1

The Impact of North American ShaleIPLOCA 46th Annual Convention

Istanbul September 2012

2BENTEKENERGY.COM

Agenda

Strong Production Continues to Drive U.S. Market Dynamics Resulting in a Second Wave of Infrastructure Build Out.

2007-2012 saw in Excess of $30B in Long-haul Build out

Estimates For The Next 5 Years May Be as High as $70B

Can the momentum continue? What does 2017-2022 look like?

3BENTEKENERGY.COM

30

35

40

45

50

55

60

65

70

Bcf

/d D

ry P

rodu

ctio

n

33% in Dry NG Production Since 2007

Emergence of Giant Shale Plays

Advanced Drilling and Well Completion

Technology

Horizontal Well Drilling

Lower Prices

Source: BENTEK Pipeline Flow Data --- Daily Supply and Demand Report: Aug 2, 2012Incremental Growth = Avg. Jan. 2005 to Avg. Aug 2012

Current Dry Production Levels At All Time Highs

Faye

ttevi

lle

Hay

nesv

ille

Mar

cellu

s

Eagl

e Fo

rd

Bar

nett

Woo

dfor

d

4BENTEKENERGY.COM

There has been $30B in Long Haul Build Out Since 2007in North America

Trunk ETX to WLA .835 Bcf 1

GS ETX to MS 1.5 Bcf2

NGPL 0.2 Bcf3

4 GulfSouth SE Exp 1.2 Bcf 87 10CP .316 Bcf9

ETC Cleburne to Carthage .5 Bcf

18

13

ETC Maypearl to Malone, 0.6 Bcf infrastructure designed to get more gas out of Ft. Worth basin to feed Carthage and South to STX (Ship area) 14

16 1719

Kinder Morgan Texas Goodrich Expansions, designed to get Bossier Sands gas into KM Texas system in Polk Cty

15

GulfSouth Gulfstream Exp 0.25 Bcf 12

ETC Cleburne to Tolar, 0.4 Bcf infrastructure designed to get more gas out of Ft. Worth basin to feed in ETC’s 42” lines going to Carthage and South to STX

20

TGT Fayetteville Lateral 0.85 Bcf22

21

26

27

25

23

29

28

Creole PL from Sabine Pass LNGCheniere 2.0 Bcf

InterconnectsNPGL, Transco, Bridgeline, Tenn, FGT,

Sabine, Targa, Varibus, GulfSouth, Transco,Trunkline, TETCO

32

DCP Carthage 0.1 Bcf

34

31

33

30

Destin 0.38 B

cf

ETC Texas Indep 1.1 Bcf

39

36

38

37

40Tennessee 800 0.3 Bcf

41

42

Elba Island Expansion of 0.9 BcfTotal Sendout increases to 2.1 Bcf

54

58

49

50

TGT Fayetteville Lateral 0.45 Bcf

4851

53

Transco Station 85 South to Mobile Bay to feedGulfstream (in Open Season) 0.254 Bcf

Transco Station 85 North 0.09 Bcf

56

E-W Eagle Ford 0.1 Bcf

46

Whi

te K

itche

n .1

Bcf

47

CP E. AK .1 Bcf 57Fayetteville Exp 0.542 Bcf62

CP .340 Bcf

52Lo

gans

port

.45

Bcf

61

Regency Exp 1.15Bcf

44

50

59GS Haynesville/Perryville .556 Bcf

4564

67 ETC/KM Fayetteville Express 1.458 Bcf

SONAT Exp .123 Bcf

75

76

77

TGT Supply Lateral 0.165 Bcf

79

Transco Pascagoula0.81 Bcf

78

Transco Mid-South Exp.225 Bcf/d

56

5www.BentekEnergy.com

1,375 2,370

490

1,450

405

1,295

1,535120

3,370

540

0 5 10 15 20 25 30 35 40 45 50

…

86 Processing Projects Combine for ~$6.5 Billion of

Potential Investment over the next 3 years

U.S. Shale Infrastructure Boom Resulting in More than 13 Bcf/d of New Processing Infrastructure Between Today and 2015

Source: BENTEK Facilities Databank – Expansions expected through 2014, MMcf/d

Rockies

Bakken

Anadarko

Permian

Eagle Ford

Utica/Marcellus

02468

1012141618

Bcf

/d

U.S. Gas Processing Capacity Additions (2010-2015)

6BENTEKENERGY.COM

Proposed U.S. Export Projects Total 18.8 Bcf/d of Capacity

Sabine Pass

Freeport

Lake Charles

Cameron

Cove Pt.

Existing Import + Proposed Export

Source: BENTEK

Gulf Coast Export Terminals:Freeport LNG I&II – 2.8 Bcf/dLake Charles – 2 Bcf/dSabine Pass – 2.4 Bcf/dCameron – 1.6 Bcf/dCorpus Christi – 1.8 Bcf/dGulf Coast LNG – 2.8 Bcf/dGulf LNG – 1.4 Bcf/d

Cove Point Exports:0.9 Bcf/d Outlet for Marcellus Gas off TCO, DTI, Transco?

KitimatHN DC LNG

LNG Canada

Proposed Export

Canadian Exports:Up to 3.3 Bcf/d combined capacity

targeting Asian LNG markets

Gulf Coast LNG

Jordan Cove

Corpus Christi

Oregon LNG

West Coast Exports:Jordan Cove– 0.8 Bcf/dOregon LNG– 1.3 Bcf/d

Elba Island0.5 Bcf/d

Excelerate – Lavaca Bay

Elba Island

Offshore Exports:Excelerate FLNG – 0.4 Bcf/d

Gulf LNG

$42B In Projected Spend From Just 7 of These Potential Facilities

7BENTEKENERGY.COM

North American Projects Are Cost CompetitiveCase Study: Japanese Market

Kitimat Sabine Pass

(Phase 1)

Freeport(Phase 1)

CorpusChristi

Cove Point

Cameron Lake Charles

Gorgon Gladstone Ichthys

Location WestCanada

U.S. - Gulf U.S. -Gulf

U.S. -Gulf

U.S. - NE U.S. -Gulf

U.S. -Gulf

Australia Australia Australia

Capacity 10 MTpa1.3 Bcf/d

9 MTpa1.2 Bcf/d

10.5 MTpa1.4 Bcf/d

13.5 MTpa1.8 Bcf/d

5MTpa0.7 Bcf/d

10.5 MTpa1.4 Bcf/d

15 MTpa2 Bcf/d

15 MTpa2 Bcf/d

8 MTpa1 Bcf/d

8.4 MTpa1.1 Bcf/d

CapEx $5.5 B $ 4.75 B $4 B $11.9 B $3 B * $6 B $7 B * $43 B $ 16 B $ 34 B

Feedstock Cost ($/MMBtu)

$3.97(AECO )

$4.00(2017 HH

Projection)

$4.00(2017 HH

Projection)

$4.00(2017 HH

Projection)

$4.00(2017 HH

Projection)

$4.00(2017 HH

Projection)

$4.00(2017 HH

Projection)

N/A(Included In ProjectCost)

N/A(Included In ProjectCost)

N/A (Included In Project Cost)

FOB (Freight on Board) Cost ($/MMBtu)

$6.86 $6.47 $5.80 $7.68 $6.01 $6.21 $6.10 $7.03 $5.03 $9.93

Transportation Cost to Japan($/MMBtu)

$1.34 $3.11 $3.11 $3.11 $3.23 $3.11 $3.11 $1.26 $1.29 $1.26

DES (Delivered Ex Ship)Cost to Japan($/MMBtu)

$8.20 $9.58 $8.91 $10.79 $9.24 $9.32 $9.22 $8.29 $6.29 $11.19

* BENTEK Estimate

8BENTEKENERGY.COM

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$/M

MB

tu

NYMEX Forward Curve Expectations

Forward Curve – August 31, 2012

BENTEK Forecast –September2012

9BENTEKENERGY.COM

Drill Time(Days)

Wells Per Yr.Per Rig

Avg. LateralLength ( Feet)

30 Day Ave.Prod Rate

(Mcfd)

IP AdditionsPer Rig PerYr. (Mcf/d)

Drill &Complete

Costs ($MM)

1st Quarter 2007

1st Quarter 2008

1st Quarter 2010

4th Quarter 2011

20

7

18

50

2,104

4,703

1,006 $2.8

2,606

18,360

130,300

$2.6

Southwestern Energy’s Rig Productivity Gains

Fayetteville Shale

+124%

-64%

+159%

+8%+174%

+610%

Source: Southwestern Energy Financials

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$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Hen

ry H

ub ($

/MM

Btu

)

Henry Hub $/MMBtu Yearly Average

The Shale Revolution Drives Down Prices

$8.85$6.74 $6.93 $3.92$8.87 $4.37 $3.97 $2.45

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$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$/M

MB

tuEq

uiva

lent

WTI $/MMBtu HH Gas $/MMBtu MB NGL Ave. $/MMBtu

Gas, Oil and NGL Price Comparison: MMBTU Equivalent

Source: ICE, EIA

Value Gap

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10/+2

225/+144

55/+27

76/+0

16/+5

5/-1

35/-94

40/+15

29/-1

29/+20

92/+54

11/-18

1/-2

14/-9

259/+199

23/+19

6/-2

47/+29

27/+12

10/+7

Active rig count: August 10, 2012 / Change in rig count from Jan. 1, 2010

Rig Increases Dry Gas Focused Areas

Rig Increases Liquids-Rich/Oil Focused Areas

Rig Declines Source: BENTEK, August 2012

Plays With High Returns Attract Drilling Rigs

2/-10

96/+12

73/+14

40/+22

78/-31

18/-19242/+119

506/+287

37/-56

2130+744

13www.BentekEnergy.com

U.S. NGL Production to Increase 49% over the next Five Years

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2005 2007 2009 2011 2013 2015 2017

Raw

Mix

Pro

duct

ion,

MM

b/d

PADD I PADD III PADD II PADD IV PADD V

1.2 Million Barrel per day Change in Raw Mix Supply

14BENTEKENERGY.COM

60 Mb/d

+630

+300+60

Pipeline Capacity

Fractionation Capacity(Mb/d)

Infrastructure Is Required To Maintain NGL Growth

Announced Increases Through 201413 NGL Pipeline Projects & 27 Fractionator Expansions Combine for ~$9 Billion of Potential Investment in Next 5Years

15BENTEKENERGY.COM

0200400600800

1,0001,2001,4001,6001,8002,000

Rig

Cou

nt

Gas Oil

Oil Rig Count Tests New Highs

1,727

364

Source: BENTEK, RigData July 2012

~1,500

16BENTEKENERGY.COM

0

50

100

150

200

250

300

350

400

1 7 13 19 25 31 37 43 49 55 61 67 73

b/d

Months on Production

2010 2011 Model

Eagle Ford Oil-Oriented Decline Curves Improving Drastically

50%35%25%25%10%10%10%10%10%10%

Source: BENTEK, HPDI

17BENTEKENERGY.COM

+1067

+250

+275

+783

+1218

Bakken

Niobrara

Anadarko

Permian

Eagle Ford

Unconventional Oil Plays – Turning The Corner

Growth 2011 – 2016 4.1 MMb/d

+131

Utica Growth 2017 – 2022 1.4 MMb/d

+429

+125

+118

+379

+176

+54

Source: BENTEK Crude Awakening Part 6; BENTEK Crude Oil PADD Balances

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Gateway 525

+837

+254

+200

+858

+916

Bakken

Niobrara

Anadarko

Permian

Eagle Ford

+1,227Canada

Note: 2011 Average to 2017 Average (MB/d)

Source: Petroleum Project TrackerNot All Projects Shown

344

345

200

Barge

Rail

Sea

way

700

Refinery Expansion

33

350

Dock Terminal

450

Refinery Closure

698+13250

Utica

New Infrastructure to Reshape North American Oil Markets

Pipeline Projects Combine for Over $15B of Potential Investment over in the Next 5 Years

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Waterborne imports get squeezed out, accounting for just 1.0 Mb/d or 6% of total U.S. supply in 2022

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

MB

/d

Domestic Production Canadian ImportsNon-Canadian Imports % Non Canadian Imports

Source: BENTEK, EIA

20BENTEKENERGY.COM

N. American Crude Could Grow Another 1.4 MMb/d Between 2017 and 2022 Requiring New Infrastructure

+492

+125

+80

+379 +22

+176

Mb/d

+689

Note: 2017 Average to 2022 Average

+126

(105)

+54?

?

?

?

?

?

??

?

?

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0

5

10

15

20

25

30

35

40

45

50

PattersonUTI

Precision Helmerich& Payne

Nabors EnsignUSA

Trinidad Unit PioneerDrilling

Union

Num

ber o

f Hor

izon

tal R

igs

2011 2012

Signs of Growth: U.S. Drilling Fleet Added 135 Horizontal Capable Rigs Between June 2011 and June 2012

Drilling Manufacturers Added Rigs at Rate of 11.6 Rigs Per Month

23BENTEKENERGY.COM

U.S. Market Key TakeawaysStrong Production Continues to Drive U.S. Market DynamicsNA has seen CAPEX in Excess of $30B in the last 5 Years on Long Haul Build outThe Next 5 Years Show Potential for an Incremental $70B 2017 and Beyond – Currently Underdeveloped Plays Will Lead to Incremental Infrastructure RequirementsNorth American Production Will Look for Exit. Growth Will Continue to be Contingent Upon Demand

24BENTEKENERGY.COM

IPLOCA Convention Istanbul I September 2012

POTENTIAL FOR SHALE GAS IN

EUROPEBy Andrew Lukas

24

25BENTEKENERGY.COM

Why Look for Gas in Europe?Numerous Under Explored Basins and Identified Opportunities with similarities to NA Resource Plays

Favourable Terms and Conditions in Politically Stable Democracies

World Class Pipeline Infrastructure With Access to a Wide Range of Markets

New EU Rules Requiring Liberalization of Gas Markets to New Entrants

26BENTEKENERGY.COM

Price Spread Is The Big Driver

$0$2$4$6$8

$10$12$14$16$18$20

NBP Month-Ahead Henry Hub Platts JKM

Global Energy Prices

27BENTEKENERGY.COM

Shale Gas Basins in Europe

Europe has 639 TCF Shale Gas Compared to US 862 TCF With Geologic Similarities

28BENTEKENERGY.COM

Current Shale Exploration

www.BentekEnergy.com 29

30BENTEKENERGY.COM

Case Study – Drilling Today –Bowland Shale - Lancashire

31BENTEKENERGY.COM

Cuadrilla UK Licences

BOWLAND SHALE GAS PLAY

BOLNEY / KIMMERIDGE SHALE OIL PLAYAND PORTLAND SAND GAS PLAY

BALCOMBE Hz GREAT OOLITE OIL PLAY

32BENTEKENERGY.COM

Comparison With Key US Shale Plays

33BENTEKENERGY.COM

Maturity v Organic Content

Note: Ro is vitrinite reflectance. It's a measure of the maturity of kerogens

34BENTEKENERGY.COM

Bowland In SummaryBowland Basin is Significant with >200TCF

Good Quality Gas - Minimum CO2

Public-Political Accord is Evolving For Success Development

Very Close to Major Pipeline Infrastructure

European Markets Are Ready For This Gas

35BENTEKENERGY.COM

European Conclusions

There are World Class Shales To Be Developed

European Shale Development is Safe and Well Regulated

Supply Basins are Close to Markets and Pipeline Infrastructure is Well Developed

European Shale Will Reduce Imports and Increase Independence

36BENTEKENERGY.COM

Thank YouThis presentation has been compiled by Andrew Lukas from

sources he believes to be reliable. However, it is not warranted as to its completeness or accuracy.

This presentation is not an offer to sell or a solicitation to buy any securities.

As it is prepared for general circulation, all readers must use their own judgment and seek their own advice before relying on

anything in this presentation.

Andrew Lukas

36

37BENTEKENERGY.COM

BENTEK Energy

BENTEK is an energy market analytics company focused on the natural gas, liquids, crude oil and power sectors.

Suzanne MinterEnergy Analyst/Account Executivesminter@bentekenergy.com

Contact Any Analyst 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.