Wealthion: Adam Taggart and Art Berman
January 17, 2022
Slide 2 Labyrinth Consulting Services, Inc.
$75.23 $75.25
$66.42
$73.95
$69.25
$62.32
$84.65
$78.81
$84.15
$76.10
$78.50
$65.57
$68.23
$75.21
$79.46
$78.90
$82.64
$58
$63
$68
$73
$78
$83
$88
$93
6/1/21 6/8/21 6/15/21 6/22/21 6/29/21 7/6/21 7/13/21 7/20/21 7/27/21 8/3/21 8/10/21 8/17/21 8/24/21 8/31/21 9/7/21 9/14/21 9/21/21 9/28/21 10/5/21 10/12/21 10/19/21 10/26/21 11/2/21 11/9/21 11/16/21 11/23/21 11/30/21 12/7/21 12/14/21 12/21/21 12/28/21 1/4/22 1/11/22
W TI F utu re s P rice ($/b ar re l)
Chart Title
Gap Top Bottom CL SMA Series7
WTI futures price have increased +3.74 (+4.7%) to $82.64 since last Friday January 7 Price remains at upper Bollinger band limit
Price is+$14.41 (+21%) higher than Dec 20 but -$2.01 (-2.4%) less than Oct 26
Source: MarketWatch, CME & Labyrinth Consulting Services, Inc. Oil & Gas General/Futures & Future Spreads/CL FUTURES
Aug 20 Delta
Oct 26 Nov 9
Jul 19
CL1 Pct Change 12/8/21 $72.36
10/26/21 $84.65 Change -$12.29 -15%
12/8/21 $72.36 11/9/21 $84.15
Change -$11.79 -14%
CL1 Weekly Avg
1/12/22 $82.64 $80.70
1/7/22 $78.90 $77.86
CHANGE $3.74 $2.84
PCT CHANGE 4.7% 3.6%
Nov 24
Dec 1
Dec 20
72.3
82.0
74.3
46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
Incremental Crude Oil + Condensate Production (mmb/d)
Chart Title
BASE Rest of World Iran Saudi Arabia North Sea BZ-KZ-MX Canada Rest of OPEC Russia Iraq United States TOTAL LINE
Source: EIA & Labyrinth Consulting Services, Inc. EIA/EIA International/International_data MASTER_2020
World crude oil + condensate production has exceeded 2005-2011 plateau
"Rest of World" production has reached historic low
United States
Saudi Arabia Other OPEC
Base
Incremental mmb/d minimum levels
2000-present
Russia Iraq
Canada
Mexico-Brazil-Kazahkstan
Rest of World Iran North Sea
Nov 2018
2005-2011 World Supply Plateau
Sept 2011
Aug 2021
Most of world oil production growth has been from the United States
since about 2010
Slide 4 Labyrinth Consulting Services, Inc.
Impressive growth in U.S. oil production from 5 mmb/d in 2008 To 12 mmb/d in 2019
9.64
11.97 11.17
0 2 4 6 8 10 12 14 16
Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17 Jan-20 Jan-23 Jan-26 Jan-29 Jan-32 Jan-35 Jan-38 Jan-41 Jan-44 Jan-47 Jan-50 Jan-53 Jan-56 Jan-59 Jan-62 Jan-65 Jan-68 Jan-71 Jan-74 Jan-77 Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19 Jan-22
Crude Oil and Condensate Production (mmb/d)
lower 48 Alaska offshore tight oil TOTAL LINE
Conventional Lower 48 States
Source: EIA , Drilling Info & Labyrinth Consulting Services, Inc. EIA Current/Monthly Updates/Crude Oil Prodution Annual_And_Forecast
Alaska
Offshore Tight
1970 Oil
2019
U.S. crude oil + condensate production peaked in 2019 at 12 mmb/d
It has declined by 0.8 mmb/d (6.7%) to 11 mmb/d in 2021
Energy density: amount of energy contained in a volume Not all energy sources are equal
42
23.5
17
0 0.04 10 20 30 40 50 60
Oil Thermal Coal Wood Natural Gas
Energy Density (MJ/kg)
MJ/m3
MJ/m3
MJ/m3 Coal vs Oil vs
Refined Products 42 0.6 1.0
Coal 23.5 1.0 1.8
Wood 17 1.4 2.5
Natural Gas 0.04 587.5 1050.0
Source: Layton (2008) & Labyrinth Consulting Services, Inc. EIA/Energy Density/Energy Density Comparison
Energy density explains why we prefer coal over wood and oil over coal Coal has 1.4 times times as much energy as wood
Oil has 1.8 times more energy than coal and 2.5 more energy than wood
energy (J) is the potential to do work
energy density (J/m3) is the amount of energy contained in a volume
Slide 6 Labyrinth Consulting Services, Inc.
1,100
1,000
550
6.5 1 0.6
0 200 400 600 800 1000 1200 1400
Natural Gas Oil Coal Solar (PV) Wind Biomass
Power Density (W/m2)
Chart Title
Series1
Solar PV has 0.6% the power density of natural gas and wind has 0.1%
Solar requires 200 times larger source area to deliver the same power as gas Wind requires 1000 times larger source area to deliver the same power as gas
Source: Smil (2011), Layton (2008) & Labyrinth Consulting Services, Inc. EIA/Energy Density/Energy Density Comparison
power (W) is the rate at which work is done power density (W/m
2) is the energy flow that can be harnessed from a given unit of volume,
area or mass
Power density: how much energy can be converted to power from a volume Natural gas has 200 times more power density than solar
and 1000 times more power density than wind
We should think about energy as workers
• 1,100 wind workers equals 1 natural gas worker.
Cost ≠ price ≠ value
$16.55
$81.48
$79.15 5.6%
1.2%
3.9%
2.1% 2.5%
6.8%
-4%
-2%
0%
2%
4%
6%
8%
10%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Feb-19 Jul-19 Dec-19 May-20 Oct-20 Mar-21 Aug-21 Jan-22
U .S . CP I In flati on Rate
W TI S po t P rice ($/b ar re l)
Chart Title
WTI INFLATION
Source: OECD, EIA & Labyrinth Consulting Services, Inc Oil & Gas General/CPI INFLATION OECD_DP_LIVE
Higher oil price is the leading cause of inflation November U.S. inflation rose from 6.2% to 6.8%
WTI price decreased slightly from $81.48 to $79.15
WTI (LHS)
Apr 2020
Slide 8 Labyrinth Consulting Services, Inc.
4.03 4.21
6.59
-0.9
-3.1
-1.0
-9.7 11.1
13.5
5.4
3.8
1.6
5.4
-8 -3 2 7 12 17
-15 -10 -5 0 5 10 15 20 25 30 35
Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22
U .S . In flati on (P er ce nt)
W or ld Oi l De man d Gr owth (mmb /d /y r) an d Br en t P rice In de x
Chart Title
INFLATION OIL DEMAND GROWTH POS OIL DEMAND GROWTH NEG WTI INDEX INFLATION LINE
Source: IEA, OPEC, US Federal Reserve Bank, & Labyrinth Consulting Services, Inc Oil & Gas General/Inflation Annual Master
Oil Demand + Oil Demand -
1974 Oil Shock
1980 Oil Shock
Financial Collapse
2021
Factors causing oil demand destruction are poorly understood
2021 oil demand growth is highest ever and annual inflation rate is highest since 1990
2020 1980
1974 2009
1990
2008
Brent price index (lhs)
1986
1.0
1.7 1.8
2.5
6.1
7.7
0.8 1.3 1.8 2.3 2.8 3.3 3.8 4.3 4.8 5.3 5.8 6.3 6.8 7.3 7.8 8.3 8.8
0 20 40 60 80 100 120 140 160 180
1800 1901 1904 1907 1910 1913 1916 1919 1922 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
W or ld P op ul ati on (b ill io ns)
Fo ssi l E ne rg y Co nsu mp tio n (T ho usan d T W h)
Chart Title
NON-FOSSIL COAL OIL GAS Renewable POPULATION
Source: Our World in Data, UN & Labyrinth Consulting Services, Inc. Labyrinth/Climate Change/World Population since 10000 BCE
Non-fossil energy sources only capable of supporting population of ~2 billion today Tripling that capacity only supports ~6.0 of 9.8 billion projected 2050 population
Population (RHS)
Coal Oil Gas
Non-Fossil
Renewable
1900 1920
1950
2019
2000
Slide 10 Labyrinth Consulting Services, Inc.
Investors and Credit Markets Are Shorting Energy
Investors believe there are better returns outside of energy
0 0.2 0.4 0.6 0.8 1 1.2
0 50 100 150 200 250 300 350 400 450
8/31/11 8/31/12 8/31/13 8/31/14 8/31/15 8/31/16 8/31/17 8/31/18 8/31/19 8/31/20 8/31/21
Ratio of S&P 500 Energy to Equity Index
S&P 500 Index for Energy and ESG
Chart Title
ENERGY VS S&P ESG ENERGY
Energy sector performance has fallen by about 50% since 2014 while ESG sector performance has increased 140%
ESG has out-performed equities by about 1.5% while energy has under-performed
Source: S&P Dow Jones Indices & Labyrinth Consulting Services, Inc. Oil and Gas General/S&P 500 Energy_ESG_Total S&P PerfmormanceComparison
ESG Index (LHS)
Energy Index (LHS) Energy-Equity Index Ratio
(RHS)
Shale companies have free cash flow
for the first time in the history of tight oil plays
Slide 12 Labyrinth Consulting Services, Inc.
$86.40
$82.65 $82.87
$78.15
$76.00
$72.50 $73.00
$67.73
$71.65
$81.48
$79.15
$71.71
$76.00
$75.50
$74.50
$72.50 $72.50 $71.50
$60
$65
$70
$75
$80
$85
$90
$95
Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22
W TI S po t P rice ($/b ar re l)
Chart Title
GAP TOP BOTTOM WTI
