Current Economic

Climate

May 7, 2015

Presentation to ROABA

• Role of OSCA • Business environment and trends • Working with change

Overview

OSCA’s Vision

3

To pursue innovative solutions that help to

build thriving communities and shared value

with our neighbours and enables the

responsible growth of Canada’s oil sands.

We facilitate engagement, build

relationships and collaborate to create

measurable socio-economic benefits.

OSCA’s Structure and Focus Areas

Aboriginal

Relations Strengthen relationships

with Aboriginal

communities by

collaborating to enhance

socio-economic

opportunities

Regional

Stakeholder

Engagement

Workforce Work with other active

groups to forecast

employee numbers,

identify required skills,

and help to retain an

adequate supply of

trained workers in

Alberta’s oil sands.

Infrastructure Foster collaboration

amongst stakeholders to

help plan, prioritize, &

promote the

development of

infrastructure by

governments and

industry in Alberta’s oil

sands.

Community

Well-Being Maintain the social

license to operate in

affected communities

while recognizing the

responsibility to help

promote sustainable

development of

Alberta’s oil sands.

OSCA Steering

Group

CAPP Oil Sands

Executive Policy

Group

Oil Sands CEO

Council

OSCA

OSCA Members and Mandate Area

• 23 oil sands companies with assets or interests in the Athabasca Oil Sands Area.

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OSCA’s Key Initiatives

Production Workforce Population

Healthy Society Task Group: • Strong relations with AHS: on-line medical controls for patient transfers,

bio-hazard disposal program • Industry best practices on short and long-term disability • Improving Addictions & Mental Health services (working group)

Community Well-Being

Sustainable Community Indicators Task Group: • Joint models for planning and measuring sustainable communities

(Municipal, industry, stakeholders)

Property Tax and Assessment Task Group: • Joint population forecast model (industry, municipality, Province) • Municipal budgets, property assessments, taxation • Municipal planning

OSCA’s Key Initiatives

7

Aboriginal Relations

Business Development Task Group • One-on-one engagement with business • Education on industry lifecycle • Expanding opportunities

Education and Skills • Developing an inclusive multi-sector forum

Sustainable Communities JIP • Community capacity building through youth

OSCA’s Key Initiatives

8

Ground Transportation Task Group: • High Load Corridor JIP • AOSA Industry infrastructure

priorities

Infrastructure

Aviation Task Group: • YYC east runway policy delaying industry charters • JIP with NavCanada for improved navigation infrastructure

Camps Task Group: • Bear Management & Safety JIP • Survey of industry standards

Power and Co-generation Task Group: • Electricity transmission reliability • Fair provincial policy on co-generation

OSCA’s Key Initiatives

Workforce

• Pilot JIP to increase supply of power engineers

• Improve workforce forecast models

OSCA’s Stakeholder Engagement

Purpose:

• Work with regional stakeholders to identify, prioritize and manage key socio-economic issues to improve outcomes.

• Identify opportunities for collaboration among stakeholders.

• Reaffirm industry’s commitment to building and maintaining relationships, communication and dialogue.

Areas of focus:

• Communities in the Athabasca Oil Sands Area (AOSA).

Engagement to date:

• Two sessions in each of Fort McMurray and Lac La Biche.

• 12 top priorities identified and being actioned.

Pressures on the Canadian Oil Industry

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The

Canadian

Oil

Industry

Geopolitics

Social

License

Demand &

Competition

Market

Access

Aboriginal

Relationships

Crude Oil

Supply/Demand

Technology

Environmental

Performance

Government

Policy

Skilled

Workforce

Crude Oil Prices

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Recent Oil Price Trend

Revised Oil Sands Capital Investment Forecast for 2015

Enbridge Mainline

Trans Mountain Express

PADD IV

Capital Investment in oil sands in 2015:

$25 BILLION

• 2015 capital investment in oil sands is forecast at

$25 billion compared to $33 billion last year – down

28%. 14

Canadian Pipeline Capacity vs 2014 Supply Forecast

Enbridge Mainline

Trans Mountain Express

PADD IV

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Note: Access to markets via pipeline is essential despite current economic climate

Economic Forecasts for Q2 2015/16

Oil Price in WTI U.S.$/bbl

Date Organization Alberta Real

GDP Growth

2015

Oil Price Q2 Oil Price 2016

April TD Bank 1.1% 42 70

May BMO 0.4% 52 avg 65

April ATB 0.8% 55 70

April CIBC - 57 68

Mar. RBC 0.6% Modest

growth

-

Feb. U.S. EIA: - 55 avg 71

Challenging Environment

Oversupply: • OPEC producing 31 M bpd – highest in four years • U.S. production rose at 1.0 m b/d over past 3 years • Canadian oil sands production increases • Inventory storage is limited

World Oil Demand

International Energy Agency – World Oil Outlook March 2015

• The forecast of global oil demand for 2015 has been raised by 90 kb/d

to 93.6 mb/d, a gain of 1.1 mb/d on the year. This increase on 2014's

0.7 mb/d growth follows cold temperatures in 1Q15 and an improving global

economic backdrop.

• Global supply rose by an estimated 1 mb/d month-on-month in March, to

95.2 mb/d, as OPEC production recorded its highest monthly increase in

nearly four years. Annual gains of a whopping 3.5 mb/d were split between

OPEC and non-OPEC production

Challenging Times

• Industry revenues forecast to be down more than $50 billion in 2015, down from $150 billion in 2014

• 2015 industry budgets reduced significantly

• Approx. 14,000 natural resource sector jobs lost in Alberta (StatsCan Mar. 2015 Labour Market Survey)

• Project schedules delayed or cancelled

• Projects moving from construction to operations

Member Company Q1 Results

Suncor Energy April 30 • Posted $341M loss in Q1 2015. 90% decline in

operating profit.

Cenovus April 30 • Posted $686M loss in Q1 2015

Imperial Oil April 30 • Earnings down 55% over same time last year to

$421M in Q1 2015.

Royal Dutch

Shell

May 1 • Earnings down 56% over same time last year to

$675M in Q1 2015

Canadian Oil

Sands Trust

May 5 • Posted loss of $186M in Q1 2015. Down 46% over Q1

of 2014.

Husky Energy May 5 • Posted Q1 2015 earnings of $191M, down from

$669M same time in 2014.

Oil Sands Production Increases – South

Athabasca (capacity - bbl/day)

Company 2011 2012 2013 2014 2015 F

Blackpearl – Blackrod Pilot 800

CNRL – Kirby South 40,000

Cenovus – Christina Lake 40,000 40,000 40,000 40,000

Cenovus – Foster Creek 30,000

Cenovus – Pelican Lk Pilot 600

CNOOC Kinosis (K1A) 20,000

ConocoPhillips-Surmont Ph.2 118,000

Devon – Jackfish 2 and 3 35,000 35,000

Connacher – Algar Ph.1 6,000

Harvest Energy–Blackgold Ph.1 10,0000

Grizzly – Algar Lake 6,000

MEG Energy – Christina Lake Ph.2 55,000

Statoil – Leismer 10,000

TOTALS 46,400 40,000 135,000 137,000 168,000

OSCA Aboriginal Business Development Task Group

Purpose: Work to identify and build partnerships with Aboriginal businesses and associations to enhance business capacity, skills and knowledge and to support economic development initiatives. Current activities include:

• Connecting with key Aboriginal businesses and organizations to build relationships and understand business needs and challenges to help foster success

• Developing information on the oil sands industry lifecycle and what it means to local business

• Identifying present and future opportunities

For more information:

Reegan McCullough Executive Director

E-mail: reegan.mccullough@oscaalberta.ca Phone: 780-790-1999

Thank You!