FUELSNews 360 - Q1 2013

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I N F O R M A T I O N

J A N U A R Y- M A R C H

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Q1 2013 Executive Summary The first quarter of 2013 fell short of expectations in terms of economic growth. While the global economy is expected to begin turning the corner in 2013, the harsh reality is that the global economy remains unstable, with European debt issues and unemployment topping the list of concerns. In the first three months of the year, macroeconomic reports show China is beginning to pick up momentum, while the United States has only shown glimpses of hope. The EU’s latest scandal with Cyprus did not help the situation, sending the Euro lower and the U.S. dollar higher, which applied downward pressure on crude prices.

Thus far, the geopolitical outlook has followed Q4 of last year. The alleged Iranian nuclear program remains in place despite multiple meetings between the West and Iran during the first quarter. The Iranian economy has been hit with multiple embargoes over the last year but does not seem to be discouraged, continuing to assert their nuclear program is purely for educational research. The North Korean situation has also been a hot topic since the end of the first quarter, with North Korea and the U.S. both displaying military power, but with no threats thus far. Due to these ongoing issues, the market has placed a risk premium on oil prices on fears of a possible oil supply disruption.

Domestically, the Fed has decided to keep the QE programs unchanged, continuing to print $85 billion per month to ensure liquidity in long-term bond markets and keeping interest rates artificially low. The Fed's policies won't change unless the stated goal of an unemployment rate of 6.5% or a reduction in inflation to less than 2% is achieved. From a U.S. supply standpoint, crude oil inventories remain heavy in Cushing, OK, the delivery point for WTI crude. Crude oil inventories have been above historical levels for over a year now, with the main driver being the increase in domestic production. As a result, the WTI crude oil discount to Brent crude oil has been around the $20 mark during Q1, allowing for some arbitrage play between the Gulf Coast and Northeast, which ultimately caused some areas in the Gulf Coast to run dry of refined products. The Jones Act has added to this supply predicament and allowed vessels to charge higher premiums, the cost of which ultimately trickled down to the consumer.

Overall, the first quarter has been marked by instability as prices continue to reflect volatile trading sessions. The situation looks similar for Q2, with hopes set on economic growth, but with projections for global and domestic oil demand remaining relatively flat. The following report summarizes the collective judgment of our supply team and industry analysts at large.

Index FUELSNews 360° Quarterly Report Q1 2013 FUELSNews 360°, published four times annually by Mansfield Energy Corp., analyzes and summarizes the prior quarter’s activity in the oil, natural gas and refined products industries. The purpose of this report is to provide industry market data, trends and reporting both domestically and globally as well as provide insight into upcoming challenges facing the energy supply chain.

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Overview

FUELSNews 360° Commentaries

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January through March, 2013

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Commentaries; Andy, Sara and Dan

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First Quarter Summary

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Commentaries; Hannah, Jorge, Scott

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Commentaries; Chris, Evan

International 20

Regional View

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Price Forward Thoughts

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Europe, Middle East, China

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Brazil, OPEC

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Economic, Domestic

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Economic Drivers; PPI, CPI, GDP

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Fundamentals; U.S. vs. Imports

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Fundamentals; U.S. Exports, Crude Imports

Domestic

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Fundamentals; U.S. Crude Oil Inventories

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Fundamentals; U.S. Days of Supply, U.S. Refinery Inputs

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PADD 1, East Coast PADD 1A, New England PADD 1B, Central Atlantic PADD 1C, Lower Atlantic PADD 2, Midwest PADD 3, Gulf Coast PADD 4, Rocky Mountains PADD 5, West Coast, AK and HI Canada

Alternative Products 32 35 36

Natural Gas Renewable Fuels; Ethanol Renewable Fuels; 2013 RIN Prices

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Q1 Price Trends Charts

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FUELSNews 360˚ Supply Team

Overview January 2013 through March 2013 Oil prices continued to reflect volatile trading sessions during the first quarter of 2013, something the market has become accustomed to seeing over the past few years. As seen on the chart below, prices for WTI crude oil ranged from $93 in early January to $90 in early March before ending the first quarter on a high of $97. The main drivers affecting prices were high inventories (which remain historically high), equities, macroeconomic reports, geopolitics and the combination of the rapid growth in domestic production and soft demand projections.

First Quarter 2013

Cyprus bailout relief

97.23

Source: Bloomberg Finance L.P.

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Overview First Quarter Summary The oil complex reflected gains during the first quarter of 2013. RBOB gasoline (yellow), WTI Crude (green) and the DGIA (purple) all increased, while HO heating oil (white) finished the quarter in negative territory. The market remained concerned about the state of the global economy, with the European crisis remaining a focal point.

Inventories also played a key role in market trends, with high demand for heating oil during the colder Winter months, while RBOB demand picked up ahead of the Spring refinery maintenance season.

Summary, First Quarter 2013 310.54 291.52 97.23

14578.54

Source: Bloomberg Finance L.P.

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Price Forward Thoughts

“Some may argue crude continues to trade within a comfortable range, but the reality is that the market has become more reactive at times, reflecting strong daily trends before responding and trading in opposition the following day.�

The year 2013 started with hopeful anticipation that the global economy would begin to turn the corner. However, despite high levels of optimism, the reality is that the global economy does not appear to be improving as hoped. Despite the fact that China is beginning to show improvements in manufacturing and production levels and the U.S. labor sector has shown small gains, Europe continues to struggle with debt issues which prevent it from moving forward. The correlation between commodities and equities has never been higher, suggesting commodities are becoming just another investment option. In Q1 2013, we saw a choppy oil complex, with crude, heating oil and RBOB all showing volatility across the board. Some may argue that crude continues to trade within a comfortable range, but the reality is that the market has become more reactive at times, reflecting strong daily trends before responding and trading in opposition the following day. Inventories have also played a role in affecting market prices, with crude stocks remaining heavy during Q1 2013, while motor gasoline inventories remained close to historical levels and distillate stocks remained slightly lower than last year.

With that said, market instability continues to be linked to the economic front, with the following economies and organizations making headlines and releasing macroeconomic reports which directed market trends during Q1 2013.

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International

Europe

The European economy remains the focal point of concern for the global economy. The recent Cyprus situation proved once again there are many economic issues which need to be resolved before the EU can begin to move forward. The International Monetary Fund (IMF) reduced European output forecasts from 0.5% to 0.2% this year. Much like last year, the IMF also expects Germany and France to grow slightly (if any) this year, while forecasts for Spain and Italy remain unfavorable, with Spain’s output expected to fall 1.5% and Italy’s output to fall 1.0%. Though forecasts over the next five years remain cautiously hopeful, it is evident the EU needs to solve output issues, unemployment issues, and debt issues before they can begin to make progress.

Middle East

Violence in the Middle East continues to make headlines, raising concerns about possible oil supply disruptions. The conflict between Iran and the West remains a factor, as none of the measures taken to stop Iran’s alleged nuclear program appear to be making a difference. Much like previous meetings, the latest meeting between both parties in Kazakhstan on February 26th did nothing to alleviate tensions, as Iran claimed their nuclear research program is “a peaceful program for educational research only.” The Middle East has been out of the spotlight for much of the quarter, reducing the crude premium during the first three months of 2013.

China

China was projected to be one of the main driving factors behind global economic growth in 2013. Despite enduring their weakest level of economic growth in almost thirteen years during 2012, with exports restrained by the global economic crisis, China’s economy managed to accelerate during the last quarter of 2012, expanding 7.9%. Despite the fragile global economic environment, experts suggest the Chinese economy is on track to continue its positive momentum and grow approximately 8.5% during 2013. In terms of oil demand, China continues to increase its oil consumption, averaging 10.35 million barrels per day (MB/d) in the first two months of 2013, approximately 4.3% higher than the same period last year. If China’s economy continues to grow at its current pace, we can anticipate an increase in oil demand as their economy will require more oil to keep up with growth projections.

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Brazil

Following a disappointing 2012, Brazil expected a stronger 2013, with Brazilian economists projecting 4.2% growth by the end of the year, following stimulus measures and favorable fiscal policies the country adopted in 2012. However, the global economy has not met expectations through the first quarter of 2013, and like other economies, Brazil’s growth has also been affected by the fragile and uncertain global economy. As a result, the World Bank reduced Brazilian GDP projections for the remainder of 2013 from 4.2% to 3.4%. Despite the sharp rebound from 2012 where GDP grew less than 1%, the revisions are disappointing as the largest economy in Latin America remains under pressure. From an oil standpoint, Brazilian production has slowed tremendously over the last few years, while gasoline imports are rising rapidly as Brazil remains short of refineries able to process crude oil. From an economic standpoint, one of the main concerns about the South American economy is that the government is keeping fuel prices low to control inflation in a lethargic global economy.

OPEC

As seen in the graph below, the OPEC basket price traded between the $105 and $113 range during Q1 2013. Despite the fact that oil prices dropped 2% this year on concerns about the global economic outlook, OPEC reported supply issues contributing to lower production levels due to the unrest in Libya, Iraqi export disruptions and pipeline leaks in Nigeria. OPEC’s output reached 30.18 MB/d in March, down from February’s 30.42 MB/d and the lowest output level since October 2011. As a result, OPEC’s output has been the closest it has ever been to its production target since January 2012. OPEC is scheduled to meet in Vienna on May 31st to review its output target for the remainder of the year.

OPEC Basket Price

OPEC Basket Price A weighted average of oil prices collected from various oil producing countries. This average is determined according to the production and exports of each country and is used as a reference point by OPEC to monitor worldwide oil market conditions.

Source: OPEC

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Domestic

Economic “ From an oil standpoint, the U.S. continues to benefit from higher production rates, allowing the U.S. to reduce its dependency on foreign oil and imports.�

Not much has changed since Q4 2012 in terms of quantitative easing, as the Fed decided to keep the QE programs unchanged for now, printing a total of $85 billion per month to ensure liquidity in long-term bond markets and keeping interest rates artificially low, until they see an unemployment rate of 6.5% or a reduction in inflation to less than 2%. So far in 2013, the U.S. economy seems to be improving, with a lower unemployment rate and higher manufacturing and production rates. However, like other economies, the growth pace is not as fast as once projected due to the fragile global economy. From an oil standpoint, the U.S. continues to benefit from higher domestic production rates, allowing the U.S. to reduce its dependency on foreign oil and imports. Crude inventories remained above historical limits in Q4 2012, while gasoline stocks remained within limits and distillate inventories remained lower than historical levels.

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Domestic

Economic

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PPI Producer prices increased in the first two months of Q1 and then took a back step in March. As seen below, the PPI index posted a 0.2% increase in January and 0.7% in February, while March’s PPI index dropped 0.6%. Despite a 0.3% decrease in December of 2012, producer prices have been driven upward mainly by increases in intermediate goods and finished goods, while March’s drop was mainly attributed to lower gasoline prices. !%&'()*%#!%+)*#",'*-#.!!"/#0&,1231&30&,12#425,6*!

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CPI Consumer prices finished the first quarter higher and look set to continue their upward momentum into the second quarter of 2013. As seen in the table below, January’s CPI remained flat, while February reflected a 0.7% increase and# March reflected a 0.2% drop. The surge in consumer prices in February was led by a 9.1% increase in gasoline prices, while food prices and other energy prices including electricity and natural gas also reported higher prices during Q1.

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GDP The U.S. Department of Commerce made its last revisions for Q4 2012, reflecting an increase in Real GDP growth from 0.1% to 0.4%. Despite the upward revision, the report is still discouraging in comparison to the previous 3.1% growth seen in Q3. The Fed announced in late March the slowdown in Q4 was mainly due to temporary factors, including extreme weather in the Northeast. For Q1 2013, experts suggest the economy will grow more than in Q4 despite the increase in payroll taxes.

However, it will be important to keep an eye out for the factors currently prohibiting economic growth -- the employment situation and European debt crisis.

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Fundamentals U.S. Demand U.S. oil demand remained historically lower during Q1 2013.

Following a Q4 which saw a decrease of 3.3% in total petroleum deliveries, petroleum products domestic demand dropped to a level of 18 MB/d during the month of February, the lowest since 1993. Both gasoline and distillate fuel deliveries dropped, with gasoline dropping from 3.1% to 8.36 MB/d, and distillate fuels sliding 7.3% to 3.69 MB/d.

U.S. Production vs. Imports U.S. crude oil production is on track to exceed imports by the end of 2013, the first time since 1995. The domestic production to imports gap is expected to reach approximately 2 MB/d by the end of 2014, with the increase in domestic crude oil production attributed to shale and other tight rock formations in North Dakota and Texas. As depicted in Graph 1, the U.S. oil deficit ranged around 5 MB/d in 2008, but the increase in domestic crude oil production allowed the deficit to narrow for now and may flip into a surplus in the near future, with forecasts for domestic production expected to exceed 8 MB/d and imports expected to fall under the 6 MB/d mark by the end of 2014.

If forecasts are accurate, the U.S. would reduce its dependency on foreign oil as domestic production will exceed imports.

U.S. Production vs. Imports (Million Barrels) Graph 1

Source: U.S. Energy Information Administration (EIA) 11

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Fundamentals U.S. Exports of Finished Petroleum Products As seen in Graph 2 below, the U.S. continues to export more and more petroleum products. Though the beginning of 2013 has not been as strong as last quarter, total finished petroleum products exports reached 2.3 MB/d in January, while motor gasoline exports reached 548,000 b/d and distillate fuel oil exports reached 774,000 b/d.

U.S. Exports of Finished Petroleum Products (Thousand Barrels Per Day) Graph 2

Source: U.S. Energy Information Administration (EIA)

Crude Imports Crude imports continued their decline during Q1 as low demand in the U.S. combined with higher domestic production allowed the U.S. to depend less on foreign oil. Averaging 7.8 MB/d, the imports level thus far in 2013 is at the bottom of the 5-year historical range.

U.S. Crude Imports (Million Barrels Per Day) Graph 3

Source: U.S. Energy Information Administration (EIA) 12

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Fundamentals

Crude Oil Inventories As displayed in Graph 4, crude oil stocks remain above historical limits. Inventories have been on the higher side throughout the last 12 months as domestic production continues to increase, while refineries continue to operate at high rates to meet export demand. Additionally, leaks, expansion efforts and other complications on the Seaway Pipeline have contributed to the historically heavy inventory levels in the Midcontinent area.

U.S. Commercial Crude Oil Stocks Excluding SPR (Million Barrels) Graph 4

Source: U.S. Energy Information Administration (EIA) 13

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Days of Supply (DOS)

Fundamentals

The number of days that crude inventories would satisfy demand.

Days of Supply As seen in Graph 5, the Days of Supply (DOS) average remained at the top of the 5-year range during Q1, reaching an average of 27 days.

Due to the increase of domestic production and lower demand, the DOS average has increased above the 26-day level in 2013.

U.S. Days of Supply of Crude Oil Excluding SPR (Number of Days) Graph 5

Source: U.S. Energy Information Administration (EIA)

Refinery Inputs As portrayed below in Graph 6, refiner net input (demand) ranged around the 14.5 MB level during Q1. Despite higher input rates seen in Q3 and Q4, refinery inputs moved back to a normal range during the first quarter.

U.S. Crude Refiner Net Input (Demand) (Million Barrels Per Day) Graph 6

Source: U.S. Energy Information Administration (EIA)

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FUELSNews 360˚ Commentaries Andy’s Answer

BULL

Regarding the last quarterly report, I turned out to be half correct for the last three months, so I guess I need to keep my day job. As it turned out, prices peaked around mid-February, although for crude, prices climbed right back at the end of the first quarter. However, heating oil and gasoline stayed rather low compared to the rest of the quarter, thus reducing crack spreads.

For this upcoming second quarter, my belief is still more to the bullish side. For example, equities are trending higher, initial jobless claims are trending lower overall, increased U.S. exports of refined products are keeping supply locally a bit tight, and consumer confidence appears rather stable as individuals learn to live in a new normal. On the bearish side, crude stocks have gained a full day over this same time last year (crude Days of Supply according to the DOE 25.11 last year vs. 27.00 at the end of March), the possibility of an improving dollar, lower projected gas demand, and the ever-threatening economic weakness are all factors for consideration. Although we may see some spread movement, particularly on the crack spreads, I’m still going to be bullish overall.

Sara’s Synopsis

BEAR

Although slightly higher, more range bound trading was the norm for crude in Q1 2013. The average price of crude came in at $94.26, whereas the low and high were $90.12 and $97.94 respectively. Worries about the forced federal budget cuts made consumers wary about the U.S. economy in March, and the latest economic news out of Europe put slight pressure on the crude market. However, this past quarter, Department of Energy data included some of the poorest light products demand in years, and crude inventory levels were at their highest since the Depression era. All of these factors make me bearish on the market.

Even with an anticipated recovery in the U.S. economy in 2013, demand is expected to be flat at year-end. Weak economic conditions are estimated to cap global oil demand which in turn offsets a U.S. recovery. Finally, U.S. crude production is beginning to outpace imports, and there doesn’t appear to be a shortage of oil in the U.S. For every positive indicator, we see an offsetting negative one, making it unlikely that 2013 will be a year of sustained higher prices. Barring a major refinery upset and thanks to lower demand, refined products should follow suit.

Dan’s Dissertation

BULL

Total U.S. crude oil inventories of 385.9 MB are 9.2% above year-ago levels and 11.6% higher than the five-year average, weighing on potential increases in domestic crude oil prices. Yet, OPEC surplus crude oil production capacity sits currently at only 3.1% of total world oil demand – exposing the global market to instability in the Middle East. Furthermore, the Federal Reserve voted in late March to maintain asset purchases at $85 billion per month until it sees evidence that the economy is strong enough to maintain the current pace of job growth. I doubt this stance materially changes in Q2, continuing to support commodity prices. While I think the trading range will ultimately be range bound, I am bullish at current levels.

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FUELSNews 360˚ Commentaries Hannah’s Hypothesis

Jorge Pradilla’s Predictions

Scott’s Sixth Sense

BULL

BEAR

Based on the current macroeconomic landscape and the tightness of supply implied by fundamentals, I am bullish flat price for Q3’13 and see WTI breaking through $100/bbl with ease, to set a new range for the coming quarter. Crack spreads are still incredibly strong, and despite the costly RIN obligations that arise from producing, refiners seem content to continue high run rates and flood the export market. This, paired with higher than expected demand for WTI due to delayed refinery upgrades, and increasingly bullish economic stats has me pretty convinced that we won’t look back to $80 until year end.

Despite hopeful economic forecasts for 2013, the global economy has proved once again it is anything but stable, having immediately impacted oil prices, with commodities becoming a more popular investment option over time. Analyzing the macroeconomic data released in Q1, I expect Europe’s economic crisis to continue for a while, which should strengthen the U.S. dollar in Q2. If this happens, expect the higher U.S. dollar to apply downward pressure on oil prices during Q2, as it has historically. On the inventory side, commercial crude oil inventories remain historically heavy at a level of 386 MB, while days of supply are almost at the 27-day level.

Furthermore, domestic demand in February reached a 20-year low of 18 MB/d, down 4.1% from the same time last year. As a result, I expect supply to remain heavy and demand to remain soft in Q2, while the macroeconomic outlook will most likely remain the same over the next three months. For all these reasons, I believe crude prices will be trending lower during Q2, trading between the $85-$95 range.

BEAR

Almost four years from the start of the so-called economic recovery, 2013 could be the year Canada finally leaves this Great Recession behind, although it may not appear so from looking at the numbers. With very few exceptions, many economists see the upcoming year as not much better than 2012, when global expansion started to weaken and decline.

Canadians hope the Bank of Canada isn't correct when they predicted the country’s 2013 GDP output would expand by only 1.7%, which would mark the third consecutive year of losing growth momentum. Even the pessimists among the private sector forecasters believe the second half of 2013 will shape into the better economy Canadians have anticipated for several years.

The optimists predict solid growth and job creation, which is certainly possible if Canada and other world powers can avoid current economic obstacles.

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FUELSNews 360˚ Commentaries (Scott continued)

The first of which is that the U.S. Congress and the White House have to work out a fiscal deal to prevent government action from sabotaging the economy.

Obstacle number two is Europe, which will remain a major risk for years to come. Based on the signs so far, particularly in the United States, I believe the Canadian economy will gain momentum each quarter of 2013, beginning with a slightly better result than the Bank of Canada's prediction. The momentum is predicted to come in at 2% in Q1 and peak near 3% in Q4. Overall, 2013 GDP will average approximately 2.2%, which would be higher if the Canadian economy had not weakened during the second half of 2012.

Chris’s Concept

BULL

My projection for the second quarter of 2013 for the market remains bullish. Currently, refiners are exporting refined products to reduce their RINs obligations which may result in tight product supply and higher prices downstream. The gasoline market will see large swings as RVP changes continue. As always, there is the threat of poor economic news which could send the market down and gasoline demand is still off from this time last year. However, overall I believe all products will stay tight, causing prices to rise.

Evan’s Estimation

BEAR

My prediction for the market as we enter the second quarter of 2013 is on the bearish side due to a few main factors. Domestic production has really ramped up in recent years, mostly due to the Bakken and Eagle Ford deposits. Since U.S. crude has increased dramatically and many East Coast refineries are railing in more domestic crude, this has alleviated our need to rely on imports. Another factor pointing to a bearish market is what’s happening overseas. The Eurozone’s economic confidence has fallen off in March after four consecutive months of increasing due to concerns. Cyprus’ banks are struggling and a new plan to tax depositors’ accounts was devised, but this may only discourage individuals from depositing money into those banks. The fear we are witnessing in Europe is strengthening the U.S. dollar against the euro, and historically, the strengthening of the U.S. dollar applies some downward pressure to the price of crude. With increased domestic crude output, and the continuing Eurozone crisis, I am predicting the market to trend downward.

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Regional View Petroleum Administration for Defense Districts

PADD 1 East Coast

Bakken Crude Moving East Bakken crude is becoming a very popular crude choice among East Coast refiners. The Bakken formation is located in North Dakota, Montana and Saskatchewan and is extremely rich in oil. This oil-rich layer of the Earth has attracted the attention of many exploration companies, creating storage space issues due to an overabundance of oil.

WTI vs. Brent Spread

“ Currently, many East Coast

refineries are paying a high price for the internationally priced Brent crude they are receiving.”

Source: OPIS

Brent and West Texas Intermediate (WTI) are two major trading classifications for crude produced internationally and domestically. Currently, many East Coast refineries are paying a high price for the internationally priced Brent crude they are receiving. The crude produced in the Bakken formation is priced against West Texas Intermediate. Since the end of 2010, the Brent-WTI spread increased dramatically compared to previous years, with Brent having a $10-$30 premium over WTI. This 20

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PADD 1A New England

Source: S&S Geological Consultants, Inc.

premium has strongly persuaded East Coast refiners to shy away from internationally priced crude and seek a domestic supply.

Nearly all of the Northeastern refineries made the decision to receive domestic crude shipments rather than import crude. Delta’s Trainer refinery recently received their first shipment of Bakken crude via rail. Delta Air Lines is switching to this cheaper crude to boost profits and preserve jobs at their 180,000 b/d facility. Phillips 66 just signed a five-year contract with Global to move this Midwestern crude to their Bayway, NJ facility.

This is not the first time the Bayway refinery has received Bakken crude, but with this fiveyear contract in place, the amount of domestic crude this refinery receives will increase substantially. PBF has also been shipping Bakken crude and heavy Canadian crude to their Delaware River refineries and plans to increase the amount of Canadian heavy crude brought into their Delaware City refinery. Philadelphia Energy Solutions and Irving Oil are also on board for this cheaper WTI crude to be shipped into their Philadelphia and Canada refineries.

Colonial Pipeline/Buckeye Pipeline Connect The Colonial Pipeline and Buckeye Pipeline completed the connection in Paulsboro, NJ allowing refined product to be shipped from the Gulf Coast to as far north as upstate New York. This connection, constructed at the PBF Paulsboro refinery, will allow product to flow up from the Southeast, head to Malvern and Macungie, and move further on to other locations in Pennsylvania and New York. The movement of product on this new connection is expected to be slow due to logistical reasons. In Malvern, PA at the Buckeye terminal, tank space is very limited which will tighten the rate of product movement to Pennsylvania and New York. Due to this logistics issue and limited product movement from the Gulf Coast to New York Harbor, minimal impact on these markets is expected.

United Refining Acquires Metro Terminals’ Assets

Source: Biodiesel Magazine

After an affiliate of United Refining purchased the terminal in Riverhead, NY, United Refining increased their presence on Long Island by purchasing all of the assets of Metro Terminals. United Refining won the auction to purchase all of Metro Terminals’ assets for $27 million. This acquisition included the 90% completed biodiesel blending plant in Brooklyn (United Refining planned to build a similar plant), the Calverton terminal (which will be merged with the Riverhead terminal), a new marine fueling dock facility in Brooklyn, Metro’s heating oil supply business, a rail project (which will connect the Brooklyn and Long Island diesel and biodiesel distribution terminals), as well as other Metro assets. Additionally, United Refining recently announced that the 50 million gallon per year biodiesel plant (one of the largest biodiesel plants on the East Coast) is projected to be up and running in the first quarter of 2014.

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PADD 1B Central Atlantic “ Hess announced their intention to sell all their terminals and shut down their Port Reading, NJ and St. Croix refineries.”

Hess Pulling Out of Downstream Hess Corporation announced in January they are pulling out of the downstream sector of the petroleum industry and will be a “predominantly exploration and production company.” Hess entered the downstream sector in the 1930s and has been a large player in the oil industry ever since. Initially, Hess announced their intention to sell all their terminals and shut down their Port Reading, NJ and St. Croix refineries. Hess later reported they will exit the retail sector as well. Their terminal assets are expected to sell for $1.5-$2.billion. In turn, this will free up around $1 billion in working capital. The Port Reading, NJ refinery has endured some difficult times, recording losses in two of the past three years. This 70,000 b/d refinery officially closed on February 26, 2013. The closure of this refinery is expected to be more of a factor in the Summer months than Winter since it was a large producer of Summer grade RBOB. Hess is expecting the sale of their assets to take as long as 18 months and anticipate most of their retail gas stations to be under new ownership by 2015.

PADD 1C Lower Atlantic

Florida

As mentioned in the last edition of FUELSNews360⁰, Florida markets continue to present supply challenges in 2013. The spread between NYH and GC through most of the quarter continued to provide an opportunity to move Gulf Coast barrels into the Harbor. Jones Act approved vessels continue to charge a premium for freight, creating higher shipping costs which are being passed down to the rack level. The Tampa market has felt the effect of less product coming into the market, with suppliers not only taking advantage of the arbitrage opportunity for refined products to the Harbor, but also transporting crude there. With U.S. crude production continuing to increase, Jones Act vessels previously carrying refined products are now moving crude.

Adding to the problems in Tampa, Murphy Oil has not been offering wholesale product since January 1st. With Murphy not offering product, the remaining unbranded suppliers will feel pressure to provide the additional volume. Orlando is experiencing similar problems as suppliers try to aid the ailing Jacksonville market. Suppliers are working diligently to ease the pain being felt in Florida, and Q2 should offer a glimpse of what’s to come as the market should settle out the differences.

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PADD 1C Lower Atlantic Did you know?

Terminals are required to have gas tanks transitioned to the appropriate RVP for their surrounding counties by May 1st.

Retail and commercial tanks have until June 1st to turn their tanks to the appropriate RVP standard.

Atlanta Grade Gasoline The Low RVP areas in Georgia which require Atlanta Summer gas may see some relief in 2014 from Summer gasoline supply issues.

Currently, the 45 counties surrounding Atlanta are required by the EPA to sell a low-sulfur 7.0lb RVP during the Summer months opposed to 7.8lb required by surrounding markets. Similarly, counties surrounding Birmingham, AL were required to sell the 7.0 until 2012 when the EPA removed the 7.0 requirement. Fuel marketers are hoping the EPA approves the State of Georgia’s request following the decision to waive Birmingham's requirement last year. The EPA released a statement saying “The Atlanta area has made significant progress in improving air quality.” It is unlikely that a decision will be made until after a meeting with the EPA, which is scheduled for Spring of 2013.

Southeast Pipelines Pipelines across the Southeast remain on tight allocations due to increased demand and limited line space. Spur lines providing relief to port terminals are the hardest hit with shipping restrictions. For example, line 29 going to North Augusta is allocated to only those shippers with consistent prior shipping history. North Augusta terminals have provided relief to Charleston and Savannah since the move to a New York price basis, with both Charleston and Savannah having inconsistent supply, the opportunity exists to bring in product from North Augusta and other pipeline terminals. North Augusta is roughly 177 miles from Charleston, which adds an additional .0750cpg for freight. The run to Savannah from North Augusta is a little shorter at 128 miles and an additional .06cpg in freight.

Colonial's Line 17 has also been placed under tight allocations. This line delivers to Griffin, Macon, Albany and Bainbridge, GA. For the same reason as North Augusta, Albany and Macon are offsetting the lack of supply in Jacksonville, FL, but contributing to further tightness.

Motiva Port Arthur Motiva’s Port Arthur refinery’s 325,000 b/d crude unit was running at full capacity on March 6th. Motiva’s expansion was completed last May, and since then the refinery has experienced a series of unplanned shutdowns due to leaks, fires and other delays. A coker and crude unit have been down since February for planned repairs and the down crude unit is the smallest and oldest of the three crude units and doesn’t have an expected restart date.

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PADD 2 Midwest

“The groundbreaking on the Dickinson refinery is a symbol of the changing U.S. energy landscape, as it is the first new refinery to be built domestically in 37 years.”

Dakota Prairie Refining Begins Construction of New Refinery Construction on a brand new diesel refinery began in late March in Dickinson, ND, as Calumet Specialty Products and MDU Resources partnered to build the state’s second refinery, projected to cost $300 million. The diesel refinery will take approximately 20 months to complete, and once it is fully operational, will process 20,000 b/d of Bakken crude oil. Indianapolis-based Calumet and Bismarck-based MDU Resources Group participate as 50/50 partners, creating a joint venture called Dakota Prairie Refining.

The groundbreaking on the Dickinson refinery is a symbol of the changing U.S. energy landscape, as it is the first new refinery to be built domestically in 37 years. The refinery is perfectly situated to take advantage of local crude produced from the Bakken shale formation, and in turn produce the diesel required to run crude production operations. The refinery will employ 100 full-time workers and create 400 construction jobs in North Dakota, a state which holds the lowest unemployment rate in the nation.

Joining Tesoro Mandan as the only refineries in the state, the new refinery is expected to be operational in late 2014.

BP Whiting Delays Upgrade, Pinching Chicago and Group Three Markets The planned upgrade at BP Whiting in Indiana, referred to by the media as the “mother” of all U.S. refining upgrades, fell behind schedule in late 2012 and early 2013, with the Q4 2012 earnings report released in February making the market privy to its complications.

Beginning in early November 2012, a crude distillation unit which went offline was projected to be up by February 2013, but has now been pushed to a Q2 2013 start-up.

This delays the ultimate goal of the upgrade, which will allow the refineries to process increased amounts of heavy Canadian crude, as the new 102,000 b/d coker cannot begin construction until the crude unit is back up. This new timetable estimates project completion as late as the beginning of 2014.

While a turnaround delay for one refinery would traditionally make the market quiver but not overreact, the fact that Exxon’s Joliet, IL refinery planned turnaround overlaps Whiting’s downtime has serious implications on supply. Joliet, a 238,500 b/d refinery, has a scheduled turnaround lasting from March to April, and will likely keep local markets tight until production returns to normal levels.

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PADD 3 Gulf Coast

Teppco Halts Interstate Delivery of ULSD and Jet Fuel Enterprise TE Products Pipeline (TEPPCO) announced in late Q1 that they will discontinue interstate distillate shipments on their Midwest pipeline, which originates in the Gulf Coast with destinations through the midcontinent and stretching as far north as Ohio.

Previous issues of FUELSNews 360⁰discussed the Gulf Coast to Chicago refined products spread, specifically how the arb has closed for shipping over the past few years and made Gulf Coast barrels uneconomical in northern markets due to discounted crude supply for PADD 2 refineries. This continued trend has made demand for shipping ULSD and jet fuel north on the line dwindle down to a point where it is no longer economically feasible for the pipeline to continue operations. With high fixed costs associated with shipping products through the pipeline, TEPPCO requires a minimum level of shipments to be able to recoup operating expenses and turn a profit.

It should be noted that distillates will still travel to the terminals via intrastate lines and third-party pipelines, and markets on the system will continue to receive deliveries from refineries and barges.

In the short-term, mid-size shippers still do not fully understand how this will impact their operations, but we expect that decreased sources of supply will ultimately amount to higher premiums for product along the line.

West Texas and New Mexico Experience Product Squeeze on Refinery Turnarounds

Source: Bloomberg

El Paso Rack Average vs.Gulf Coast ULSD

The first quarter experienced a myriad of supply issues in PADD 3, namely in West Texas and New Mexico, due to multiple local refineries going into planned and unplanned turnaround during the same time period. It began with the Holly Artesia refinery, with an output of 115,000 b/d, entering a planned turnaround which was scheduled to last from January through February. Western Refining’s 128,000 b/d El Paso refinery soon went down afterward, and was scheduled to restart mid-February and last through the end of the first quarter. The issue was exacerbated by the Phillips66 Borger refinery conducting repairs on a wet gas compressor and having reduced output for the month of March.

Most recently, we’ve seen the Alon Big Spring refinery enter into an unplanned shutdown, removing another 70,000 b/d production from this area.

The resulting product shortages created full blown outages in the area, mostly affecting Albuquerque and El Paso in both diesel and gas. Below is a chart demonstrating the increasing premium for local El Paso ULSD versus the Gulf Coast hub benchmark. Product remains tight in these areas into Q2, but we look for this to clear up within the next month as production comes back online.

Source: OPIS 25

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PADD 4 Rocky Mountains

At the beginning of the year, the Rockies led the decline in U.S. oil refining margins. A number of suppliers in Denver, CO posted wholesale gasoline well below $2/gallon. Neighboring PADD 5 was more than $.80/gallon higher. Weak demand pushed area refiners to slash prices to a level thought to be out-of-date, with pump prices in Colorado and Wyoming less than $3/gallon and $.35/gallon below the national average.

PADD 4 vs PADD 5 Wholesale Gas Prices

Source: OPIS

In other areas of PADD 4, supply disruptions were the norm in Salt Lake City and Boise for both diesel and gas early in the year. Truck rack terminals were drained of product by 7a.m. The first quarter also took us into turnaround season with numerous refiners such as Suncor, HollyFrontier, Tesoro and Chevron participating in PADD 4 at various locations. In addition to the above, refinery turnarounds in Albuquerque and El Paso created supply disruptions for both New Mexico and Arizona. As a result, long haul deliveries from outlying areas became the norm.

Magellan Acquiring Pipeline from Plains All American Magellan Midstream Partners, L.P. announced an agreement to acquire approximately 800 miles of refined products pipeline from Plains All American Pipeline, L.P. The acquisition includes both the Rocky Mountain Pipeline System and the New Mexico Pipeline System. The Rocky Mountain Pipeline System includes 550 miles of common carrier pipeline reaching Colorado, Wyoming and South Dakota, as well as four terminals and nearly 1.7 million barrels of storage. The New Mexico Pipeline System includes 250 miles of common carrier pipeline transporting product from El Paso to Albuquerque as well as south to the Texas-Mexico border. The $190 million acquisition is expected to close in Q2 2013.

Source: Magellan 26

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PADD 5 West Coast, AK, HI

“West Coast gasoline

inventories were at a 19-year high the first week of January due to poor demand.”

West Coast refiners entered a heavy turnaround season after the first of the year, with the markets beginning transition to the low RVP gasoline specification during the month of February. In addition, over 250,000 b/d of gasoline was offline in Southern California, in spite of West Coast gasoline inventories being at a 19-year high the first week of January due to poor demand. It was not until March that a drawdown in record inventories began to be realized.

PADD 5 Gasoline Inventories

Source: OPIS

PADD 5 Distillate Inventories have shown a similar story the past few years.

PADD 5 Diesel Inventories

* Some of the information provided is owned and licensed by OPIS. In no event shall any user copy, modify, publish, retransmit or otherwise reproduce information from OPIS. Copyright 2013. All rights reserved.

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Source: OPIS

PADD 5 West Coast, AK, HI

Tesoro Corp. continues to be in the headlines, as their acquisition of BP’s southern refining and marketing business is moving forward. Management believes their acquisition of the BP Carson refinery will receive government approval, as thus far the company has not seen any objections and has even received endorsement for the acquisition from California’s governor. They also expect the Federal Trade Commission to give an official ruling sometime in the next quarter, and expect to close on the transaction before mid-year.

Since Tesoro announced plans to stop operations at its 94,000 b/d Kapolei refinery in Hawaii in April 2013, they are moving ahead to convert the refining facility into an import and distribution terminal. While Tesoro wants to maintain the terminal to support their marketing efforts, they will continue with their plans to offer their terminal and retail assets for sale. Late in February, the United Steelworkers (USW) appealed to Hawaii’s governor to include their group on a committee formed to examine the impact of the refinery’s closure to the state.

Kinder Morgan’s plan to move West Texas Crude to California continued to gain traction.

If Kinder moves forward with the plan, this would be the first time California could access crude from West Texas by pipeline. It is very expensive to buy crude in Southern California and access to Texas supply at a price advantage could change refining economics positively. West Coast refiners typically rely on crude production from Alaska, San Joaquin Valley and other foreign imports. A final decision on the east to west crude pipeline is expected to be forthcoming.

As for Alaskan crude supply, oil production from Alaska’s North Slope has yielded less oil every year since 2002. According to a recent Bloomberg article, production dropped 7.9% in January alone from a year earlier as output wells declined without the addition of any new wells. This shrinking supply has encouraged West Coast refiners to pursue rail shipments from the Midwest.

Per the California Division of Occupational Safety and Health, Chevron was fined $1 million for violations related to their Richmond refinery fire on August 6, 2012. The citations included numerous “willful serious” and “serious” violations, resulting in the highest penalties in California’s OSHA history, as well the highest allowed under state law. The Cal/OSHA report highlighted that Chevron did not follow its own inspectors’ recommendations in 2002 to replace the corroded pipe that ruptured and caused the fire.

In addition, the report stated Chevron did not follow its own emergency procedures when the leak was found. No serious worker injuries were reported, however, 15,000 local residents sought treatment after breathing emissions from the fire. Although, Chevron’s Q1 restart plan for the damaged CDU will not be met, Chevron is looking to restart early in Q2 pending state approval. Since the fire in August of 2012, the refinery is operating at reduced rates.

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Canada

The Canadian economy suffered through its second consecutive below-par quarter at the end of 2012, setting the stage for another year of mediocre growth and job creation in 2013. The global outlook is not as positive as expected, with Europe mired in recession, and economic expansion in the U.S. continuing at a gradual pace. The Bank of Canada is predicting a growth for 2013 of 1.7%, down from their original forecast of 2%.

Canadian Economy at a Glance % change from

R eal GDP Industrial production Employment Unemployment rate* Manufacturing Production Employment S hipments New orders Inv entories R etail s ales Car s ales Housing starts (000s)* Ex ports I mports Trade balance ($billlions)* Cons umer prices

Lastest month

Previous month

Year ago

Dec Dec Feb Feb

-0.2 -1.1 0.3 7.0

0.8 -1.7 1.9 7.4

Dec Feb Jan Jan Jan Jan Jan Feb Jan Jan Jan Jan

-1.8 -1.4 -0.2 5.1 1.7 1.0 10.5 178.0 2.1 1.9 -0.2 0.1

-3.3 -0.8 -1.6 6.9 0.1 -0.1 -2.9 159.0 -1.4 -0.6 0.1 0.5

* Levels are shown for the latest period and the same period a year earlier.

Source: Source: Royal Bank of Canada

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Canadian Oil Infrastructure

Canada Canada’s oil and gas reserves include more than 25 billion barrels of crude oil and liquids, 150 billion barrels of economically recoverable bitumen, and over 40 trillion cubic feet of natural gas, and are among the largest and most strategically significant reserves in the world.

Source: International Energy Agency

Canadian Crude Oil Production Forecast Source: Canadian Association of Petroleum Producers (CAPP)

In 2011, total Canadian crude production stood at 2.9 MB/d. By 2020, that number is forecasted by the Canadian Association of Petroleum Producers (CAPP) to reach 4.2 MB/d.

• Imperial Oil’s Kearl 2, Capacity: 350,000 b/d • Athabasca and PetroChina’s Dover project, Capacity: 250,000 b/d • Total’s Fort Hills, Capacity: 160,000 b/d

• Canadian Natural Resources’ Horizon Phase 2-3, Capacity: 135,000 b/d • Cenovus Narrows Lake, Capacity: 130,000 b/d

Recent domestic crude oil production in the U.S. is on track to surpass imports, representing another shift in market conditions which would punish Canadian energy stocks and further cast doubt on multi-billion dollar oil sands expansion.

A six million b/d import market is available to the Canadian producer. The issue isn’t a question of whether the market exists, but rather one of market accessibility. The Keystone XL Pipeline will change that outcome when the $5.3 billion northern leg connects growing oil sands output in Alberta and Bakken crude in North Dakota to refineries in Louisiana and Texas. The pipeline’s uncertain future has not plugged the southbound flow of Canadian crude, which is increasingly replacing U.S. oil imports from Nigeria, Angola and the United Kingdom. Canadian oil continues to fare well from a market share perspective, but not as well on a price comparison.

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Alternative Products Natural Gas

Following the warmest year on record for the contiguous U.S. in 2012 – according to the National Oceanic and Atmospheric Administration – weather was again the main driver of natural gas prices in Q1 2013. The new year began with a relatively warm start that caused February NYMEX natural gas futures to trade down to $3.05 on January 2nd – a three month low at the time and the lowest intraday value thus far in 2013. But a recent March chill triggered strong demand to end the Winter season, boosting May futures to a Q1 2013 intraday high of $4.1210 on March 28th, the last trading session of the quarter. Ultimately, May natural gas futures settled at $4.0240 to end the day.

Front Month NYMEX Natural Gas 4.024

Source: Bloomberg Finance, L.P.

Late Season Cold and Inventories The front month contract’s settlement above $4 per MMBTU on March 27th was the first time front month gas eclipsed that mark since September 2011, as heating use drew down inventories and gas demand for electricity generation climbed to near all-time highs. The rally exceeded many analysts’ expectations, particularly as it happened so early in the year. For instance, on March 18th, after their Summer 2013 price target had been eclipsed, Goldman Sachs Group released a note stating, “We see increased upside risk to our price forecasts of $3.75 per MMBtu for the second and third quarters of 2013 and $4.25 for 2014.”

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Natural Gas

While the underlying supply and demand data for natural gas can be volatile week to week, itâ&#x20AC;&#x2122;s clear the below normal temperatures led to late season heating demand. As the below graph shows, LCI Energy Insight data for total natural gas in storage from 2010â&#x20AC;&#x201C;2013; gas has been drawn from storage at a much quicker pace in 2013 (the light blue line) relative to prior years, especially in mid-March.

Total Natural Gas in Storage, All Regions

-7.70 -8.268 -16.189 -27.411

Source: Bloomberg Finance, L.P.

Detailing that the gas flowed to heating demand, the below graph underscores a corresponding spike in 2013 consumer demand (light blue line) in mid-March.

This increase in demand, and a decrease in natural gas production, is bringing overall inventories in line with historical averages. For the week ending March 22nd, natural gas inventories decreased 95 Bcf to 1.781 Tcf, 3.4% above the five-year average and 26.7% below year-ago levels. The cumulative withdrawal since the start of this Winter season on November 1st is 2.148 Bcf, 11% above the five-year average of a 1,930 Bcf withdrawal.

Seasonal Demand of Natural Gas Delivered to Consumers

79.738 69.204 70.699 71.059 65.433

Source: Bloomberg Finance, L.P. 33

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Natural Gas Infrastructure Update As highlighted in the last issue of FUELSNews 360⁰, natural gas pipeline infrastructure is a vital– yet often overlooked – aspect of the natural gas supply chain. This is particularly evident as current infrastructure strains to move gas from relatively new, inundated production points to traditional, constrained demand regions. However, significant improvements could soon be underway. According to the EIA’s pipeline projections data, nearly 30 Bcf per day of natural gas pipeline capacity in the U.S. is in some stage of proposed or planned development. Per the Federal Energy Regulatory Commission, about 39% of the capacity projects have received approval from the agency, though only 10% are actively under construction. Of the active projects, more than half are in the Southwest, while over 40% of projects in any stage are in the Northeast.

Capacity increases from U.S. planned gas pipeline expansions through 2016, by region and stage of project development Bcf/d 14 12 Announced

10

Pre-filled

8

Applied

6

Approved

4

Under Construction

2 0 Northeast

Southwest

Southeast

Other

Source: U.S. Energy Information Administration, Pipeline Projects.

Note: “Other” category includes natural gas from the Central, Western, Midwest, Northwest regions and Puerto Rico. The Western and Southwest regions include pipelines expansions that extend into Mexico.

Data excludes gathering, storage and distribution lines, as well as pipeline conversions. Project status reflects company and Federal Energy Regulatory Commission (FERC) statements as of December 2012.

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Renewable Fuels

Ethanol values trended upward for most of the year, experiencing its best quarterly performance since the end of 2010. Since early January, front month CBOT ethanol values increased $.272 per gallon, or nearly 12.5%, with ethanol for April delivery settling at $2.4510 per gallon on March 28th. Prices were boosted in part due to consistently declining inventories that tally well beneath the lowest values seen over the past several years for this time of year.

U.S. Ethanol Stock Level

“ The USDA forecasts farmers will sow 97.282 million acres this year, up from 97.155 million in 2012.”

Source: EIA

U.S. ethanol stocks decreased eight consecutive weeks through March 22nd, to 17.4 MB currently.

Inventory has dropped steeply over the last year, down 5.2 MB or 23% from this same time in 2012.

Corn After a general upward trend to start the year, ethanol values plummeted on the last trading day of the quarter as the USDA said corn inventories were bigger than analysts forecasted and that farmers will plant the most corn since 1936. On March 28th, the day the report was released, May CBOT corn futures traded limit down $.40 to settle at $6.9525 per bushel; consequently, CBOT ethanol for May delivery, the most active contract on the exchange, traded down 5.33% to settle at $2.433 per gallon. Corn inventory fell to a nineyear low of 5.399 billion bushels in the U.S. as the drought cut output last year. This would be typically bullish news as the inventory number is down 10% from a year earlier, but analysts were expecting much worse. As highlighted in a Bloomberg survey, the industry anticipated a drop to 4.995 billion on concern that ethanol producers and animal feed demand would more drastically erode inventories. Adding to the bearish news, the USDA forecasts farmers will sow 97.282 million acres this year, up from 97.155 million in 2012.

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Renewable Fuels

“RIN-sanity” The historically sleepy market for D6 Ethanol RINs received unusual attention throughout Q1 as prices for the 2013 vintage skyrocketed to over $1 per RIN, an increase of nearly 1,500% according to settlements. The jump in prices is attributed to concern that the industry has reached the “ethanol blendwall” as most of the gasoline in the U.S. is already blended with 10% ethanol. However, the Renewable Fuel Standard mandates that an increasing amount of ethanol be blended each year, even as overall gasoline demand declines, vehicle fuel economy increases, and many hurdles exist to utilizing higher ethanol blends – mainly retail infrastructure and engine warranties.

2013 RIN Prices

“ The Renewable Fuel Standard mandates that an increasing amount of ethanol be blended each year, even as overall gasoline demand declines, vehicle fuel economy increases, and many hurdles exist to utilizing higher ethanol blends – mainly retail infrastructure and engine warranties.”

Source: EIA

RINs are the basic currency for compliance with the current Renewable Fuel Standard (RFS2). Under RFS2, signed into law in 2007, obligated parties – essentially petroleum refiners or importers – are required to have RINs for a certain percentage of gasoline or diesel they sell. Obligated parties can blend renewable fuel to obtain the RIN or buy RINs from others in the marketplace that have more than they need. RFS2 mandates that the U.S. consume 13.8 billion gallons of ethanol in 2013.

Jumping into the “RIN-sanity” discussion was everyone from stock analysts to politicians. For instance, on March 13th, Macquarie equity analysts released a note downgrading the stocks of certain refiners based on their exposure to RIN prices. This is despite the fact refiners had been among the strongest U.S. stocks running up to the RIN spike. “We find it frustrating that an ancillary issue related to a mandated government program that has essentially nothing to do with fundamentals is threatening to derail the bull run on the refiners,” said Chi Chow, a Macquarie analyst. And never far from the spotlight, politicians also decided to address the rising cost of RINs. Senators David Vitter (R-LA) and Lisa Murkowski (R-AK) urged the EPA in a letter to take decisive action to protect consumers from the cost of the credits.

"We ask that you utilize any and all existing regulatory authority and flexibility to address the issue of rising RIN costs and alleviate the threat of increased consumer fuel costs.”

Ethanol industry groups responded by claiming the ethanol blendwall has been erected by obligated parties themselves. In mid-March, on a conference call with reporters, Bob Dinneen, President of the Renewable Fuels Association, said that refiners are using RINs to create “hysteria” and “undermine” RFS2.

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Price Trends 321 WTI Crack for Q1

33.9882 32.5248

29.636

Source: Bloomberg Finance L.P.

Ethanol (DL) vs. RBOB (XB) for Q1

2.449 291.53

Source: Bloomberg Finance L.P. 37

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Price Trends DOE Gasoline Inventories, Total U.S.

-0.226M 0.220M 0.221M 0.215M 0.216M

0.208M

Source: Bloomberg Finance L.P.

DOE ULSD Inventories, Total U.S.

0.101M 96847.00 95332.00 93648.00 91877.00

73545.00

Source: Bloomberg Finance L.P. 38

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Price Trends Crude Futures Curve on the First and Last Day of Quarter

Source: Bloomberg Finance L.P.

HO Futures Curve on the First and Last Day of Quarter

Source: Bloomberg Finance L.P. 39

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Price Trends HO, Bean Oil, Biodiesel 2013 RINs for Q1

0.8000

50.11 291.52

Source: Bloomberg Finance L.P.

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Mansfield’s National Supply Team Mansfield’s supply team brings unique experience and industry expertise to the table. From contract pricing and hedging to trading of fuel, renewables and alternatives such as CNG and LNG, the Mansfield supply team covers the gamut of knowledge that is required to manage today’s complex national fuel supply chain. Although they work as a national team, each member’s regional focus enables Mansfield to deliver geographic based supply solutions by more efficiently managing market specific refining, shipping and terminal/assets.

Andy Milton VP of Supply & Distribution Andy Milton heads the supply group for Mansfield and during his tenure the company has grown from 1.3 billion gallons to over 2.5 billion gallons per year. Andy’s industry experience spans all aspects of the fuel supply business from truck dispatch, analytics, and index pricing to hedging and bulk purchasing. Prior to Mansfield, Andy worked at RaceTrac Petroleum. Andy’s expertise in purchasing via pipeline, vessel, and the coordination via futures and options for hedging purchases enables him to successfully lead a team of experienced and motivated supply personnel at Mansfield. Andy’s team handles a wide geographic area of all 50 states and Canada, including all gasoline products, ULSD, kerosene, Heating Oil, biodiesel, Ethanol, and Natural Gas. Andy’s education began at Young Harris College and later at Georgia Southern University where he received a BS in Sports Management.

Sara Hordinksi VP of Western US Supply Sara Hordinski’s extensive background in supply and trading, futures hedging and rack marketing, brings a unique perspective to Mansfield’s supply department. Although new to Mansfield’s supply department, Sara has more than twenty-five years’ experience in the oil & gas refined products industry. She has marketed refined products throughout much of the United States by pipeline, truck, and rail. In addition, she worked with numerous suppliers, refiners, jobbers, c-store owners, and distributors nationwide to develop competitive contract pricing and hedging programs individual to their needs.

Dan Luther Manager of Supply & Distribution Dan Luther is responsible for purchasing, hedging, and the distribution of natural gas and renewable fuels. Before joining Mansfield, Dan was Director of Operations at Aska Energy and also worked at RaceTrac Petroleum, where he helped manage all barge, rail, and truck fuel deliveries before assuming ethanol trading responsibilities, including purchasing product to fulfill RaceTrac’s demand while trading product across other U.S. markets. Dan holds a BSBA in Supply Chain Management and Marketing from Ohio State University and is currently working towards his MBA at Georgia Tech.

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Hannah Hauman Manager of Supply & Distribution Hannah Hauman serves as the Midcontinent Supply Manager, based out of Houston, TX. Hannah manages all refined products trading, supply distribution, contracts and daily rack purchases. In addition, Hannah manages Mansfield’s fixed price shorts nationwide. Prior to joining Mansfield, Hannah worked for Marathon Petroleum Company, RaceTrac Petroleum, and Atlas Oil Company in a wide variety of functions ranging from truck dispatch to speculative futures trading. Hannah holds a BS in Business Management from The University of Findlay and is currently pursuing her graduate degree at the University of Houston.

Jorge Pradilla Supply Risk Supervisor Jorge Pradilla started at Mansfield as an intern where he assisted with tracking supplier postings and market analytics. Jorge progressed to become a Supply Risk Supervisor focusing on Mansfield’s futures and clearport activities including reconciliation, broker dealings and trade executions. Jorge oversees the company’s hedging portfolio as well as tracks liabilities, fixed price contracts and analyzes market trends.

Jorge also authors the FUELSNews Daily. Born in Colombia, Jorge holds a BS in Marketing from Piedmont College and an MBA in Managerial Leadership.

Chris Carter Southeast Supply Manager Chris Carter serves as the Southeast Supply Manager responsible for refined product purchases including contracts, day deals and rack purchases. The Southeast region covers Florida, Georgia, Mississippi, Alabama, Tennessee, South Carolina, North Carolina, Virginia and Maryland. His responsibilities also include supply contracts and current bids. Chris manages pipeline shipments of gas and diesel on the Colonial, Plantation and Central Florida Pipelines. Chris joined Mansfield in 2009 as a Supply Optimization Analyst and earned his BA in Business Management from North Georgia College and State University.

Evan Smiles Northeast Supply Supervisor Evan Smiles began his career with Mansfield as an intern in the supply department back in the winter of 2011, assisting in the Southeast region. Evan quickly advanced into the role of Northeast Supply Optimization Analyst and currently holds the position of Northeast Supply Supervisor, handling various tasks including supply bids, day deal purchasing, long haul analysis, contract negotiations/fulfillment and supply optimization. Evan earned a BS in Sports Management and BBA in Finance from the University of Georgia.

Scott Van Berkel Director of Canadian Operations Scott recently joined Mansfield after a 32 year career with Shell Canada Ltd. Scott’s broad expertise spans a variety of areas including marketing, sales, logistics and customer service. Scott held numerous management positions with both Shell Canada and their parent company, Royal Dutch Shell. Scott’s extensive knowledge of the Canadian market, coupled with his experience working in the Commercial, Industrial and Retail businesses, makes him an invaluable asset to the supply team. Scott holds a BS in Agricultural Economics from the University of Manitoba.

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FUELSNews 360° M A R K E T N E W S & I N F O R M AT I O N

Mansfield Energy Corp. www.mansfieldoil.com www.fuelsnews.com 678.450.2000 1025 Airport Pkwy SW Gainesville, GA 30501 United States of America

©2013 Mansfield Energy Corp.

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Disclaimer: The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contract.