$UUUU Energy Industry – Exploration and Production 2021 Q1 Review and Outlook

ENERGY INDUSTRY OUTLOOK

Exploration and Production: 2021-1Q Review and Outlook

Oil Prices

Oil prices continued their upward trend in the first quarter with WTI prices reaching mid-sixties in early March before closing the quarter closer to $60/bbl. Brent oil prices are trading approximately 5% above WTI prices. Improving global economic trends have improved the outlook for oil demand. OPEC, which initiated supply reductions last year, has maintained those reductions despite the improved demand outlook. Near-term, temporary events such as cold weather and the blockage of the SUEZ canal have helped keep spot prices high. The oil future curve is flat with longer-term pricing just below $60/bbl.

Meanwhile, domestic producers have been slow to react to higher oil prices. There are slightly more than half the number of active oil rigs in the United States versus this time last year (324 verses 624) and only 25% of the rigs operating at peak (1600). Note in the graph below how WTI oil prices began rising in the fall of 2020, but the rig count barely responded. International rig counts show a similar story. We are somewhat at a loss to explain the slow supply reaction to higher prices. Perhaps COVID issues are making it difficult to man the crews needed to run rigs. Perhaps producers are wary of supply bottlenecks that pushed oil prices into negative levels last fall. Perhaps producers believe OPEC will punish U.S. producers that expand when prices cross $50/bbl. by opening up supply and driving prices back down below $40/bbl. Whatever the reason, the lack of a supply response has the effect of keeping oil prices above the levels we believe would occur when supply and demand are in balance.

Natural Gas Prices

Natural gas prices followed oil prices up in January and February due to much-publicized cold fronts across the Midwest. The May contract peaked at $3.22/mcf on February 16th. However, prices fell in March when warmer weather took over. Current prices are near $2.60/mcf, close to where they began the quarter. Natural gas futures rise modestly as they stretch into the fall approaching $2.75/mcf. There were 92 gas drilling rigs in operation as of March 26th down from 102 rigs a year ago.

The recent decline in natural gas prices mirrors what can be seen in the natural gas storage numbers. Storage began the winter near full capacity but has fallen sharply in January and February due to cold weather. At current levels, storage is near 5-year averages. As we enter the end of the heating season, there is little chance that levels will move away from average levels.

Energy Stocks

Energy stocks, as measured by the XLE Energy Index, rose alongside oil prices climbing 32% during the quarter. The chart below shows that the performance of energy stocks in comparison to the S&P Composite Index.

Outlook

The rebound in oil prices came faster than expected and is staying higher than we would have expected. We have been adjusting our models to reflect higher prices but are maintaining our long-term oil price forecast of $50 per barrel and $2.50 per mcf. Energy companies should start reporting positive cash flow at these prices and increasing drilling budgets.

Our near-term outlook for energy stocks remains positive. We expect companies to report favorable results for the next few quarters. Longer-term, we have concern that oil demand will be constrained by power generation competition from renewable energy and decreased demand for gasoline and diesel due to a growth in electric vehicles. At the same time, increased supply from OPEC and continued drilling productivity will mean lower energy prices. We recommend investors stay focused on energy companies with solid balance sheets, low operating costs and protected prices.

NOBLE QUARTERLY HIGHLIGHTS

Capstone Green Energy – NasdaqGS: CGRN

Industry: Energy – Green energy; Heavy electrical equipment

Capstone Green Energy (Capstone or CGRN) is a leading producer of microturbine-based low emission energy systems. Microturbines are small combustion turbines that use a variety of fuels such as natural gas, biogas, RNG and hydrogen to generate electricity, thermal energy, and air-conditioning. Microturbines are customizable and efficient, reducing the emission of pollutants and greenhouse gases. Capstone’s microturbines are scalable, and systems range from 30 kilowatts to 10 megawatts. Capstone has shipped nearly 10,000 units to 83 countries.

1st Quarter News Highlights:

March 11, 2021: Capstone Turbine Corp. announces that it continues to expand the range of non-fossil fuels able to power its innovative microturbine based energy solutions. With the signing of a new OEM agreement with Professor Dr. Berg & Kießling GmbH (B+K), Capstone immediately received an order for the first Capstone microturbine kit under the new agreement. The Capstone microturbines will be integrated into the innovative B+K ClinX product. The ClinX product uses renewable sources instead of fossil fuels and thus prevents unnecessary CO2 emissions.

Energy Fuels, Inc. – NYSE American: UUUU

Industry: Energy – Mineral energy; Uranium; Rare earth minerals and metals

Energy Fuels is a U.S.-based uranium mining company, supplying uranium concentrate to major nuclear utilities. The company also produces vanadium from certain of its projects, as market conditions warrant. Energy Fuels owns the White Mesa Mill in Utah, the Nichols Ranch in-situ recovery (ISR) Project in Wyoming, and the Alta Mesa ISR Project in Texas. The White Mesa Mill is the only conventional uranium mill operating in the U.S. and has the ability to produce vanadium when market conditions warrant. Energy Fuels’ common stock trades on the NYSE American under the trading symbol “UUUU” and the Toronto Stock Exchange under the trading symbol “EFR”.

1st Quarter News Highlights:

March 9, 2021: The company announces that the first shipments of natural monazite ore arrived at the Company’s White Mesa Mill (the “Mill”) in Blanding, Utah this past weekend. This material was separated by The Chemours Company at its Offerman Mineral Sand Plant in Georgia and transported by truck to the Mill. Energy Fuels expects to gradually ramp-up production of an intermediate rare earth element (“REE”) product, called a “mixed REE carbonate.” This product will then advance to REE separation, which is the next stage in the REE value chain. Energy Fuels also expects to recover the uranium in the ore, which will be used as fuel for the generation of clean, carbon-free nuclear energy.

InPlay Oil – OTCQX: IPOOF

Industry: Energy – Oil and gas; Exploration and production

InPlay Oil is a junior oil and gas exploration and production company with operations in Alberta focused on light oil production. The company operates long-lived, low-decline properties with drilling development and enhanced oil recovery potential as well as undeveloped lands with exploration possibilities. The common shares of InPlay trade on the Toronto Stock Exchange under the symbol IPO and the OTCQZ Exchange under the symbol IPOOF.

1st Quarter News Highlights:

March 23, 2021: InPlay Oil held a webcast for the investment community where management expressed its desire to pay down debt and invest in wells with high returns. Management expressed their belief that energy prices are in the sweet spot for the company in the low $60/BBL and believes operating and drilling costs will continue to decline with a decrease in competition.

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Noble Capital Markets Energy Newsletter Q1 2021

This newsletter was prepared and provided by Noble Capital Markets, Inc. For any questions and/or requests regarding this newsletter, please contact >Francisco Penafiel

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All statements or opinions contained herein that include the words “ we”,“ or “ are solely the responsibility of NOBLE Capital Markets, Inc and do not necessarily reflect statements or opinions expressed by any person or party affiliated with companies mentioned in this report Any opinions expressed herein are subject to change without notice All information provided herein is based on public and non public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on their own appraisal of the implications and risks of such decision This publication is intended for information purposes only and shall not constitute an offer to buy/ sell or the solicitation of an offer to buy/sell any security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or domicile This publication and all information, comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without prior notice Past performance is not indicative of future results.

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