Highlights from my testimony to the House of Commons’ Standing Committee on Natural Resources - opening statement

A Strait of Hormuz under IRGC control is not and never will be "open", as I believe the Kuwaitis, Saudis, and Emiratis will never be willing to pay tolls, impacting Strait export capacity foreseeably with additional workarounds to take year/s.

Consistent feedback from trading desks has been that geopolitical volatility had paralyzed generalist funds from deploying and that at least in Canada, meaningful sidelined buying power exists, waiting for "the day after." The investment thesis was never the spike to $150 on tank bottoms and the depletion of the US SPR, it was then and remains now a sector discounting ~$65WTI with what we think will be a fundamental floor of ~$80 given: 🛢️record low inventories that will continue to fall further (regional tank bottoms US SPR at/near operational minimum levels) 🛢️~0.45MM Bbl/d of new demand for the next 3 years to restock depleted inventory likelihood of increases to SPR targets 🛢️productive capacity challenges with 80% of most production coming online within 1-4 months but "the last 20% is the hardest" = >2MM Bbl/d 🛢️A Strait of Hormuz under IRGC control will never return to pre-war levels and partial workarounds will take years 🛢️ Reasonable to think some element of a political risk premium?!? 🛢️$74WTI = yellow light now for US shale? Inventory challenges only accentuated under growth mode 🛢️pre-UAE joining the non-OPEC ranks, non-OPEC production was forecasted to be peaking in 2026 🛢️pre-war, UAE adjusted, OPEC spare capacity was only ~1.35MM Bbl/d half of that is 100% reliant on the SofH

The market remains solely focused on the # of ships EXITING the Strait (~80MM Bbls to go). I'm much more interested in the # of ships ENTERING, as that is what is preventing the return of ~ 12MM Bbl/d of production:

A great read from Jeff Currie, inline with our view that under the status quo, oil safety buffers will be used up this Summer: carlyle.com/carlyle-compass/…

Widespread frustration and confusion felt by many, from casual observers to industry veterans. The ultimate cure for apathy is tank bottoms which no fake or obfuscating tweet can hide. That seems likely and imminent if the status quo persists which remains our base case.

Few have seen more in their energy careers than Amos Hochstein, and his intimate familiarity with the US SPR makes this qualified comment so important to understand: "I don't know anyone who believes [the US SPR] can go below 300MM barrels." Sitting at 349MM Bbls and drawing ~8MM Bbls/week, the market essentially has 6 weeks of safety buffer left, reinforcing the point that the WH did not anticipate the Strait remaining closed for 100 days and front-loaded all of their emergency measures. We are hurtling into the wall at 150mph yet the 37 proclamations of "imminent peace" has lulled Wall Street into a profound sense of complacency. All signs point to "critical" in July.

The "battle for the barrel"™️continues with US Big 3 inventory levels hitting their lowest seasonal levels in modern history. Tank bottoms and US SPR minimum operational levels both to be reached in July.

Takeaways from spending a day with some of the smartest energy people on the planet: 🛢️ The risk of a US product export ban is real if the national average gasoline price hits ~$5/gallon 🛢️the most important questions to come up at dinner were "how does this end?" and "why would Iran give up the Strait at this point?" 🛢️base expectation broadly is the Strait will NOT reopen soon as neither party is feeling enough pressure and both sides believe they are winning - military reopening not politically palatable and lacks European buy-in (you broke it, you fix it) 🛢️I believe the Kuwaitis, Saudis, and Emiratis will NOT ship through the Strait under an Iranian toll system. Incremental workarounds underway with more to come but will take years...Strait oil exports will never reach past levels 🛢️many expect US tank bottoms in July and US SPR to approach minimum operating levels in July/August (!) - the US has front-loaded emergency responses not having expected the closure to last as long as it has and now has limited recourse after July - Presidential jawboning has made the imbalance worse as demand has not yet been impacted. Regional product shortages are being masked (bring your own jet fuel) 🛢️skepticism around available data - China believed to be drawing from SPR even though satellite data does not show and Strait voyages OUT believed to be potentially higher than reported 🛢️how long will it take for production to recover? Weeks/month for majority (~80%) for KSA, UAE, Kuwait, the last 20% is the hardest, and big question mark for Iraq (~2.9MM Bbl/d shut-in) given geology and bureaucracy 🛢️biggest reason why the expected shortage has been delayed? Chinese drop in imports of ~4.0MM Bbl/d leveraging their SPR. Much skepticism around reported demand "destruction" of 5MM Bbl/d 🛢️Net/net: bullish near-term oil price with significant frustration on price action. "New normal" ahead with energy security priority 1, 2, and 3 = increased influence of Western Hemisphere (ie. Canada if we seize it). Many oil stocks discounting <$65WTI with an expected floor price of $75-$80 in 2027

Given the potential for a significant oil price spike in the coming weeks and the consequent risk of bad government energy policies like a US export ban, I’m on a 2 day due diligence trip in Washington DC to assess these risks for investors.

Of the ~36,000 well bores in the Middle East ~10,000 of them have been shut-in resulting in production down ~12MM Bbl/d. Sultan Al-Jaber of the UAE said will take at least 4 months to return 80% of supply. An oilfield service co. warned me of >700k bbl/d of potential capacity damage. Yet, a journalist today writes of a "flood" in a matter of weeks. No wonder consensus is so bearish!

Energy Aspects: "So far, the crude market has balanced 12 mb/d production loss via run cuts (around 5 mb/d), stockdraws (around 4 mb/d) and Chinese imports dropping by 2.5–3 mb/d, with non-OPEC supply in the Americas adding some supply growth. Even if Chinese imports remain this low (which is theoretically possible if Beijing is also allowing some slow drawdown of strategic stocks), commercial stocks will plummet to tank bottoms once the SPR releases run out. This is particularly true as restoring flows and production will take months and seasonally stronger demand will kick in, especially as the current price set is not incentivising any material drop in demand. Prices will have to do the work to balance the market."

Global SPR releases to ⬇️ from ~2.5MM Bbl/d April-June to 0.7MM Bbl/d in July and August, just as seasonal demand ⬆️ = accelerating pace of visible stock draws with regional tank bottoms soon. SPR's have been one the of the larger finite safety buffers masking market tightness.

HRH Prince Abdulaziz, likely the most informed and plugged-in energy expert on the planet: “for me to be silent is a humble admission of the fact that I don’t know what will happen, not tomorrow but in half an hour time.” There is no playbook for what we are going through!

Ninepoint Energy Strategies Update: the "battle for the barrel"™️ and why oil product shortages in the coming weeks are likely, resulting in a price spike

This morning I’m reading “alarmingly low US distillate stocks” ~7MM bbls above operationally challenging levels, and Mercuria head of freight saying 10% of global ships could be forced to stop NEXT MONTH due to fuel shortages. This is how we go from oil pricing deficits to pricing shortages.

The "battle for the barrel"™️continues and US tank bottoms look likely by early July ➡️ truth serum for a market that continues to ignore reality.

During peak ESG/divestment, when sentiment towards the sector was hugely challenged and valuations significantly depressed, we called on industry to cease production growth and instead maximize free cashflow for the exclusive use of share buybacks. This philosophy became industry standard to the great benefit of shareholders. While we still believe in the necessity of meaningful return of capital, a balance between growth and share buybacks is more appropriate going forward given there is now a "new" normal for the sector when the US/Iran war ends. An(other) energy crisis looms, and the world very much needs more Canadian energy! This refined view was communicated last week at the Calgary Energy Roundtable Conference.

I love my job because every day there is something new to learn. Today it is sea barnacles. ft.com/content/28c8ca92-0c98…

What if we are being misinformed in order to keep a lid on the oil price? What if talks are actually NOT going well and a peace treaty is NOT in fact imminent? What if there is no actual "cease fire" given ongoing kinetic action by both sides? What if Exxon and Chevron are right and working inventory levels are about to be breached in the coming weeks resulting in a price spike? What if the Strait does NOT in fact open, while everyone believes it will because "it has to"? What then???

RBC on investor sentiment: "energy specialists continue to dominate the energy trade flow with generalists still preferring to overweight tech. Some conversations of generalists indicate an appetite to evaluate energy once an Iran resolution occurs and a more defined oil market is established. Energy stocks on average discounting $67WTI and trading at 4.5X EV/EBITDA / 13% FCF yields at strip." Apathy = opportunity.