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December 27, 2011 Energy Data Highlights Crude oil futures price 12/22/2011: $99.53/bbl up$5.66 from week earlier up$9.05 from year earlier Natural gas futures price 12/22/2011: $3.169/mmBtu up$0.042 from week earlier down$0.9834 from year earlier Weekly coal production 12/17/2011: 21.938 million tons up0.274 million tons from week earlier up1.303 million tons from year earlier Natural gas inventories 12/16/2011: 3,629 Bcf down100 Bcf from week earlier up235 Bcf from year earlier Crude oil inventories 12/16/2011: 323.6 mmbbl down10.6 mmbbl from week earlier down17.1 mmbbl from year earlier

Natural Gas/ Power News

EIA Storage Release 12/15/11 (Actual): -102 Bcf Previous Week: -20 Bcf +4.3% Change from 1 Year Ago +10.3% Change 5-year Average Shale-Gas Boom Spurs Race The boom in low-cost natural gas obtained from shale is driving investment in plants that use gas for fuel or as a raw material, setting off a race by states to attract such factories and the jobs they create. Shale-gas production is spurring construction of plants that make chemicals, plastics, fertilizer, steel and other products. A report issued earlier this month by PricewaterhouseCoopers LLC

estimated that such investments could create a million U.S. manufacturing jobs over the next 15 years. West Virginia is vying with Pennsylvania and Ohio to attract an ethylene plant that Royal Dutch Shell PLC said it plans to build in the Appalachian region to take advantage of the plentiful new gas supplies. Shell is due to announce a site early in 2012. Ethylene, produced from ethane in natural gas, is used to make plastics and other materials that go into an array of products, including pipes, paint and antifreeze. West Virginia's legislature, meeting in a special session, passed a bill this month setting rules for shale gas drilling and production. The legislation ensures "a reliable supply" of shale gas in West Virginia and should dispel regulatory uncertainty that could slow investment, Keith Burdette, the state's commerce secretary, said in an interview. http://online.wsj.com/article/SB1000142405297020484450457710042125300512 2.html Fracking boom boosting demand for Ohio sand The surge in exploration for oil and natural gas in underground shale deposits has created a booming business for Ohio companies that provide special sand used in drilling, the Akron Beacon Journal reports. About 6,000 to 8,000 tons of sand is needed for the hydraulic fracturing process to drill one well, the newspaper reports. It is mixed with water and chemicals to fracture the shale and release the resources inside. http://www.bizjournals.com/columbus/morning_call/2011/12/fracking-boomboosting-demand-for-ohio.html Natural-gas price likely to drop in 2012 Booming U.S. natural-gas production from shale formations and slowing demand from households, factories and power plants are poised to send prices down for an unprecedented fifth year in 2012. Gas might tumble 8.2 percent from its 2011 average next year, as output rises 2.8 percent to a record 67.72 billion cubic feet a day, the Energy Department forecasts. Demand probably will grow 1.7percent, after a 1.8percent increase this year, the department said this month. Its been practically impossible to turn off the shale-gas tap, said Adam Sieminski, chief energy economist at Deutsche Bank in Washington. Industrial demand has been rising, but its not enough. The natural-gas price has dropped 29percent on the New York Mercantile Exchange this year, the most since 2006, as improved drilling technology and profits from selling gas liquids encouraged producers to pump record amounts of the fuel from shale formations from Texas to Pennsylvania. Future prices have dropped in each of the past three years, the longest stretch of declines since the contracts began trading on the Nymex in 1991. http://www.dispatch.com/content/stories/business/2011/12/27/natural-gas-pricelikely-to-drop-in-2012.html

Exelon-Constellation merger edges closer to completion US electricity firm Exelon Corporation is edging ever closer to the completion of its merger with Constellation Energy Group (CEG), despite attempts to halt it by EDF Energy. Last week, the New York Public Service Commission cleared the merger, and the State of Maryland Governor, Martin O'Malley publicly backed it, meaning the deal is now highly likely to be approved by the Maryland Public Service Commission. "The one we were most concerned about was Maryland, but now the governor has thrown his approval onto the merger it seems like Maryland is on

track to approve the deal," says Brian Chin, director, electric utilities, equity research at Citigroup, which has had both Exelon and Constellation as clients within the past 12 months. Upon merger completion, Exelon will hold the largest nuclear fleet (19GW) in the US and will also become the largest competitive power generator, with total generation surpassing 34GW. Serving 6.6 million customers, Exelon will be the second largest distributor of electricity and gas. http://www.risk.net/energy-risk/news/2134191/exelon-constellation-merger-edgescloser-completion Iran Awards $1.9 Billion Lavan Gas Contract to Sepehr Energy The Iranian Offshore Oil Co. awarded a $1.9 billion contract to Sepehr Energy Co. to develop the Lavan natural gas field after ending talks with Polands biggest natural-gas company, Mehr reported. The contract includes construction of a petrochemical complex on Lavan island, agency said. Lavan contains about 10 trillion cubic feet of gas and has a capacity for producing 750 million cubic feet a day of natural gas, the state-run news agency said. http://www.bloomberg.com/news/2011-12-27/iran-awards-1-9-billion-lavan-gascontract-to-sepehr-energy.html Natural gas imports expected to increase China's reliance on natural gas imports will continue, accounting for more than half of the country's total consumption, as demand surges for the fuel for both industrial and residential use. China, which is widely estimated to realize more than 9 percent growth in GDP in 2011, imported 3.1 billion cubic meters (cu m) of natural gas in November, 1.5 times higher than during the same month last year, according to figures from the National Development and Reform Commission (NDRC). The increase in November saw the nation's total imports of natural gas in the first 11 months of the year grow by 91.5 percent year-on-year to 28.1 billion cu m. The country produced 91.4 billion cu m of natural gas between January and November, with growth of 6 percent compared with the same period in 2010, the NDRC said. China's imports of natural gas are expected to hit 30 billion cu m this year, said Duan Zhaofang, a natural gas researcher at the Economics & Technology Research Institute of China National Petroleum Corp, the country's biggest energy producer. http://www.chinadaily.com.cn/usa/business/2011-12/27/content_14334627.htm

Green/ Alternative Energy News

Dark Times Fall on Solar Sector Long viewed as a remedy for the world's dependence on fossil fuels, the solar industry is dimming as makers of panels used to harness the sun continue to fall by the wayside. Bankruptcies, plummeting stock prices and crushing debt loads are calling into question the viability of an industry that since the 1970s has been

counted on to advance the U.S.and the worldinto a new energy age. Global demand for solar power is still growingabout 8% more solar panels will be installed this year compared with 2010, according to Jefferies Group analysisbut it is expected to flat-line next year. At the heart of the industry woes are swiftly falling prices for solar panels and their componentspolysilicon, wafers, cells and the modules themselves. The reason is simple: There are simply too many manufacturers trying to sell their wares. http://online.wsj.com/article/SB1000142405297020455230457711714051199684 0.html?mod=WSJ_hp_LEFTTopStories Total Doubling Down on Solar Energy, Raises Stake in SunPower Total SA (FP), Europes third-largest oil producer, raised its bet on solar energy by boosting its stake in SunPower Corp. and selling its renewable energy development unit to the U.S. company. Total, which already owns 60 percent of the second-largest U.S. solar-panel maker, agreed to pay $163.7 million for an additional 6 percent, SunPower said yesterday in a statement. The solar company agreed to acquire Totals Tenesol SA unit for $165.4 million in cash. Total will pay a 50 percent premium over the Dec. 22 closing price for the SunPower shares, a move that Pavel Molchanov, a Houston-based analyst at Raymond James & Associates Inc., said was a vote of confidence in the company. Its plans contrast with BP Plc, Europes second-largest oil company, which is shuttering its solar unit after 40 years. http://www.bloomberg.com/news/2011-12-23/total-increases-sunpower-stake-with164-million-share-purchase.html

Crude Oil News

OPEC Daily Basket Price 12/21/2011- $106.98 (OPEC Daily Basket Price 12/20/2011- $105.05) Brent Above $108 on Supply Worries, US Data Supports Brent crude rose slightly to trade above $108 on Tuesday, supported by supply disruptions in Syria and Iranian naval exercises in a key shipping lane, while improved U.S. home sales data also supported prices. London Brent rose 39 cents to $108.35 per barrel. U.S. light, sweet crude was up 0.4 percent at $100.04 a barrel. "Syria could be a support factor for the time being, but we will not see a big climb or rocket high prices because of that," Ken Hasegawa, a derivatives manager with brokerage Newedge in Tokyo, said. "So far supply disruptions have not been a big issue because of some easing of demand in Europe. This has offset the disruption of supplies." Syrian Oil Minister Sufian Alao said on Saturday that his country's oil production had fallen by about 30 to 35 percent as a result of sanctions imposed on Syria over its nine-month crackdown on anti-government protests. Also adding to supply worries were Iran naval exercises. Iran on Saturday began 10 days of naval exercises in the Strait of Hormuz, raising concern

about a possible closure of the world's most strategic oil transit channel in the event of any outbreak of military conflict between Tehran and the West. http://www.cnbc.com/id/45769989 Oil Trades Near Two-Week High on Speculation U.S. Recovery to Boost Demand Oil traded near the highest settlement in two weeks amid speculation the U.S. economy will continue to recover, bolstering demand for raw materials in the worlds biggest crude consumer. Futures were little changed after gaining 6.6 percent last week, the most since the five days ending Oct. 28. Reports today may show U.S. consumer confidence improved to a five-month high and home prices in 20 cities declined at a slower pace. Financial markets from Hong Kong to the U.K. and the U.S. were closed for holidays yesterday. Economic indicators, especially in the U.S., are improving, said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo, who forecasts oil will trade more or less at the $100-level in coming months. http://www.bloomberg.com/news/2011-12-26/oil-futures-open-at-99-92-a-barrel24-cents-higher-in-new-york-trading.html

Crude Oil Higher in Thin Trading Crude-oil futures were slightly higher Tuesday in thin trading as many market participants weren't trading because of a public holiday in London. At 6 a.m. ET, the front-month February Brent contract on London's ICE futures exchange was up 37 cents, or 0.3%, at $108.33 a barrel. The front-month February contract on the New York Mercantile Exchange was trading up 8 cents at $99.76 a barrel. Brent crude and Nymex prices traded in a narrow range as volumes were low. Oil prices traded higher on both sides of the Atlantic, but Nymex prices kept below the key $100 a barrel mark, which was breached last week after the U.S. Labor Department said Thursday that new jobless claims fell to their lowest level since April 2008. "The main thing to consider this week will be the lack of trading volume," said Olivier Jakob, an analyst at Petromatrix, in a note Tuesday. Investors are waiting for Standard & Poor's to announce which European countries it will downgrade, he said. http://online.wsj.com/article/SB1000142405297020339110457712413426930864 6.html?mod=googlenews_wsj

Oil traders flee as crude price swings below $100 Large traders pulled out of the oil market, cutting bets to a four-year low, as crude climbed above $100 a barrel on rising tension with Iran, then fell on concern over the European economy. Outstanding contracts among the biggest players in the futures market, including swaps dealers, hedge funds, producers and commercial users, fell by 4.9 percent to 2,207,528 contracts, the lowest since May 2007, in the seven days ended Dec. 20, according to the Commodity Futures Trading

Commissions Commitments of Traders report on Dec. 23. http://www.dailyherald.com/article/20111226/business/712269797/

Crude Oil Recovery May Be Cut Short, Gold to Challenge Trend Support Crude oil prices may continue to drift higher as a supportive set of US economic data helps fuel a corrective rebound in risky assets on the back of year-end profittaking. Expectations point to nominal improvements in the Consumer Confidence as well as the Richmond and Dallas Federal Reserves measures of manufacturing activity (released independently of one another).Technical positioning is beginning to warn of a turn lower ahead however. Prices are testing the top of a falling channel set from the November 17 high, now squarely at the 100.00 figure, with a break higher targeting 101.39. Near-term support remains at 97.89. A candle in Star position hints preliminary signs of a bearish reversal may be emerging but confirmation is needed before anything can be said with confidence. http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities /2011/12/27/Crude_Oil_Recovery_May_Be_Cut_Short_Gold_to_Challenge_Trend_Su pport.html Crude Oil Analysis for the Week of December 26, 2011 Last week the fundamentals clashed with the technicals in the February Crude Oil futures market and by weeks end the fundamentals clearly won. Even though the contract did not take out any significant price levels, the strong upside momentum probably gave bullish traders the incentive to continue to buy while putting fear into the short-traders and encouraging them to continue to cover their positions. Technically, the main trend on the weekly chart remains up although momentum was clearly beginning to shift to the downside after 4 weeks of consolidation. Even the penetration of a key 50 percent price level at $95.15 as well as an uptrending Gann angle had to have had long traders on edge as the market appeared to be setting up for a retracement of the rally from $75.73 to $103.28. http://oilprice.com/Energy/Oil-Prices/Crude-Oil-Analysis-for-the-Week-of-December26-2011.html

Petroplus Plunges as Lenders Freeze $1 Billion of Critical Credit Lines Petroplus Holdings AG, Europes largest independent oil refiner, fell to a record low after lenders froze about $1 billion in uncommitted loans. The revolving credit lines are critical for business, the refiner, based in Zug, Switzerland, said in a statement. The company is evaluating additional strategic options to maintain operations in its European refining and marketing system. Petroplus stock fell as much as 40 percent and was trading down 1.33 francs at 2.10 francs at 10:44 a.m. in Zurich. The shares have lost 83 percent since the start of the year. Demand for fuels such as gasoline has weakened in the sluggish global economy, cutting profits and leading to temporary closures, sales and conversion of refineries into storage sites. The credit freeze is a serious issue as in the worst case the company would lack the funds required to maintain operations, Vontobel Holding

AG said in a note today. We strongly advise investors to stay clear of the stock until a sustainable financing can be restored. http://www.bloomberg.com/news/2011-12-27/petroplus-plunges-as-lenders-freeze1-billion-of-critical-credit-lines.html

Libyan Crude Output Exceeds 1 Million Barrels a Day: Persian Gulf Oil Iraqi crude oil production jumped to the highest level in at least 20 years, or more than 3 million barrels a day, said Hussain al-Shahristani, deputy prime minister for energy affairs. Libya, holder of Africas biggest crude reserves, is now pumping more than a million barrels a day as its industry recovers from months of conflict, said the Nuri Berruien, chairman of its state-run National Oil Corp. http://www.bloomberg.com/news/2011-12-26/libyan-crude-output-exceeds-1million-barrels-a-day-persian-gulf-oil.html

S Korea's GS to invest big in energy, oil sectors next year South Korea's GS Group, part owner of the country's second-biggest oil refiner GS Caltex, said Tuesday it will spend Won 1.8 trillion ($1.6 billion) in energy investments next year, including the construction of a heavy oil upgrader and overseas upstream development. The conglomerate, which also has retail and construction units under its wing, plans to invest a total Won 3.1 trillion in 2012, including the Won 1.8 trillion earmarked for the energy sector. "GS Caltex would maintain its investment pace next year despite uncertain business conditions to strategically prepare for the future," the group said without providing comparison figures for this year. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/7927942 Recent Rig Counts Date of Last Year's Count 23 Dec 10 23 Dec 10 November 2010

Area U.S. Canada

Last Count

Cou Change from nt Prior Count -11 -125 -12

Date of Prior Count 16 Dec 11 16 Dec 11 October 2011

Change from Last Year +294 +95 +55

22 Dec 2008 11 22 Dec 11 406

Internatio Novemb 1185 nal er 2011

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

Weather
Dagmars Hurricane Winds Cut Power to 170,000 People in Nordic Countries The storm Dagmar swept across the Nordic countries with Hurricane-strength winds, cutting power and Norwegian natural gas exports as well as damaging buildings and halting train traffic. About 180,000 homes in Sweden, Finland and Norway were still without electricity as utilities worked to restore power after the storm toppled trees and damaged power lines, according to estimates today and late yesterday by power companies and national grid operators. http://www.bloomberg.com/news/2011-12-27/dagmar-s-hurricane-winds-cutpower-to-170-000-people-in-nordic-countries.html

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