Energy Market Outlook Webinar...Energy Transfer Partners Rover Phase 1B & II 3/1/2018 2018 OH -> MI,...

Energy Market Outlook Webinar

October 18, 2017

Today’s Webinar Agenda

• Winter Weather Outlook

– Short-term temperature outlooks.

– Winter weather forecasts – colder winter than a year ago?

• Short-Term Market Fundamentals: Key Winter Price Drivers

– Natural gas production nearing record levels – will the growth continue this winter?

– Storage inventories are at the lowest pre-winter levels since 2014.

– How will new pipeline capacity impact the market this winter?

• Natural Gas and Power Price Review

• Long-Term Demand Drivers: U.S. Exports and Global Natural Gas Demand Growth

– U.S. natural gas export update (liquefied natural gas (LNG) exports and exports to

Mexico)

– How will global natural gas demand trends impact domestic markets?

1 © 2017 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate

subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

Weather: Approaching Winter

Weather Overview



Data source: NOAA

• Warm temperatures will give way to a cold shot across the Midwest and East for late October.

• The thinking right now is that this cold shot will be transient as blocking is not quite strong enough to hold

any cold in place.

• Record heat is expected for southern California this weekend and early next week.

October Demand Picture

• Recent cold changes will likely prevent this October from being the warmest of the 2000s.

– Most of the chill this month has been will be limited to the Northwest and northern

Rockies.

– Overall this October temperature pattern is quite similar 2007. The winter of 2007-08 had

2,636 gas weighted heating degree days (GWHDD) – slightly colder than the 30-year and

10-year normal.

4

OCTOBER TOTAL DEGREE DAYS

OF THE 2000s

OCTOBER 2017 REALIZED TEMPERATURE

DEPARTURES PLUS FORECAST

© 2017 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate


Data sources: CWG and EarthSat

Will Cold Stick Around?

• The models are starting to converge on a cold shot into the Midwest and East for late October.

• Ridging over the West and the north Atlantic will help transport cold air out of Canada.

• However, there is a lack of ridging (blocking) over the Arctic, which will prevent any extreme

cold air from moving into the U.S.

• This can be seen through the Arctic Oscillation forecast (neutral).

5

ARCTIC OSCILLATION FORECAST 500 MB PRESSURE ANOMALIES



Data sources: WSI and EarthSat

Winter Supply & Demand Fundamentals

Storage Inventories: Lowest Pre-Winter Total Since 2014

Customer Takeaway: Storage inventories have returned to near-average levels this year, which should provide floor

support for natural gas prices this winter, especially if heating demand picks up due to colder weather.

• Storage stands at 3,595 Bcf as of Oct 6th, a deficit of -153 Bcf (-4.1%) versus year-ago levels and -8 Bcf (-0.2%)

lower than the five-year average. Stocks are lower than the five-year average for the first time since Jan 2017.

• Total injections have been 16% lower than the five-year average this refill season.

• The U.S. Energy Information Administration (EIA) predicts storage will end October at 3,829 Bcf, but if mild

weather extends into November, stocks could reach closer to 3,900 Bcf before the first net withdrawal.

• Stocks are set to enter winter at the lowest level since 2014. Storage exceeded 4,000 Bcf in the past two years.

-0.2%

-4.1%



Data sources: EIA, Constellation

Natural Gas Production Nearing Record Levels

• After declining for the first time in over a decade last year, U.S. natural

gas production has returned to growth in 2017.

• Production hit a year-to-date high of 74.5 Bcf/day during mid-September,

just off the all-time high of 75 Bcf/day set in 2015.

• Gains have been driven by record Appalachian production and growth in

associated gas output in the Permian basin.

• Oil and gas rig count growth has started to slow, but the EIA projects

natural gas output will average a record high of 78.5 Bcf/day in 2018.

Customer Takeaway: The upswing in production is deserving of a bearish checkmark ahead of winter, but further

production growth will be necessary during 2018 for supply to keep pace with expected demand growth.

2018 EIA forecast = 78.5 Bcf/d

2017 y-t-d avg output = 72.4 Bcf/d



Data sources: EIA, Baker Hughes

Natural Gas Demand Update

Customer Takeaway: Although mild weather has lowered power sector gas demand this year, the EIA expects stronger

demand across the board in 2018 due to new natural gas-fired generation, export growth & new industrial gas demand.

Demand

Component

2017 y-t-d

Average

2016

Average

Y-o-Y

%∆

2018 EIA

Forecast

LNG Exports

1.9

Bcf/d

0.5

Bcf/d

+280% 3.1

Bcf/d

Exports to

Mexico

4.0

Bcf/d

3.5

Bcf/d

+14% 4.5

Bcf/d

Industrial

Demand

21.3

Bcf/d

21.1

Bcf/d

+1% 21.9

Bcf/d

Power Sector

Gas Burns

26.8

Bcf/d

27.3

Bcf/d

-2% 26.3

Bcf/d

• LNG Exports

• Exports to Mexico

• Power Burns

• Industrial Demand

• (show y-o-y change & EIA forecasts??)

Hurricane impact




Marcellus Related Pipeline Expansion Projects (2017 and ‘18)

Customer Takeaway: 8.5Bcf/day of additional takeaway pipeline capacity out of Marcellus/Utica will come online in

2018. This will likely exceed growth in Marcellus/Utica production and lift regional forward gas prices such as

Dominion South Point.

Pipeline Project In-Service Date Year Flow DirectionVolume

(MMcf/d)Reversal Status

Texas Gas Northern Supply Access 4/1/2017 2017 OH -> LA 284 Y In service

Transco Dalton Expansion 8/1/2017 2017 NJ -> GA 448 N In service

TETCO Lebanon Extension 8/1/2017 2017 PA, OH -> IN 102 Y In service

Energy Transfer Partners Rover Phase IA 9/1/2017 2017 OH -> MI, CAN 900 N In service

TETCO Adair Southwest 11/1/2017 2017 OH -> KY 200 Y Under Construction

TETCO Access South 11/1/2017 2017 OH -> MS 320 Y Under Construction

Columbia Gas Transmission Rayne Xpress 11/1/2017 2017 KY -> LA 621 Y Under Construction

Columbia Gas Transmission Cameron Access Project 2/1/2018 2018 KY -> LA 800 Y Under Construction

Tennessee Gas Pipeline Southwest Louisiana Supply 2/1/2018 2018 OH, PA -> LA 900 N Under Construction

Energy Transfer Partners Rover Phase 1B & II 3/1/2018 2018 OH -> MI, CAN 2,350 N Under Construction

Spectra Energy NEXUS Gas Transmission ^ 9/1/2018 2018 OH, MI 1,500 N Under Construction

Transco Atlantic Sunrise 9/1/2018 2018 PA -> AL 1,700 Y Under ConstructionTennessee Gas Pipeline Broad Run Expansion 9/1/2018 2018 WV -> LA 200 Y Under Construction

Transco Appalachian Connector% 9/1/2018 2018 WV -> NC 2,000 N Open Season Completed

ANR East Project ^ 11/1/2018 2018 OH -> IN, MI, CAN 2,000 N Open Season Completed

Current News 2016 Capacity Added 2,406

Oct 11: FERC grants Rover permission to resume HDD drilling at four OH sites 2017 Capacity Added 2,875

Oct 11: FERC grants NEXUS permission to begin construction 2018 Capacity Planned 11,450

Currently Under Construction 8,591

• The TETCO & Columbia projects are all on schedule to come online in November as well as Phase IB of Rover

(additional 600 MMcf/day) by the end of the year.

• Rover and Nexus getting Federal Energy Regulatory Commission (FERC) approval keeps two important greenfield

projects in Northeast on track for 2018.




Natural Gas and Power Pricing Trends

NYMEX Forward Strip Poised for a Break-Out?

Customer Takeaway: For the third straight year, natural gas prices have consolidated at the $3 pivot point prior to the

impending winter. Continued improvement in natural gas production may provide resistance, but prices could break to

the upside on the first signs of cold weather given lower storage inventories this year.

Polar Vortex

Prices at 17-year low



Data sources: Constellation Prices as of COB 10/13/2017

NYMEX Calendar Strip Prices

Customer Takeaway: NYMEX calendar strip prices for 2019-2022 delivery continue to trade well below $3/MMBtu

as stronger production growth keeps pressure on long-term forwards; structural gas demand growth (via exports,

power sector, industrial) remains the primary upside risk for NYMEX prices in coming years.



Data sources: Constellation Prices as of COB 10/13/2017

Forward Power Price Trends (Six Month History)

Note: These energy-only power prices are an indicative, non-transactable snapshot of the wholesale market as of COB 10/13/17.

New England Texas SoCal

Mid-Atlantic Northern Illinois Michigan

Customer Takeaway: After posting consistent declines for most of the summer (outside of California), forward power

prices have found support since late August in anticipation of winter and on slightly stronger natural gas prices. ERCOT

prices recently rose by more than 5% on news of major coal unit retirements in Texas early next year.



Data sources: Constellation

Index Power Price Trends (Since 2012)

Note: These non-load weighted, monthly average day-ahead power prices are an indicative, non-transactable snapshot of the wholesale market as of COB 10/11/17. (ERCOT prices from real-time market.)

New England Texas SoCal

Mid-Atlantic Northern Illinois Michigan

Customer Takeaway: Index price volatility has been relatively muted during the past two years due to mild weather and

low natural gas prices. However, sustained cold weather this winter could drive some increased volatility compared to

the historically mild winters of the past two years.




Long-Term Demand Drivers

Long-Term Demand Drivers: Where we Stand

• Trains 1-4 are operational at Sabine Pass and Cove Point will

come online in early 2018, adding 0.7 Bcf/day.

• Exports to Mexico are steady at just over 4 Bcf/day, but

infrastructure delays in Mexico could hamper growth in 2018.

• U.S. set to become a net exporter of natural gas starting 2017.

Customer Takeaway: The six LNG projects that are operating (Sabine Pass) or under construction are progressing

overall as planned and should be online by 2019. Exports to Mexico face delays due to pipeline constraints in

Mexico but by 2020, they are still forecasted to reach 6-7 Bcf/day level.



Data sources: EIA

Wrap Up

Key Developments to Watch This Fall and Winter Supply

• Will Production Growth Continue? EIA expects production to grow from 74 Bcf/day to an average of 78.5 Bcf/day in 2018.

• Pipeline Expansions: Rover Phase I adding ~1 Bcf/day of new capacity; NEXUS approved for start of construction this fall.

• Storage Inventories: Inventories set to enter winter at lowest level in three years: ~3.8 Tcf versus 4.0+ Tcf last year.

Demand

• LNG Exports: Sabine Pass Train 4 in operation. Cove Point (MD) set for commercial operation by end of 2017.

• U.S. is a Net NG Exporter: Per EIA, U.S. set to be a 1.4 Bcf/d net exporter this winter vs. 0.6 Bcf/d net importer last winter.

• Winter forecasts: Forecasts favor coldest winter since 2014-15 which will boost heating demand levels.

Data source: EIA, Constellation, NYMEX

Customer Takeaway: Power prices across all regions remain under 10% of all-time lows. Short- and medium-term weather

volatility may have a limited affect on outer year strips, which continue to show value. Export demand growth remains as

takeaway projects come online.



Prices as of COB 10/13/2017

Questions?

Appendix

EIA: Heating Costs Expected to Increase this Winter

Customer Takeaway: NOAA’s forecast calls for an increase in heating costs due to predictions for near-normal winter

weather which would driver stronger heating demand compared to the historically warm winters of the past two years.

• Per the EIA’s Winter Fuels Outlook, heating degree days

(HDDs) are forecast to increase by 13% this winter.

• This would be the coldest winter since 2014-15, but close

to the five-year average HDD level.

• Natural gas heating costs are forecasted to rise by 12%,

primarily due to colder weather.

• Henry Hub prices are expected to be 5% higher than last

winter, reflecting stronger demand.

• Nearly 50% of U.S. households heat with natural gas.




NYMEX Natural Gas Forward Curve vs. One Year Ago

Customer Takeaway: NYMEX calendar strip prices for 2018-2022 delivery continue to trade well below $3/MMBtu

as stronger production growth keeps pressure on long-term forwards; structural gas demand growth (via exports,

power sector, industrial) remains the primary upside risk for NYMEX prices in coming years.



Data sources: Constellation, NYMEX; Prices as of COB 10/2/17

Forward Power Prices vs. One Year Ago

Note: These energy-only power prices are an indicative, non-transactable snapshot of the wholesale market as of COB 9/1/17.

New England Texas Hudson Valley (NY)

Mid-Atlantic Northern Illinois Ohio

Customer Takeaway: Weakness in long-term natural gas prices has translated into a significant year-on-year decline in

Cal’19-Cal’22 forward power prices. Outer year calendar strips in many markets are trading at a discount to near-term

prices.




NOAA and Model Forecasts (Updated)

25

OFFICIAL NOAA FORECAST MODEL FORECASTS



Data source: NOAA and IRI

Summary of Influencers



Index Expected Values Correlation

ENSO Neutral Cold

PDO Neutral Neutral

AMO Positive Warm

QBO Negative Cold

Arctic Ice Low Warm

Recent Pattern Warm Warm

Sunspots Low Cold

Key Northeast Pipeline Start Ups in 2018

Customer Takeaway: Rover is scheduled to flow from 0.5 Bcf/day to full 3.25 Bcf/day of capacity by April 2018

and along with Atlantic Sunrise should allow Northeast production to expand as new pipeline capacity comes online.

• Transco officially started greenfield construction in mid-September on the Central Penn line with construction

expected to last 10 months and be fully operational by mid-2018. Capacity will be 1.2 Bcf/day.

• For Rover, Energy Transfer Partners (owner of the Rover pipeline) received approval on August 31st from FERC to put

Phase 1A (1 Bcf/day) of the mainline into service. Approximately 0.5 Bcf/day of Marcellus/Utica gas began to flow

west on Rover.

• Phase 1B is scheduled to be completed by end of 2017 (1.5 Bcf/day). Phase II is scheduled for end of Q1 2018.

Rover Pipeline

(Mainline Route 1A)

Atlantic Sunrise

Project (Transco)



Data source: EIA, ETP

Key Northeast Pipeline Start Ups in 2017

Customer Takeaway: TCO Leach Xpress and TETCO’s Access South projects will increase Northeast take away

capacity by ~2.0 Bcf/day. This gas could go to Texas/Louisiana or could be rerouted into the Midwest as well.

• TCO’s Rayne/Leach Xpress is 1.5 Bcf/day flow from Utica basin in Southeast Ohio to Leach, Kentucky and allow gas

to flow on Columbia Gulf back down to Texas/Louisiana.

• TETCO’s Adair Southwest (200 MMcf) will flow gas from Pennsylvania to TETCO’s zone M2 in Adair County Kentucky.

From Kentucky, Access South (320 MMcf) to zone M1 in Mississippi which will serve Freeport LNG in Houston, for

example.



Data source: EIA, ETP

Long Term Basis Trends in Midwest and Northeast

Customer Takeaway: The build out of pipeline capacity between 2017-’19 will increase the takeaway

capacity for Northeast production to the Midwest.



Data source: Range Resources

Disclaimer

The information contained herein has been obtained from sources which Constellation NewEnergy, Inc. and/or Constellation

NewEnergy-Gas Division, LLC (collectively, “Constellation”) believes to be reliable. Constellation does not represent or warrant as to

its accuracy or completeness. All representations and estimates included herein constitute Constellation’s judgment as of the date

of the presentation and may be subject to change without notice. This material has been prepared solely for informational

purposes relating to our business as a physical energy provider. We are not providing advice regarding the value or advisability of

trading in “commodity interests” as defined in the Commodity Exchange Act, 7 U.S.C. §§ 1-25, et seq., as amended (the “CEA”),

including futures contracts, swaps or any other activity which would cause us or any of our affiliates to be considered a commodity

trading advisor under the CEA. Constellation does not make and expressly disclaims, any express or implied guaranty,

representation or warranty regarding any opinions or statements set forth herein. Constellation shall not be responsible for any

reliance upon any information, opinions, or statements contained herein or for any omission or error of fact. All prices referenced

herein are indicative and informational and do not connote the prices at which Constellation may be willing to transact, and the

possible performance results of any product discussed herein are not necessarily indicative of future results. This material shall

not be reproduced (in whole or in part) to any other person without the prior written approval of Constellation.



Energy Market Outlook Webinar...Energy Transfer Partners Rover Phase 1B & II 3/1/2018 2018 OH -> MI,...

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