1. Scotia Howard Weil Oil & Gas Macro Views New Orleans
Blake Fernandez
Peter Kissel
April 16, 2015
Scotia Howard Weil is a division of Scotia Capital (USA) Inc., a member of the Scotiabank group, and represents Scotiabank’s energy equities business in the United States. For all relevant disclosures and certifications see Appendix A Important Disclosures of this report.

2. Oil Macro Outlook New Orleans
Blake Fernandez
Peter Kissel
April 16, 2015
Scotia Howard Weil is a division of Scotia Capital (USA) Inc., a member of the Scotiabank group, and represents Scotiabank’s energy equities business in the United States. For all relevant disclosures and certifications see Appendix A Important Disclosures of this report.

3. SHW Price Deck / Historical Crude Price

4. Supply/Demand Fundamentals
Source: IEA and Scotia Howard Weil
Source: IEA and Scotia Howard Weil

5. Global Oil Inventories
Source: Scotia Howard Weil and EIG

6. Source: CVX Company Reports
Spending Curtailments
Source: CVX Company Reports

7. U.S. Rig Count / Production Rollover
Source: Baker Hughes and Scotia Howard Weil
Source: EIA and Scotia Howard Weil

8. Future M&A Wave? Source: Scotia Howard Weil
Source: CVX Company Reports

9. Industry Cost Recalibration
Source: BP Company Reports

10. Medium-Term Outlook IEA Medium-Term Outlook
Source: IEA and Scotia Howard Weil

11. Gas Macro Outlook New Orleans
Blake Fernandez
Peter Kissel
April 16, 2015
Scotia Howard Weil is a division of Scotia Capital (USA) Inc., a member of the Scotiabank group, and represents Scotiabank’s energy equities business in the United States. For all relevant disclosures and certifications see Appendix A Important Disclosures of this report.

12. SHW Price Deck / Historical Gas Price
Source: Howard Weil, FactSet

13. Natural Gas Supply and Demand
Source: EIA

14. Natural Gas Marketed Production
Source: EIA

15. Natural Gas Storage Levels
Source: EIA

16. Natural Gas Supply and Demand

17. U.S. Natural Gas Production

18. Howard Weil Estimated E&P Cash Flows

19. Annual Oil & Gas Capital Expenditures

20. Independent E&P Observations/Themes
Capital prudency being rewarded
Cash flow levels dictating activity levels
Rate of return secondary
Cost reductions improving level of economic inventory at ~$50 crude
Capital markets have been open for business
M&A likely, but a bit too soon; E&P looking for long term inventory more than near term growth (assets not companies)

21. Appendix A: Important Disclosures
I, Blake Fernandez and Peter Kissel, certify that the views expressed in this research report accurately reflect our personal views about the subject securities or issuers; and I, Blake Fernandez and Peter Kissel, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report
This report was prepared by a Scotia Howard Weil Research analyst. Scotia Howard Weil is a Division of Scotia Capital (USA) Inc., a US Registered broker-dealer and a member of the New York Stock Exchange and FINRA. Scotia Howard Weil Research analysts focus primarily on the US Energy Sector. Scotia Capital (USA) Inc. is a wholly owned subsidiary of Scotia Capital Inc., a Canadian registered investment dealer, and indirectly owned by The Bank of Nova Scotia. Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including Scotia Capital Inc. and Scotia Capital (USA) Inc. In addition to Scotia Howard Weil Research, Scotiabank publishes and distributes Scotiabank Global Banking and Markets Equity Research (“Scotiabank Research”), which is a separate research publication. Scotia Howard Weil Research Analysts and Scotiabank Research Analysts are independent from one another and their respective coverage of issuers are different. In addition, because they are independent from one another, Scotia Howard Weil Research Analysts and Scotiabank Research Analysts may have different opinions on the short-term and long-term outlooks of local and global markets and economies.
This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider Scotia Howard Weil’s research and/or ratings as only a single factor in making their investment decisions. Past performance of the financial instruments recommended in this report should not be taken as an indication or guarantee of future results.
All pricing of securities in reports is based on the closing price of the securities’ principal marketplace on the night before the publication date, unless otherwise explicitly stated.
Any prices that are stated in this report are for informational purposes only. Scotiabank, Global Banking and Markets makes no representation that any transaction may be or could have been effected at those prices.
The compensation of the research analyst who prepared this report is based on several factors, including but not limited to, the overall profitability of Scotiabank, Global Banking and Markets and the revenues generated from its various departments, including investment banking. Furthermore, the research analyst’s compensation is charged as an expense to various Scotiabank, Global Banking and Markets departments, including investment banking. Research Analysts may not receive compensation from the companies they cover.
For Scotia Howard Weil Research analyst standards and disclosure policies, please visit
Equity research reports published by Scotia Howard Weil, Scotiabank, Global Banking and Markets are available electronically via: Bloomberg, Thomson Financial/First Call - Research Direct, Reuters, Capital IQ, and FactSet. Institutional clients with questions regarding distribution of equity research should contact us at
Scotia Capital (USA) Inc. is a multidisciplined financial services firm that regularly intends to seek investment banking business with companies covered in its research reports, and thereby seeks to receive compensation from these companies for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent for private transactions. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
For applicable current disclosures for all covered companies, please write to the Scotia Howard Weil Research Department at the following address:
Scotia Howard Weil Research Department
1100 Poydras Street, Suite 3500
New Orleans, Louisiana 70163
Additional Disclaimers and Disclosures
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Scotia Capital (USA) Inc. or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within.
This report/ may be considered advertising under federal law. If you decide not to receive Scotia Howard Weil Research via , please reply to and ask to be removed.
Additional information is available upon request: 1100 Poydras Street, Suite 3500, New Orleans, LA –

22. Definition of Scotia Howard Weil’s Equity Research Ratings & Risk Rankings
Prior to January 7, 2013, Scotia Howard Weil utilized a rating system of Focus List Stock (FS), Market Outperform (MO), Market Perform (MP), Market Underperform (MU) and Rating Suspended (RS). Click here to view definitions.
We have a four-tiered rating system, with ratings of Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform. Each analyst assigns a rating that is relative to his or her coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst.
Our risk ranking system provides transparency as to the underlying financial and operational risk of each stock covered. Statistical and judgmental factors considered are: historical financial results, share price volatility, liquidity of the shares, credit ratings, analyst forecasts, consistency and predictability of earnings, EPS growth, dividends, cash flow from operations, and strength of balance sheet. The Director of Research and the Supervisory Analyst jointly make the final determination of all risk rankings.
The rating assigned to each security covered in this report is based on the Scotiabank, Global Banking and Markets research analyst’s 12-month view on the security. Analysts may sometimes express to traders, salespeople and certain clients their shorter-term views on these securities that differ from their 12-month view due to several factors, including but not limited to the inherent volatility of the marketplace.
Ratings
Focus Stock (FS)
The stock represents an analyst’s best idea(s); stocks in this category are expected to significantly outperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst.
Sector Outperform (SO)
The stock is expected to outperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst.
Sector Perform (SP)
The stock is expected to perform approximately in line with the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst.
Sector Underperform (SU)
The stock is expected to underperform the average 12-month total return of the analyst’s coverage universe or an index identified by the analyst that includes, but is not limited to, stocks covered by the analyst.
Other Ratings
Tender – Investors are guided to tender to the terms of the takeover offer.
Under Review – The rating has been temporarily placed under review, until sufficient information has been received and assessed by the analyst.
Risk Rankings
Low
Low financial and operational risk, high predictability of financial results, low stock volatility.
Medium
Moderate financial and operational risk, moderate predictability of financial results, moderate stock volatility.
High
High financial and/or operational risk, low predictability of financial results, high stock volatility.
Speculative
Exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, exceptionally high stock volatility. For risk-tolerant investors only.

23. As of 12/31/2014, Scotia Howard Weil has 140 companies in its coverage universe. Of the 140 securities under Scotia Howard Weil’s coverage universe, 140 carry a recommendation. The percentages referenced below are based upon the 140-rated securities in the Scotia Howard Weil coverage universe.
59% have been assigned a Focus List (FS) or Sector Outperform (SO) rating. Within the last 12 months, 40% of companies with this rating are investment banking clients of the Firm.
41% have been assigned a Sector Perform (SP) rating. Within the last 12 months, 36% of companies with this rating are investment banking clients of the Firm.
0% have been assigned a Sector Underperform (SU) rating. Within the last 12 months, 0% of companies with this rating are investment banking clients of the Firm.
For the purposes of the ratings distribution disclosure FINRA requires members who use a ratings system with terms different than “buy,” “hold/neutral” and “sell,” to equate their own ratings into these categories. Our Focus Stock, Sector Outperform, Sector Perform, and Sector Underperform ratings are based on the criteria above, but for this purpose could be equated to strong buy, buy, neutral and sell ratings, respectively.
Valuation Method Used to Determine Price Target: Our current price targets for the Integrated Oils sector are formulated using a traditional discounted cash flow (DCF) approach to assigned reserves (10% discount rate) to arrive at a net asset value (NAV). Our NAV analysis is complemented by applying an earnings per share (EPS) and EV/EBITDA multiple. The assigned multiple is determined using a host of parameters including historical average multiples, historical multiples at various periods of the cycle, and qualitative judgments.
Risk Factors Which May Impede the Achievement of the Price Target: (1) Industry fundamentals with respect to customer demand or product/service pricing could change and adversely impact expected revenues and earnings; (2) issues relating to major competitor or market shares or new product expectations could change investor attitudes toward the sector or the stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation; or (4) external factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects.
Oil and Gas Prices and OPEC: Financial and operating performance for companies in the Energy industry are affected by absolute and relative changes in oil and gas prices, which are influenced by a multitude of regional, national and global factors. As such, future stock price performance may also be influenced by such factors associated with changes to fiscal and royalty regimes in countries where it operates, or might operate, the potential for geopolitical upheaval (given its global presence) and may face various technical and operational risks associated with the products and services it provides. Agreements among OPEC members, including production limitations, may also affect worldwide commodity prices and financial and operational performance for companies in the Energy industry.
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Employees of Scotia Capital (USA) Inc. or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within.
This report/ may be considered advertising under federal law. If you decide not to receive Scotia Howard Weil Research via , please reply to and ask to be removed.