A recent commodity pricing poll survey shows that energy reserve-based lenders have shifted their natural gas price decks higher for 2014 while holding oil decks steady. This is according to Macquarie Tristone’s latest “Quarterly Energy Lender Price Survey” of 27 banks. These included U.S. national and regional banks, as well as international banks, that all engage in reserve-based lending.

For 2014, the first-quarter survey indicates a mean base-case West Texas Intermediate (WTI) oil price forecast of $78.80 per barrel and a mean base-case Henry Hub gas price forecast of $3.48 per million British thermal units (Btu). The survey of Brent-based oil shows a mean base-case of $77.21.

The five-year trend shows a decreasing forward price deck for oil, and an increasing forward price deck for gas, with average 2018 oil and gas price forecasts of $75.75 per barrel for WTI, $75.59 for Brent and $4 per million Btu for Henry Hub.

Modest escalation of both oil and gas prices after 2018 is common, but prices are capped at means of $76.21 per barrel, $75.74 and $4.58 per million Btu for WTI, Brent and Henry Hub, respectively. The average discount rate used by participating banks is 9%, unchanged from last quarter’s average.

Operating costs, on average, are escalated 0.6% per year for WTI, 1% for Brent and 0.6% for Henry Hub.

The firm compared the average base-case against Nymex futures pricing as of Jan. 15, 2014, for oil and gas separately. When compared with Nymex futures pricing, the average base-case results for WTI were 86% of Nymex and for Brent, 84% of Nymex in 2013; the average base-case results for WTI and Brent each average 97% in 2018.

The average base-case results for gas were 83% of Nymex Henry Hub futures in 2014 and 95% in 2018.

Quarter-to-quarter pricing trends. Compared to last quarter’s survey, front-year pricing has increased by 0.2% for oil and by 8.5% for gas. In the later years, forecasts for oil prices in the fifth year decrease by 0.3%, and forecasts for gas prices increase by 0.8%.

Sensitivity case results. The third-quarter survey also includes a sensitivity case, which represents the lenders’ low or conservative price decks. Of the 27 participating banks, 24 banks provided a sensitivity case for WTI and Henry Hub, which averages a 21% discount to base-case lending policies for both oil and gas over the five-year strip. Three banks provided a sensitivity case for Brent, which averages a 19% discount to the base-case pricing over the five-year strip.

1Q 2014 Price Survey: Mean Of 27 Participating Banks (Base Case)

WTI Oil ($/bbl) Brent Oil ($/bbl)* Henry Hub Gas ($/MMBtu)

2014 78.80 77.21 3.48

2015 77.71 76.62 3.78

2016 76.45 76.14 3.83

2017 75.85 75.46 3.96

2018 75.75 75.59 4.00

2019+ Esc. .6% .0% 1.0%

Cap 76.21 75.74 4.58

LOE Esc 0.6% 1.0% 0.6%

Discount Rate 9% 9% 9%

*Mean of five participating banks

Source: Macquarie Tristone

Quarter-Over-Quarter Base-Case Pricing Trends*

WTI Oil ($/bbl) Brent ($/bbl)** Henry Hub Gas ($/MMBtu)

4Q13 1Q14 % Change 4Q13 1Q14 % Change 4Q13 1Q14 % Change

Front year 78.63 78.80 0.2% 76.63 77.21 0.8% 3.21 3.48 8.5%

Second year 77.83 77.71 -0.2% 76.76 76.62 -0.2% 3.33 3.78 9.9%

Third year 76.69 76.45 -0.3% 76.40 76.14 -0.3% 3.65 3.83 5.0%

Fourth year 75.99 75.85 -0.2% 75.80 75.46 -0.4% 3.84 3.96 3.2%

Fifth year 76.00 75.75 -0.3% 75.70 75.59 -0.1% 3.97 4.00 0.8%

Sixth year and beyond 0.4% 0.6% N/A 0.7% 0.0% N/A 1.3% 1.0% N/A

Cap 76.04 76.21 0.2% 76.29 75.74 -0.7% 4.63 4.58 -1.1%

*27 Participating Banks

**Mean of five participating banks

Source: Macquarie Tristone

1Q 2014 Price Survey: Mean Of 24 Participating Banks, Sensitivity Case

WTI ($/Bbl) Brent ($/bbl)* HH Gas ($/MMBtu)

2014 61.54 62.10 2.74

2015 60.89 62.32 2.87

2016 60.42 61.55 3.04

2017 60.31 60.77 3.14

2018 60.35 60.77 3.27

2019+ Esc. 0.6% 0.0% 1.2%

CAP 62.08 60.33 3.59

LOE Esc 0.3% 1.0% 0.3%

Discount Rate 9% 8% 9%

*Mean of three participating banks

Source: Macquarie Tristone