It's raining hard and we're going to get wet: oil and gas update

The human brain is a wonderful thing.It starts working the moment you are born,and never stops until you stand up to speak in public.

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• Google me.• Canadian is just an unarmed American with health

care.• I’m a gas optimist because I think things could be

worse.

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• I monitor media and analysts reports• Forces in play suggest no relief from low commodity

prices• Retrenchment is in full flight• Transaction setting is ripe

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• The longest retrenchment in 30 years• 150 days (5-6 months)• Not the deepest – December 2008• Restructuring is here

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The stone age ended before we ran out of stones.

Saudi impairment - $14. 4 Trillion, $182 billion revenuereduction annual

$1.6 trillion transferred from producers to consumers

$24b revenue reduction for Iran

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Punishing for oil sandsConsolidation happening – Suncor after Canadian OilSands15 oil sands projects on hold4 cancelled outright

Next under pressure is deep water

Middle East should be expanding

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• Where oil sands are cancelled shale is doing cost out• Costs tumbling quickly• Well costs falling rapidly• High grading the drilling targets• Huge amounts of waste in the field

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At risk business models:

• megaproject oil and gas,• megaproject EPC, construction• expensive oil (North Sea, oil sands)• Corrupt petro-states• Undiversified petro economies• Highly leveraged unconventional oil and gas

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Wood mac estimates• $118b in May• $220B by September• 1500b revised September

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• Australian costs 30% above global norms• Australia costs have come down 15% (Wood

Mackenzie)• Rest of world also down 15%• Australia not making up any lost ground

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Every organisation is perfectly designed to get the resultsthey are getting.

Upstream budgets under stress

Better ways to make money

Marginal barrels at risk

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Intentionally small to avoid embarrassing anyone

Top to bottom difference – LNG production exposure(long contracts)

Bottom – need for capital

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Private equity – KKR, Goldman, Blackrock, Macquarieactive

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No time to wasteIf not restructuring, you need to be

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We’ve gotten used to it raining money, but there’s beenchange in the weather.

It’s raining harder than a cow pissing on a flat rock.

You don’t want to be under that cow.

Leave you with three thoughts.

$50TransactionsUpside

What do you call someone who's born in Perth, grows upin Brisbane, and then dies in Melbourne?Dead.

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