EFTA Document EFTA01385325

January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite iFigure 10: Tight oil growth scenarios (kb/d yoy) 2000 1500 1000 - 500 0 -500 -1000 Soon Diatch• ant —WTI 545/bbl —WTI $50/bbl WTI $55/bbl — WTI 560/bbl —WTI S65/bbl - WTI 570/lab WTI 575. Productivity growth would Scaly lift longer term numbers 2016 2017 2018 2019 2020 2021 1Pre-FID breakevens falling • With upstream project economics under pressure and oil industry capex suppressed, it is no surprise that full-cycle breakevens of prospective projects would be coming down. To quantify just how much, we look at pre-FID upstream projects where recoverable reserves are at least 50mboe, and where liquids reserves constitute at least half of the resource. We also limit the survey to projects outside of OPEC; we include Alaska and Gulf of Mexico but exclude US tight oil assets. Comparing the O4-16 dataset against O3-17, we see that breakevens on a 10% discount rate have fallen from USD 53/bbl to USD 46/bbl. We also observe that deepwater reserves still contribute the most reserves by resource theme, and that USD 65/bbl could still be considered a marginal cost of new supply from oil sands projects. IA balanced market • Broadly speaking, oil markets look to be in relative balance after three years of oversupply. However, we expect some retracement of H2-17 strength owing to first quarter oversupply and a resurgent US tight oil sector. • The O1 surplus is modest at +541kb/d in comparison to the 2015 full-year surplus of +1.7mb/d, but this breaks the string of two quarters of undersupply and further progress in eliminating the last 140mbb1 of OECD liquids surplus. • According to the relationship between cumulative quarterly supply- demand imbalances and price, this would suggest weakness of -5% on the quarterly average price. Page 50 Figure 11: Changes in break-even by type - conventional through sands liquids reserves 44-2016 Cony. onshore Low 35 High 61 Avg 52 (mmbbl) 2,792 Cony. shelf 22 102 50 2,650 Deepwarer 28 68 49 6,998 Oil Sands 63 95 70 2,466 43-2017 Cony. onshore tow 26 High 55 Avg 45 Liquids reserves (mmbbl) 3,047 Cony. shelf 27 70 42 3,209 Deepwarer 26 76 43 18,522 Oil Sands 53 67 63 3,290 Sane Dana* Sint —5fratenzie Figure 12. Global supply demand balance (inlaid) 2 000 1.500 1 000 0 500 0 000 -0.500 •Saskistaillen I ...- ----- -, •1 Sanwa crilete;`, ' iwoj 2019 I \ M — =,/ 2014 2015 2011 2017 2016 2019 2020 Source Mt am Er McNN, 01Dou Selma CCCOnEA 2017. MAWS], cep/Mesa Isola woo Ole orgAtc. fral4ke0 to DOLISChlt Bank Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRI M. P. 6(e) CONFIDENTIAL DB-SDNY-0086609 SDNY_GM_00232793 EFTA01385325