PRISM™ REFINING AND MARKETING INDUSTRY ANALYSIS SYSTEM PRODUCT DESCRIPTION Baker & O’Brien, Inc. 1333 West Loop South Suite 1350 Houston, Texas 77027 PRISM Product Description INTRODUCTION Baker & O'Brien, Inc.’s PRISM™ modeling system has proven to be a powerful tool for analysis of individual refineries and the refining and marketing supply chain. Initially conceived and developed over fourteen years ago, the PRISM system has been updated and expanded into one of the most flexible and comprehensive refining industry analysis tools available on the market today. The PRISM system combines a large historical technical/economic database (the “Database”) with a robust refinery simulator (the “Simulator”). The Database includes extensive information on: • Refinery processing capacities, • Refinery configurations and process technologies, • Crude and intermediate feedstock runs, • Product slates and qualities, • Product distribution and sales patterns, • Operating costs, • Crude and product logistics, • Carbon dioxide emissions, • Transportation costs, and • Historical financial performance. The PRISM software is offered on a license-only basis. Licensees have the option of subscribing to any or all of the four PRISM Data Services that cover a total of 286 operational refineries1: the United States Data Service (USDS), the Canadian Data Service (CANDS), the European Data Service (EDS), and the Asia-Pacific Data Service (APDS). The USDS includes information for essentially all operating petroleum refineries in the United States (U.S.). The USDS is updated quarterly, and historical data is available back to 1998. CANDS, EDS, and APDS are updated annually. CANDS includes all Canadian refineries, and data are available beginning with calendar year 2007. The EDS includes Europe west of Russia, Turkey and Israel. It begins with data for 2005 and includes the 95 refineries2 listed in Appendix A. Refineries in the EDS represent 94% of regional refining capacity. The APDS covers 74 refineries3 beginning with 2011 data (see Appendix B). Licensees are also able to build their own models of refineries not included in our subscription services. No confidential data is solicited from PRISM Data Service subscribers. The Data Services are based on publicly-available data, filtered and enhanced with the experience and judgment of ™ PRISM is a trademark of Baker & O'Brien, Inc. 1 Operational as of January 1, 2013. 2 89 of the 95 refineries were operating in 2012. 3 APDS includes 19 North American and 2 South American refineries. Page 1 131015 PRISM Product Description Baker & O’Brien’s consulting staff. As a result, the Data Services provide detailed information on individual refineries. Calculations are performed using the PRISM Simulator (part of the software provided to PRISM licensees). The PRISM Simulator employs a non-linear, deterministic approach, although several linear programming (LP) sub-routines are used for refinery product blending optimization. The Simulator strikes a balance between technical sophistication and ease-of-use. PRISM subscribers are able to review, supplement, and/or revise the data provided for individual refineries and, using the PRISM Simulator, make their own analyses. PRISM licensees use the model for a wide variety of purposes. It has proven to be especially useful and valuable in the following areas: • Crude oil marketing and trading; • Screening of potential refinery acquisitions; • Competitive benchmarking; • Evaluating the impact of new environmental regulations; • Evaluating carbon dioxide (CO2) emissions; • Screening new feedstocks; • Screening new process configurations for existing or grassroots refineries; • Evaluating bitumen upgrading schemes; • Refinery hydrogen balance analysis; • Analysis of capital investments; • Benchmarking of refining costs and margins; • Operations analysis; • Regional analysis of product markets; • Crude and product pipeline capacity utilization studies; • Wholesale market strategy rationalization; and • Product netback analysis. Current PRISM software licensees include integrated international oil companies, independent refiners, crude and synthetic crude oil producers, crude and product traders, industrial gas producers, pipeline companies, and refinery technology licensors. Ten of the twelve largest North American refining companies, collectively comprising over 60 percent of installed North American refining capacity, license the PRISM system. Besides the U.S., there are PRISM users in Asia, Australia, Canada, Europe, and South America. Page 2 131015 PRISM Product Description REFINING INDUSTRY STUDIES The PRISM U.S. Data Service includes detailed estimates of individual refinery operations and financial performance. Because the data are derived from public sources, individual refineries can be named. The data includes unit capacities, configurations, operating parameters, refinery crude slates, feedstock purchases, yields, and product distribution. Variable expenses such as fuel, electricity, steam, and hydrogen, and fixed costs including employee head counts are estimated. Turnaround activity, unplanned unit outages, shutdowns, and new construction are monitored to keep the PRISM Database current. FIGURE 1 MULTI-REFINERY FINANCIAL REPORT Note: Company names are displayed in the actual PRISM report. PRISM licensees use the database to measure the performance of individual refineries against any grouping of competitors. PRISM data are current so performance can be tracked on an on-going basis. Users can analyze financial and operational trends and perform screening studies to support merger and acquisition activities. FIGURE 2 MULTI-REFINERY KEY PERFORMANCE INDICATORS Page 3 131015 PRISM Product Description Since the PRISM Database is kept up-to-date, it provides an ideal starting point for investment studies, analysis of changing fuel specifications, and market demand patterns. Licensees have used the PRISM System to analyze the regional impact of regulatory changes in product specification (i.e., diesel sulfur and gasoline benzene levels), green-house gas regulations, and the survivability of individual refineries. Figure 3 is from a report that Baker & O’Brien performed on behalf of a major industry association. Using the PRISM System, we measured the costs of pending gasoline rules on a refinery-by-refinery basis and generated the supply curve shown below. FIGURE 3 COST OF COMPLIANCE 2016 Domestic Gasoline Production (excluding Ethanol) Sensitivity Case 2 Cost vs. Volume 60 50 Annualized Costs Summer Costs 40 30 ¢/Gal. 20 10 Increase in Cost of Gasoline Production 0 0.01.02.03.04.05.06.07.0 Cumulative U.S. Gasoline Production (excluding Ethanol) MMB/D Page 4 131015 PRISM Product Description CARBON DIOXIDE EMISSIONS The imposition of CO2 emissions limits and credit trading schemes has added a new dimension to refinery economic analysis. The PRISM Refinery Simulator calculates CO2 emissions based on crude slates, throughput, and other operational factors. Refiners and traders can: • Compare the emissions of individual refineries; • Evaluate the impact of changes in crude slate or other operating changes on emissions; and • Calculate the value of CO2 credits to individual refineries. FIGURE 4 CO2 EMISSIONS FROM SELECTED CANADIAN REFINERIES Operations Summary – Canada 2011 Company A Company B Company C Company D Alberta Maritimes Ontario Maritimes 1,000 Tonne/yr. Canada Canada Canada Canada CO2 EMISSIONS 1,975 598 1,239 4,149 CO2 from Fluid Catalytic Cracking 1,039 276 371 1,458 CO2 from Steam Methane Reforming 293 CO2 from Plant Fuel Gas Consumed 447 237 228 601 CO2 from Liquid Fuel Consumed 1,398 CO2 from Purchased Fuel 278 458 CO2 Associated w/Purchased Electricity 211 85 181 399 Page 5 131015 PRISM Product Description CRUDE OIL ECONOMICS AND MARKETING The PRISM system is an excellent tool for evaluating crude oil substitution economics. Support of crude oil marketing and trading groups is one of its major uses. Because the PRISM Databases include capacity, configuration, and current crude slate data, it is ideal for selecting target refineries for crude marketing campaigns. It is easy to calculate crude economics and evaluate combined capital investment and crude slate changes (i.e., the addition of a coker or hydrocracker combined with a shift to heavier, more-sour crude oils). FIGURE 5 VALUE OF URALS IN A NORTHWESTERN EUROPEAN REFINERY B/D PRICE Cash Northwestern European Refinery Base Alternate ChangeUS $ US $000/D Crude Basrah Light 33.0 25,316 25,316 Es Sider 36.3 3,824 3,824 N'Kossa Swt 41.3 5,666 5,666 Oseberg 35.9 12,440 12,440 Sirri 33.4 60,670 60,670 Urals 31.8 183,638 203,638 20,000 TOTAL CRUDE 291,554 311,554 20,000 Other Feedstocks Hydrogen (FOE) 4,234 4,581 347 107.15 /FOE-B 37 Ethanol 2,107 2,107 0 91.69 /B 0 Isobutane 1,895 1,644 (251) 59.14 /B (15) BioDiesel 4,077 4,081 4 144.86 /B 1 TOTAL OTHER FEEDSTOCKS 12,313 12,413 100 1.15 /B-Urals 23 Light Oil Products EURO 10ppm 95 RON 33,554 38,728 5,175 87.94 /B 455 EURO 10ppm 98 RON 8,388 9,682 1,294 92.17 /B 119 EURO 10ppm E5 BOB 95 RON 11,859 8,883 (2,975) 87.35 /B (260) EURO 10ppm E5 BOB 98 RON 2,965 2,221 (744) 93.56 /B (70) US RBOB E10 Reg 18,821 19,733 912 88.03 /B 80 Jet A-1 17,493 18,693 1,200 90.90 /B 109 EURO Diesel 10 ppm 79,095 79,177 82 91.78 /B 8 EURO Lt Heating Oil 1000 ppm 33,529 35,829 2,300 666.47 /Tonne 179 TOTAL LIGHT OIL PRODUCTS 205,703 212,946 7,243 31.05 /B-Urals 621 Other Products Propane 6,687 7,215 528 51.83 /B 27 Normal Butane 5,735 6,121 386 57.68 /B 22 Mixed BB 3,801 5,079