EY Price Point: global oil and gas market outlook, Q2, April 2020

EY Price Point: global oil
and gas market outlook
Q2 | April 2020

Q2 overview
The first quarter of this year has seen some extraordinary events. As if chronic oversupply, prices stuck below
sustainable levels, the looming energy transition, and investor pressure to decarbonize weren’t enough, our
industry now faces a dramatic, but hopefully temporary, downturn in demand as a result of the ongoing COVID-
19 outbreak. The markets had hoped (or even expected) that OPEC+ would step up with production cuts to
offset demand disruptions, but an agreement hasn’t materialized and with the current price war there are
potential longer-term ramifications. For the past three years, the market dynamic has been a balance between
North American production growth and OPEC+ production discipline. If this episode signals a wavering of that
discipline, no one knows how it might play out.
Every segment of the industry has been touched and we have no idea how long this will last or how severe the
impact will be. Refining margins, which have given the oil majors refuge during past downturns have also
suffered. LNG cargos have been turned away with no alternative destination. There are plausible exit scenarios,
but each of them requires considerable time or rapid restoration of some version of the status quo ante.
Gary Donald
EY Global Oil & Gas Assurance Leader
gdonald@uk.ey.com
Andy Brogan
EY Global Oil & Gas Leader
abrogan@uk.ey.com
Q2 | April 2020 EY Price Point: global oil and gas market outlookPage 2

Q2 theme
The theme for this quarter is seismic. In the last three months, everything that we thought we understood
about supply, demand and the structure of oil and gas markets became (for the time being, at least) irrelevant.
The immediate and abrupt reduction in oil and gas demand following the outbreak of COVID-19 — and the
resulting shock to the economy — surfaced some long-standing issues that have made balance in petroleum
markets precarious at best. As the various forecasting agencies inched their demand forecasts downward, the
market looked to Saudi Arabia, Russia and the rest of OPEC+ to step up with temporary production cuts. When
that didn’t happen, there was very little stopping prices from dropping dramatically, as they did.
No one has a crystal ball that will tell us how this will play out. In the very near term, absent some supply
curtailment, prices will continue to be under pressure as storage capacity becomes scarce and it will get more
and more difficult to find a home for crude. In the intermediate term, there are a number of scenarios that
could play out. When the pandemic calms, demand may bounce back quickly and that will relieve some of the
downward stress. As that happens, and market balance at sustainable prices is within reach, it may be easier
for market movers, such as Saudi Arabia and Russia, to find an agreement that works for everyone. Absent
that, bringing supply and demand together will take time as non-OPEC production gradually comes down while
the recent dramatic reductions in capital spending echo through the system.
• When the COVID-19 pandemic ends, what will be the long-term damage to the
economy and demand for petroleum products?
• How long will it take for capital expenditure cuts to impact production and bring
the market into balance?
• How long will it take (if ever) for Russia and OPEC to restore the production
discipline that has kept the market stable for some time now?
?

Q2 trends
EY Price Point: global oil and gas market outlookPage 4
OPEC+
production
discipline no
longer a
factor
For some time now, the market has leaned
on OPEC+ to balance the market by
producing less oil. The crash in demand
from COVID-19 left a gap too big to fill, and
the resulting conflict left existing
agreements in ruins. A free-for-all in
production and pricing has ensued.
Depressed
pricing may
have a more
immediate
production
impact
In previous downturns, capital markets
have enabled continued exploration and
production, particularly in North
America. There are early indications that
there will not be the same access to
capital and that diminished access to
capital will mean less oil sooner rather
than later.
LNG and
crude cargos
without a
home
Crude oil and LNG production can’t be shut
down quickly or without cost. In the very
near term, as demand has fallen
significantly, the world is running out of
places to put product that has no buyer. No
one knows how low prices will need to go to
balance supply and demand.
Product markets have never lost this
much demand so rapidly, even in
economic meltdowns such as the 2008
financial crisis. Previously, refining has
provided some level of stability to
investors in integrated companies.
Refinery margins have fallen
precipitously this time around as
refineries compete for the product
demand that remains.
Refining not a
refuge
Q2 | April 2020

Market fundamentals
Source: US EIA
• Oil is about mobility and productivity. Those two things are interrelated
and neither has been or will be untouched by the COVID-19 outbreak.
Three out of every four barrels of crude oil are used in industry or for
transportation.
• Until the COVID-19 crisis, oil had traded in an exceptionally narrow range
for the past year. As the virus spread in China, prices steadily declined in
response to diminished demand and expectations of reduced worldwide
economic growth. When the pandemic paralyzed the movement of goods
and people, it became clear that demand growth was unachievable and
demand would likely contract for some time.
• For a while, the market expected, or hoped, that the major oil-producing
countries would (as they have for the past four years) provide market
balance. Not only did that not happen, but previous agreements to hold
back production collapsed, and with them oil prices.
OPEC production discipline disappears and prices crash
0
10
20
30
40
50
60
70
80
US$/bbl
Brent
WTI
• In the wake of the oil price earthquake, producers across the board have
announced many plans to conserve cash. Share buyback programs are
being curtailed and dividend cuts have already been unveiled and more are
certainly being considered, but the most immediate reaction to the crisis
has been cuts in capital expenditure plans.
• Absent a rapid recovery of demand or a new agreement among OPEC and
Russia to curtail production, the only path to market rebalancing is a
gradual erosion of production (or at least production growth) in the sources
of supply most dependent on capital investment.
• US shale, Canadian oil sands and deepwater resources are the most
obvious candidates. Recent history tells us, however, that the response
could be muted and lagged. In the wake of the 2014 downturn, production
declines were about a year behind capex cuts, and the size of the
production declines were no more than half the reduction in capex.
How quickly will North American production respond to capex cuts?
Source: Capital IQ and EY analysis
-60%
-40%
-20%
0%
20%
40%
-10%
-5%
0%
5%
10%
15%
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
Percentage change in BOE production (left axis)
Percentage change in capex (right axis)

Market fundamentals
Unlike previous downturns, refining margins have been severely
impacted LNG cargos are searching for new homes
• Refiners were already facing tough market conditions with IMO2020 not
delivering the anticipated growth in product cracks. With the spread of
COVID-19 resulting in weaker demand for oil products, refiners are
forced to continue operating at low throughput levels.
• Gross refining margins plummeted in all regions during the quarter (vis-
à-vis 4Q19) in the range of 10%–17%. With a collapse of crude oil prices,
downstream earnings will not offset weak upstream performance of
IOCs in the near term, unlike the 2014–16 downturn.
• Normally, refiners would benefit from sharply falling crude oil prices and
more medium sour supply. However, in the near term, the margins will
shrink further as demand continues to remain fragile. In the long term,
stronger margins stemming from the oil price decline may offset
modestly lower volumes.
Source: Refining margin monitor, Jefferies
6
7
8
9
10
11
12
13
14
15
1Q19 2Q19 3Q19 4Q19 1Q20 (till 18
March)
Refiningmargins(US$/bbl)
US Gulf Coast NW Europe Singapore
• The COVID-19 outbreak and resulting slowdown in economic activity has
impacted LNG demand, which was already growing at a slow pace before
the crisis.
• Force majeure declared by Chinese LNG buyers, lockdowns in major Asian
and European markets and full inventories mean that LNG cargos have
nowhere to go. Production cuts may be imminent.
• The weak demand and depressed spot prices could give LNG buyers more
bargaining power and accelerate the transition to a hub-based market,
marked by spot prices and increasing the role of traders.
• Amid weak market conditions and capex cuts, final investment decisions on
new LNG export projects will likely be delayed. Progress on recently
sanctioned projects is also expected to slow down.
0
1
2
3
4
5
6
7
Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20*
Gasprice(US$/MMBtu)
Henry Hub UK NBP TTF JKM
*Estimated YTD price
Source: Capital IQ and JP Morgan

Market fundamentals
• We are rapidly approaching the point where electric vehicles (EVs) will
reach cost and performance parity with internal combustion engine (ICE)
vehicles. In fact, with oil prices at levels prevailing before the price crash,
the cost per vehicle mile for an EV is appreciably lower than for a
comparable ICE vehicle.
• Obviously, a dramatic change in the price of gasoline affects those
economics. The EY analysis of the costs suggests that an incremental
US$10/bbl change in the price of crude oil translates to a 1-cent change
in the cost per mile of driving an ICE vehicle. The relative economics of
EVs and ICE vehicles are complicated, and the cost of fuel is only about
20% of overall costs of ICE vehicle ownership.
• It is unclear how much marginal changes in driving economics will affect
consumer choices. The decision to buy an automobile is multidimensional,
and this is particularly true for “green” products, such as EVs.
How will depressed oil prices affect energy transition? Government budgets in oil-producing countries will be strained
Source: Loup Ventures and EY analysis
-25
25
75
125
175
225
Kuwait Kazakhstan Iraq UAE Saudi
Arabia
Libya Iran
Fiscalbreakevenoil
price,2020E(US$/bbl)
Source: IMF, EIA
• Oil is a key source of income for OPEC members and the crude oil price
plunge will result in revenue losses, putting a strain on their fiscal
budgets. Many of these countries are already suffering from a fiscal
deficit, which may widen further if prices continue to remain at the
current levels.
• The fiscal break even oil price of crude oil-exporting nations based on
their respective governments’ budget is high relative to prevailing crude
oil prices. Among all the crude oil exporters, Kuwait has the lowest
break even oil price of US$55/bbl, which is still 38% higher than the
average estimated crude oil price of US$40 in 2020.
• Sustained low oil prices may force the OPEC countries to slash their
government budgets drastically for 2020 (by cutting salaries, subsidies,
etc.), raise taxes or borrow from international capital markets to survive
in tough market conditions.
Average WTI price estimate for 2020 Average Brent price estimate for 2020
$0.464
$0.486
$0.458
$0.449
$0.444
Tesla Model 3
Toyota Camry oil at $60 WTI
Cost per vehicle mile traveled

Brent futures
Q2 | April 2020Page 8
Brent futures decreased
substantially in March as
the decline in oil demand
(resulting from the
COVID-19 pandemic)
acted as a catalyst for
the breakdown in the
OPEC+ agreement that
had historically brought
stability to the oil
markets.
Although futures pricing
is expected to increase
over time, the duration
and extent of the current
imbalance are unknown.
Futures data is effective
as of 20 March 2020.
Source: Thomson Reuters Datastream
EY Price Point: global oil and gas market outlook
20
30
40
50
60
70
80
90
US$/bbl
Historical Brent Brent futures – March 2020 Brent futures – December 2019

Brent:
Average price per bbl forecast in 2024 —
consultants
WTI:
Average price per bbl forecast in 2024 —
consultants
Oil price outlook
For both benchmarks, consultants
(on average) forecast higher oil
prices throughout the period.
Consultants focus primarily on the analysis of a
long-term sustainable oil price, whereas
banks/brokers balance their views on the basis
of current market conditions.
Following news that OPEC and Russia would
not extend production cuts on 6 March 2020,
our analysis is based on the following:
• For 2020 and 2021, bank/broker and
consultant estimates released since
9 March 2020
• For 2022 onward, as a result of
uncertainty as to whether current
dynamics will sustain beyond the near
term, consultant estimates include those
released since 1 January 2020
In the long term, we note high relative
forecasting uncertainty given the proven
ability of identified risk factors to move the
price significantly in a short period of time.
Consultant forecasts result in averages of
US$71.0/bbl and US$67.0/bbl for Brent and
WTI, respectively, in 2024.
This data is effective as of 20 March 2020.
Brent
Bank/broker and consultant price estimates, ranges
and averages
WTI
and averages
Source: Bloomberg, banks’/brokers reports, consensus economics, consultant website
US$71.0 US$67.0
20
30
40
50
60
70
80
2020 2021 2022 2023 2024
US$perbarrel
Bank/broker range Consultants range
Bank/broker average Consultants average
20
30
40
50
60
70
80
2020 2021 2022 2023 2024
US$perbarrel

Henry Hub:
Average price per MMbtu forecast in 2024 —
consultants
UK NBP:
Average price per therm forecast in 2024 — consultants
20
25
30
35
40
45
50
55
2020 2021 2022 2023 2024
GBppertherm
Gas price outlook
For both benchmarks, consultants
(on average) forecast higher gas
prices throughout the period.
Consultants focus primarily on the analysis of a
long-term sustainable gas price, whereas the
banks/brokers balance their views on the basis
of current market conditions.
Following news that OPEC and Russia would
not extend production cuts on 6 March 2020,
the EY analysis is based on the following:
• For 2020 and 2021, bank/broker and
consultant estimates released since
9th March 2020
• For 2022 onward, as a result of
uncertainty as to whether current
dynamics will sustain beyond the near
term, consultant estimates include those
released since 1 January 2020
NBP price estimates are scarce, with only one
consultant forecast release included in the
2020 and 2021 estimates (based on the
preceding forecast timing update threshold)
and three forecasts thereafter.
Henry Hub
and averages
UK NBP
and averages
US$2.9 GBp44.3
Source: Bloomberg, bank/broker reports, consensus economics, consultant website
1.0
1.5
2.0
2.5
3.0
3.5
2020 2021 2022 2023 2024
US$perMMbtu

Appendix
Brent oil price estimates
Source: Bloomberg, bank/broker reports
Source: Consultant websites, Oxford Economics
Bank/broker 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl) 2024 (US$/bbl)
High 49.0 63.5 65.0 61.2 62.4
Average 40.8 48.8 53.9 58.0 59.4
Median 42.0 50.0 55.0 59.7 60.0
Low 30.0 34.0 35.0 51.0 55.0
Consultant 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl) 2024 (US$/bbl)
High 43.3 55.4 71.0 73.0 75.0
Average 40.9 50.7 66.6 69.1 71.0
Median 40.9 50.7 69.6 71.0 72.4
Low 38.5 46.0 56.0 61.5 64.0
Note: Due to the impact of COVID-19 and the lack of production cuts from OPEC+, the consultants’ price analysis for the years 2020 and 2021 only includes forecasts that were updated
subsequent to 8 March 2020. For the long-term forecast (2022 onward), all the consultants’ estimates released since 1 January 2020 have been considered. Additionally, given the
aforementioned market conditions, the analysis only considers bank/broker estimates that were published subsequent to 8 March 2020.

Appendix
WTI oil price estimates
Bank/broker 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl) 2024 (US$/bbl)
High 55.0 59.5 61.2 58.1 59.3
Average 38.4 46.3 50.4 53.7 55.5
Median 38.0 47.5 50.0 55.0 56.3
Low 29.0 31.0 32.0 44.0 50.0
Source: Bloomberg, banks/brokers reports
Consultant 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl) 2024 (US$/bbl)
High 38.2 50.4 67.0 68.3 70.0
Average 37.2 46.5 62.6 65.2 67.0
Median 37.2 46.5 65.8 67.7 69.2
Low 36.2 42.7 52.0 57.1 59.4
Source: Consultants’ websites, Oxford Economics
subsequent to 8 March 2020. For the-long term forecast (2022 onward), all the consultants’ estimates released since 1 January 2020 have been considered. Additionally, given the

Appendix
Henry Hub gas price estimates
* Where brokers have reported figures in US$/mcf, we have used a conversion ratio of 1.037 for mcf conversion to MMBtu.
Bank/broker 2020 (US$/MMBtu) 2021 (US$/MMBtu) 2022 (US$/MMBtu) 2023 (US$/MMBtu) 2024 (US$/MMBtu)
High 2.6 3.0 3.3 3.5 3.1
Average 2.2 2.5 2.6 2.8 2.8
Median 2.2 2.5 2.6 2.8 2.8
Low 1.7 1.8 2.0 2.3 2.5
Consultant 2020 (US$/MMBtu) 2021 (US$/MMBtu) 2022 (US$/MMBtu) 2023 (US$/MMBtu) 2024 (US$/MMBtu)
High 2.1 2.5 3.0 3.2 3.2
Average 2.0 2.3 2.8 2.9 2.9
Median 2.0 2.3 3.0 3.0 3.1
Low 1.9 2.0 2.1 2.2 2.3

Appendix
NBP gas price estimates
Bank/broker 2020 (GBp/therm) 2021 (GBp/therm) 2022 (GBp/therm) 2023 (GBp/therm) 2024 (GBp/therm)
High 32.0 40.0 50.0 52.0 44.0
Average 27.6 34.3 43.1 46.3 42.0
Median 27.2 34.6 41.2 46.6 42.0
Low 24.9 30.0 40.0 40.0 40.0
Consultant 2020 (GBp/therm) 2021 (GBp/therm) 2022 (GBp/therm) 2023 (GBp/therm) 2024 (GBp/therm)
High 25.6 25.6 50.0 53.8 55.8
Average 25.6 25.6 41.8 43.4 44.3
Median 25.6 25.6 50.0 51.0 52.0
Low 25.6 25.6 25.4 25.3 25.2
* Where brokers have reported figures in US$/mcf, we have used a conversion ratio of 1.037 for mcf conversion to MMBtu and the brokers’ forecasted FX rates.
* Where consultants have reported figures in US$/MMBtu, we have used the particular consultants' forecast FX rate for the purpose of our conversion.

Key contacts
Important notice
Price outlook data included in this publication is effective as of 20 March 2020. Given the rapidly evolving nature of
the market and views of market participants, analysis can become quickly outdated. It should be noted that the EY
analysis is not for the purpose of providing an independent view of the outlook for oil and gas prices. Instead, we are
collating the views of market participants.
Price outlook data should not be applied mechanistically. Instead, careful consideration should be given to the purpose
of any value assessment with price forecasts assessed in the context of the other key assumptions, such as resources
and reserves classification, production rates, discount rates and cost escalation rates, together with an appreciation of
the key sensitivities in any such analysis.
Jeff Williams
EY Global Oil & Gas
Advisory Leader
+1 713 750 5916
Gary Donald
EY Global Oil & Gas
Assurance Leader
+44 20 7951 751
Derek Leith
EY Global Oil & Gas
Tax Leader
+44 12 2465 3246
Andy Brogan
EY Global Oil & Gas
Leader
+44 20 7951 7009
John Hartung
EY Global Oil & Gas TAS
Leader
+1 713 751 2114

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EYG no. 001824-20Gbl
ED None
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EY Price Point: global oil and gas market outlook, Q2, April 2020

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EY Price Point: global oil and gas market outlook, Q2, April 2020