44 STEEL MARKETS Year-to-date through July 2015 US rotary rigs operating 2015 2014 Total Offshore Land Oil Gas Oil% Sep-15 842 31 811 644 198 76.5% Domestic 1,090 2,279 -52.2% Aug-15 849 34 849 662 187 78.0% Imports 1,818 2,351 -22.7% Jul-15 866 31 835 649 217 74.9% -37.2% Jun-15 861 28 833 634 227 73.6% Jan-15 1683 53 1629 1362 321 80.9% 14-Sep 1929 53 1866 1592 337 82.5% Total 2,908 4,630 July 2015 vs. July 2014 2015 2014 Domestic 122 333 Sept 2014 was recent two-year peak -63.3% Imports 96 389 -75.3% Total 218 722 -69.8% Comments: US OCTG market (000 tons) Dramatic gains in drilling efficiency or productivity (barrels per day per rig) have been the main reason behind the resiliency of drilling companies since the oil price downturn started in earnest in mid-2014 (oil prices tracked in the $85 to $115/bbls range from Jan 2011 to mid-2014 before falling to current/recent levels below $50 and $40/bbl. US average seamless OCTG price. Average carbon, alloy, production tube, casing $ per ton Tube rounds Spread Bakken rate (bbls/day/rig) estimated at 694 in Sept 2015 from 486 in Sept 2014 and 241 two years earlier in Sept 2012 Eagle Ford rate (bbls/day/rig) estimated at 795 in Sept 2015 from 566 in Sept 2014 and 280 two years earlier in Sept 2013 However, these rates are now slowing dramatically and are expected to result in steeper than expected decline in US oil output which, despite the price declines, has continued to grow through April 2015 and at least sustain at high levels since then. Four key reasons for surging oil drilling productivity gains in last several years, especially since mid-2014: Jan-14 $1,806 $505 $1,301 Feb-14 $1,807 $515 $1,292 Mar-14 $1,812 $515 $1,297 Apr-14 $2,066 $500 $1,566 May-14 $1,825 $500 $1,325 Jun-14 $1,830 $490 $1,340 Jul-14 $1,833 $490 $1,343 Aug-14 $1,839 $485 $1,354 Sep-14 $2,083 $480 $1,603 Oct-14 $1,845 $480 $1,365 Nov-14 $1,839 $480 $1,359 Dec-14 $1,830 $480 $1,350 Jan-15 $1,817 $438 $1,379 1 2 3 4 Feb-15 $1,763 $425 $1,338 Mar-15 $1,693 $410 $1,283 Apr-15 $1,648 $410 $1,238 May-15 $1,619 $355 $1,264 Jun-15 $1,597 $348 $1,249 Jul-15 $1,591 $330 $1,261 Deeper wells and more fracing stages per well Faster drilling operations PAD drilling - now accounts for almosy two-thirds of all drilling activity; uses multiple wells per rig High grading (going after richest and most productive reserve areas) Aug-15 $1,583 $320 $1,263 Comments on completed well data below: Drillers high-grading to deeper wells with more fracking stages per well # of wells drilled down 11.0% YTD H1-2015, but down 36.6% June 2015 vs June 2014 showing market situation worsening US number of new wells completed by depth YTD versus YTD Year-to-date H1-2015 # of Wells Total Under 5,000 5,000 to <10,000 10,000 to <15,000 15,000 and <20,000 20,000 and Over 13,600 2,622 2,314 4,591 2,962 1,111 19% 17% 34% 22% Share 100% % Change -11.0% -32.7% -17.7% -9.4% 8% 10.5% 33.2% Year-to-date H1-2014 Total Under 5,000 5,000 to <10,000 10,000 to <15,000 15,000 and <20,000 20,000 and Over # of Wells 15,289 3,896 2,812 5,067 2,680 834 Share 100% 25% 18% 33% 18% 5% US Number of New Wells Completed by Depth Latest month versus year ago June 2015 Total Under 5,000 5,000 to <10,000 10,000 to <15,000 15,000 and <20,000 20,000 and Over # of Wells 1,476 173 277 548 353 125 12% 19% 37% 24% Share 100% % Change -36.6% -73.9% -36.0% -41.9% 8% -25.5% -39.9% June 2014 Total Under 5,000 5,000 to <10,000 10,000 to <15,000 15,000 and <20,000 20,000 and Over # of Wells 2,327 664 433 944 474 208 29% 19% 41% 20% 9% Share 100% October 2015 STEEL MARKETS myra.indd 2 www.steeltimesint.com 11/3/15 11:31 AM