bentek north american market overview & outlook...2008 q1 2010 q1 2011 q1 20 8 18 43 2,104 4,985...
TRANSCRIPT
1
BENTEK North American Market Overview & Outlook
To Illinois State UniversityInstitute for Regulatory Policy Studies
Springfield, ILOctober 30, 2012
2www.BENTEKENERGY.com
Agenda
Drilling Efficiencies and Oil & NGL Production Will Sustain Annual Growth of Gas Volumes
Demand Is Responding to Low Prices
Prices Will Be Low and Stable as Supply Continues to Overwhelm Demand
Changes in Intra-Regional Flow Dynamics Will Impact Local Prices, Particularly Out West
3www.BENTEKENERGY.com Source: BENTEK Cell Model
Massive Displacement Forcing Gas Into New Markets
4www.BENTEKENERGY.com
Supply
5www.BENTEKENERGY.comSource: BENTEK Supply/Demand Balance History
U.S. Production Slows But Sustains YOY Growth
50
52
54
56
58
60
62
64
66
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bcf
/d
2009 2010 2011 2012 YTD
2010 Avg: 57.1 Bcf/d
2009 Avg: 55.1 Bcf/d
2011 Avg: 61.6 Bcf/d
2012 Avg: 63.5 Bcf/d
6www.BENTEKENERGY.com
9/+1
214/+133
42/+14
70/-6
14/+3
6/+0
36/+11
28/-2
31/+22
103/+65
6/-23
2/-1
260/+200
27/+23
6/-2
43/+25
24/+9
7/+4
Active rig count: October 5, 2012 / Change in rig count from Jan. 1, 2010
Rig Increases Dry Gas Focused Areas
Rig Increases Liquids-Rich/Oil Focused Areas
Rig Declines Source: BENTEK, October 2012
3/-9
95/+11
70/+11
42/+24
75/-34
16/-21219/+96
470/+251
43/-50
13/-10PICEANCE
CALIFORNIA
MICHIGANPOWDER RIVER
GREEN RIVER
WIND RIVER
OTHER ROCKIESWILLISTON
SAN JUANUINTA
OTHER APPALACHIAN
D-J
MARCELLUS WET
MARCELLUS DRY
UTICA
ILLINOIS
ARK FAYETTEVILLE
ARK WOODFORD
OFFSHORE
TX GULFEAGLE FORD
PERMIAN
ANADARKO
FT WORTH
AL-MS-FL
LA GULF
EASTTX
ARKLA
OTHER MIDCONTINENT
TX GULF
30/-99TOTAL
2006CHANGE
+716
Source: BENTEK Regional Production Monitors, September 2012
Massive Shift of Rigs to Oil & Liquids Plays
7www.BENTEKENERGY.com
IRRs Shift Production to Oil/NGL-Rich Plays
89%Permian
Bakken56%
51%Niobrara
32%Uinta Cleve/Tonk98% Miss.Lime94%
Piceance4%
Eagle Ford 50%
Montney
16%
68%
Granite Wash
84%
Haynesville0%
Pinedale3%
Ark/Wood
1%Fayetteville
4%
Horn -1%WCSB
0%
Marcellus
7%
Source: Company Presentations, Quarterly Reports, and News Releases
Oil Play
NGL Play
Dry Gas Play
8www.BENTEKENERGY.com
Numerous Plays Become Attractive Again at $4 Gas
Haynesville0%
Pinedale
3%
Ark/Wood
1%
Fayetteville4%
Horn -1%WCSB
0%
Marcellus
7%
Source: Company Presentations, Quarterly Reports, and News Releases
@ $5
@ $4
@ Current $
22%41%
16% 29%
8%19%
27% 43%
9www.BENTEKENERGY.com
Drill Time(Days)
Wells Per Yr.Per Rig
Avg. LateralLength ( Feet)
30 Day Ave.Prod Rate
(Mcfd)
IP AdditionsPer Rig PerYr. (Mcf/d)
Drill &Complete
Costs ($MM)
2007 Q12008 Q12010 Q12011 Q1
208
18
43
2,104
4,985
1,006 $2.8
2,673
18,360
116,148
$2.6
Technology Gains Drive Gas ProductionSWN Energy
Fayetteville Shale
+137%
-58%
+166%
+8%
+138%
+533%
Source: Southwestern Energy Financials
10www.BENTEKENERGY.com
0
50
100
150
200
250
300
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 2012
Hor
izon
tal R
ig C
ount
Bcf
/d
Fayetteville Haynesville Marcellus Horizontal Rig Count
Shale Rig Counts Peaked in 2010 Yet Production Has Grown 8 Bcf/d Since 2010
Source: BENTEK Production Monitors
11www.BENTEKENERGY.com
0
10
20
30
40
50
60
70
80
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
History Forecast
Source: BENTEK Forward Curve Quarterly 2012.09.28
Associated Gas, Efficiencies, Stronger Prices Will Sustain Production Growth
+10 Bcf/d By 2017
12www.BENTEKENERGY.com
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bcf
/d
Net Exports To West Net Exports to Midwest Net Exports to Northeast
Historic Exports: 6.77 Bcf/dHistoric Decline: 0.67 Bcf/d
Forecast Exports: 4.29 Bcf/dForecast Decline: 0.78 Bcf/d
U.S. Substantially Less Reliant on Canadian Gas
Source: BENTEK Canadian Observer Suite and CellCast
History Forecast
13www.BENTEKENERGY.com
Demand
14www.BENTEKENERGY.com
-
10
20
30
40
50
60
70
80
90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
Power ResComm Industrial Exports to Mexico Pipe Loss
Power, Industrial, Mexican ExportsSpur Demand Growth
Does not include forecast LNG exportsSource: BENTEK Forward Curve Quarterly 2012.09.28
+9 Bcf/d Vs. 2012History Forecast
15www.BENTEKENERGY.com
Over 70 Industrial Demand Expansions Planned By 2017
Source: BENTEK Industrial End Users Report
16www.BENTEKENERGY.com
Industrial Demand Forecast to Add 0.3 Bcf/d/year
-
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
History: BENTEK Supply/Demand Balance Analytic Report HistoryForecast: BENTEK Forward Curve Quarterly, 2012.09.28
Demand bottoms out with recession
Summer baseload has
since increased 1.3 Bcf/d
Winter & Summer to average 1.3
Bcf/d above 2012
17www.BENTEKENERGY.com
Mexican Exports to Continue Rising
Up to 1 Bcf/d of Export Expansions By
2014
0
1
2
3
4
5
6
7
8
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
Mexican Demand
History Projected
0.0
0.5
1.0
1.5
2.0
2.5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
U.S. Exports to Mexico
History Forecast
Mexican Demand: SENERHistory: BENTEK Supply/Demand Balance Analytic Report History
Forecast: BENTEK Forward Curve Quarterly, 2012.09.28
18www.BENTEKENERGY.com
YOY Gas Demand from Power Up 5 Bcf/d (23%)
10
15
20
25
30
35
40
Bcf
/d
5 Yr. Avg. 2011 2012
Source: BENTEK Supply/Demand Balance History
2012 YTD: 26.7 Bcf/dVs. 2011 YTD: +5.0 Bcf/dVs. 5-Yr YTD: +6.7 Bcf/d
19www.BENTEKENERGY.com
-
500
1,000
1,500
2,000
2,500
3,000
0
5
10
15
20
25
30
35
40
Thou
sand
Ton
s Eq
uiva
lent
Bcf
/d
PRB CAPP NAPP Illinois Uinta Imports Other
Gas Prices Capable of Capturing Market Share
Source: EIA, BENTEK Power Burn Report
12-Month ForwardHH Avg$3.63
5.2 Bcf/d
2011 HH Avg$3.98
3.0 Bcf/d
20www.BENTEKENERGY.com
New Gas-Fired Generation Will Boost DemandUnder Construction
Year MW
2013 8,254
2014 6,488
2015 1,350
2016 624
2017 85
Total 19,293
Gas Burn Equivalent
1.7 Bcf/d
Under Construction + Proposed Gas Burn
Equivalent
5.9 Bcf/d
Gas Burn Equivalent assumes all plants are combined-cycle running at 50% utilization with heat rates of 7.5.Source: Platts & BENTEK Generation Data
21www.BENTEKENERGY.com
-
10
20
30
40
50
60
70
80
90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
Supply Demand (No LNG Exports)
Tightening Balance May Support Near-Term Prices;Long-Term Supply Surplus Grows
Source: BENTEK Forward Curve Quarterly 2012.09.28
+0.2 +0.1 -0.3+1.9 +1.8 -0.3 -- -0.9 +0.8 +1.1
22www.BENTEKENERGY.com
N.America Becomes Net LNG Exporter By 2016
(0.8)(0.4)0.00.40.81.21.6
Net LNG Exports (Bcf/d)
First Ex Q1 2016, Net Ex Q3 2016
Source: BENTEK Special Report “LNG Surge”
23www.BENTEKENERGY.com
Regional Dynamics
24www.BENTEKENERGY.com Source: BENTEK Cell Model
Massive Displacement Forcing Gas Into New Markets
25www.BENTEKENERGY.com
0
2
4
6
8
10
12
14
16
Bcf
/d
Northeast Production
Legacy Production Lean Marcellus Wet Marcellus Utica
Incremental 7.4 Bcf/d by 2016
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
Bcf
/d
Northeast Inflows
Canada Midcon Southeast LNG
Marcellus to Remain Cheapest Gas Due to Production Growth and Takeaway Constraints
Source: BENTEK Northeast Production Monitor and BENTEK Cell Model
26www.BENTEKENERGY.com
8
10
12
14
16
18
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bcf
/d
Alberta BC Other Montney Horn River Saskatchewan NWT NB NS
Actual Projection
Canadian Production Declines But Exceeds 12 Bcf/d
Source: BENTEK Canadian Production Monitor Monthly
Annual Production: 15.2 Bcf/dAnnual Decline: 0.52 Bcf/d
Annual Production: 13.1 Bcf/dAnnual Decline: 0.29 Bcf/d
27www.BENTEKENERGY.com
Rockies Production To Stay Flat
0
2
4
6
8
10
12
Bcf
/d
DJ Other Piceance Powder River GR-O Uinta
Source: BENTEK Rockies Production Monitor
History Forecast
28www.BENTEKENERGY.com
Anadarko Basin Drives MCP Growth
0
1
2
3
4
5
6
7
8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bcf
/d
Midcon Producing Production Forecast
Source: BENTEK Midcon Production Monitor
29www.BENTEKENERGY.com
0.00.10.20.30.40.50.60.70.80.91.0
Bcf
/d
Williston Basin Expansions
Gross Production Flared Processing Capacity
ONEOK Garden Creek
ONEOK Stateline I
HESS Tioga Plant Expansion
ONEOK Stateline II
330 MMcf/d of Planned Processing Expansions Over Next Three Years
Expansions Will Support Bakken Growth
Source: BENTEK Midcon Production Monitor
30www.BENTEKENERGY.com
Midcon Sources Gas From Other Areas
Market Share of Midcon Imports
MCP10%
Canada43%SE Gulf
23%
Rockies23%
Northeast1%
2007
MCP13%
Canada31%
SE Gulf32%
Rockies21%
Northeast3%
2012
Source: BENTEK Midcon Observer
31www.BENTEKENERGY.com
Midcon Demand Stagnant
-
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bcf
/d
RCI - History Power - History RCI - Forecast Power - Forecast
+0.2 Bcf/d per year-0.3 Bcf/d per year
Source: BENTEK CellCast and Midcon Observer
32www.BENTEKENERGY.com
Midcon Market Gas Power Demand Rising
Source: BENTEK Midcon Observer History and Energy Information Administration
-
10,000
20,000
30,000
40,000
50,000
60,000
0.0
0.5
1.0
1.5
2.0
2.5
3-Year Average 2011 2012 YTD
MW
Gen
erat
ed
Bcf
/d
Gas Burn Total Power Generation
Gas Burn:YTD: 1.99 Bcf/d
+0.75 Bcf/d above 2011 YTD+0.9 Bcf/d above 3-Yr YTD
33www.BENTEKENERGY.com
-$0.25
-$0.05
$0.15
$0.35Tetco M3
-$0.25
-$0.05
$0.15
$0.35Chicago
-$0.25
-$0.05
$0.15
$0.35
SoCal
-$0.25
-$0.05
$0.15
$0.35Dominion S.
-$0.25
-$0.05
$0.15
$0.35Waha
$0.00$1.00$2.00$3.00$4.00$5.00
Henry Hub
-$0.25
-$0.05
$0.15
$0.35Opal
-$0.25
-$0.05
$0.15
$0.35Chicago
Supply Shifts and Production Growth Will Moderate Prices
Source: ICE/Clearport and BENTEK Natural Gas Price Matrix
34www.BENTEKENERGY.com
-
2
4
6
8
10
12
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Bcf
/d
El Paso North El Paso South PG&E (Redwood)TransWestern (W.Thoreau) Kern (Veyo) Aggregate Capacity
CASW Inbound Pipelines Are At ~80% Capacity
Source: BENTEK West Coast Observer
35www.BENTEKENERGY.com
-
2
4
6
8
10
12
2009 2010 2011 2012 2013 2014 2015 2016 2017
Bcf
/d
Total Flows Projected FlowsMexican Expansions (Fully Utilized) Forecast CA/SW Demand GrowthCapacity
Demand & Export Growth Will Test CASW Capacity
Source: BENTEK West Coast Observer, CellCast, and Forward Curve
36www.BENTEKENERGY.com
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
Cas
h ($
/MM
Btu
)
PG&E SoCal Henry Chicago Transco Z6 FGT Z3
California Features Highest Demand Prices
Source: CME/NYMEX Clearport and BENTEK Natural Gas Price Matrix
37www.BENTEKENERGY.com Source: BENTEK Cell Model
Another Shift Looms With LNG Exports
38www.BENTEKENERGY.com
AECO
2009 2010 2011 2012
-$0.44 -$0.49 -$0.32 -$0.42 Dawn
2009 2010 2011 2012
$0.32 $0.37 $0.39 $0.29Sumas
2009 2010 2011 2012
-$0.13 -$0.28 -$0.11 -$0.12
PG&E
2009 2010 2011 2012
$0.21 $0.16 $0.25 $0.33
SoCal
2009 2010 2011 2012
-$0.30 -$0.13 $0.07 $0.15
Waha
2009 2010 2011 2012
-$0.51 -$0.22 -$0.12 -$0.08
Henry Hub (Cash)
2009 2010 2011 2012
$3.92 $4.37 $3.99 $2.53
Dominion South
2009 2010 2011 2012
$0.31 $0.21 $0.12 $0.02
Tetco M3
2009 2010 2011 2012
$0.72 $0.74 $0.63 $0.22
Transco Z6
2009 2010 2011 2012
$0.95 $1.03 $0.99 $0.47NW Rox
2009 2010 2011 2012
-$0.82 -$0.47 -$0.23 -$0.17
Chicago (Nicor)
2009 2010 2011 2012
$0.00 $0.08 $0.12 $0.07
Basis Tightening Continent-Wide
2012 prices are average of year-to-date as of 2012.09.24
39www.BENTEKENERGY.com
Price Outlook
40www.BENTEKENERGY.com
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
U$/
MM
Btu
NYMEX BENTEK
Prices To Remain Range Bound Between $3 to $3.50
Source: BENTEK Market Call 2012.09.28NYMEX is 30-day average as of 2012.10.14
41www.BENTEKENERGY.com
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2013 2014 2015 2016 2017
U$/
MM
Btu
NYMEX BENTEK
Significant Resistance at $5 Mark
NYMEX is last seven-day average as of 2012.10.14Source: BENTEK US Forward Curve 2012.09.28
42www.BENTEKENERGY.com
Key Takeaways
Despite Weak Gas Prices Supply Will Remain Abundant
Structural Demand Growing But Not Pacing Supply
Basis Will Flatten Until LNG Exports Become Established
Until Then Gas Will Struggle to Break $5 Mark
43www.BENTEKENERGY.com
BENTEK Energy
BENTEK is an energy market analytics company focused on the natural gas market and related energy sectors.
Rick MargolinDirect: [email protected]: BentekRickM
Or
Contact Any Analyst at 303.988.1320
DISCLAIMER. THIS REPORT IS FURNISHED ON AN “AS IS”BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS OF THE REPORT OR THE INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES, OPTIONS OR ANY OTHER USE. BENTEK MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE.RELEASE AND LIMITATION OF LIABILITY: IN NO EVENT SHALL BENTEK BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFIT) ARISING OUT OF OR RELATED TO THE ACCURACY OR CORRECTNESS OF THIS REPORT OR THE INFORMATION CONTAINED THEREIN,WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY.