Summary of Conference Call Notes on US Oil & Gas Services and Exploration & Production Industry Overview - The focus is on the Oilfield Services (OFS) sector, particularly in relation to Venezuela's oil production potential and its impact on stock prices of major OFS companies [1][2]. Key Points and Arguments 1. **Market Reaction to Venezuela News**: - The stock prices of major OFS companies such as SLB, HAL, and WFRD increased significantly (approximately 9%, 8%, and 10% respectively) due to expectations of increased foreign investment in Venezuela's oilfields [2]. - The market capitalization increase of 8-10% on a single day appears disproportionate when considering the EBITDA contribution needed to justify it, estimated at over $6 billion for the Big 4 OFS companies [1][2]. 2. **Revenue Opportunity Assessment**: - A return to around 75 active rigs in Venezuela could represent a market opportunity of approximately $3-3.5 billion for OFS services, which is less than the market capitalization increase suggests [1][3]. - Historical data indicates that when Venezuela produced 2.5-3 million barrels per day, it operated 70-80 rigs, suggesting a potential $10 billion drilling and completion (D&C) market if similar activity levels are achieved [3]. 3. **Valuation and Yield Analysis**: - The stock movement has closed the valuation gap between large-cap OFS and E&P companies, particularly at a WTI price of $60 [4][9]. - The 2027 Free Cash Flow (FCF) yield for OFS companies has improved, reflecting a rebound in the Middle East, although it did not significantly drop below E&P yields [4][9]. 4. **Historical Context and Future Outlook**: - The Big 4 OFS companies previously wrote off billions in receivables from Venezuela, and restarting collection efforts may influence current stock movements [4]. - The overall sentiment suggests that while some of the stock price increases may be temporary, a portion of the gains could be sustained as the market recognizes the valuation gap [4]. Additional Important Information - The report includes a detailed analysis of stock movements and their implications for revenue opportunities, with a total implied revenue opportunity exceeding $6 billion for the global OFS sector [8]. - The report also highlights the competitive landscape, indicating that OFS companies may face competition in certain product lines, which could affect their revenue from D&C services [3]. Conclusion - The conference call emphasizes the potential for growth in the OFS sector driven by developments in Venezuela, while also cautioning that the current stock price increases may not fully reflect the underlying revenue opportunities. The analysis suggests a complex interplay between market sentiment, historical performance, and future expectations in the oil and gas services industry [1][4][8].

Summary of Venezuela's Oil Sector Analysis Industry Overview - The analysis focuses on Venezuela's oil sector, highlighting its significant oil reserves and production challenges. Venezuela is noted to have the largest crude oil reserves globally, with approximately 241 billion barrels deemed recoverable but not yet produced [2][3]. Key Points and Arguments - **Production Decline**: Venezuela's crude oil production has drastically decreased from a peak of approximately 3.5 million barrels per day (mb/d) in the late 1990s to around 0.9 mb/d currently. This decline is attributed to under-investment and the impact of sanctions [5][19]. - **Recent Trends**: Following a sharp decline during the 2014/15 oil price crash and the COVID-19 pandemic, production has recently shown slight recovery, reaching about 1 mb/d [8][19]. - **Export Challenges**: Venezuela's oil exports have been significantly affected by U.S. sanctions, with recent enforcement leading to a drop in exports from a peak of ~1 mb/d to ~0.6 mb/d [17][19]. The U.S. refining system is well-equipped to process Venezuelan crude, but sanctions have limited this flow [10][11]. - **Naphtha Imports**: The import of naphtha, essential for processing Venezuela's heavy oil, has been constrained by sanctions. Historically sourced from the U.S., recent imports have shifted to Russia [22][23]. - **Reserve Positions**: Other companies, such as Sinopec and Roszarubezheft, hold significant reserves in Venezuela, totaling over 6.5 billion barrels, compared to the state oil company PdvSA's reserves of over 200 billion barrels [25]. - **Future Production Outlook**: The future of Venezuela's oil production remains uncertain, with potential for recovery contingent on political stability, government actions, and investment. Historical parallels with Iraq and Libya suggest that optimism may not translate into immediate production increases [28][29][31]. - **Market Impact**: The global oil market is currently in surplus, with estimates indicating an oversupply of 2-3 mb/d in the first half of 2026. This suggests that temporary disruptions in Venezuela's production may have limited price impacts [30]. - **Investment Needs**: Significant investments of $15-20 billion over ten years are estimated to be required to increase production by an additional 0.5 mb/d [31]. Additional Important Insights - **Political Factors**: The analysis emphasizes the importance of political stability and governance in determining the future of Venezuela's oil production [29]. - **Sanctions and Compliance**: The report highlights the ongoing impact of U.S. sanctions on Venezuela's oil sector and the need for compliance with applicable laws in investment activities [34]. This summary encapsulates the critical aspects of Venezuela's oil sector as discussed in the analysis, providing insights into production challenges, market dynamics, and future outlooks.

Summary of Key Points from the Conference Call Industry Overview - The focus of the conference call is on the oil industry, particularly regarding the geopolitical situation in Venezuela, Iran, and the ongoing Russia/Ukraine conflict, which are currently supportive for oil prices but may lead to bearish trends in the long term [1][2]. Core Insights and Arguments - **Venezuelan Oil Supply**: The US administration's "quarantine" on Venezuelan crude oil exports is expected to continue until satisfactory actions are taken by the Venezuelan government. Venezuelan oil exports were halved to approximately 500,000 barrels per day (b/d) in December 2025 due to a US naval blockade [2]. - **Future Projections**: The baseline scenario anticipates Venezuelan oil output to begin rising in the fourth quarter of 2026, with an increase of about 300,000 to 500,000 b/d from mid-2026 to the end of 2027. This increase is contingent on political stability and successful elections in Venezuela, which are expected by summer 2026 [2][5]. - **OPEC+ Response**: OPEC+, led by Saudi Arabia, is likely to cut output to maintain Brent crude prices between $55 and $60 per barrel if there is a significant rise in inventories due to increased Venezuelan production [2][5]. - **Investment Needs**: A substantial investment of $80 to $100 billion is required to restore Venezuelan oil output to approximately 2 million b/d over eight years. The Orinoco Belt contains the majority of Venezuela's proven reserves, estimated at over 300 billion barrels, which is nearly 20% of global reserves [10]. - **Technical Constraints**: Despite vast reserves, the lack of a stable investment climate and infrastructure means that large-scale production increases will take years rather than months. Historical production data shows a peak of around 3.7 million b/d in the 1970s, with current production just over 1 million b/d [7][10]. - **Short-term Gains**: Near-term production increases are expected to come from blending and diluent availability rather than political changes. Access to naphtha for blending could unlock up to 200,000 b/d of incremental output without significant new investments [8]. Additional Important Insights - **Governance and Stability**: The political situation in Venezuela remains uncertain, and any meaningful increase in oil supply will depend on governance reforms and the establishment of a stable government that can attract investments [6][12]. - **China's Oil Procurement**: If China does not receive its usual volumes of Venezuelan oil, it may seek alternative heavy crude oils from the open market, which could impact global oil prices [14]. - **Downstream Constraints**: Venezuela's refining capacity is currently operating at about 25% of its nameplate capacity, reinforcing the country's dependence on crude exports and imported refined products [11]. This summary encapsulates the key points discussed in the conference call, highlighting the complexities and uncertainties surrounding the Venezuelan oil market and its implications for global oil prices.

Morgan Stanley Research Global January 5, 2026 12:50 PM GMT January 5, 2026 Vishwanath Tirupattur – Chief Fixed Income Strategist | Strategist Devin McDermott – Head of North American Energy Research | Equity Analyst and Commodities Strategist Simon Waever – Global Head of EM Sovereign Credit and LatAm Fixed Income Strategy | Strategist Ariana Salvatore – Public Policy Strategist | Strategist MORGAN STANLEY & CO. LLC Martijn Rats – Global Commodities Strategist and Head of European Energy Research | Equity ...

4 January 2026 | 2:24PM EST Commodities Research Oil Comment: Price Risks From Venezuela: Ambiguous in Short-Run But Negative in Long-Run Daan Struyven +1(212)357-4172 | daan.struyven@gs.com Goldman Sachs & Co. LLC Yulia Zhestkova Grigsby +1(646)446-3905 | yulia.grigsby@gs.com Goldman Sachs & Co. LLC Alexandra Paulus +1(212)902-7111 | alexandra.paulus@gs.com Goldman Sachs & Co. LLC Price Risks From Venezuela: Ambiguous in Short-Run But Negative in Long-Run 1 PDVSA reportedly aimed to reduce Orinoco Belt pro ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the oil industry, specifically the outlook for 2026 and the dynamics affecting Brent crude prices and supply-demand balance. Core Insights and Arguments - A surplus of approximately **1.9 million barrels per day (mb/d)** is expected in 2026, which is lower than other estimates (IEA: 3.8 mb/d, Argus: 3.6 mb/d) but still significant, comparable to the excess during the 2008/09 financial crisis [9][18] - The surplus is anticipated to peak in **mid-2026** and gradually decline by late 2027 as demand growth erodes the excess supply [9][60] - Brent prices are forecasted to trend lower, reaching the mid-**$50s** by mid-2026, with specific quarterly forecasts indicating **$57.5** in Q1 2026 and **$55.0** in Q2 2026 [5][17] - The oil market is expected to experience a **contango** structure, where future prices are higher than current prices, due to rising inventories [9][15] Supply Dynamics - Non-OPEC supply growth was robust in 2025, with an increase of **1.2 mb/d** compared to 2024, leading to a total non-OPEC oil liquids supply growth of **1.8 mb/d** [33][34] - OPEC production is projected to remain stable at around **29.8 mb/d** in 2026, with limited growth potential due to eroded spare capacity [50][53][66] - The report highlights that geopolitical risks have historically not led to significant production losses, suggesting that the current supply dynamics are primarily driven by market fundamentals rather than geopolitical events [15][86] Demand Insights - Global oil demand growth is estimated at **1.05 mb/d** for 2025, slightly below the long-term trend, with expectations for **0.9 mb/d** growth in 2026 [22][27] - The divergence between total oil liquids and crude oil demand is noted, with a shift towards more LPG and ethane consumption, impacting refinery throughput [28][27] Inventory and Pricing Locations - Significant inventory builds have occurred, with approximately **424 million barrels** identified since January 2025, including **82 million barrels** in China [20][22] - Key pricing locations have seen limited inventory increases, with commercial OECD stocks rising only **65 million barrels** during the same period [73][78] - The expectation is that inventories in key pricing locations will eventually reflect the surplus, despite current geographical disparities in inventory builds [68][70] OPEC's Strategic Focus - OPEC's primary focus in 2026 will be to establish a new framework for cooperation in 2027 and beyond, rather than aggressively cutting production [80][81] - The report suggests that OPEC may prioritize long-term agreements over immediate production cuts, which could lead to a more stable market environment in 2027 [85] Conclusion - The oil market is expected to remain oversupplied in 2026, with Brent prices likely to decline due to rising inventories and stable supply from both OPEC and non-OPEC sources. The geopolitical landscape, while uncertain, is not expected to significantly disrupt supply flows, and OPEC's strategic focus will shift towards long-term cooperation rather than short-term production cuts.

Summary of North American Oil & Gas Conference Call Industry Overview - The conference call focuses on the North American Oil & Gas industry, providing predictions and insights for 2026, including stock performance and commodity prices [2][4]. Key Predictions and Insights 1. **Crude Oil Price Outlook**: - Crude oil prices are expected to show a two-half performance in 2026, with a forecast of narrowing oversupply leading to a balanced market by 2027. Current WTI prices are projected to remain in the $55-60/bbl range, with potential declines towards $50 before recovery [5][6]. 2. **Energy Sector Performance**: - The energy sector requires WTI prices of $65-70 by year-end 2026 to outperform the S&P 500. The previous threshold of $80 was not met, but the sector has shown resilience with an average WTI of approximately $65 in 2025 [5][6]. 3. **Natural Gas Market Dynamics**: - A forecast of $4.00/mmbtu for Henry Hub natural gas prices in 2026, with improvements in basis differentials due to increased LNG exports and new pipeline capacities. Projects like GCX Expansion and Blackcomb are expected to enhance capacity significantly [5][6]. 4. **Preference for Natural Gas E&Ps**: - Natural Gas Exploration & Production (E&Ps) are favored over Oil E&Ps due to long-term demand growth and stable pricing expectations. The outlook suggests that natural gas prices can remain flat at $3.50-4.00 long-term, supporting cash flow generation for E&Ps [5][6]. 5. **Activity Levels in North America**: - The U.S. rig count is stable, indicating that activity levels are bottoming out. Despite some expected weakness in early 2026, higher activity levels are anticipated in the second half of 2026 as crude oil and natural gas prices improve [5][6]. 6. **Balance Sheet Strength**: - Companies with strong balance sheets are expected to outperform, especially if crude oil prices remain weak in the first half of 2026. Balance sheet improvements are seen as a key driver for stock performance [5][6]. 7. **Shift from Capex to Buybacks**: - Should WTI prices decline to $50, companies are likely to reduce capital expenditures and increase stock buybacks, which could be beneficial for long-term investor returns [5][6]. 8. **Increased Exploration Activity**: - A resurgence in exploration activity is anticipated as companies seek resources outside core areas due to depth concerns in existing fields. Major players like EOG and MUR are expected to lead this trend [5][6]. 9. **Mergers and Acquisitions (M&A)**: - A reversal in M&A activity is expected in 2026, with more public-to-public transactions aimed at improving resource quality and balance sheet strength. This trend is anticipated to ramp up as the number of private E&Ps available for acquisition declines [5][6]. 10. **Impact of Midterm Elections**: - The outcomes of the midterm elections in late 2026 could influence the energy sector's outlook for 2027, with a Republican majority likely maintaining current supportive policies, while a Democratic shift could lead to changes detrimental to crude oil prices [5][6]. Additional Insights - The call also included detailed financial metrics for various companies in the sector, highlighting their market performance, EV/EBITDA multiples, and free cash flow yields, which are critical for assessing investment opportunities [10]. - The overall sentiment is cautiously optimistic, with a focus on balancing supply and demand dynamics, improving financial health of companies, and strategic shifts in capital allocation [5][6].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the oil markets, focusing on Venezuela and Russia, and the implications of U.S. sanctions on their oil exports [1][2][3]. Core Insights and Arguments - **Sanctions on Venezuela**: The recent drop in WTI oil prices to $55/bbl has prompted the Trump administration to consider enforcing sanctions on Venezuelan oil exports. The administration may monitor Venezuelan tankers or implement stricter sanctions, but the extent of enforcement remains uncertain [1][2][4]. - **Quantitative Impact of Sanctions**: The term "sanctioned" in Trump's statement limits the blockade's impact to approximately 0.4 million barrels per day (mbd) of Venezuela's heavy crude exports and 0.1 mbd of product exports, primarily fuel oil [1][5]. - **U.S. Military Presence**: An increased U.S. military presence in the Caribbean is noted, which may influence oil futures and suggests a potential political transition in Venezuela [1][7]. - **Russian Oil Exports**: Despite sanctions, Russian crude exports are estimated at around 3.5 mbd in December, only slightly below previous highs. Product exports have also recovered to approximately 2.1 mbd, supported by refinery throughput of 5.3–5.4 mbd [1][21]. - **Sanctions' Effect on Trading Structures**: Sanctions have altered trading structures rather than significantly reducing export volumes. Exports are being rerouted through new intermediaries, which increases transaction costs and clearance times [1][22][28]. - **Economic Pressure on Russia**: Russia's upstream sector is experiencing declining gross profits, dropping from about $57/bbl at the start of 2025 to below $30/bbl now. This trend may have more significant long-term implications than the sanctions themselves [1][34]. Additional Important Insights - **Potential for Venezuelan Production Recovery**: In a post-Maduro scenario, production could initially drop by up to 50% due to operational disruptions but may rebound to around 1.2 mbd within months if political stability is restored [1][11][16]. - **Investment Opportunities**: The return of former partners, including Chinese companies, could lead to increased production levels in Venezuela, contingent on political changes and new investments [1][15]. - **Long-term Outlook**: The oil supply and demand balance for 2025 and beyond indicates a potential increase in global oil supply, with Venezuela representing a significant upside risk if political conditions improve [1][37][38]. This summary encapsulates the critical points discussed in the conference call, highlighting the current state of the oil markets concerning Venezuela and Russia, the implications of U.S. sanctions, and potential future developments in the industry.

Summary of Key Points from the Expert Call on IEA's World Energy Outlook 2025 Industry Overview - The discussion focused on the **Global Oil and Gas** industry, particularly insights from the **IEA's World Energy Outlook 2025** [1] Core Insights 1. **Rising Electrification and Energy Demand** - Incremental energy demand growth over the next decade is expected to primarily come from emerging markets outside of China - Key demand drivers include the expanding car fleet, plastic production, air-conditioning uptake, and rapid data center build-out - Electricity demand is accelerating globally, with low-emissions generation expanding faster than electricity demand, especially in Asia - Renewables, particularly solar PV, are growing rapidly, while nuclear energy is regaining momentum, and natural gas usage is increasing - Coal demand is projected to peak by 2030 before declining, highlighting the need for dispatchable capacity and enhanced power system flexibility [2] 2. **Diverging Pathways for Oil Demand in Road Transport** - The WEO 2025 presents differing oil demand projections under the Current Policies Scenario (CPS) and Stated Policies Scenarios (STEPS) - Under CPS, oil demand is expected to grow until 2050, while STEPS indicates demand will flatten by 2030, later than previous forecasts - The divergence is attributed to the transport sector outside China, with CPS assuming lower global electric vehicle (EV) uptake (43% by 2040) compared to STEPS (55% by 2040) - The IEA assumes an EU internal combustion engine (ICE) ban in 2035, which could impact both scenarios if pushed back to 2040 - The agency updates key cost components annually to reflect declining trends in EV prices and other inputs [3] 3. **Natural Gas and Coal Dynamics** - Significant changes in natural gas and coal dynamics were noted, reflecting shifts in power sector policies, including reduced renewable incentives and improved LNG competitiveness - Global long-term energy demand is expected to plateau, with regional and fuel-specific variations - In the STEPS scenario, global natural gas demand is projected to peak after 2030, while some Southeast Asian markets may not reach a peak - Gas demand uncertainty is linked to the power sector, particularly the extent of coal-to-gas switching versus direct renewable adoption - An oversupplied LNG market is anticipated to lower prices, stimulating demand in Asia [4] Additional Important Points - The report emphasizes the importance of understanding the risks associated with oil and natural gas price volatility, refining margins, and exploration risks [6] - The document includes disclaimers regarding the potential conflicts of interest and the independence of UBS's research products [7][36] - The report is intended for professional clients and does not constitute investment advice [27][50]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the oil industry, specifically the Brent crude oil market and its dynamics in relation to global supply and demand factors [1][3][4]. Core Insights and Arguments - **Brent Crude Price Decline**: Brent crude prices have fallen below $60 per barrel, marking the lowest level in four years due to increased oil stockpiles and rising supply risks from Russia and Venezuela [3][4]. - **Global Stock Builds**: The pace of global visible stock builds has accelerated to 2.1 million barrels per day (mb/d) over the last 90 days, resulting in global oil storage reaching a four-year high [3][4]. - **Shifts in Oil Purchases**: Increased purchases of discounted Russian oil by China and India are freeing up more crude for OECD buyers, impacting pricing dynamics [3][4]. - **Market Dynamics**: Higher exports from the Middle East and Brazil, along with a moderation in China's demand, have contributed to softer crude prices in Asia compared to the Atlantic region [3][4]. - **Contango Formation**: The combination of a large global surplus and seasonal builds in OECD is likely to flip Brent and WTI prompt timespreads into contango [3][4]. - **Long-Term Supply Risks**: Escalating tensions between the US and Venezuela, along with potential negotiations for peace in Ukraine, present upside risks to long-term oil supply from these regions [3][4]. - **Net Supply Changes**: Trackable net supply has increased by 1.0 mb/d over the last week, driven by lower demand from OECD Europe and China, alongside higher production from Russia [3][4]. Additional Important Insights - **Refined Products Margins**: Margins for refined products have declined due to increased refinery output in the US, China, and Kuwait, and ongoing peace talks affecting market sentiment [4][5]. - **OECD Commercial Stocks**: OECD commercial stocks now stand at 2,812 million barrels, which is 56 million barrels below the end-of-December forecast [9][13]. - **China and OECD Demand**: The demand nowcast for China oil decreased by 0.3 mb/d to 17.4 mb/d, while OECD Europe oil demand decreased by 0.6 mb/d to 13.3 mb/d [39][45]. - **Oil Rig Counts**: The US oil rig count increased by 1 to 414, while Canada’s count decreased by 3 to 123 [10][9]. Conclusion - The oil market is currently experiencing significant fluctuations due to various geopolitical and economic factors. The decline in Brent prices, coupled with rising stock levels and changing demand dynamics, suggests a complex environment for investors and stakeholders in the oil industry. The potential for increased supply from Russia and Venezuela, along with shifts in purchasing patterns, will be critical to monitor in the coming months [3][4][10].