Who Will Do The Work 2018-2022 North American Pipeline & Utility - PowerPoint PPT Presentation

Florida Energy Pipeline Association Who Will Do The Work 2018-2022 North American Pipeline & Utility Workforce Supply vs. Demand Florida Energy Pipeline Association (FEPA) 2018 FEPA Summer Symposium Mark Bridgers - Continuum Capital Hammock Beach Resort, FL July 19, 2018 www.ContinuumCapital.net

Objective & Agenda Objectives – Introduce the audience to the likely landscape that Pipeline Operators, Engineers, and Contractors will face over the next decade where volatility and change will stress the financial, leadership, and people resources of these firms. Agenda – Global Economy – Energy, Pipeline, Utility Construction Economy – Workforce Development History & Solutions • Appendix I – Pipeline Labor Availability Research Mark Bridgers 2018 Who Will Do The Work 2 7/19/2018 www.ContinuumCapital.net

Meeting Agenda Global Economy Energy, Pipeline, Utility Construction Economy Workforce Development History & Solutions Mark Bridgers 2018 Who Will Do The Work 3 7/19/2018 www.ContinuumCapital.net

Overall Economic Summary 2018 & 2019 includes great news – Excitement and optimism abound for general economy and construction industry…consumer confidence is at a 17 year high – U.S. GDP growth accelerated at the end of 2017 and is starting 2018 at same rate and will continue throughout the year – Global growth is continuing and performing better than previous years…also showing up in some commodity price increases – Low energy prices persist, even with the movement of oil up…natural gas will remain low – $1.2 trillion in construction spending in 2017 and 2018 forecast at slightly higher level 2018 & 2019 – Political environment in Washington poisoned, will be problematic for next three years and 2018 mid-term elections will not bring stability 2019 & Beyond?? – 8+ years into economic expansion, all expansions end with a recession, when? – 2018 will show faster economic growth, improving conditions, and continued optimism – Rule of thumb: The likelihood of economic slowdown is inversely correlated to the number of tower cranes observed – Short and shallow recession in 2019/2020 followed by return to faster economic growth Mark Bridgers 2018 Who Will Do The Work 4 7/19/2018 www.ContinuumCapital.net

Trump as “Constructor in Chief” Continued good news and optimism – It is a good time to be in the energy industry - 2018, and 2019 will be some of the best years for design and construction activity driven by: – Economic Conditions – Faster economic growth in 2017 occurred and 2018 is exhibiting even faster growth, we will see continued spending by owners on capital assets • Tax Bill – Already having desired effect and showing up in American’s wallet, job growth numbers, and capital spending – Infrastructure Spending – Proposed plan places spending burden on states – both positive and negative in that selected projects driven by local selection…funding also local – Energy Policy – FERC quorum restored in August 2017, continued support for energy infrastructure, curtailing of some EPA overregulation has sets the stage to drive construction activity over the next 2-4 years – Regulatory Oversight – More flexible regulation drives additional construction activity and loosening of spending from owners who have been sitting on their hands Risks: North Korea, Iran, Trade War, Inflation, Interest Rates “I think it's a myth that expansions die of old age… So the fact that this has been quite a long expansion doesn’t lead me to believe that… its days are numbered.” Janet Yellen Mark Bridgers 2018 Who Will Do The Work 5 7/19/2018 www.ContinuumCapital.net

Gross Domestic Product (GDP) 2016 GDP of only 1.6%; 2017 closed at 2.3% with 3+% growth at the end of the year; 2018 anticipated at 3% for full year Consumer confidence continues to rise and is approaching 1999 peak - 17 years ago! 10.0 4.9 5.0 4.6 3.9 1.7 3.9 4.0 3.5 3.2 3.1 3.3 2.9 0.8 2.8 2.6 2.2 2.0 1.4 1.2 5.0 0.4 0.2 0.8 -0.5 0.8 0.1 Percent 0.0 -5.4 -1.2 -2.7 -5.0 -1.5 Janet Yellen takes office Brexit announced Jerome Powell takes Ben Bernanke takes office -8.2 -10.0 office 2006q1 2007q1 2008q1 2009q1 2010q1 2011q1 2012q1 2013q1 2014q1 2015q1 2016q1 2017q1 2018q1 160.0 CCI Annual 140.0 Average 120.0 100.0 Index 80.0 60.0 40.0 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Mark Bridgers 2018 Who Will Do The Work 6 7/19/2018 www.ContinuumCapital.net

Inflation Still exceptionally low, moving up in 2018 and will continue up through remainder of they year ending around 3%…expect no dramatic change until 2019 or 2020 With price of oil moving up, energy goods are showing some inflation 7.5 CPI 5.0 Percent 2.5 0.0 -2.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 40.0 CPI 20.0 Energy Goods Percent 0.0 -20.0 -40.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mark Bridgers 2018 Who Will Do The Work 7 7/19/2018 www.ContinuumCapital.net

Stock Market Performance Superb 2017…2018 very volatile but why? 2017 Drivers…combination of optimism, continued economic performance and continued low interest rates 2018 Drivers…sense bull market must end – Technical correction (-10%) in January/February – recovered half of correction by end of February – Federal reserve raised rates 2x already and expect 2 more – rates are still and will remain at historically low figures throughout 2018. – Federal reserve has announced intention to unwind last 10 years of bond purchases…what will the impact be? 2018 markets will remain highly volatile as traders attempt to second guess the market and perfect exit and entry timing Mark Bridgers 2018 Who Will Do The Work 8 7/19/2018 www.ContinuumCapital.net

Residential Construction Single family constrained by labor, lot, and Lumber availability – Inventory shortage continues flat or shrinking and is holding prices up and in hot markets moving prices much higher Multi-family to serve millennial and other renter is hot and may be approaching overbuilt? 2017 total starts 1.2 million; 2018 expected to show increase to 1.3 million range 3000 Housing Starts ('000s) Starts (000s) 2000 1000 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Mark Bridgers 2018 Who Will Do The Work 9 7/19/2018 www.ContinuumCapital.net

Global vs. Local Commodities Global and US growth accelerating is pushing up commodity prices Tariffs are pushing up commodity prices Price increases are not yet significant enough to hurt growth but an all out trade war would be catastrophic <-Annual Monthly-> All Construction Materials 280.0 Index: Base of 100.0 in 1982 Steel Products 260.0 NonFerrous (Copper, etc.) 240.0 Lumber 220.0 200.0 180.0 160.0 140.0 120.0 100.0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Source: Continuum analysis and presentation of US Department of Commerce raw data. Mark Bridgers 2018 Who Will Do The Work 10 7/19/2018 www.ContinuumCapital.net

Unemployment Continuing to improve and pulling workers back into workforce – 200,000+ jobs added in November & December 2017; 215,000 monthly average jobs addition for 2018 year to date – Labor Participation inching up? Still 4% below peak – each point = 3-4 million workers rejoining the labor force – approximately 15 million people total 24% Const. Unemployment 19% Unemployment Percent 14% 9% 4% 2011 2012 2013 2014 2015 2016 2017 2018 67 66.4 66 Percent 65 64 62.6 63 US Labor Participation Rate 62 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mark Bridgers 2018 Who Will Do The Work 11 7/19/2018 www.ContinuumCapital.net

Meeting Agenda Global Economy Energy, Pipeline, Utility Construction Economy Workforce Development History & Solutions Mark Bridgers 2018 Who Will Do The Work 12 7/19/2018 www.ContinuumCapital.net

Domestic Oil & Gas Production U.S. can potentially out produce competing countries Still competitive even at low energy prices – rig counts moving up more aggressively as oil price moves up More activity on major plants and other assets in Utica and TX/OK footprint; gathering, cracking, or transporting product – will help multiple markets 2,400 Gas Annual Average 2,000 US Rig Count 1,600 Oil Annual Average 1,200 800 400 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $150 $15 Crude Oil (WTI) Natural Gas (Henry Hub) $100 $10 $50 $5 $0 $0 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Mark Bridgers 2018 Who Will Do The Work 13 7/19/2018 www.ContinuumCapital.net