A range of upside forces have shifted market sentiment and some parties are talking of $90, or even $100/bbl oil in the short to medium term. Our insights on the outlook for the global oil price in Q4 2018.

1. EY Price Point:
Global oil and
gas market
outlook
Q4 | October 2018

2. Page 2 Q4 | October 2018 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
Q4 overview
It would be fair to say that the third quarter of 2018 was an inflection point.
A range of upside forces have shifted market sentiment and some parties are talking
of $90, or even $100/bbl oil in the short to medium term. The longevity of these
forces will determine whether the factors driving the recent spike in prices sustain. In
contrast, the long term view on oil prices remains relatively unchanged as
uncertainty around the impact of decarbonization policies and uptake of electric
vehicles remains.

3. Page 3 Q4 | October 2018 EY Price Point: global oil and gas market outlookPage 3
The theme for this quarter is reset. Oil markets have come to the realization
that the impact of geopolitical factors, strong demand growth and OPEC
production discipline cannot be offset by US shale alone.
OECD stocks sit at 91 days. The last time we saw similar levels, Brent was
trading at prices in excess of $100/bbl. However, questions remain over the
longevity of recent upside forces.
?
Q4 theme
► Will OPEC and Russia continue to ignore calls to increase output?
► Is demand growth sustainable in a higher oil price environment?
► Will Iranian exports decline further in November once US sanctions become effective?
► Will North American supply growth continue to slow in the fourth quarter?

4. Page 4
Page 4 Q4 | October 2018 EY Price Point: global oil and gas market outlook
The gas market is rapidly shifting from a
prolonged supply glut to an impending
shortfall. The market has absorbed the
additional capacity brought online. China’s
booming demand is constrained only by
inadequate infrastructure. The pendulum of
investment could well be swinging back to
gas.
OECD
stocks
continue
their decline
Stocks of crude oil and refined products
provide a buffer against rising prices and price
volatility. The length and severity of the most
recent downturn was emphasised by inflated
stocks. OPEC policy was to reduce stock
levels to the five year average. That goal has
now been met and stocks continue to fall.
Trends
Iranian exports of crude oil and condensate
fell by 0.6mmbbl/d (28%) in August. Cargoes
to South Korea have stopped whilst those to
India declined by 70%. For now, Chinese
imports have remained relatively resilient.
With US sanctions on Iran effective from
November, the coming months will be telling.
US
sanctions
on Iran
begin to bite
Gas
demand to
the rescue
There has long been questions over the returns
generated by North American shale, while
export capacity added further pressure in the
quarter. Slowing growth in North American
output was unable to offset the impact of
demand growth and falling OPEC output in the
third quarter.
North
American
production
flat

5. Page 5
Page 5 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Market fundamentals
► Brent and WTI averaged $75.05 and $69.79 per bbl respectively during the
third quarter. The overall impression is that oil prices rose compared to the
second quarter. On balance that impression is accurate. However, this is
predominantly driven by a late spike in September as Iranian exports fell in
advance of US sanctions becoming effective in November.
► Despite calls from President Trump, OPEC declined to announce production
increases beyond those agreed in June to compensate for declines in
output from Iran and Venezuela.
► The Brent-WTI spread increased significantly towards the end of the quarter
as US production growth exceeded that of other markets, placing downward
pressure on regional prices.
Brent tops US$80/bbl to reach highest level since 2014 Upside forces shift market toward undersupply
► The global oil supply and demand dynamic continues to be dominated by
demand growth, OPEC supply decisions and North American production. In
previous quarters, OPEC production has remained relatively flat, leaving rising
North American output to offset global demand growth. That trend didn’t quite
continue in the third quarter as North American output growth slowed, pushing
the market further into an undersupply position.
► Rising oil prices and the strength of the US dollar will impact demand for crude
from emerging markets. The Indian rupee and Chinese RMB have depreciated
significantly against the US dollar in 2018 (12% and 6%, respectively).
► Although frontier regions and mature fields in Africa, Latin America and Asia
continue to suffer from natural decline, investment has shown signs of recovery
with production from these regions expected to stabilize or even grow in future
quarters.
55
60
65
70
75
80
85
7/2/2018 8/2/2018 9/2/2018
$/bbl
Brent
WTI
Source: EIA
(1.20)
(1.00)
(0.80)
(0.60)
(0.40)
(0.20)
-
Starting
balance
Demand
growth
OPEC North
America
Other End
balance
millionbarrelsperday
Movement to Oversupply Movement to UndersupplySource: IEA oversupply undersupply

6. Page 6
Page 6 Q4 | October 2018 EY Price Point: global oil and gas market outlook
► North American oil production has been the main source of recent oil supply
growth. Growth has consistently exceeded expectations and been
extraordinarily resilient despite market pressures.
► Growth has levelled off in recent months. If this trend continues, it will likely
have a significant impact on the global oil supply and demand dynamic.
► Most forecasts assume that regional production growth will continue for the
foreseeable future. The most recent EIA Short Term Energy Outlook predicts
an increase of ~1.4 million barrels per day between 2018 and 2019.
► Questions over the sustainability of that growth have been raised for a number
of periods in the absence of sustainable positive returns. Export constraints in
the Permian basin are now adding additional pressure.
8000
8500
9000
9500
10000
10500
11000
9/1/2017 12/1/2017 3/1/2018 6/1/2018 9/1/2018
kbbl/d
US Lower 48 Oil Production
Trend line
30/9/17- 30/6/18
Trend line
30/6/18-30/9/18
Market fundamentals
► Iranian oil exports fell to 1.68mbbl/d in August, representing a 28% decline
from July as major importing nations elected to reduce imports in advance of
November. South Korea has elected to halt Iranian imports altogether.
► China began using Iranian tankers to deliver volumes in July to sustain
imports until at least October. India have been more conservative, with the
country’s largest refiners not as yet requesting any cargoes for November
delivery. China’s response come November will largely determine the outlook
for Iranian exports.
► OPEC production remained relatively stable throughout the quarter, excluding
the impact of growth from Libya after production restarted at the country’s
biggest oil field. In September, OPEC declined to announce plans to increase
production to compensate for declines in Venezuelan and Iranian output.
US sanctions on Iran begin to bite
27,500
28,500
29,500
30,500
31,500
32,500
-
500
1,000
1,500
2,000
2,500
3,000
May June July August
Iranian crude oil and condensate exports by destination (kbbl/d)
Other China India Japan South Korea Total OPEC (exc. Libya growth - RHS)
Source: S&P Global, Forbes, OPEC Source: EIA
Growth in North American production slows

7. Page 7
Page 7 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Market fundamentals
OECD stocks continue their decline
Source: IEA
► US gas markets remain relatively stable. Rising exports are helping offset
production growth. In China, the coal-to-gas switching policy has increased
demand from the industrial and residential sectors. With more households
targeted to switch to gas this year, LNG import prices in the region are
expected to remain elevated as buyers look to secure supplies for the winter.
► Heading into winter, European gas supplies look tight. Storage levels were
severely depleted last winter. Injections will need to continue to replenish
stocks. Low wind generation, reduced nuclear availability and a rise in the
value of EU emissions allowances are also driving higher demand for gas in
the power sector.
► Europe and Asia will be competing for LNG cargoes at times this winter, which
means price spikes are likely during any cold snaps.
0
2
4
6
8
10
12
$/mmbtu
UK NBP Henry Hub LNG Asia FOB
Source: EY analysis of data from Thomson Reuters Datastream
Growth in gas demand is pushing up prices
84
86
88
90
92
94
96
98
100
102
2009 2010 2011 2012 2013 2014 2015 2016 2017
Daysforwarddemand
► Stocks of crude oil and refined products provide a buffer against rising prices
and price volatility. Since stocks peaked in 2015, upside factors have
generally failed to significantly move the market as participants knew that
there was storage overhang. OPEC stated that their goal was to return
inventories to the five year average. That goal seems to have been achieved.
► The market appears to be in a state of structural undersupply, as demand
growth exceeds that of supply. We started the quarter with a shortfall
(undersupply position) of ~0.25 million barrels per day and ended it with a
shortfall of 0.5 half million barrels per day.
► Stocks may continue to fall. If they do, upside forces will begin to have an
exaggerated impact on the market’s reaction and crude oil prices.

8. Page 8 Q4 | October 2018 EY Price Point: global oil and gas market outlookPage 8
Uncertainty around the energy mix of the future is drawing questions on the value of oil and gas assets on the
balance sheets of oil and gas companies today1. Energy consumers are more environmentally aware, alternative
energy technologies are advancing at accelerating rates and governments are setting more ambitious targets for
decarbonization. Many argue that the industry is at a crossroads, or at least progressing towards one at pace.
Some commentators have argued that investors should be challenging the price assumptions adopted by oil
companies when valuing their reserves, which underpin the value of oil and gas assets. There always has been,
and always will be, a lot of speculation about what the future price of oil will be. As a result of the level of uncertainty,
together with the range of views available in the market, it is easy to challenge a company’s price assumption. De-
carbonization is one of many factors that will likely impact future oil prices, but not necessarily the most influential
factor. Oil demand growth, the emergence (or absence) of improved extraction technologies and geopolitical factors
could all have greater influence on price than decarbonization – in both the short and long term.
Arguments have been offered up to suggest that IOCs are overstating their asset position by using overly
optimistic price assumptions. It has been highlighted that price assumptions used by companies for impairment
testing differ from their publically disclosed investment appraisal thresholds. This isn’t unusual or surprising.
Investment thresholds are multidimensional and incorporate perceived risk and risk appetites as well as required
returns at a given price – a much broader concept than a determination of a ‘best estimate’ of future prices used in
impairment testing. After all, a company applying the futures curve (being a reasonable indication of where the
market saw prices at least in the near term) as their investment threshold in early 2014, would currently be receiving
serious challenge over the investment decisions they made at that time.
Reserve valuation in the age of decarbonization: What is the right price?
1
Sarasin & Partners publication: Are oil and gas companies
overstating their position?

9. Page 9 Q4 | October 2018 EY Price Point: global oil and gas market outlookPage 9
Reserve valuation in the age of decarbonization: What is the right price? (continued)
Oil price assumptions of IOCs are above the IEA’s Paris aligned price trajectories. The world may or may not meet
the goals of the Paris Accord. Market consensus, as indicated by the range of views available (slide 11) when
compared to IEA’s Sustainable Development and Beyond 2 degrees scenarios, seems to indicate that the targets
will not be met. IEA’s modelling of up to ten future scenarios whilst stating that there are ‘too many variables in
play’
2
to generate a forecast, only supports the potential for uncertainty around each scenario being realized. In
addition, analysis performed by Wood Mackenzie suggests that recent M&A transactions have been based on long
term oil price assumptions of between $60-$70/bbl, a range comparable with prices used by IOCs when testing for
impairment.
Companies must determine a best estimate of future prices. It is an auditor’s role to attest that those assumptions
are in accordance with the relevant accounting standard. In the case of impairment testing of tangible oil and gas
properties under IFRS, those assumptions should be ‘reasonable and supportable’, reflective of management’s
‘best estimate’ and, where available, give greater ‘weight to external evidence’.
There is a wide range of variables at play that will determine future oil prices. As with any estimate, as additional
information comes to light on those variables, such information will be fed into the views of market participants.
Price assumptions adopted by IOCs are within the range of possible future outcomes as supported by external
evidence (slide 10). Whatever assumptions are underpinning those estimates, the IOCs are not alone in adopting
them. The views of market participants support those assumptions.
2
EIA World Energy Outlook 2017

10. Page 10
Page 10 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Brent futures
Consistent with the increase in spot
prices, the futures curve has been
lifted by the impact of upside forces.
Brent futures for delivery in 2020
and 2021 have also increased as
consumers attempt to reduce their
exposure against any further
increases in spot prices before
Iranian sanctions become effective
in November.
This data is effective as of 26
September 2018.
20
30
40
50
60
70
80
90
100
110
120
Sep/12 Sep/13 Sep/14 Sep/15 Sep/16 Sep/17 Sep/18 Sep/19 Sep/20 Sep/21 Sep/22 Sep/23 Sep/24
$/bbl
Historical Brent Futures Curve September 2018 Futures Curve June 2018

11. Page 11
Page 11 Q4 | October 2018 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 crude benchmarks, banks
and brokers predict (on average)
marginally higher oil prices in 2018
and 2019. 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.
Consistent with the recent trend in spot
prices, we note an uplift in the near
term outlook since the previous quarter.
However, no significant movement is
noted in the longer term where other
market forces dominate.
Consultants’ forecasts result in
averages of US$78.1/bbl and
US$74.5/bbl vs. banks’/brokers’
averages of US$68.0/bbl and
US$64.1/bbl for Brent and WTI,
respectively in 2022.
This data is effective as of 26
September 2018.
US$68.0 US$78.1 US$64.1 US$74.5Brent:
Average price
forecast in 2022
WTI:
Average price
forecast in 2022
Banks/brokers Consultants Banks/brokers Consultants
Source: Bloomberg, banks’/brokers’ reports, consensus economics, consultants’ website
30
40
50
60
70
80
90
100
2018 2019 2020 2021 2022
$perbarrel
Bank/Broker range Consultants range
Bank/Broker average Consultants averageBank/broker average
Bank/broker range
30
40
50
60
70
80
90
100
2018 2019 2020 2021 2022
$perbarrel
Bank/Broker range Consultants range
Bank/Broker average Consultants averageBank/broker average
Bank/broker range

12. Page 12
Page 12 Q4 | October 2018 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.
The outlook for Henry Hub remains
relatively consistent with June 2018.
Increases are noted for NBP as demand
from emerging markets continues to grow.
NBP estimates for UK NBP are scarce with
only 6 and 3 data points available from
banks/brokers and consultants,
respectively.
This data is effective as of 26 September
2018.
US$3.7 GBP54.1 GBP53.7UK NBP:
Average price
forecast in 2022
Banks/brokers Consultants
Source: Bloomberg, banks’/brokers’ reports, consensus economics, consultants’ website
Banks/brokers Consultants
US$3.1Henry Hub:
Average price
forecast in 2022
2.0
2.5
3.0
3.5
4.0
4.5
2018 2019 2020 2021 2022
$permmbtu
Bank/Broker range Consultants range
Bank/Broker average Consultants average
Bank/broker range
Bank/broker average
35
40
45
50
55
60
65
70
2018 2019 2020 2021 2022
GBppertherm
Bank/Broker range Consultants range
Bank/Broker average Consultants average
Bank/broker range
Bank/broker average

13. Page 13
Page 13 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Brent oil price estimates
Appendix
Bank/broker 2018 (US$/bbl) 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl)
High 85.0 85.6 90.0 89.0 85.0
Average 72.9 73.3 72.2 70.5 68.0
Median 73.5 74.5 70.0 69.8 68.5
Low 60.5 54.1 52.2 60.0 58.0
Source: Bloomberg, Banks’/Brokers’ reports, consensus economics.
Source: Consultants’ websites, Oxford Economics, Wood Mackenzie.
Consultant 2018 (US$/bbl) 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl)
High 76.5 76.5 75.1 85.1 90.7
Average 70.7 68.9 72.2 75.2 78.1
Median 74.1 69.4 72.0 73.5 75.3
Low 54.1 58.8 69.7 71.1 72.5
This data is effective as of 26 September 2018.

14. Page 14
Page 14 Q4 | October 2018 EY Price Point: global oil and gas market outlook
WTI oil price estimates
Appendix
Bank/broker 2018 (US$/bbl) 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl)
High 79.0 80.0 83.0 81.0 81.0
Average 67.9 68.3 67.4 65.4 64.1
Median 67.7 67.8 65.0 64.4 64.1
Low 58.0 55.0 53.0 53.5 51.5
Source: Bloomberg, Banks’/Brokers’ reports, consensus economics.
Source: Consultants’ websites, Oxford Economics, Wood Mackenzie.
Consultant 2018 (US$/bbl) 2019 (US$/bbl) 2020 (US$/bbl) 2021 (US$/bbl) 2022 (US$/bbl)
High 69.3 69.7 71.9 81.1 86.7
Average 65.0 64.5 68.4 71.4 74.5
Median 68.0 65.3 67.0 69.0 73.1
Low 50.6 55.3 66.5 67.0 68.6
This data is effective as of 26 September 2018.

15. Page 15
Page 15 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Henry Hub gas price estimates
Appendix
Bank/broker 2018 (US$/MMBtu) 2019 (US$/MMBtu) 2020 (US$/MMBtu) 2021 (US$/MMBtu) 2022 (US$/MMBtu)
High 3.3 3.6 3.7 3.7 3.8
Average 2.9 3.0 3.0 3.1 3.1
Median 2.9 2.9 3.0 3.0 3.0
Low 2.7 2.5 2.6 2.6 2.6
Source: Bloomberg, Banks’/Brokers’ reports, consensus economics.
* Brokers have reported figures in $/mcf. We have used a conversion ratio of 1.037 for mcf conversion to MMBtu.
Source: Consultants’ websites, Oxford Economics, Wood Mackenzie.
* Wood Mackenzie has reported figures in US$/mcf. We have used a conversion ratio of 1.037 for mcf conversion to MMBtu.
Consultant 2018 (US$/mmbtu) 2019 (US$/mmbtu) 2020 (US$/mmbtu) 2021 (US$/mmbtu) 2022 (US$/MMBtu)
High 3.1 3.6 4.0 4.0 4.2
Average 3.0 3.1 3.4 3.6 3.7
Median 3.0 3.1 3.2 3.5 3.7
Low 2.9 2.9 3.1 3.2 3.3
This data is effective as of 26 September 2018.

16. Page 16
Page 16 Q4 | October 2018 EY Price Point: global oil and gas market outlook
NBP gas price estimates
Appendix
Bank/broker 2018 (GBP/therm) 2019 (GBP/therm) 2020 (GBP/therm) 2021 (GBP/therm) 2022 (GBP/therm)
High 60.0 61.6 65.2 58.0 58.0
Average 56.2 56.8 56.2 53.3 54.1
Median 56.8 58.5 56.1 53.7 53.4
Low 50.0 46.0 46.0 45.0 51.0
Source: Bloomberg, Banks’/Brokers’ reports, consensus economics
Source: Consultants’ websites, Oxford Economics.
*Oxford Economics has reported figures in US$/MMBtu. We have used exchange rate forecast by Oxford Economics from USD to GBP.
** GLJ has reported figures in US$/MMBtu. We have used exchange rate forecast by GLJ from USD to GBP.
Consultant 2018 (GBP/therm) 2019 (GBP/therm) 2020 (GBP/therm) 2021 (GBP/therm) 2022 (GBP/therm)
High 55.0 51.1 53.8 55.4 56.2
Average 53.9 50.5 51.9 52.8 53.7
Median 54.5 50.5 51.5 52.5 53.6
Low 52.2 50.0 50.5 50.5 51.5
This data is effective as of 26 September 2018.

17. Page 17
Page 17 Q4 | October 2018 EY Price Point: global oil and gas market outlook
Key contacts
Important notice
Price outlook data incorporated within this publication is effective as of 26 September 2018. 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.
Adi Karev
EY Global Oil & Gas Leader
+852 2629 1738
Derek Leith
EY Global Oil & Gas Tax
Leader
+44 12 2465 3246
Andy Brogan
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
•
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