Short term forecast of natural gas prices, production, and inventory levels and the implications for coal production in the United States.

1. Introduction
Coal Forecasting Depends on….
1. Natural Gas Industry
2. Steel Manufacturing

2. Coal vs. Natural Gas – Fuel Switching
0
5
10
15
20
25
30
35
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
110,000,000
US$/MMBTU
Tons/month
US Total Coal Production
US Total (Current Monthly Level) US Total (Max. 12mo. Avg.)
US Total (12 mo. avg) Regulatory Timeline
Henry Hub Natural Gas Spot Price (Dollars per Million Btu)
Annual Avg. Down
32.4% from the highs

3. Natural Gas: Production
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
GasProduction
(MMcf/month)
Production - By Type
Shale Gas Wells
Coalbed
Methane Wells
Oil Wells
Conventional
Gas Wells
29%
18%
49%

4. Natural Gas: Imports vs. Exports
Projected
-90.00
-40.00
10.00
60.00
110.00
160.00
BCF/month
US Natural Gas Imports vs. Exports
Net LNG
Import/Export
Net Pipeline
Import/Export
Net LNG &
Pipeline
Import/Export
Pipeline
LNG

5. Natural Gas: Consumption
0
200
400
600
800
1000
1200
BCF/month
For Residential Consumption: For Electricity Generation:
2012
2013
2014
2015
2016
2017
Range:
• From 22.1% (Jan. ‘15)
• To 47.0% (Jul. ‘15)
Range:
• From 4.6% (Aug. ‘15)
• To 33.5% (Feb. ‘15)
400
900
1400
1900
2400
2900
3400
BCF/month
Total Natural Gas Consumption:
16.8%
11.7%
33.1%
3.3%
35.2%
2015 Natural Gas Consumption
By Source:
Residential Sector
Commercial Sector
Industrial Sector
Transportation Sector
Electric Power Sector

6. Natural Gas: Comparative Inventory
Forecast
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017
BCF,yearoveryear
BCF,endofperiod
U.S. Working Natural Gas in Storage
billion cubic feet
Year over Year Change
Storage level
deviation from average
Source: Short-Term Energy Outlook, May 2016.
Note: Colored band around storage levels represents the range between the minimum
and maximum from Jan. 2011 - Dec. 2015.

7. Short Term Natural Gas Forecast
0.50
1.50
2.50
3.50
4.50
5.50
6.50
7.50
8.50
9.50
-1500
-1000
-500
0
500
1000
1500
HenryHubPrice
(US$/MMBTU)
YearoverYearInventory
(BCF,endofperiod)
Year Over Year Inventory vs. Price
Comparative Inventory (YoY)
Henry Hub Natural Gas Spot Price (Dollars per Million Btu)
Historical CI Based Price Forecast
Mar '16
$1.72
Forecast: $4.29
vs.
EIA: $3.09
Forecast
Polar Vortex (Feb '12)
$5.99
Apr '12
$1.94
Prices are Also Very Well Correlated:

8. Natural Gas: Supply vs. Demand
(100)
-
100
200
300
400
500
600
700
800
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
Balance
(BCF/mo.12MMA)
(BCF/mo.12MAA)
Supply/Demand Balance
NatGas Production + Net Imports - Consumption (BCF 12MMA)
NatGas Consumption (BCF per Mo. 12MMA)
NatGas Production + Net Imports (BCF 12MMA)

9. Natural Gas: Supply/Demand vs. Prices
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
(BCF/mo.12MAA)
Supply/Demand Balance & Price Correlation
NatGas Production + Net Imports - Consumption (BCF 12MMA) NatGas Consumption (BCF per Mo. 12MMA)
NatGas Production + Net Imports (BCF 12MMA) Henry Hub Natural Gas Spot Price (Dollars per Million Btu)
Prices are Very Well Correlated:

10. Short Term Natural Gas Forecast
-100
0
100
200
300
400
500
600
700
800
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
NatGasSupplyBalance
(BCF/mo12MMA)
(BCF/mo.12MMA)
U.S. Natural Gas Supply Balance
NatGas Production + Net Imports - Consumption (BCF 12MMA) NatGas Consumption (BCF per Mo. 12MMA)
NatGas Production + Net Imports (BCF 12MMA) Henry Hub Natural Gas Spot Price (Dollars per Million Btu)
Historical Supply Balance Based Price Forecast
HenryHubPrice
(US$/MMBTU)
Polar Vortex (Feb '12)
$5.99
Apr '12
$1.94
Mar '16
$1.72
Forecast: $4.05
vs.
EIA: $3.09
EIA Projections
$6.00
-
-
$4.00
-
-
$2.00
-
-
$0.00

11. Shor Term Forecast Summary
Bottom Line: Nat-Gas prices
are going up in the next 12-
18 months. EIA: $3.09
Me: $4.05-4.29

12. 0
5
10
15
20
25
30
35
40
45
TCF
EIA Projections (without CPP)
Shale Production
NonShale
Long Term Natural Gas Projections
The Shale & Fracking Boom will
have to continue for quite a
while.
Steep Decline Curves
Capital Intensive
Finite Resources
Is that likely??

13. 0
5
10
15
20
25
30
35
40
45
50
BCF/day
Shale Production per Basin
Utica (OH, PA & WV)
Marcellus (PA,WV,OH & NY)
Bakken (ND)
Rest of US 'shale'
Eagle Ford (TX)
Woodford (OK)
Haynesville (LA & TX)
Fayetteville (AR)
Barnett (TX)
Antrim (MI, IN, & OH)
Natural Gas Peaking Already?
- Still Growing
- Still Growing
- Peaked Nov. ’15
- Peaked Oct. ‘15
- Peaked Mar. ‘15
- Peaked Aug. ‘14
- Peaked Jan. ‘12
- Peaked Nov. ‘12
- Peaked Nov. ‘11
- Peaked Mar. ‘00

14. For the Boom to Continue,
Price’s will have to go UP…
Natural Gas Peaking Already?
CAPEX is Declining

15. -
50,000
100,000
150,000
200,000
250,000
300,000
MMcf/month
Year over Year Natural Gas Production
YoY Marketed Production
Natural Gas Peaking Already?
Year over Year
Production Already
Declining.
Growth Peaked Dec. ‘14
and… WHY is Production Decelerating???
WHY is CAPEX Declining???

16.  Shale Drilling is Capital Intensive
 E&P’s have Deteriorating Credit Quality
 Period of Easy Financing is Over
“Drilling On Debt”
CHK’s Debt Rated Caa2
(w/ negative outlook)
Shale Boom = Debt Boom
“Exxon Mobil
Downgraded”
 Held S&P’s top rating
since 1930
-April 26, 2016

17. Debt Boom = Bankruptcy Boom
2016 Cumulative Filings
“US Oil & Gas Bankruptcies
Spike 379%” -CNN Money
Feb. 11, 2016

18. Summary
Short Term:
1) YoY Inventory suggest prices of $4.29
2) Supply/Demand Balance suggests
prices of $4.09
3) YoY Production Already Declining
Long Term:
1) Shale Boom Peaked for Most Basins
2) Period of Easy Money Over
3) Bankruptcies on the rise.
4) ROI’s Require Higher Natural Gas
Prices

19. BOTTOM LINE:
1. $4 Natural Gas will lead to fuel switching (back to coal).
2. Therefore.. Coal will Bottom sometime in 2016.
3. And.. Retake Natural Gas as top Fuel source in 2017.
4. Beyond 2017.. Depends on Shale E&P “financing” and CAPEX.
Outcomes