POSITIONED FOR GROWTH BNSF Railway John Miller Group Vice President Agricultural Products BNSF Railway 1
Historic Rail Industry Volumes U.S. Class I Weekly Rail Volumes 800,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 750,000 (000) Units 700,000 650,000 600,000 550,000 500,000 450,000 2 Source: AAR, CS-54 Data through Week 21, May 28, 2016
Recent Volume Trends Across the U.S. Rail Industry 10% Year-over-Year Percent Change Four-Week Rolling Average Volume U.S. Class I Rail Industry 2015 2016-7.3% year-over-year Last 4 weeks through Week 21-14% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 3 6 9 12 15 18 21 Weeks 3 Source: Association of American Railroads (AAR) through week 21; May 28, 2016
BNSF Weekly Volume Trends 220 2006 Peak 2015 Peak 219K 215K 205 190 Units 175 160 145 BNSF Railway Units Weekly Railroad Traffic Actuals Through Week 21 2007 2015 2016 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 4 Source: Association of American Railroads (AAR) through May 28, 2016
Economic Conditions The Good, The Bad, and The Ugly U.S. Railroads (CS54 Groups, % Change in Units Handled) 2016 YTD, Most Recent 21 Weeks 2016 vs. 2015 (through May 28, 2016) ALL OTHER WASTE AND SCRAP FOOD AND KINDRED CHEMICALS LUMBER AND WOOD GRAIN GRAIN MILL PRODUCTS PULP AND PAPER CRUSHED STONE METALLIC ORES TRAILERS -32.7% -26.3% -20.4% -20.6% -13.7% 1.2% 0.9% 0.8% 0.5% -1.3% 0.2% -6.0% -2.6% -6.3% -6.4% -6.6% -6.8% -7.1% 7.6% 9.8% 18.0% 22.5% -40% 30% 5 Source: Association of American Railroads (AAR) through May 28, 2016
U.S. Economic Outlook Trend 2016 2016 Annual Forecast Changes Over Time y/y percent change GDP IPI Less Tech 6 Source: IHS Economics, May 2016
The Rail Industry Sees Cyclical Movements Similar to GDP Percent Change Year-over-Year 12% -17% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Rail Volumes U.S. GDP 7
Exchange Rates Wall Street Journal U.S. Dollar Index 00 U.S. Dollar Index 91 82 73 June 3, 2016 86.15-0.7% y/y -5% YTD +19% vs. Jul '14 64 01/01/2013 03/19/2013 06/04/2013 08/20/2013 11/05/2013 01/21/2014 04/08/2014 06/24/2014 09/09/2014 11/25/2014 02/06/2015 04/24/2015 07/10/2015 09/25/2015 12/11/2015 02/26/2016 05/13/2016 8 Source: Wall Street Journal, BUXX; June 3, 2016
BNSF is a Leading U.S. Railroad A Berkshire Hathaway company 32,500 route miles in 28 states and operates in three Canadian provinces Approximately 8,199 locomotives 13,000 bridges and 88 tunnels Moves one-fourth of the nation s rail freight Operates about 1,200 freight trains per day Serves more than 40 ports and 25 intermodal facilities Leads rail industry in technological innovation Unlike other forms of transportation, BNSF trains operate on an infrastructure financed almost entirely by the railroad 2015 BNSF Density Flow 9
What BNSF Carried in 2015 (000) Units CONSUMER PRODUCTS 5,066 COAL 2,286 Y/Y CHANGE +0.5% Y/Y CHANGE +0.7% INDUSTRIAL PRODUCTS 1,873 Y/Y CHANGE -5.9% AGRICULTURAL PRODUCTS 1,044 Y/Y CHANGE +7.2% (thousands of units) 10
Consumer Products Commodity Breakdown Domestic International Automotive 11
BNSF Network Consumer Products 2015 BNSF Consumer Products Density Flow 12
Consumer Products The long-term outlook for Domestic intermodal rong given the demand for Highway-to-Rail versions International intermodal will grow with the economy and Trans- Pacific Trade Regulatory pressure on Truck Industry Hours of Service, Electronic Logging Device, Drug and Alcohol Database, Speed Limiters 13
Consumer Products Market Drivers REAL GDP VS. "LESS-TECH" MANUFACTURING OUTPUT GDP GROWTH VS. INTERMODAL GROWTH 4.0% Real GDP Less-Tech Mfg. 16% 8% 0.0% 50 29 57 86 14 43 71 37 Jul-08 Jan-08 Jul-09 Jan-09 Jul-10 Jan-11 Jul-11 Jan-10 14 Source: IHS Economics, FTR 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 RETAILERS INVENTORIES Jul-12 Jan-12 Jul-13 Jan-13 Jul-14 Jan-14 Jul-15 Jan-15 Jul-16 Jan-16 Jul-17 Jan-17 Jul-18 Jan-18 Jul-19 Jan-19 Jan-20 1% -7% -15% 300 225 150 75 '- '(75) '(150) '(225) '(300) 2000 2001 2002 2003 2004 U.S. GDP 2005 2006 2007 2008 2009 2010 NA Intermodal Driver Shortage (-) / Surplus (+) 2011 2012 2013 2014 2015 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1
What BNSF Carried in 2015 (000) Units CONSUMER PRODUCTS 5,066 COAL 2,286 Y/Y CHANGE +0.5% Y/Y CHANGE +0.7% INDUSTRIAL PRODUCTS 1,873 Y/Y CHANGE -5.9% AGRICULTURAL PRODUCTS 1,044 Y/Y CHANGE +7.2% (thousands of units) 15
BNSF Network - Coal 2015 BNSF Coal Density Flow 16
Coal Decreased electricity generation due to record mild winter and low natural gas prices has resulted in all-time high coal inventory levels Unfavorable export market driven by worldwide supply and strong dollar Increased Federal regulation leads to more renewable capacity and coal plant closures in the long-term 17
Coal Energy Markets Low natural gas prices and softening utility generation NATURAL GAS PRICE PRB INVENTORIES $6 115 $5 94 $3 $2 $0 400,000 315,000 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 WEEKLY U.S. POWER GENERATION Days 73 51 30 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Days of Burn Normal Days of Burn 45 38 PRB COAL BURN 230,000 kwh 145,000 Days 31 23 60,000 Jan May Jun Jul Nov Dec 2015 5 YR MIN 5 YR Range 2016 5 YR AVG 18 Source: Nymex; Energy Ventures Analysis; EEI 16 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
What BNSF Carried in 2015 (000) Units CONSUMER PRODUCTS 5,066 COAL 2,286 Y/Y CHANGE +0.5% Y/Y CHANGE +0.7% INDUSTRIAL PRODUCTS 1,873 Y/Y CHANGE -5.9% AGRICULTURAL PRODUCTS 1,044 Y/Y CHANGE +7.2% (thousands of units) 19
Industrial Products Commodity Breakdown Food & Beverage Beer & Wine Canned Goods Perishables Vegetables Construction Products Pipe, Sheet, Structural, Scrap, Taconite, Aluminum, Sand, Salt, Clays, Crushed Stone, Cement, Lime, Gypsum Petroleum Products Crude Oil LPG Asphalt Alcohols & Solvents Building Products Paper, Pulp, Lumber, Panel, Rail Equipment, Transformers, Generators, Roofing Materials, Waste Chemicals & Plastics Acids, Intermediates, Caustic Soda, PVC, Polypropylene, Polystyrene, Polyethylene 20
BNSF Network Industrial Products 2015 BNSF Industrial Products Density Flow 21
Industrial Products Dramatically lower oil prices have driven down demand for petroleum and its associated products (such as frac sand and steel pipe) Demand for residential and commercial construction materials (aggregates, cement and lumber) remains solid The strong U.S. Dollar is limiting steel exports, as well as steel inputs such as taconite 22
Active Oil Rig Counts Bottoming Out Current rig count supported by improved supply-demand and pricing environment 1,800 U.S. OIL RIG COUNT 120 WEEKLY WTI SPOT PRICE 2009-CURRENT 1,350 90 Rig Count Million bbls/day 900 450 8 6.5 5 3.5 2 0 1/2/09 8/14/09 3/26/10 11/5/10 6/17/11 CRUDE OIL PRODUCTION (Lower 48 States-Onshore) 23 Source: Baker Hughes, BTU Analytics, EIA.gov 1/27/12 9/7/12 4/19/13 11/27/13 7/11/14 2/20/15 10/2/15 5/13/16 May-16 Nov-15 May-15 Nov-14 May-14 Nov-13 May-13 Nov-12 May-12 Nov-11 May-11 Nov-10 May-10 Nov-09 May-09 $/bbl BBLS/day 60 30 0 1,000 750 500 250 '- Jan-09 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Oct-14 Apr-15 Oct-15 Apr-16 NEW WELL OIL PRODUCTION PER RIG Bakken Eagleford Niobrara Permian Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
Successful What BNSF Leadership Carried in 2015 Successful Business (000) Units CONSUMER PRODUCTS 5,066 COAL 2,286 Y/Y CHANGE +0.5% Y/Y CHANGE +0.7% INDUSTRIAL PRODUCTS 1,873 Y/Y CHANGE -5.9% AGRICULTURAL PRODUCTS 1,044 Y/Y CHANGE +7.2% (thousands of units) 24
Agricultural Products Commodity Breakdown Wheat Barley Corn Soybeans Milo Grain Bulk Foods Sweeteners Syrups Animal Products Starch Other Grain Products Oils Feeds Flour Specialty Grains Oilseeds & Meals Malt Fertilizer Ethanol 25
BNSF Network Agricultural Products 2015 BNSF Agricultural Products Density Flow 26
Agricultural Products U.S. grain supplies are at their highest levels in almost 30 years after three consecutive large crops, incenting farmers to store grain Grain exports remain challenged due to the strong U.S. dollar and high domestic/global supplies Global demand continues to outpace supply 27
Agricultural Products Market Drivers 80,000 WORLD GRAIN SUPPLY OUTPACING DEMAND Supply Demand 3,000 CHINESE SOYBEAN IMPORTS Million Bushels 75,000 70,000 65,000 Million Bushels 2,250 1,500 750 60,000 2011/12 2012/13 2013/14 2014/15 2015/16 '- 2011/12 2012/13 2013/14 2014/15 2015/16 Million Bushels 3,500 2,625 1,750 875 '- U.S. RECORD ENDING GRAIN STOCKS Corn Wheat Soybeans 2011/12 2012/13 28 Source: USDA.gov; www.investing.com 2013/14 2014/15 2015/16 $9 $8 Corn Price $6 $5 $3 STRONG DOLLAR VS. CORN PRICE Corn Price U.S. Dollar Index Jan-10 Jul-10 Jan-11 Aug-11 Feb-12 Sept-12 Mar-13 Oct-13 Apr-14 Nov-14 May-15 Nov-15 $11 $10 $9 $8 $7
Northern Migration of Crop Production 1950-2015 1950 1960 1970 1980 1990 2000 2010 2015 29
U.S. Farm Income Decreases USDA forecasting a 40% decrease in U.S. Farm INCOME in 2016 v. 2014 Total U.S. Farm DEBT will RISE $9B year over year totaling $373B in 2016 Total U.S. Farm EQUITY expected to decrease by 2% in 2016 30 Source: USDA (http://ers.usda.gov) U.S. and State-Level Farm Statistics February, 2016
Rail Industry Capital Spend Over the Years Record Railroad Spending on Infrastructure & Equipment* $ Billions $32.0 $26.5 $21.0 $15.5 $10.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Capital Spend * Capital spending + maintenance expenses. Data are for Class I railroads 31 Source: AAR
BNSF s Capital Investments Replacement Capital Expansion PTC Locomotive Equipment $ Billions $5.8 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 32
2016 Capital Investments 2016 Capital Commitment $4.2B 12% 8% 14% 66% Core Network and Related Assets Locomotive, Freight Car, and Other Equip Expansion and Efficiency PTC $2.8 billion Core Network & Related Assets $600 million Loco, Freight Car, & Other Equip $500 million Expansion & Efficiency $300 million Positive Train Control 33
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