LNG—The Update

Good News and Bad News

GOOD: Still big LNG gains in Canada

BAD: Waiting for catalysts—everything in limbo now

PROFIT FROM LNG?TODAY’S TALK

The US experience LNG Economics The BC Opportunity

LNG—THE OPPORTUNITY

LNG—THE OPPORTUNITY

US LNG

SEXY, BUT EXPENSIVE!!Valuations now ultra highCash flows 2 years away4-6% yield baked in, lots of debtPositives?

-Asia desperate for supplier competition

-Panama Canal

CANADIAN LNG STOCKS—

IT’S HAPPENING NOW

CANADIAN LNG STOCKS—

IT’S HAPPENING NOW

CANADIAN LNG STOCKS—

IT’S HAPPENING NOW

LNG PRICING

Source: Kootenay Capital,Calgary AB

LNG PRICING/SUPPLY COST

LNG PRICING/SUPPLY COST

• Liquefaction Plant Capital Costs $2.00 per Mcf– Based on $1,200 mln per mtpa construction costs at 8% cost of capital

• Natural Gas $4.00 per Mcf

• Pipeline Transportation $ .75 per Mcf

• Liquefaction and Refrigeration Costs$ .80 per Mcf

• Plant Maintenance Costs $ .50 per Mcf

• Operational Costs $ .20 per Mcf

• LNG Shipping Costs $1.12 per Mcf

• Total Delivered LNG Cost to Asia from BC $9.37 per Mcf

N. AMERICA LNG BUILD OUTUSA

6 Proposals Approved to ship LNG8.5 bcf/d=13% current US production

1st export Sabine Pass late 2015

Brownfield—changing import to export—16 bcf capacity idle ($100 billion white elephant)

CANADA 14 Proposals; none approved—total 13 bcf/d 1st export Q4 15—but very small; #2 not until 2018 Greenfield—from scratch—higher risk

14

Ambitious plans – consortiums ahead

Source: Transport Canada, Kootenay

Terminal Capacity by Project (bcf/d)

Prince Rupert

Initial FullXOM 1.6 4.0BG 1.8 2.8Petronas 1.6 2.4Total 5.0 9.2

Kitimat

KLNG 1.3 1.3LNGCan 1.6 3.2DCEP 0.2 0.2Total 3.1 4.7

Total 8.1 13.9

BC LNG

Potential Multi-Year Run for service companies Huge spending to develop reserves $7.5 billion in construction per bcf export 13 bcf=$97.5 billion 13 bcf=all the natgas Canada produces today Like to see 3-5 bcf by 2020

Where’s the BIG Money Going?

New gas pipelines = $4 billion in GDP/45,000 job years

Terminal facilities (Rupert/Kitimat) 8350 job years

Production profits from upstream gas extraction=$134 billion to 2035

Where’s the BIG Money Going?

SMALL TechnologyCould Win Big in BC LNG

BC LNG Cooperative / Golar LNG New Technology—Small Scale Floating Export

Terminals by Golar--FSRU 1st to production—2015/2016 Golar—GLNG-NASD—LNG shipper—make BIG

money They capture most of the “arb”—price difference

Leading Edge Technology

2nd FSRU in the world I think BC could have multiple small scale

FSRUs $300 million capex vs. $10 billion 18 months to build vs 5 years I expect FID very quickly—big catalyst

Who Will Be First in BC?1. Petronas—Malaysia—FID late 2014

(Pacific Northwest LNG)

2. Golar/Haisla—small scale floating barge

(BC LNG)

3. Woodfibre north of Vancouver

Conclusion

Easy Money already made in US LNG Canadian LNG needs catalyst for next leg

GOLAR Makes FID should be that catalyst

But $100 billion spending will happen soonMulti year run for services stocks

Questions?