EFTA Document EFTA01385301

3 January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite Figure 7: The cost advantage of U.S. ethane based producers vs naphtha- based producers in Eutope and Asia grew markedly from 2010 thru 2014 before compressing in 2015.16 90% • 00% • 70% 00%- 50% 40% 30% 20% 10% 0% wt. 2037 2008 2002 2010 2011 2012 2013 ri n1/3 Coel ansnlan on Europe • US 0c .den.* an NE A sUS C. nwnlage anise An Sent 205CienniC Onsche (Ant Over t.unply in the i1.S ethane market hos led to enhanced margins. While U.S. ethane production is up sharply over the past five years, the ability of the U.S. chemical industry to use this additional ethane will be limited until new greenfield ethylene capacity comes on stream in '17-'18. U.S. ethane supply has increased significantly over the last few years. We estimate U.S. ethane supply has increased from 700k bpd in '08 to 1.8 MM bpd in '17, with U.S. ethane demand of 1.4 MM. The U.S. ethane market first entered an oversupplied position starting in '13 and this dynamic continued in '14-'17. The development of increased ethane production has been the primary driver of the current, highly profitable and extended U.S. ethylene cycle. ..however 1..1 ethane nrices ale epeeted to increase in '18 However with 325k bpd of incremental ethane exports in '16-'19 and an additional 500k bpd of ethane demand from 6 greenfield ethylene projects scheduled to start-up in '18-'19, U.S. ethane demand should be approx. 1.9 MM bpd by year-end '18. As a result, ethane supply/demand fundamentals, which are currently loose (and the driver of near record low ethane prices). should tighten to a balanced-to-short market by year-end '18. This shift in ethane fundamentals should drive ethane prices higher by year-end '18. rbb Figure 8: Ethane supplyidemand became very long in beginning in 2013 ('000 ls per day) 2.1001 1.000 1 1.700 1,500 1 1.300 1 1.100 1 000 700 M 8 8 R R r2 .! /.! R R R R US wine Ittmet.namon canny —0— Ethane dolman from CINVICC.* crecbaro tt,Ce '.4$ CAcvneal 00.41010 Sent Page 26 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086585 CONFIDENTIAL SDNY_GM_00232769 EFTA01385301