Fall Focus JHockley

FALL 2009 FOCUSINVESTMENT CONFERENCE Jackson Hockley Senior Investment Analyst Energy Sector Equipment & Services, Oil & Gas... Oil Prices, What Will They Do Next?It’s been a wild ride!!

FALL 2009 FOCUS

INVESTMENT CONFERENCE

Jackson Hockley

Senior Investment Analyst

Energy Sector

Equipment & Services, Oil & Gas

Energy

Performance Review

The Energy Sector, S&P 500, and Commodity Prices

Source: Factset

S&P 500, -14%

Energy Sector, -22%

Light Crude Oil, -38%

Natural Gas, -48%

-70.0%

-60.0%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

S&P 500 Energy Sector Light Crude Oil Natural Gas

Performance Review

The Energy Sub-Sectors

Source: Factset

Integrated, -17%

E&P, -13%

Equip & Svcs, -29%

Drilling, -33%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Integrated Majors E&P

Equipment & Services Drilling

Oil Prices, What Will They Do Next?

It’s been a wild ride!!

Oil

Prices

Source: Factset

Where Will Oil Prices Go Next?

“Oil should fall to between $4 and $10 a

barrel, which, needless to say, supports

our deflationary outlook.”

–Robert Prechter

August 13, 2009

Opinions Are All Over The Board…

Source: Bloomberg, Dinakar Sethuraman, “Oil May Fall Below $10 in Next Decade, Prechter Says”

Where Will Oil Prices Go Next?

Then:

“Oil will sink to $20/barrel.”

–Philip Verleger

(Professor at The University of Calgary)

July 2009

Now:

“I’m fairly certain we’ll see prices in the $30’s this year.”

–Philip Verleger

(Professor at The University of Calgary)

September 21, 2009

Opinions Are All Over The Board…

Where Will Oil Prices Go Next?

Oil will average $90/barrel in 2010

–Goldman Sachs

September 24, 2009

Opinions Are All Over The Board…

Global Oil Supply & Demand

Source: Schlumberger

Regional Population

Population Map

North America:

337 Mil

Asia: 4.0 Bil (4,000 Million) Europe: 730 Mil

Africa: 954 Mil Latin America & Carib:

575 Mil

Oceania: 34 Mil

Source: CIA "The World Factbook 2008"

Oil Consumption

U.S vs Asia Pacific Oil Consumption

0%

5%

10%

15%

20%

25%

30%

35%

40%

US % of Global Oil Consumption Asia Pacific % of Global Oil Consumption Asia Ex-Japan % of Global Oil Consumption

Source: BP Statistical Review Of World Energy 2009

U.S Natural Gas Storage

U.S Natural Gas Storage Levels

0 500 1000 1500 2000 2500 3000 3500 4000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Week

2009 2008 12 Year Average (with absolute max and min)

Source: DOE

U.S Natural Gas Demand By Type

Natural Gas Demand By Type

2008

Industrial 31%

Commercial 15%

Vehicle Fuel 0%

Electric Pow er 31%

Residential 23%

Source: EIA

Power Generation

Power Generation By Fuel Source

Coal

Nuclear

Oil Natural Gas

Other

0%

20%

40%

60%

80%

100%

19 65 19 68 19 71 19 74 19 77 19 80 19 83 19 86 19 89 19 92 19 95 19 98 20 01 20 04 20 07

Source: EIA

49% 20% 9% 21%

U.S Shale Gas Plays

Source: EIA

Shale Production Metrics Have Improved Over Time

For example, look at Southwestern Energy’s Fayetteville

metrics since 1Q 2007

Source: Wells Fargo, Southwestern Energy, and Bentek Energy LLC

Time To

Drill (Days)

Average Lateral Length (Feet)

30 Day Average Prod Rate (Mcfd)

Drill &

Completion Costs ($Million)

Wells Per

Yr Per Rig

IP Additions Per Rig Per Year (Mcfd)

Quarter 1, 2007 Quarter 1, 2008 Quarter 2, 2009

20

11 2,104

4,123

1,006

2,952

$2.6 $2.9 18

33 18,360

97,953

Southwestern Energy's Fayetteville Shale Production Metrics

So How High Should Natural Gas Prices Go?

Estimated NYMEX Gas Price Required For A 10% Pretax IRR

$4.10

$4.59

$4.42

$3.50

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Marcellus Haynesville Barnett

Core

Fayetteville Woodford Barnett

Noncore

So urce: Deutsche Bank, Co mpany Data

Wave of New LNG Projects in the Pacific Basin

Source: Deutsche Bank, Wood Mackenzie

Buy-rated Stocks

Chevron (CVX)

Exxon Mobil (XOM)

Apache (APA)

Suncor (SU)

Talisman (TLM)

Noble Energy

Baker Hughes (BHI)

Halliburton (HAL)

National Oilwell Varco (NOV)

Noble (NE)

Schlumberger (SLB)

Transocean (RIG)

FALL 2009 FOCUS

INVESTMENT CONFERENCE

Questions for Energy?

FALL 2009 FOCUS

INVESTMENT CONFERENCE

Jackson Hockley

Senior Investment Analyst

Thank you.