1

US NATURAL GAS SITUATION AS OF JUNE 2016

Bruce LaCourSeptember 8, 2016

0

500000

1000000

1500000

2000000

2500000

United States Monthly Natural Gas Production Since January 20003000000

Jan-

2000

Jul-2

000

Jan-

2001

Jul-2

001

Jan-

2002

Jul-2

002

Jan-

2003

Jul-2

003

Jan-

2004

Jul-2

004

Jan-

2005

Jul-2

005

Jan-

2006

Jul-2

006

Jan-

2007

Jul-2

007

Jan-

2008

Jul-2

008

Jan-

2009

Jul-2

009

Jan-

2010

Jul-2

010

Jan-

2011

Jul-2

011

Jan-

2012

Jul-2

012

Jan-

2013

Jul-2

013

Jan-

2014

Jul-2

014

Jan-

2015

Jul-2

015

Jan-

2016

Nat

ural

Gas

Pro

duct

ion

(MM

CF)

Month/Year

16

14

12

10

8

6

4

2

0

Jan-

2000

Ju

n-20

00

Nov

-200

0 Ap

r-20

01

Sep-

2001

Fe

b-20

02

Jul-2

002

Dec-

2002

M

ay-2

003

Oct

-200

3 M

ar-2

004

Aug-

2004

Ja

n-20

05

Jun-

2005

N

ov-2

005

Apr-

2006

Se

p-20

06

Feb-

2007

Ju

l-200

7 De

c-20

07

May

-200

8 O

ct-2

008

Mar

-200

9 Au

g-20

09

Jan-

2010

Ju

n-20

10

Nov

-201

0 Ap

r-20

11

Sep-

2011

Fe

b-20

12

Jul-2

012

Dec-

2012

M

ay-2

013

Oct

-201

3 M

ar-2

014

Aug-

2014

Ja

n-20

15

Jun-

2015

N

ov-2

015

Apr-

2016

Nat

ural

Gas

Pric

e ($

Per

MM

Btu

)

Month/Year

United States Henry Hub Natural Gas Price Since 2000

4

5

6

7

LNG EXPORT WILL INCREASE THE PRICE OF HENRY HUB NATURAL GAS SIGNIFICANTLY

• THE EXPORT CAPACITY OF FERC-APPROVED FACILITIES IS ABOUT 15.7 BILLION CUBIC FEET PER DAY. PROPOSED FACILITIES ADD ANOTHER 28.5 BILLION CUBIC FEET PER DAY FOR A POTENTIAL EXPORT CAPACITY OF 44.2 BILLION CUBIC FEET PER DAY AS OF AUGUST 2016.

• THE CURRENT DRY SHALE GAS PRODUCTION CAPACITY IN THE UNITED STATES IS BELOW 43 BILLION CUBIC FEET PER DAY.

• MANY ARE ASSUMING THAT SHALE GAS PRODUCTION WILL RESUME THE UPWARD TREND IN PRODUCTION WHEN NATURAL GAS PRICES START TO INCREASE. GOOD LUCK WITH THAT ASSUMPTION!! MORE THAN LIKELY, SHALE GAS HAS BEGUN A TERMINAL DECLINE. HOW STEEP THAT DECLINE WILL BE DEPENDS ON WHAT HAPPENS TO THE ECONOMY WITHIN THE NEXT SEVERAL MONTHS AND WALL STREET’S ABILITY TO CONTINUE TO FINANCE NET LOSING OPERATIONS.

• BEFORE SHALE GAS PRODUCTION STARTED TO INCREASE IN 2006, CONVENTIONAL GAS PRODUCTION HAD HIT A PLATEAU AND STARTED A SLIGHT DECLINE IN 2005. CONVENTIONAL GAS PRODUCTION HAS BEEN DECLINING EVER SINCE.

• WHEN CONVENTIONAL GAS PRODUCTION BEGIN TO DROP IN 2005, THE HENRY HUB PRICE ROSE TO OVER $10 PER MILLION BTU FOR THE FIRST TIME AND AGAIN IN 2008 . MORE THAN LIKELY, THE PRICE WILL BE BACK IN THAT AREA SOMETIME EARLY NEXT DECADE.

• DOES ANYONE REALLY THINK THIS LNG EXPORT CRAZE WILL CONTINUE FOR MUCH LONGER? PROBABLY THE SAME PEOPLE WHO THINK THE FEDERAL RESERVE IS GOING TO SAVE THE ECONOMY AND WALL STREET AGAIN.