Utica Shale Briefing: Client CPE Day 2013

Cohen & CompanyUtica / Point Pleasant shale play briefingp y g

November 19, 2013

Vince BevacquaE V P ShaleCommE.V.P, ShaleComm

The State of O & NG in the U S AThe State of O & NG in the U.S.A

Shale Energy = Game changer

'It's difficult to overstate the shale revolution's profound contributions to the U.S. economy'’p ySource: IHS study reported in several national media outlets 9/4/13

In 2011, the U.S. became a net exporter of petroleum , p pproducts for the first time in 60 years.Source: Bloomberg Businessweek 9/3/13

Crude oil imports DOWN 19% (first half of 2013) = $31.6 Billion off the trade deficitSource: IHS study reported in several national media outlets 9/4/13y p


Shale Energy = Game changer

"Barring any major environmental accidents related to onshore shale drilling, which could slow or reverse i d h h U S hindustry growth, we expect the U.S. to approach energy self-sufficiency toward the end of this decade."David Wood a managing director in Standard & Poor's Corporate Ratings groupDavid Wood, a managing director in Standard & Poor s Corporate Ratings groupSource: Akron Beacon Journal- 5/22/13

F t Gl b l 500Fortune Global 500

7 of top 10 companies = Energy Companies

Most Profitable = Exxon Mobil $44.9 billion


Initial Benefits - National

1.2 million jobs directly or indirectly linked to shale energy exploration

Will grow to 3.3 million by 2020

58% i i NG i 2007• 58% increase in NG reserves since 2007

• NG price DOWN NEARLY 75%

• $120 billion in U.S based investment - 2012

Source: IHS study reported in several national media outlets 9/4/13


Six major shale plays in U.S

Bakken (ND)

Barnett (TX)Barnett (TX)

Haynesville (LA)

Eagle Ford (TX)

Marcellus (PA)

Utica (OH)

The State of O & NG in OhioThe State of O & NG in Ohio

Initial Benefits - Ohio

$34 billion outside investment in Ohio by 2015

Last 2 years = 38,000 Ohio jobs

$793 million annual Ohio salaries$793 million annual Ohio salaries

Source: OOGEEP


Initial benefits - Ohio

Tax Collection Increase

21% increase in sales tax receipts in shale counties1.4 % increase in non-shale counties

$12.3 billion in 2011 to $14.9 billion in 2012

T b ll P t M h i W St kTrumbull, Portage, Mahoning, Wayne, Stark, Columbiana, Holmes and Carroll

Source: Cleveland State University Study


Initial benefits - Ohio

Road improvements

RUMA (Road Use Maintenance Agreement)

Mahoning County doubled its paving program withMahoning County doubled its paving program with O & NG money

NiS $1 5 illiNiSource - $1.5 millionHalcón Resources- $500,000

Current state of Utica / Point Pleasant playCurrent state of Utica / Point Pleasant play

Unproven…but with i lgreat potential.


End of October 2013

953 Utica wells permitted427 Drilled164 Producing

1 000 NEW wells expected to be1,000 NEW wells expected to be IN PRODUCTION by 2015

Source: Media reports of ODNR data


93% ^ oil production from 201193% ^ oil production from 201180% ^ gas production from 2011

• SO FAR, the Utica is primarily a “wet gas” play

• Currently selling for 85% of crude oil value

• Ethane, Butane & Propane

Source: Media reports of ODNR report 5/22 /13


Current top producers in Ohio# 1 Chesapeake (Oil & NG)# 2 Anadarko (oil)# 2 Hess (NG)# 2 Hess (NG)

24 Other E & P companies in Ohio including:BPBPChevronCONSOLHalcón ResourcesHalcón ResourcesHilcorpEnverVestAntero ResourcesSource: Media reports of ODNR report 5/22 /13


Current top producing Counties in OhioCurrent top producing Counties in OhioPermits Drilled Producing

Carroll 339 148 94Harrison 141 74 20Harrison 141 74 20Columbiana 91 47 8Noble 70 40 11Guernsey 60 22 20Guernsey 60 22 20*(400% - 600% growth since 2012)

Trumbull 13 7 1Mahoning 28 8 0Stark 12 5 1Portage 14 7 2

Source: Media reports of ODNR report 5/22 /13


Reasons for optimismReasons for optimism

A single Utica well produces as much oil as 312 conventional wells

A single Utica well produces as much natural gas as g p g448 conventional wells

* 34 Rigs currently working Ohio’s Utica Shale* 34 Rigs currently working Ohio s Utica Shale

Source: Media reports of ODNR data


Reasons for optimismReasons for optimismChesapeake“The Utica is outstanding, and we have several other emerging areas that are in the evaluation process that we’ll be looking at.”* Gas production DOUBLED in 3Qp Q

EV Energy Partners“The pace of Utica drilling at this early stage of itsThe pace of Utica drilling at this early stage of its history exceeds that of the other major shale plays at a similar stage.”



McClendon betting on Ohio

• Former chairman and CEO of Chesapeake Energy

• American Energy Partners

• Has raised $1 billion for new venture• Has raised $1 billion for new venture

• “Staking his comeback” on the Utica Shale play

• Guernsey, Belmont, Harrison and Noble counties



McClendon betting on OhioUtica shale (is) going to be the biggest thing to hit the Ohio economy “since maybe the plow.”

Estimates $500 billion worth of oil and gasunder Ohiounder Ohio

What’s next? What s next?

Processing plants Pipelines midstream investmentsProcessing plants, Pipelines, midstream investments

$$7.2 billion in plant and pipelines in eastern Ohio planned

• 7 processing-separation plants

• Several pipeline networks• Several pipeline networks

Source: Media reports


Examples Processing plantsExamples - Processing plantsMarkWest•$2.2 billion Cadiz Harrison CountyCadiz, Harrison County•$1 billionUrichville, Tuscarawas County

Momentum M3Momentum M3•Kensington, Columbiana County• Leesville, Carroll County•Hub- Harrison County$1 billion + combined investment$1 billion + combined investment

Cracker Plant(s)Shell ChemicalMonaca PAMonaca, PA“seeking ethane suppliers”$3.2 billion Ethane > Ethylene (plastics)


Examples PipelinesExamples - Pipelines

Antero – water line from Ohio River to Tyler and Ritchie Counties80 miles - $525 million$

Spectra Energy70 miles- Columbiana County, Carroll, Jefferson, Belmont and Monroe ( ibl M h i & T b ll)(possibly Mahoning & Trumbull)

NiSource Services“Hickory Bend”y50 miles- Columbiana County, Carroll, Jefferson, Harrison & Belmont Counties$300 million


Examples PipelinesExamples - Pipelines

Hilcorp Corp. and PVR Partners45 miles- connecting Utica with Texas Eastern and Rockies Expresses g pinterstate pipelines$125 million

Willi C i I d B d lk Pi li P t LPWilliams Companies Inc. and Boardwalk Pipeline Partners LPBluegrass pipeline - connecting Utica and Marcellus with storage in Louisiana


midstream investments

Halcón Field ServicesHalcón Field Services

Oil storage & rail transfer station

Ohio Commerce Center, Lordstown

$70 million

“New” Rock? New Rock?

U D i f tiUpper Devonian formation

• Originally drilled in 1970’s

• Above Utica and Marcellus

• PA & WV

“C t hi ” il d f• “Catching” oil and gas from Marcellus

• Could be more “liquids rich” than Marcellus

OutlookOutlook

Locally, production numbers are inconclusive due to lack of data.

However, if this play comes close to expectations, the Utica / Point Pleasant formation will produce oil and natural gas for the next 40 years.the next 40 years.

After 2015- 1,000 new wells a year for 20 years

Lease sales/ M & A will create new wave of E & P activity

Royalty payments will continue throughout the duration of production

New technology could enhance production, just as horizontal d illi d f i t h i h t d thi t itdrilling and new fracing techniques have created this opportunity

Source: Media reports and expert interviews