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OSC Self-Help Natural Gas Risk Management

OSC Self-Help Natural Gas Risk Management. Presented by Midwest Energy Logistics October 10, 2013. Table of Contents. Goals of Risk Management Program Hedging Results Summary Looking Ahead. Goals of Risk Management. Risk Management = Hedging = Forward Fixed Pricing

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OSC Self-Help Natural Gas Risk Management

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  1. OSC Self-Help Natural Gas Risk Management Presented by Midwest Energy Logistics October 10, 2013

  2. Table of Contents • Goals of Risk Management Program • Hedging Results Summary • Looking Ahead Midwest Energy Logistics - October 10, 2013

  3. Goals of Risk Management • Risk Management = Hedging = Forward Fixed Pricing • Trading known for unknown • Insurance against worst case scenarios • Budget sensitive • Making informed decisions • Most commodities are weather sensitive, natural gas is extremely weather sensitive • Getting beyond media bias and buyer bias Midwest Energy Logistics - October 10, 2013

  4. Our Strategy The 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 Midwest Energy Logistics - October 10, 2013

  5. Our Track Record Thus Far Midwest Energy Logistics - October 10, 2013

  6. Hedges in Place • June 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 Midwest Energy Logistics - October 10, 2013

  7. Our Current Positions Midwest Energy Logistics - October 10, 2013

  8. Hedge Results Per School Year • July 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. Midwest Energy Logistics - October 10, 2013

  9. Planning For Weather Surprises Midwest Energy Logistics - October 10, 2013

  10. Forecasting the Future • If you want a 98% probability prediction then… • If we experience a warm winter the price will go down and the schools will consume less • If 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 Midwest Energy Logistics - October 10, 2013

  11. Why is MEL So Bullish - #1 Producer Cost is Higher Than the Current Market Price Midwest Energy Logistics - October 10, 2013

  12. 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 Midwest Energy Logistics - October 10, 2013

  13. 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) Midwest Energy Logistics - October 10, 2013

  14. Why is MEL So Bullish - #4 The US is Not The Only Game in Town Anymore Midwest Energy Logistics - October 10, 2013

  15. Thank You Mark Jergens Midwest Energy Logistics, LLC (614) 477-0313 mjergens@midwestenergylogistics.com Midwest Energy Logistics - October 10, 2013

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