Presented by Midwest Energy Logistics October 10, 2013.

OSC Self-Help Natural Gas Risk Management

Presented by Midwest Energy LogisticsOctober 10, 2013

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Table of Contents

Goals of Risk Management ProgramHedging Results SummaryLooking Ahead

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Goals of Risk ManagementRisk Management = Hedging = Forward

Fixed PricingTrading known for unknownInsurance against worst case scenariosBudget sensitiveMaking informed decisionsMost commodities are weather sensitive,

natural gas is extremely weather sensitiveGetting beyond media bias and buyer bias

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Our StrategyThe Hedging Committee evaluates the current market conditions using outside experts and then pursues a risk management plan based on several key factors:• Budgets• Stability/Insurance• Value• Premium reduction• Dollar cost averaging

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Our Track Record Thus Far

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Hedges in PlaceJune 12 – Oct 13

$3.444 NYMEX Avg.$3.559 Schools Avg.($135,670) Loss vs.

Market

Nov 13 – June 15$4.006 NYMEX Avg.$3.908 Schools Avg.$301,394 Gain vs.

Market

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Our Current Positions

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Hedge Results Per School YearJuly 12- June 13

$3.405 NYMEX Avg.$3.523 Schools Hedge and Open Avg.

July 13- June 14$3.78 NYMEX Avg.$3.76 Schools Hedge and Open Avg.

July 14- June 15$4.082 NYMEX Avg.$3.987 Schools Hedge and Open Avg.

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Planning For Weather Surprises

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Forecasting the FutureIf you want a 98% probability prediction

then…If we experience a warm winter the price will

go down and the schools will consume lessIf we experience a cold winter the price will go

up and the schools will consume more

Now back to the real world, assuming normal weather, MEL believes futures prices will increase to the $4.00 - $5.00 range during 2014-2015

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Why is MEL So Bullish - #1 Producer Cost is Higher Than the Current Market Price

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Why is MEL So Bullish - #2 The Export Market is About to Take Off

• Potentially 20 Bcf per day could be exported from North American terminals by 2016.• At least 10 Bcfd is likely• Plus new pipelines to Mexico would increase exports another 2 Bcfd• Plus reversal of Canadian pipelines could new another 5 Bcfd in exports

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Why is MEL So Bullish - #3 Producers Aren’t Drilling for Natural Gas on Purpose Anymore

• Producers are looking for oil and natural gas liquids• The three big liquids fields are the Bakken (ND), Eagle Ford (TX), and Utica (OH)• Gas from oil wells is referred to as “associated gas”• The only profitable dry gas field appears to be the Marcellus (PA/WV)

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Why is MEL So Bullish - #4 The US is Not The Only Game in Town Anymore

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Thank You

Mark JergensMidwest Energy Logistics, LLC

(614) [email protected]