update of the domestic exploration and production sector what’s different now? dave donegan...
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![Page 1: Update of the Domestic Exploration and Production Sector What’s Different Now? Dave Donegan Sinclair Oil & Gas Co. Idaho Petroleum Marketers and C-Store](https://reader030.vdocuments.mx/reader030/viewer/2022032517/56649c8c5503460f94946995/html5/thumbnails/1.jpg)
Update of the Domestic Exploration and Production Sector
What’s Different Now?Dave Donegan
Sinclair Oil & Gas Co.
Idaho Petroleum Marketers and C-Store Associations Annual Meeting
Sun Valley, ID – Thursday August 1, 2013
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© Sinclair 2011. All rights reserved 2
• Upstream subsidiary of a private integrated oil company – primary objective is attractive rate of return projects in US.
Sinclair Oil & Gas Company
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Our Strategy
• Focus on unconventional reservoirs with low geologic risk and lots of running room – in particular we target “shale plays”
• Opportunistic rather than geographic strategy
• Small staff but leverage geologic expertise in shale reservoirs and operational expertise in horizontal drilling and multi-stage hydraulic fracture stimulation
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Our Strategy (cont.)
• Current activity in Bakken (MT/ND), Woodford (OK), Wolfcamp/Cline (TX), Cain and A1 Carbonate (MI).
• Looking for new opportunity.
• Typically try to partner with other operators, enter plays early, but not first.
• Partner of choice!
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Mature Oil Early
DevelopmentNat. Gas
Mature Nat. Gas
Test Stage
Oil
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• Story of the past five years is the dramatic increase in North American crude oil and natural gas production.
• Why?
• Multi-stage frac completions in horizontal wells drilled in unconventional reservoirs (primarily shale's).
Crude prices have remained remarkably stable over the past year in the face of a long list of supply disruptions, from Nigerian oil theft and Syrian civil war to an export standoff between Sudan and South Sudan. The reason in large part is a thick new blanket of North American oil cushioning the markets.
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Cross-section of a Typical Horizontal Well
Source: Anadarko
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The Shale Gale delivered rapid U.S. production increases - & precipitated gas
price collapseHenry Hub monthly average cash price
September 201264.7 Bcf per day
NGL-and oil-richplays begins to drive third wave
Avg $7.45Jan 04 to Dec 08
Source: Courtesy Pete Stark IHS, CERA, Intelligence Press, and EIA
Hurricanes Katrina, Rita
Shale Gale starts withBarnett, Fayetteville, and Woodford shale plays
Hurricane Ike
July 200856.1 Bcf per day
Avg $3.75Jan 09 to Sept 12
Haynesville, MarcellusShale plays drive second wave
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Domestic production of shale gas has grown dramatically over the past few years
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North America Key Gas Plays2009-2012 (June) Gas Wells
Source: Courtesy Pete Stark - IHS
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Spot natural gas prices vary significantly across global markets since 2008, with many
markets far below oil –related benchmarks
Source: Courtesy Pete Stark - IHS
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Shale GaleNatural Gas Game Changer Scorecard
• Major competitive advantages for the U.S. economy• Jobs: 2012 = 900,000 2035 = 2.1 million• GDP: $122 billion 2035 = $287 billion• Taxes: 2012 = $31 billion 2035 = $73 billion
• Offset ~ 10 Bcfd of LNG imports to NAM• NAM poised to launch LNG exports• But Canada gas exports to U.S. decrease 4 Bcfd (32%)
• Low priced gas facilitates transformation to clean energy
• Low priced gas helping to drive major petrochemical investments and reviving energy dependent manufacturing
Source: Courtesy Pete Stark - IHS
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U.S. dependence on imported liquids depends on both supply and demand
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Non-OECD liquid fuels use surpasses almost flat OECD liquid fuels use in the near future
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Liquids fuel consumption in the United States, China, and India, 1990-2040
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World oil prices move together due to arbitrage
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Domestic production of tight oil has grown dramatically over the past few years
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Key Tight Oil PlaysNorth America Oil & Horizontal Wells 2010-2012
Source: Courtesy Pete Stark - IHS
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Selected U.S. Tight Oil PlaysHorizontal Oil Well Average Oil + Gas IP (boe/d)
Source: Courtesy Pete Stark - IHS
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Tight Oil Upside PotentialIncrease in High Volume Wells > 1,000 b/d
Source: Courtesy Pete Stark - IHS
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Tight OilUpside Potential is Growing
• Continuous process improvements – lower costs & increase recoveries
• Confirm new reservoirs in established plays:• Bakken / Three Forks: 2012 three primary reservoirs; 2013 three new Three Forks
reservoirs plus Bakken silt technically recoverable resource @ 3.5% RF +~ 12 Bboe
(60%)
• Niobrara: 2012 one primary reservoir; 2013 four primary reservoirs: Increase reserves ~
1.3 Bboe
• Wolfcamp: 2012 one primary reservoir; 2013 three – four primary reservoirs, potential
increase of > 5Bboe
• New Play fairways – S. OK Oil Province, Lower Woodford• Continental Resources - ~2 Bboe (~4 Bboe for fairway)
Source: Courtesy Pete Stark - IHS
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© Sinclair 2011. All rights reserved 27Source: NDIC
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ND Drilling Stats
Source: JJ Kringstad – North Dakota Pipeline Authority
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ND Oil Pricing: ND-WTI Differential
Source: EIA Data
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US Williston Basin Oil Transport*
*Some data based on estimates or assumptionsSource: JJ Kringstad – North Dakota Pipeline Authority
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The Tight Oil Revolution Scorecard
• Updated U.S. supply view – plateau ~ 4.5 MMbd 2023
• What does this mean to U.S. economy? $5 Tr investment• Jobs: 2012 = 800,000 2035 = 1.4 million• GDP: 2012 = $116 billion 2035 = $188 billion• Taxes: 2012 = $30 billion 2035 = $51 billion
• Dramatic decrease in U.S. oil imports• In 2005 U.S. net oil imports = 12.2 mbd or 58% of demand. By 2020
U.S. net import requirement will shrink to 30% of demand. (Most of the net imports will be from Canada and Mexico)
• Huge implications for energy security and the economy
• North America tight oil is a model for global potentialSource: Courtesy Pete Stark - IHS
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Bakken-Three Forks Williston Basin
Tight Oil Upside Potential New Reservoirs in Established Plays
Source: IHS
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© Sinclair 2011. All rights reserved 33Source: Macquarie Capital (USA), IHS, EIA – July 2012
Finding & Development Costs Trending Higher
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The Market EnvironmentWhat has changed since 2012?
Source: Courtesy Pete Stark - IHS
2Q12 vs. 2Q13
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Conclusions
• Fossil fuels are expected to provide the majority of U.S. energy supplies for the foreseeable future.
• Domestic supply of North American crude oil and natural gas has increased dramatically over the past five years and is expected to continue – This was the big surprise.
• Economic benefit to the U.S. of a healthy domestic exploration and production sector is critical to U.S. economic and security objectives. The impact is measurable and significant.
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Update of the Domestic Exploration and Production Sector
What’s Different Now?Dave Donegan
Sinclair Oil & Gas Co.
Idaho Petroleum Marketers and C-Store Associations Annual Meeting
Sun Valley, ID – Thursday August 1, 2013
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