI Buys EP; MRO Buys Hilcorp; KKR Buys Samson

33When The Macro Clouds Lift…Watch Out!

Conclusions

Macro Environment Choppy

Shale Is A Game Changer

Gas Stays Painful

Oil Will BE Good

Consolidation Will Continue

Cycles Within An Uptrend

34

Best Underlying Long-Term Oilpatch Outlook We’ve Seen In 20 Years

Time For Q&A

35

36

Tudor, Pickering, Holt & Co., LLC is an integrated energy investment andmerchant bank, providing high quality advice and services to institutionaland corporate clients. Through the company’s broker-dealer,Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI), the company offerssecurities and investment banking services to the energy community. TPHAsset Management, LLC (TPHAM) is an SEC registered investment adviserthat delivers a suite of energy investment strategies. Certain employeesof TPHAM are also employees of TPHCSI.

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Disclosure Statement

Dan Pickering is the Head of Asset Management and the Chief EnergyStrategist at TPH Asset Management, LLC (“TPHAM”) which is an operatingcompany of Tudor, Pickering, Holt & Co., LLC, separate from Tudor,Pickering, Holt & Co. Securities, Inc. (“TPHCSI”) and is not associatedwith the research division at TPHCSI. Mr. Pickering is a registeredrepresentative of TPHCSI. The views expressed herein by Mr. Pickering donot constitute research, investment advice or trade recommendations andmay not represent the views and/or opinions of TPHAM’s portfoliomanagers or the research division atTPHCSI.

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