2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
IPAA / TIPRO
Mike Lister
Managing Director & Energy Corporate Banking Group Head
Chase, J.P. Morgan, and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively,
“JPMC”).
This document was prepared solely and exclusively for the benefit and internal use of the party to whom it is directly addressed and delivered (the “Company”) in
order to make a preliminary presentation to the Company regarding certain products or services that might be provided by JPMC. This document and any related
presentation materials are for discussion purposes only and are incomplete without reference to, and should be viewed solely in conjunction with, a related oral
briefing provided by JPMC. This presentation does not constitute a commitment by any JPMC entity to extend or arrange credit or to provide any other services. The
Materials and oral briefing (collectively the “Information”) contain information which is confidential and proprietary to JPMC and may only be used by the Company for
the purpose of evaluating the products and services described in the Information and may not be copied, published, disclosed or used, in whole or in part, for any
other purpose other than as expressly authorized by a JPMC entity.
2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
In preparing the Information, JPMC has relied upon and assumed, without independent verification, the accuracy and completeness of information available from
public sources or provided to it by or on behalf of the Company. JPMC does not guarantee the accuracy, completeness or reliability of that information. JPMC’s
opinions and estimates contained herein reflect prevailing conditions and our views as of this date, which are accordingly subject to change, and should be regarded
as indicative, preliminary and for illustrative purposes only. Our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company
or any other entity.
The Information is not intended and shall not be deemed to constitute or contain advice on legal, tax, investment, accounting, regulatory, technology or other matters
on which the Company may rely, and the Company should consult with its own financial, legal, tax, accounting, compliance, treasury, technology, information system
or similar advisors prior to entering into any agreement for JPMC products or services. The Company is responsible for its own independent assessment as to the
cost, benefit, suitability and appropriateness of any products or services it obtains from JPMC. JPMC makes no representations as to the actual value which may be
received in connection with any JPMC product or service or the legal, tax, or accounting implications of consummating any transaction contemplated by the
Information.
The Information contained herein is intended as general market and/or economic commentary, does not constitute and should not be treated as J.P. Morgan
research. The Information may differ from that contained in J.P. Morgan research reports. The Information is not intended as nor shall it be deemed to constitute
advice or a recommendation regarding the issuance of municipal securities or the use of any municipal financial products. JPMC is not providing any such advice or
acting as the Company’s agent, fiduciary or advisor, including, without limitation, as a Municipal Advisor under Section 15B of the Securities and Exchange Act of
1934, as amended.
The Information does not purport to set forth all applicable terms or issues and are not intended as an offer or solicitation for the purchase or sale of any financial
product or service or a commitment by JPMC as to the availability of any such product or service at any time. JPMC products and services are subject to applicable
laws, regulations, service terms and policies of JPMC. Not all products and services are available in all geographic areas or to all customers. Eligibility for particular
products and services is subject to satisfaction of applicable legal, tax, risk, credit and other due diligence, JPMC’s “know your customer,” anti-money laundering,
anti-terrorism and other policies and procedures.
Products and services may be provided by commercial bank affiliates, securities affiliates or other JPMC affiliates or entities. In particular, securities brokerage
services other than those which can be provided by commercial bank affiliates under applicable law will be provided by registered broker/dealer affiliates such as J.P.
Morgan Securities LLC, J.P. Morgan Institutional Investments Inc. or by such other affiliates as may be appropriate to provide such services under applicable
law. Such securities are not deposits or other obligations of any such commercial bank, are not guaranteed by any such commercial bank and are not insured by the
Federal Deposit Insurance Corporation.
All trademarks, trade names and service marks appearing in the Information are the property of their respective registered owners.
© 2016 JPMorgan Chase & Co. All rights reserved.
Agenda
2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
Page
JPMorgan Overview
1
Debt Market Update
3
M&A Activity
15
Oil Market Outlook
18
J.P. Morgan’s extensive North American coverage model supporting the energy sector
Corporate Banking
Syndicated Finance/
Borrowing Base Lending
 Significant client coverage and capital deployed to the energy
M&A and A&D
Advisory
sector
Equity Capital
Markets
Commodity
Hedging
 One of the largest credit underwriting and engineering teams
 Extensive expertise in North American reserves
 Research, Lending, Equity, and Debt Underwriting – all energy
focused
 Diverse client base enables JPM to distribute industry-leading
Debt
Capital Markets
Leasing
research
Oil & Gas
 #1 Overall Cash Management Provider (2011-15)
Cash
Management
Investment Banking
 Global financial institution uniquely positioned to assist O&G clients
 Extensive relationships with corporations, governments and other
investors
 #2 bookrunner in global and U.S. equity for last 7 years
 #1 in U.S. E&P equity and equity-linked league table 2006 – YTD 2016
JPMORGAN OVERVIEW
 #1 in global high yield bonds nine years in a row: 2005 – 2015
 #1 in E&P sector for high yield bonds each year from 2006 – 2015
 #1 in syndicated loans for 23 years
 #1 in high grade bonds: 2014 – YTD 2016
 Industry leader in commodity derivatives
Source: Dealogic
1
Corporate Trust/
Retirement Plan
Services
Debt
Private Placements
Interest Rate
Risk Management/
Foreign Exchange
J.P. Morgan remains a financing leader in the E&P industry
U.S. oil & gas high yield bookrunner: 2016YTD ($ millions)1
Total market: $25,275mm
10.2%
8.0%
7.6%
7.0%
6.8%
6.4%
6.2%
6.2%
5.8%
4.4%
JPM
MS
8
3
CSFB
7
Citi
DB
BAS
RBC
3
3
6
1
WFC
3
GS
Mitsubishi
2
0
Number of Lead-Left Deals
Range of reserve-based facility sizes ($ in millions)2
57
Sole Lender
Admin Agent
Non-Admin Agent
13
JPMORGAN OVERVIEW
37
28
20
21
23
15
16
12
24
14
11
12
4
< $100
$100 - $249
$250 - $499
[1] J.P. Morgan as of 12/12/16, Equal split for bookrunners
[2] J.P. Morgan as of 12/1/16
2
$500 - $999
9
> $1,000
Agenda
2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
Page
JPMorgan Overview
1
Debt Market Update
3
M&A Activity
15
Oil Market Outlook
18
U.S. high yield energy trading performance (2015 – 2016 YTD)
Selected U.S. high yield energy indices (YTW%)
WTI
US HY
US HY Energy
US BB's Energy
US B's Energy
US CCC's Energy
$70
52.0%
46.0%
$60
40.0%
$51.49
$50
34.0%
$40
28.0%
$30
22.0%
$20
DEBT MARKET UPDATE
16.0%
11.68%
$10
6.63%
6.57%
5.77%
4.72%
$0
10.0%
4.0%
Jan-15
May-15
Sep-15
Jan-16
Source: Morgan Markets
3
May-16
Sep-16
Energy, BB, B, and CCC rated bonds’ YTD performance
Selected high yield BB , B and CCC indices (YTW%)
WTI
JPM HY BB
JPM HY B
Selected global high yield energy indices (YTW%)
JPM HY CCC
$55
25.0%
35.0%
$51.49
WTI
JPM HY Energy Services
JPM HY E&P Index
JPM HY Midstream Index
JPM HY Energy
$55
$51.49
30.0%
$50
$50
20.0%
25.0%
$45
$45
15.0%
20.0%
13.04%
$40
$40
15.0%
10.0%
11.84%
$35
$35
10.0%
DEBT MARKET UPDATE
6.43%
7.08%
6.87%
$30
5.11%
4.79%
5.0%
$30
5.0%
0.0%
Jan-16
$25
Apr-16
Jul-16
0.0%
Jan-16
Oct-16
Source: Morgan Markets
4
$25
Apr-16
Jul-16
Oct-16
Global HY energy trading levels – an unexpected rebound
February 11, 2016
220
91.0%
200
70.6%
160
Notional ($Bn)
$13.4
$15.8
36.1%
100
80%
$17.9
70%
60%
$16.8
50%
40%
$23.2
80
22.1%
60
9.9%
40
20
$30.3
$10.6
47.6%
120
90%
75.9%
62.2%
55.5%
140
2.6%
30%
$28.0
20%
$24.2
10%
$14.6
0
$5.3
$100+
% of bonds in range 2.6%
Bond price range
100%
% of total
> 75% of bonds trading lower than $80
180
100.0% $200.0
0%
$90-99
7.3%
$80-89
12.1%
$70-79
14.0%
$60-69
11.6%
$50-59
7.9%
82.2%
84.7%
87.0%
$40-49
6.7%
$30-39
8.4%
$20-29
5.3%
$10-19
15.1%
$0-9
9.0%
91.3%
93.2%
94.6%
95.5%
100.0%
$4.2
$3.0
Total
100%
240
220
200
180
160
140
120
100
80
60
40
20
0
Bond price range
80.1%
48.6%
$4.6
$5.5
100%
90%
72.8%
$16.0
$219.2
$9.5
$5.1
$1.9
$9.9
80%
70%
60%
$53.0
50%
40%
> 82% of bonds trading higher than $80
30%
$106.5
20%
10%
0%
$100+
% of bonds in range 48.6%
$90-99
$80-89
$70-79
$60-69
$50-59
$40-49
$30-39
$20-29
$10-19
$0-9
Total
24.2%
7.3%
2.1%
2.5%
2.3%
4.3%
1.9%
1.4%
0.9%
4.5%
100.0%
Note: J.P. Morgan HY Energy index includes E&P HY Index, Midstream HY Index, Energy Services HY Index, Propane HY Index, and Refining HY Index
5
% of total
Notional ($Bn)
DEBT MARKET UPDATE
December 12, 2016
Strong correlation between oil and energy bank stock prices
Equities performance since December 2015
50%
Pre-oil concerns
12/1/15
Median P/2016E
12.9x
Median P/TBV
1.56x
WTI Crude
$41.85 / bbl
Current
Median P/2017E
Median P/TBV
WTI Crude
12/8/16
17.6x
1.86x
$50.84 / bbl
29.0%
25%
21.5%
21.4%
0%
DEBT MARKET UPDATE
(25%)
Oil bottom
Median P/2016E
Median P/TBV
WTI Crude
(50%)
Dec-15
Feb-16
Apr-16
WTI Crude Oil
2/11/16
10.0x
1.10x
$26.21 / bbl
Jun-16
Energy Banks
KBW Nasdaq Bank Index
Aug-16
Oct-16
Dec-16
Source: FactSet, SNL Financial; Market data as of 12/8/16
Note: Energy banks include all banks with funded energy commitments >1% of gross loans during at least one quarter since December 31, 2015, namely, ASB, BAC, BBT, BOKF, C, CFR, CIT, CMA, FFIN,
FIBK, FITB, FNBC, GNBC, HBCP, HBHC, HTH, IBKC, IBTX, JPM, KEY, LTXB, MSL, NBHC, PB, PNC, RF, SBSI, STI, TCBI, TRMK, WFC and ZION
6
Bank energy portfolios stabilizing since Q1 2016
Aggregate energy outstandings ($bn) and energy reserves (%) over time, by asset class
>$1tn
$78.6
$50bn-$1tn
$10bn-$50bn
Reserve ratio
$77.1
$73.0
$72.5
$20.5
$19.9
$9.8 5.0%
5.2% 4.7%
3.5%
$1.8
$18.8
$9.7
6.4% 7.1%
2015Q4
6.6%
6.4%
4.8% $1.7
2016Q1
Funded
$249
7.4%
$17.7
$9.1
6.7%
4.8% $1.6
2016Q2
Aggregate exposure ($bn)
$240
<$10bn
6.4% 7.4%
$8.4 5.3%
5.1% $1.5
2016Q3
Median energy reserves (%)
Unfunded
$242
5.8%
6.0%
Q1'16
Q2'16
$236
5.6%
DEBT MARKET UPDATE
4.5%
$136
$139
$136
$135
$104
$111
$107
$101
Q4'15
Q1'16
Q2'16
Q3'16
Q4'15
Q3'16
Source: SNL Financial, FactSet, Company disclosures; Financial data as of September 30, 2016
Note: Energy banks include all banks with funded energy commitments >1% of gross loans during at least one quarter since December 31, 2015, namely, ASB, BAC, BBT, BOKF, C, CFR, CIT, CMA, FFIN,
FIBK, FITB, FNBC, GNBC, HBCP, HBHC, HTH, IBKC, IBTX, JPM, KEY, LTXB, MSL, NBHC, PB, PNC, RF, SBSI, STI, TCBI, TRMK, WFC and ZION
7
High yield defaults & distressed exchanges by industry
Summary1
 109 OFS bankruptcies since 2015
OFS Bankruptcies
 2015: 39
 YTD 2016: 70
 105 E&P bankruptcies since 2015
E&P Bankruptcies
 2015: 44
 YTD 2016: 61
DEBT MARKET UPDATE
2015 default and distressed exchanges by industry
Industry
Automotive
Chemicals
Consumer
Diversified
Energy
Financial
Food and Beverages
Gaming Lodging
Healthcare
Housing
Industrials
Metals and Mining
Metals and Mining (Coal)
Paper and Packaging
Retail
Services
Technology
Telecommunications
Transportation
Utility
Total
2016 default and distressed exchanges by industry
Amt affected ($mn)
No. of actions
0
0.0%
0
0.0%
0
0.0%
0
0.0%
968
2.0%
3
5.1%
3,249
6.8%
4
6.8%
23,235
48.7%
33
55.9%
0
0.0%
0
0.0%
211
0.4%
1
1.7%
150
0.3%
1
1.7%
2,105
4.4%
2
3.4%
0
0.0%
0
0.0%
250
0.5%
1
1.7%
2,101
4.4%
3
5.1%
12,241
25.6%
6
10.2%
0
0.0%
0
0.0%
575
1.2%
1
1.7%
2,500
5.2%
3
5.1%
140
0.3%
1
1.7%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
0
0.0%
47,725
59
Sources: Haynes & Boone Bankruptcy Tracker as of 10/25/16; Morgan Markets as of 12/6/16
8
Industry
Automotive
Chemicals
Consumer
Diversified
Energy
Financial
Food
Gaming
Healthcare
Housing
Industrials
Metals and Mining
Paper & Packaging
Retail
Services
Technology
Telecommunications
Transportation
Utility
Total
No. of actions
Amt affected ($mn)
400
0.6%
1
1.2%
448
0.7%
1
1.2%
331
0.5%
1
1.2%
383
0.6%
2
2.3%
45,907
69.4%
52
60.5%
1,793
2.7%
4
4.7%
144
0.2%
1
1.2%
295
0.4%
1
1.2%
361
0.5%
1
1.2%
0
0.0%
0
0.0%
355
0.5%
1
1.2%
8,675
13.1%
7
8.1%
2,712
4.1%
2
2.3%
1,620
2.4%
6
7.0%
1,000
1.5%
2
2.3%
767
1.2%
1
1.2%
141
0.2%
1
1.2%
225
0.3%
1
1.2%
594
0.9%
1
1.2%
66,150
86
Oil & gas restructuring processes continue on…
DEBT MARKET UPDATE
General takeaways
E&P
“Minimal losses of principal expected”
Midstream
“Limited restructurings; Uncertainty about MLP structures”
Oilfield Services
“Rough road ahead; Jury still out”
9
2016 – Balancing act for large energy banks
Distressed Credits
 Chapter 11 filings / restructurings
Well Capitalized
Existing Credits
 Decisively raised capital when
available
New Transactions
 Driven by private equity-backed
E&Ps
 Conservative capital structures
 Distressed debt exchanges
 Non-core asset sales
 Free cash flow positive drilling
plan
 Revised OCC guidance
 Generally operating in more
 Significant upfront, multi-year
hedging
attractive basins
 Moderate transaction sizes
 Bank loan loss reserves
executed to date
DEBT MARKET UPDATE
 Evaluating opportunistic
 Post-restructuring credit facilities
acquisitions
 Improving bank market capacity
for larger transactions if well
structured
10
Seasonal changes in Borrowing Bases…
Lenders
Spring 2016
Fall 2016
 Significant stress hits balances sheets (loan losses spike)
 New private equity-backed deals
 Lending price decks revised downward for new reality
 OCC clarity
 Most banks in pause or ‘reduce exposure’ mode
 Moderate increase in lender appetite
 Confusion over revised OCC guidelines
 Hedging activity picks up
 Borrowing base significantly affected
– 63% decreased
– 23% reaffirmed
– 14% increased
 Improved market for borrowing base redeterminations
– 44% reaffirmed
– 28% increased
– 28% decreased
Borrowers
DEBT MARKET UPDATE
Spring 2016
Fall 2016
 Structural amendments
 Borrowing base redeterminations stabilize
 Higher pricing
 Assets are trading – increased M&A
 Hedge protection rolling off
 Significant acquisition hedging
 Institutional investor appetite rebounds
11
Recently revised OCC Oil & Gas Handbook potential impact to borrowers
“The tougher standards will require greater scrutiny and analysis by bankers and their credit officers” – Haynes & Boone LLC
 Following the 2015 annual review by the Shared National Credit Program (“SNC”), the Agencies (FDIC &
OCC) reported a high level of credit risk and increased weakness in oil & gas loans:
2015 SNC Annual
Review Summary
 “Aggressive acquisition and exploration strategies from 2010 through 2014 led to increases in
leverage, making many borrowers more susceptible to a protracted decline in commodity prices.
…Classified commitments - a credit rated as substandard, doubtful, or loss - among oil and gas
borrowers totaled $34.2 billion, or 15 percent, of total classified commitments, compared with $6.9
billion, or 3.6 percent, in 2014.”
 New assessment ratings standards include the analysis of:
 The borrower’s ability to repay secured debt with considerations for total debt repayment within
OCC Credit
Assessment
Standards
Reserve Life
 Total funded debt / EBITDAX leverage ratios
 Total funded debt / capital
 Total committed debt / total proved future net revenue (unrisked and undiscounted; current NYMEX
prices)
 “Because the new guidelines represent a course change for evaluating energy banks’ portfolios, the
impact of the new guidelines could be more like a tsunami than a ripple.” – Haynes & Boone LLC
DEBT MARKET UPDATE
 E&P companies have experienced more difficulty obtaining bank financing or amendments, waivers, or
Industry Impact
extensions
 Loans with lower credit ratings increase the loss reserves banks must set aside, increasing the costs to
carry an adversely rated loan on its books
 At a time when producers are in need of flexibility from their lenders, possible solutions are more limited
Sources: OCC Handbook March 2016 & Haynes & Boone LLC’s “New OCC Oil and Gas Loan Review Guidelines” published March 28, 2016
12
Effect on oil & gas borrowers from new guidelines
“Regulatory pressure could force [banks] to tighten the purse strings [on energy companies]” - WSJ
Capital
Appetite
 Regulatory focus on leveraged loans increases banks’ loan loss reserves
 Limited appetite for additional exposure
 Banks re-rating portfolios given regulatory guidance and commodity prices
Bank
Flexibility
 Focus on structures and free cash flow
 Risk appetite for commodity hedging exposure impacted
 Focus shifts from collateral coverage to free cash flow
Credit
Metrics
 Emphasis on maintenance “replacement” CAPEX
 Lower maintenance capital results in more liquidity for CAPEX to hold or grow production, or to repay
DEBT MARKET UPDATE
debt, etc.

Costs
Given the banks’ requirement to hold more capital, energy companies have experienced the following:

Increasing borrowing costs

Tightened credit structures

Stricter hedging requirements
“The effects… can cascade through companies' capital structures and require them to look elsewhere for [capital]” – WSJ
13
Snapshot of E&P hedging position by market capitalization as of 3Q16
2014 - 2018 Natural Gas and Crude Hedge Ratios – Mean and Median
Natural Gas – Mean Hedge Percentages by Year
2014 Realized
2015 Realized
2017 Hedges
2018 Hedges
Crude – Mean Hedge Percentages by Year
2016 Hedges
80%
66%
61%
60%
2017 Hedges
2018 Hedges
60%
60%
52%51%
49%
42%
72%
15%
20%
10%
29%30%
30%
20%
16%
20%
4%
10%
0%
43%
42%
40%
28%26%
23%
68%
53%
50%
44%42%
2016 Hedges
72% 71%
65% 66%
70%
40%
30%
2015 Realized
80%
70%
50%
2014 Realized
6%
3%
6%
0%
Large Cap
Mid Cap
Small Cap
Large Cap
Mid Cap
Small Cap
Summary
DEBT MARKET UPDATE
2014 Realized
% Gas
% Oil
Hedged
Hedged
2015 Realized
% Gas
% Oil
Hedged
Hedged
2016
2017
2018
% Gas
Hedged
% Oil
Hedged
% Gas
Hedged
% Oil
Hedged
% Gas
Hedged
% Oil
Hedged
Large Cap Median
34%
65%
25%
22%
20%
26%
26%
9%
1%
0%
Large Cap Mean
42%
53%
28%
29%
26%
30%
23%
16%
4%
3%
Mid Cap Median
76%
81%
50%
68%
51%
65%
49%
49%
4%
0%
Mid Cap Mean
61%
72%
49%
65%
44%
66%
42%
42%
15%
6%
Sm all Cap Median
71%
79%
68%
75%
52%
70%
51%
40%
0%
0%
Sm all Cap Mean
66%
72%
60%
71%
52%
68%
51%
43%
20%
6%
Source: Company reports and J.P. Morgan estimates as published by J.P. Morgan North America Equity Research OR as estimated by J.P.Morgan Global Commodities Group when research model is
unavailable; Companies with less than 5% oil or gas production are not included in calculated median for respective commodity.
14
Agenda
2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
Page
JPMorgan Overview
1
Debt Market Update
3
M&A Activity
15
Oil Market Outlook
18
2015: U.S. upstream M&A market led by Permian and SCOOP / STACK…
Number of transactions in 2015 (>$50mm)
25
56
38
0$-$500mm
13
1
$500mm-$1bn
3
20
19
6
1
1
12
1
2
4
Basin: Midland
Tot. V.: $3,671
1
28
Delaware
$4,109
2
2
1
1
2
26
Tot. V.:
$1bn-$1.5bn
1
2
Play: W. Anadarko
15
2
$1,040
1
1
1
SCOOP
STACK
Arkoma
$1,021
$1,982
$604
>$1.5bn
Hunton/Miss
$72
18
10
10
1
16
2
16
14
3
7
7
1
1
5
1
5
1
7
16
9
6
6
5
1
6
4
6
3
1
2
5
4
3
4
3
2
0
M&A ACTIVITY
Permian
MidCon
Rockies
Appalachia
Diversified
ETX/Haynesville
$3,154
$1,957
$5,533
$1,852
Bakken
Eagle Ford
GOM
Other
Total transaction value ($bn)
$7,780
$4,718
Source: IHS Herold, PLS as of 11/28/16
15
$2,614
$436
$598
$318
2016 YTD: Permian dominance accelerates
Number of transactions 2016 YTD (>$50mm)
56
38
17
30
29
12
5
2
3
1
7
9
Midland
Delaware
Tot. V.: $7,026
20
4
2
6
$1bn-$1.5bn
4
9
2
Play: W. Anadarko
Basin:
$500mm-$1bn
4
6
25
0$-$500mm
7
1
6
$14,351
Tot. V.: $1,013
26
SCOOP
STACK
$1,106
$1,785
Arkoma
Hunton/Miss
$0
>$1.5bn
$270
19
1
28
14
15
13
16
1
1
16
18
10
10
18
1
18
6
5
11
5
6
6
3
3
3
2
5
2
0
M&A ACTIVITY
Permian
MidCon
Rockies
Appalachia
Diversified
ETX/Haynesville
$2,113
$5,003
$678
$6,198
6
9
1
1
3
1
1
Bakken
Eagle Ford
4
1
1
1
3
GOM
Other
Total transaction value ($bn)
$21,377
$4,174
Source: IHS Herold, PLS as of 11/28/16
16
$1,321
$3,157
$2,425
$1,642
Permian continues to dominate the equity market, but other basins are gaining traction
E&P equity/equity-linked offerings 2016YTD
E&P equity/equity-linked capital raised ($bn)
Appalachia
Bakken
Diversified
DJ
Mid-Con
% Permian
20%
25%
SCOOP/Stack
Permian
% Permian
61%
71%
23%
$10.9
51%
42%
$10.6
42%
$10.6
2.2
2.5
0.8
0.4
0.4
0.4
5.4
$7.2
1.7
3.0
4.5
0.2
2.9
$3.5
0.5
3.5
0.9
3.0
$2.3
1.4
2.5
M&A ACTIVITY
0.1
Q1
Q2
$2.5
1.0
1.1
3.6
0.3
$0.8
0.9
0.6
0.2
Q3
Q4
1.9
Q1
2015
Q2
2016
Source: Dealogic, Factset as at 11/22/16. Note: excludes MLP issuance
17
0.6
1.2
0.2
0.6
Q3
Q4
Agenda
2016 ENERGY BANKING SECTOR: YEAR IN REVIEW
Page
JPMorgan Overview
1
Debt Market Update
3
M&A Activity
15
Oil Market Outlook
18
Tighter markets ahead! Price outlook supported by OPEC deal. End-’16 Brent at
$54/bbl, end-’17 at $60/bbl. WTI end’17 at $58/bbl
J.P. Morgan crude oil price forecast ($/bbl)
1Q16
2Q16
3Q16
Brent - av erage
4Q16
2016
1Q17
2Q17
3Q17
4Q17
2017
50.00
44.81
52.00
54.00
57.00
60.00
55.75
Brent - end of period
39.60
49.60
50.00
54.00
54.00
53.50
56.00
60.00
60.00
60.00
Brent Actual To Date
35.21
47.03
46.99
49.17
…
…
…
…
…
…
48.00
43.05
50.00
52.00
55.00
58.00
53.75
51.50
54.00
58.00
58.00
58.00
…
…
…
…
WTI - av erage
WTI - end of period
38.34
48.33
49.00
54.00
54.00
WTI Actual To Date
33.63
45.64
44.94
47.83
…
Source: ICE, NYMEX, Bloomberg, J.P. Morgan Commodities Research.
Note: LT means long-term forecast. All Forecasts are period averages. Actual to date prices are as of November 30, 2016.
 OPEC implements more aggressive production cuts.
 OPEC fails to agree terms for its production initiative,
OIL MARKET OUTLOOK
Addition of non-OPEC producers to production
initiative adds to upside risks
Competition for market share resumes
 Macroeconomic growth shock results in much weaker
 Geopolitical instability increases in the key petroleum
demand growth
exporting countries
 US shale producers have reduced costs/improved well
 Steeper-than-expected decline in mature oil fields
productivity to compete in a $40/bbl world.
Technology/ productivity improvements exceed our
assumptions.
 Demand growth accelerates on lower prices pushing
refinery margins higher
 Uncompleted well inventory falls more rapidly than
18
assumed, boosting US production
OIL MARKET OUTLOOK
Q&A
19