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Exhibit 96: OPEC 2016 Production Cut Agreement and Recent Changes If fully implemented, OPEC's proposed cut would reverse production growth from the prior 6 months. Million Barrels/Day 14 m Production Change in 6 Months Leading up to the November 2016 OPEC Meeting 12 m November 2016 Agreed Cut 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 ran raq Libya UAE Total Algeria Angola Ecuador Kuwait Nigeria Qatar Saudi Venezuela Data as of November 30, 2016. Source: Investment Strategy Group, Bloomberg, OPEC. Exhibit 97: US Energy Sector Ratio of Capital Spending (Capex) to Depreciation Low capex levels suggest there is upside to investment. Ratio 25 Capex-to-Depreciation Ratio === Long-Term Average 3.0 25 2.0 0.0 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Data through September 30, 2016. Source: Investment Strategy Group, Empirical Research Partners. suggest the transition toward a balanced market is underway. The same could be said for the dramatic cuts in US drilling budgets, which have precipitated notable declines in US shale output (see Exhibit 94). Lower oil prices have also supported above- average global demand growth, helping to absorb excess inventories. Lastly, OPEC agreed to lower production in November 2016, while also securing a promise from its significant non-OPEC counterparts to do the same. Taken together, these developments support our forecast for moderately higher oil prices in 2017. This balancing act is still precarious, however. Oil inventories stand well above seasonal averages, so failure to honor the announced production cuts could delay the recovery in oil prices or, even worse, cause renewed declines. The risk of poor compliance is not trivial, given that producers have exceeded their quota 90% of the time by an average of 1 million barrels per day (mmbd) since 2000 (see Exhibit 95). The pledges from Russia and certain smaller non-OPEC producers are particularly suspect, as similar promises to cut their Oil is finding its footing again after having stumbled dramatically over the last two years. own output along with OPEC have been broken in the past. Moreover, while the announced cuts are significant—the OPEC agreement would reduce production by up to 1.2 mmbd, equivalent to about one year of average global demand growth— they are largely a reversal of production growth seen over the last six months (see Exhibit 96). Meanwhile, Libya and Nigeria were excluded from these new OPEC quotas given sizable domestic disruptions that have depressed their production. Recent signs of improvement, however, suggest a rebound in their production cannot be dismissed. Therefore, the announced cuts are not a panacea to the current oil imbalance, particularly if US shale output increases meaningfully in response. This last point is important, as US shale accounted for 60% of global production growth between 2012 and 2015 despite representing less than 5% of the total output. Although US production is now declining, two factors may arrest its slide in 2017. First, the breakeven price for shale drilling has fallen to an average of $50 per barrel, reflecting a 20% decline in production costs and improvements to the shale model, including faster drilling, larger wells and better resource recovery. In response, more than 200 oil rigs have been placed in service since their number troughed in May 2016.’ Second, capital spending by the US energy sector is Outlook | Investment Strategy Group 75 HOUSE_OVERSIGHT_014608