America’s Energy Renaissance: Top Plays for Income and Growth

1. America’s Energy Renaissance: Top Plays for Income and Growth Elliott H. Gue January 18, 2014 Editor, Energy & Income Advisor Editor, Capitalist Times

2. Back to July 1988

3. The World’s Largest Oil and Gas Producer

4. US Energy Liberty Day is Approaching

5. US Enjoys Cheap Gas and Electricity Prices

6. The US Manufacturing Renaissance

7. It’s Morning in America

8. Where’s the Crude Coming From?

9. Half of American Oil Production is Unconventional

10. Where’s Oil Trading?

11. Refining: As Easy as 3-2-1 • Refiners are manufacturing firms: convert oil to gasoline, diesel, jet fuel, other products. • 3 Barrels of oil ($93.82/bbl x 3) = $281.46 • 2 Barrels of Gasoline ($2.68/ gallon x 42 x 2) = $225.12 • 1 Barrel of Diesel ($3.05/gallon x 42 x 1) = $128.1 • 3-2-1 Spread: $225.12 + $128.1 - $281.46 = $70.76 divided by 3 = $23.58 per Barrel.

12. Valero Energy (NYSE: VLO)

13. Valero Energy (NYSE: VLO)

14. Shale Development: Where’s the Money Coming From?

15. Vanguard Natural Resources (NYSE: VNR) • Recently acquired 87,000 Gross Acres in Pinedale and Jonah fields WY. • 80% NatGas, 16% NGLs • Historically Hedges 85% of Gas production through 1H 2017 and 75% of Oil through 2015 • Opportunity for more acquisitions as producers need to fund shale. • Yields 8.4%, Paid Monthly

16. California is . . . . .Different

17. Pacific Coast Oil Trust (ROYT) • Perpetual trust with an 11.7 percent yield. • Produces 98 percent crude oil. • Southern California fields are mature and have a low decline rate, often well under 5%. • 80% interest in developed properties. • 25% royalty interest in Diatomite formation. • Active waterfloods and steamfloods

18. Going Horizontal

19. More Gas With Fewer Rigs

20. Drilling Efficiency Gas and Oil

21. Launch Pad for Growth

22. Patterson-UTI (NSDQ: PTEN) • 60% of revenues from contract drilling, 40% from pressure pumping • 300 working rigs • 2009: 75% of rigs mechanical, 2013: more than 50% electric, 126 rigs APEX. • 6 New APEX Rigs (all “Walking”) in 2H 2013, 12 in 1H 2014

23. The Denver-Julesburg Basin

24. Niobrara Offers Solid Economics

25. Noble Energy (NBL) • First wells in the DJ Basin in 2010, last year drilled 195 Wattenburg, 25 in CO • By 2016 plans 500 wells/yr. in DJ Basin • Liquids rich portion of Marcellus • Eastern Med. Tamar 9 tcf and Leviathan 17 tcf in Israel, Cyprus-A 5 to 8 tcf

26. Eni (NYSE: E) • 16.81% stake in Kashagan in Caspian Sea first oil produced middle 2013 • 100,000 boe/day in deepwater GOM • 700,000 in new projects over 4 years, 3 to 4% annualized • Mamba Complex Mozambique 30 tcf gas • Barent’s Sea Norway and Russia • Disposing of non-core assets • PIIGS discount unwarranted. • Offers a 6.5% yield.

27. LyondellBasell Industries (NYSE: LYB) • 80 percent of Companies EBITDA benefits from favorable US NGLs prices. • Ethane cracking capacity to expand in 2014-2015, before competition. • Using NGLs imported from USA to reduce EU costs • Near 3% yield and share buybacks

28. Thank You. Elliott H. Gue January 18, 2014 Editor, Energy & Income Advisor Editor, Capitalist Times 1-888-960-2759 Service@CapitalistTimes.com