1.
EY Price Point:
global oil and
gas market
outlook
Q1 | January 2019

2.
Page 2 Q1 | January 2019 EY Price Point: global oil and gas market outlookPage 2
Gary Donald Andy Brogan
EY Global Oil & Gas EY Global Oil & Gas
Assurance Leader Transaction Advisory Services Leader
gdonald@uk.ey.com abrogan@uk.ey.com
Q1 overview
World oil markets continue to surprise us by doing things that, in retrospect, aren’t surprising.
The market left 3Q18 full of optimism fueled by expectations of Iranian supply interruption and
muted North American supply growth. That optimism was overturned in 4Q18. The ability of
governments to change policy (US waivers on Iran sanctions), the capital markets’
unpredictable willingness to fund struggling businesses in hope of a better tomorrow (North
American shale), the power of dominant suppliers to influence prices (OPEC and Russia) and
the risk of a slowing economy loom large.

3.
Page 3 Q1 | January 2019 EY Price Point: global oil and gas market outlookPage 3
The theme for this quarter is reversal . Following a period of sustained growth throughout the
first 10 months of 2018, the oil price recovery began to reverse in the fourth quarter. With
anticipated decline in Iranian output underpinning the oil price recovery, the market was caught
off guard by the US Government’s decision to issue waivers. US production continues to grow
(notwithstanding questions about returns) and OPEC, for a while at least, opened the taps
before conceding to production cuts effective from January.
Crude prices climbed in January as the market noted the effect of OPEC and Russia
production cuts and muted Iranian exports despite waivers granted.
?
Q1 theme
► Will Iranian sanctions eventually have the effect that the market predicted?
► How many times will OPEC be willing to curtail its production to balance the world markets?
► Has confidence in the oil price recovery been wounded enough to have a sustained impact
on capital spending in North America?

4.
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Page 4 Q1 | January 2019 EY Price Point: global oil and gas market outlook
OPEC and Russia planned to make up for
supply shortages left by the impact of
sanctions on Iran. After waivers were issued,
OPEC and Russia announced an agreement
to curtail production. Will the group continue to
concede to growing US production by drawing
back its own output?
Confidence
in the world
economy
In recent years, low interest rates and the free
flow of money have enabled steady economic
growth, strong energy demand and investment
in energy infrastructure.
Tighter money and the risk of escalating trade
wars are now placing demand growth under
question.
Trends
Historically, sanctions and sanction relief have
had a big impact on oil markets. The markets’
expected impact of US sanctions on Iran
buoyed prices throughout the first three
quarters of 2018 only for gains to reverse
following the issue of waivers in the final
quarter.
US
sanctions
on Iran
OPEC and
Russia
North America’s return to growth in 4Q18
delivered around 800,000 bpd of new
production to market. Returns approached
sustainable levels in 3Q18, but cash flows
were marginal. We’re now left questioning
whether the recent fall in crude prices will
affect capital budgets and production growth.
North
American
shale

5.
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Page 5 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Market fundamentals
► Brent and WTI averaged $68.76 and $59.97 per bbl, respectively, during the
fourth quarter. Average prices in the fourth quarter represent a decline of 8%
and 14%, respectively.
► Both benchmarks climbed in September before suffering a steep decline as
the market was caught off guard by the US Government’s decision to issue
waivers to major off-takers of Iranian crude.
► North American production growth returned and macro-economic concerns
dented confidence in demand growth. OPEC and Russia continue to concede
to growing US production, agreeing to production cuts effective from January.
► US waivers will not last forever but neither will OPEC and Russia’s production
cuts. The search for a new equilibrium has started.
Oil gains reversed in 4Q18 North American growth leaves market oversupplied
► The important levers impacting global oil supply and demand remain the same:
demand growth, OPEC and Russia production strategies and North American
supply.
► In previous quarters, soaring North American production was offset by demand
growth while OPEC held production flat in an effort to balance the market.
Output elsewhere will remain steady, if not in natural decline, until the flow of
capital returns to deepwater projects.
► During 4Q18, the dynamic changed. OPEC countries increased output, pre-
empting a drop in Iranian output only for waivers to be issued at the last minute.
Prices fell, leaving OPEC and Russia to (yet again) curtail supplies in an effort
to stabilize the market. Time will tell if this round of price pressure will be
enough to dampen North American investment.
40.00
50.00
60.00
70.00
80.00
90.00
02/07/2018 02/08/2018 02/09/2018 02/10/2018 02/11/2018 02/12/2018
$/bbl
Brent
WTI
Source: EIA Source: IEA
(1.20)
(0.80)
(0.40)
-
0.40
0.80
1.20
Starting
balance
Demand
growth
OPEC North
America
Other End balance
millionbarrelsperday
Movement to oversupply Movement to undersupply

6.
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Page 6 Q1 | January 2019 EY Price Point: global oil and gas market outlook
► Crude oil production in North America continues to perplex the market. After a
pause in 3Q18, there was an upward surge in the middle of 4Q18, followed by
another pause in the last part of the quarter.
► North American operators’ return on capital began to approach sustainable
levels in 3Q18, a state of affairs that is certain to reverse as fourth-quarter
results are reported given a fall in prices.
► Free cash flow continued to elude around half of North American upstream
operators in 3Q18. Although many companies have operating cash sufficient
to fund capital investment, most continue to require external capital.
► Once again, we are forced to question how long capital allocation and
production growth are sustainable in the absence of stable free cash flow.
Market fundamentals
► US sanctions on Iran became effective in November. In preparation,
significant off-takers wound down imports of Iranian crude throughout the
year, reducing global oil supply and supporting the oil price recovery.
► With an objective of reducing prices at the pump, President Trump issued
waivers in the fourth quarter in order to reverse growing crude prices. Exempt
countries include China, India, South Korea and Japan, representing a group
that accounted for approximately 80% of Iran’s pre-sanctions exports. Waivers
run for a period of 180 days.
► The market reacted (perhaps overreacted) instantaneously to the issuance of
waivers. Although data is limited, Iranian imports have remained well below
pre-sanction levels in recent months. The market will learn more as to the true
extent of exempt imports in 1Q19.
Iran output and waivers
Source: Reuters, Bloomberg Source: EIA
Free cash flow continues to elude North American operators
(300)
(200)
(100)
-
100
200
300
400
500
600
$m
3Q18 free cash flow of North American upstream operators
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
May 18 September 18 October 18 November 18
bbl/d
Iranian crude exports by destination
China India Japan South Korea Other
Pre-announcement Post-announcement of US sanctions on Iran being re-imposed

7.
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Page 7 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Market fundamentals
Macro economics weighing on demand
Source: The Federal Reserve System
► The US gas market remains relatively stable. Cold weather in recent months
boosted gas demand for heating and supported prices. Strong growth in
domestic gas production is expected to place downward pressure on US gas
prices.
► Moderate winters in well-supplied Asian and European markets have led to a
softening of regional gas and LNG prices. Gas shortages that resulted in price
spikes similar to those of last year are unlikely to recur as China and other
markets are well stocked.
► Increasing LNG spreads and strong growth in Asian demand have renewed
interest in sanctioning new supply. FIDs on LNG projects are trickling through
and are expected to gain momentum over the coming months.
Source: EY analysis of data from Thomson Reuters Datastream
Asian LNG demand triggering FIDs
► Since the world financial crisis began in 2008, central banks across the world
have flooded the banking system with cash. Short-term interest rates hovered
near 0% for some time. Interest rates have gradually increased, raising
recession risk.
► Trade tensions between the US and China continue unabated. No new tariffs
have been announced recently, but there are signs of a slowing Chinese
economy. Automobile sales in China fell for the first time in more than 20
years in 2018, and slowing sales in China have led US companies to issue
profit warnings.
► A growing economy guarantees steady, predictable oil and gas demand
growth. Economic contraction, particularly in developing countries where
energy demand growth is concentrated, would have the opposite effect.
0
2
4
6
8
10
12
$/mmbtu
UK NBP Henry Hub LNG Asia FOB
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-2014 Jan-2015 Jan-2016 Jan-2017 Jan-2018
%
Historical interest rates
LIBOR US Federal funds

8.
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Page 8 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Brent futures
Brent futures fell in line with the
decline in spot prices throughout the
fourth quarter. Similarly, we have
seen an uptick in January.
Liquidity of the futures curve falls
rapidly beyond 2020, and therefore
the views of banks/brokers and
consultants are considered more
appropriate sources of determining or
challenging a long-term price
assumption.
40
45
50
55
60
65
70
75
80
85
Jan-2018 Jan-2019 Jan-2020 Jan-2021 Jan-2022 Jan-2023 Jan-2024
$/bbl
Historical Brent Brent futures - 31 December 2018
Brent futures - 10 January 2019 Brent futures - 31 October 2018

9.
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Page 9 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Oil price outlook
Brent:
Brokers’ and consultants’ price estimates, ranges and
averages
WTI:
Brokers’ and consultants’ price estimates, ranges and
averages
For both benchmarks, brokers
predict (on average) marginally
higher oil prices in 2019 and 2020.
The trend is reversed in the
midterm.
Consultants focus primarily on the
analysis of a long-term sustainable oil
price, while the banks/brokers balance
their views on the basis of current
market conditions.
Despite the fall in oil prices noted in
4Q18, the views of market participants
remain relatively unchanged. However,
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.
Consultants’ forecasts result in
averages of US$78.7/bbl and
US$74.4/bbl vs. banks’/brokers’
averages of US$67.4/bbl and
US$61.7/bbl for Brent and WTI,
respectively in 2023.
This data is effective as of
11 January 2019.
US$67.4 US$78.7 US$61.7 US$74.4Brent:
Average price
forecast in 2023
WTI:
Average price
forecast in 2023
Banks/brokers Consultants Banks/brokers Consultants
Source: Bloomberg, banks’/brokers’ reports, consensus economics, consultants’ website
30
40
50
60
70
80
90
100
2019 2020 2021 2022 2023
$perbarrel
Bank/Broker range Consultants range
Bank/Broker average Consultants average
40
50
60
70
80
90
100
2019 2020 2021 2022 2023
$perbarrel
Bank/Broker range Consultants range
Bank/Broker average Consultants average

10.
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Page 10 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Gas price outlook
Henry Hub:
Brokers’ and consultants’ price estimates, ranges
and averages
UK NBP:
Brokers’ and consultants’ price estimates, ranges and
averages
For Henry Hub, consultants forecast
(on average) higher prices than
banks/brokers. The NBP forecasts of
banks and brokers exceed that of
consultants.
Banks’ and brokers’ view of the outlook
for Henry Hub is essentially flat with the
increase throughout the forecast period,
representing little more than inflation.
In contrast, consultants’ estimates reflect
a steady upward trend, reflecting a view
on demand growth and production
economics.
Estimates for UK NBP are scarce with
only 5 and 3 data points available from
banks/brokers and consultants,
respectively.
This data is effective as of
11 January 2019.
US$3.8 GBP51.2 GBP58.7UK NBP:
Average price
forecast in 2022
Banks/brokers Consultants
Source: Bloomberg, banks’/brokers’ reports, consensus economics, consultants’ website
Banks/brokers Consultants
US$3.3Henry Hub:
Average price
forecast in 2023
40
45
50
55
60
65
70
2019 2020 2021 2022 2023
GBppertherm
Bank/Broker range Consultants range
Bank/Broker average Consultants average
2.0
2.5
3.0
3.5
4.0
4.5
2019 2020 2021 2022 2023
$permmbtu
Bank/Broker range Consultants range
Bank/Broker average Consultants average

11.
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Page 11 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Brent oil price estimates
Appendix
Bank/broker 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl)
High 80.0 85.0 90.0 95.0 83.0
Average 69.0 70.5 71.8 70.5 67.4
Median 69.5 70.0 70.0 70.0 65.0
Low 54.5 52.1 62.0 60.0 58.3
Source: Bloomberg, banks’/brokers’ reports
Source: Consultants’ websites, Oxford Economics
Consultant 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl)
High 70.0 75.1 85.1 90.7 95.7
Average 63.6 69.8 73.4 76.1 78.7
Median 63.3 68.5 71.5 73.7 75.5
Low 58.8 65.6 66.8 68.6 71.2
This data is effective as of 11 January 2019.

12.
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Page 12 Q1 | January 2019 EY Price Point: global oil and gas market outlook
WTI oil price estimates
Appendix
Bank/broker 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl)
High 75.9 81.0 88.0 86.0 70.0
Average 62.2 64.8 66.5 65.3 61.7
Median 63.3 65.6 64.7 64.0 61.2
Low 49.0 48.9 55.5 53.5 53.5
Source: Bloomberg, banks’/brokers’ reports
Source: Consultants’ websites, Oxford Economics
Consultant 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl) 2023 (US$/bbl)
High 63.0 71.9 81.1 86.7 91.6
Average 56.9 64.6 68.8 71.9 74.4
Median 56.3 63.8 67.6 71.4 72.8
Low 53.4 57.2 58.2 59.7 62.0
This data is effective as of 11 January 2019.

13.
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Page 13 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Henry Hub gas price estimates
Appendix
Bank/broker 2019 (US$/MMBtu) 2020 (US$/MMBtu) 2021 (US$/MMBtu) 2022 (US$/MMBtu) 2023 (US$/MMBtu)
High 3.7 4.3 4.2 3.8 4.0
Average 3.1 3.1 3.1 3.1 3.3
Median 3.1 3.0 3.2 3.0 3.3
Low 2.6 2.6 2.6 2.6 2.6
Source: Bloomberg, banks’/brokers’ reports
* Brokers have reported figures in $/mcf. We have used a conversion ratio of 1.037 for mcf conversion to MMBtu.
Source: Consultants’ websites, Oxford Economics
Consultant 2019 (US$/MMBtu) 2020 (US$/MMBtu) 2021 (US$/MMBtu) 2022 (US$/MMBtu) 2023 (US$/MMBtu)
High 3.6 4.0 4.0 4.2 4.4
Average 3.2 3.3 3.5 3.6 3.8
Median 3.0 3.2 3.4 3.5 3.6
Low 3.0 3.0 3.2 3.4 3.6
This data is effective as of 11 January 2019.

14.
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Page 14 Q1 | January 2019 EY Price Point: global oil and gas market outlook
NBP gas price estimates
Appendix
Bank/broker 2019 (GBP/therm) 2020 (GBP/therm) 2021 (GBP/therm) 2022 (GBP/therm) 2023 (GBP/therm)
High 60.0 65.2 56.3 54.0 53.4
Average 56.9 55.3 52.9 52.8 51.2
Median 56.3 54.0 53.4 53.4 51.2
Low 53.4 50.0 48.0 51.0 49.0
Source: Bloomberg, Banks’/Brokers’ reports
*Jefferies has reported figures in $/mcf. We have used exchange rate forecast by Jefferies for USD to GBP conversion and an mcf to mmbtu conversion ratio of 1.037.
Source: Consultants’ websites, Oxford Economics
*Oxford Economics has reported figures in US$/MMBtu. We have used exchange rate forecast by Oxford Economics from USD to GBP conversion.
** GLJ has reported figures in US$/MMBtu. We have used exchange rate forecast by GLJ for USD to GBP conversion.
Consultant 2019 (GBP/therm) 2020 (GBP/therm) 2021 (GBP/therm) 2022 (GBP/therm) 2023 (GBP/therm)
High 63.8 60.8 60.0 61.2 62.4
Average 60.0 57.6 57.2 57.6 58.7
Median 60.0 60.0 59.6 58.5 58.5
Low 56.1 52.0 51.9 53.2 55.2
This data is effective as of 11 January 2019.

15.
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Page 15 Q1 | January 2019 EY Price Point: global oil and gas market outlook
Key contacts
Important notice
Price outlook data incorporated within this publication is effective as of 11 January 2019. Given the rapidly evolving nature of the market and
views of market participants, analysis can become quickly outdated. It should be noted that our 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/reserves classification, production
rates, discount rates and cost escalation rates together with an appreciation of the key sensitivities in any such analysis.
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Derek Leith
EY Global Oil & Gas Tax
Leader
+44 12 2465 3246
Andy Brogan
EY Global Oil & Gas
EY Transactions Advisory
Services Leader
+44 20 7951 7009
Jeff Williams
EY Global Oil & Gas
Advisory Leader
+1 713 750 5916
• Gary Donald
EY Global Oil & Gas
Assurance Leader
+44 20 7951 7518
•