Today’s topics:  Why are oil prices going up?  What are the fundamentals doing?  Oil Production  Oil Demand  Nano One Materials Corp  Dan Blondal, CEO

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Oil is VERY IMPORTANT Crude oil is a depleting resource that is: Directly related to standard of living Consumed in enormous volumes No substitutes have the scale to replace oil By Q4 the global demand for hydrocarbon based liquid fuels will be near 97 million bbls per day Constant renewal of supply requires ongoing investment of LOTS OF CAPITAL We have already consumed the low hanging fruit

Oil Prices Heading Up

Why is Oil Price going up? Oil is an essential commodity Only a small surplus makes the price go down Only a small shortage makes the price go up Low oil prices cure low oil prices Producers & Consumers respond to price Non-OPEC production is on decline OPEC has very little excess capacity OPEC can’t meet demand on their own

IEA: Oil Market Report Published May 12, 2016 “Changes in data confirm the direction of oil markets towards balance.” Oversupply of 1.5 MM bbls per day in Q1 will shrink to near zero by the end of Q3 YOY demand increased 1.4 MM bbls per day in the first quarter – higher than expected Strong demand growth in India, China & Russia OECD inventories down in Feb & Mar Non-OPEC production is falling Production falling in Libya, Nigeria, Ven. & Iraq

Oil Supply is Falling

U.S. Oil Production is Falling

U.S Active Rig Count This has devastated the oilfield service sector

Oil Demand is Going Up

IEA: Conclusion Supply / Demand will Balance in Q3 IEA: “…our view is that in the second half of 2016 the gap between supply and demand narrows significantly to 0.2 mb/d in both 3Q and 4Q.” Many analysts now see a supply shortage by Q4

© 2013 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida | U.S. Research Published by Raymond James & Associates © 2016 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida | Our Oil Price Outlook 13

What is the “Right” oil price?

Oil Price Forecast Oil Prices used in EPG Forecast models 1 st Quarter$30 2 nd Quarter$40 3 rd Quarter$50 4 th Quarter$ $60 Natural Gas: $1.70 to $2.70 for 2016

Natural Gas Crude oil is priced and traded on a GLOBAL MARKET Natural gas is priced and traded on REGIONAL MARKETS Weather has a big impact on demand for natural gas in U.S.

U.S. Gas Market s/b be tighter by YE

Natural Gas Demand Ramping Up

What happens next? Oil & Gas Prices: The fundamentals will win out in the long run, but in the short run they are frequently trumped by emotions (and speculative traders) Investors are always looking ahead: Rapidly dropping active rig count Shrinking oil production + increasing demand Falling crude oil & refined product inventories Hot Summer will increase Ngas demand I do not expect a significant increase in well completions until oil tops $60