NG Good, CL Better May 12, 2011 1
Value of CL will drive NG production Market is working producers focused on the highest value BTU s Oil infrastructure is needed to relieve deep discounts NG Good, CL Better N. American oil growth will reduce Gulf Coast imports if we can move it there 2
Natural Gas Good 3
U.S. Production Still on the Rise 62.0 -- Current Levels at All Time Highs 60.0 58.0 Bcf/d 56.0 54.0 52.0 50.0 Maintenance & Freeze-offs 2009 Avg. = 56.4 Bcf/d 2010 Avg. = 57.8 Bcf/d 2011ytd Avg. = 59.1 Bcf/d 48.0 1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1 11/1 12/1 2009 2010 2011 Source: BENTEK Supply and Demand Report, Dry Production 4
Sub $4.00 Breakevens Drive Resource Plays Horn $4.30 $3.24 Montney $3.54 WCSB $5.30 Pinedale $2.77 $4.32 PRB Cana Piceance $3.80 Granite Woodford Wash San Juan $3.17 $4.02 $5.13 $0.92 $2.29 $4.03 Barnett $4.01 $3.84 Permian $0.00 $5.00 $0.00 $5.00 Bakken $3.66 $1.67 $3.42 Eagle Ford Marcellus Woodford Haynesville $1.78 $2.94 Fayetteville $3.17 Source: BENTEK Note: Breakevens computed at 12:1 Crude Ratio and 1:1 NGL Ratio Green Circles Breakeven s Computed at $80 Crude and 1:3 NGL Ratio Based on 4Q2010 Financials and State Production Data 5
Active Rig Additions Since Low - May 2009 +3 +1 +137 North-South Liquids Fairway +4 +16 +2-7 +1 +78 +15-1 +7 +29 +33 +6 +28 +21-3 +145 +14-6 +322 +19-2 +40 +10 +7 +966 +140 +23 +3 +134 Note: April 2011 Source: RigData, BENTEK Not all rigs/basins shown on map 6
Processing Capacity Additions 500 420 190 330 80 1,968 580 270 430 500 120 225 1,920 2013 7.5 Bcf/d 7
Production Projections (Based on Current Drilling Activity Going Forward) 100.0 Gross Production (Bcf/d) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 21 Bcf/d Balance U.S. Production Balance U.S. Marcellus Haynesville Fayetteville Woodford Barnett Eagle Ford Anadarko 8
Impact on Prices $7 NYMEX Forward vs. Bentek $6 $5 $0.81 $1.13 $1.00 $0.91 $1.32 $4 $3 $2 $1 $0 Bentek NYMEX 9
Crude Oil Better 10
Average Annual Nat Gas Price ($/MMBtu) $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- 2005 2006 2007 2008 2009 2010 2011 11
Annual Average Ratios 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 25 NGL-Gas Ratio 2005 2006 2007 2008 2009 2010 2011 Oil-Gas Ratio 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 12
Historical U.S. Crude Production 10,000 8,000 000s b/d 6,000 4,000 2,000 0 1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 Crude Oil 1900-2008 Crude Oil 2008, 2009 & 2010 Source: EIA, Excludes NGLs and Other Liquids 13
U.S. Active Rig Locations Williston Basin Bakken Shale (Oil Play) Pinedale/Jonah Tight Gas Niobrara Shale Play (Oil Play) Uinta Piceance Marcellus Shale Gas Play Woodford Shale Gas Play Granite Wash Tight Gas Sands Fayetteville Shale Gas Play Barnett Shale Gas Play Permian Basin-Oil Targets Horizontal Rigs Directional Rigs Eagle Ford Shale Play Haynesville Shale Gas Play 1400 1200 1000 800 600 400 200 0 Vertical Rigs U.S. Active Rigs Ver Source RigData and BENTEK: Lower 48 States, May 6, 2011 Dir Hor 14
Crude Oil Break Even Ranges $45-$95 $35-$95 $40-$60 $40-$60 $40-$65 $45-$65 $/Bbl 15
U.S. Crude Oil Supply Growth 1,000 2,000 600 200 250 300 800 500 200 250 1,500 160 400 200 600 120 150 1,000 300 150 400 100 80 200 100 500 200 100 40 50 0 Denver-Julesberg Williston Eagle Anadarko Permian Ft. Basin Ford Worth Basin Area (Bakken) & Niobrara Anadarko-TX Denver-Julesberg Permian-TX Permian-NM Anadarko-OK Niobrara Mb/d 16
U.S. Crude Oil Supply Growth +236 1,316 Mb/d by End of 2016 +157 +95 +465 +83 +279 Mb/d 17
Forecast Through 2016 10,000 8,000 000s b/d 6,000 4,000 2,000 1995 0 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 1900-2007 2008-2010 2011-2016 Source: BENTEK, EIA, Excludes NGLs and Other Liquids 18
Adding In Canada 4,500 4,000 3,500 3,000 2,500 2,000 1,500 $45-$85 Canada 19
N. American Crude Oil Supply Growth +971 +236 1,316 2,287 Mb/d by End of 2016 +157 +95 +465 +83 +279 Mb/d 20
U.S. and CN Forecast Through 2016 12,000 10,000 000s b/d 8,000 6,000 4,000 2,000 1985 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 U.S. 1965-2010 U.S. 2011-2016 Canada 1965-2010 Canada 2011-2016 Source: BENTEK, EIA, BP Stat Review Excludes NGLs and Other Liquids 21
U.S. Crude Runs are Flat to Declining 16,000 15,000 000s b/d 14,000 13,000 12,000 11,000 10,000 1982-2010 2011-2016 Source: BENTEK, EIA 22
Jan 2011 to April 2011 WTI Basis $ (15) $ (20) $ (13) $ (16) $ (9) $ 1 $ 98 $ (3) $ 6 23
Value of CL will drive NG production Market is working producers focused on the highest value BTU s Oil infrastructure is needed to relieve deep discounts NG Good, CL Better N. American oil growth will reduce Gulf Coast imports if we can move it there 24
BENTEK Energy, LLC BENTEK is an energy market analytics company, focused on the natural gas market and related energy sectors. James H Simpson Vice-President and General Manager jsimpson@bentekenergy.com Contact Any Analyst Direct at (303) 988-1320 DISCLAIMER. THIS REPORT IS FURNISHED ON AN AS IS BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS OF THE REPORT OR THE INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES, OPTIONS OR ANY OTHER USE. BENTEK MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE. RELEASE AND LIMITATION OF LIABILITY: IN NO EVENT SHALL BENTEK BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFIT) ARISING OUT OF OR RELATED TO THE ACCURACY OR CORRECTNESS OF THIS REPORT OR THE INFORMATION CONTAINED THEREIN,WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY. 25