investing in the tuscaloosa marine shale

14
An Investing Primer on the Tuscaloosa Marine Shale

Upload: tyler-crowe

Post on 06-May-2015

6.454 views

Category:

Economy & Finance


2 download

TRANSCRIPT

Page 1: Investing in the Tuscaloosa Marine Shale

An Investing Primer on the Tuscaloosa Marine Shale

Page 2: Investing in the Tuscaloosa Marine Shale

The Tuscaloosa Marine Shale is in Louisiana and Mississippi and is one of the most undeveloped shale plays in the United States today.

What is it?

Page 3: Investing in the Tuscaloosa Marine Shale

What is it?Geology is comparable to the Eagle Ford, but with 90% oil. Unfortunately, it’s at depths of greater than 14,500 ft.

Page 4: Investing in the Tuscaloosa Marine Shale

It hasn’t been developed until recently because it’s a technically challenging

formation. But, high oil content, promising well results, and proximity to the St. James

trading hub (higher price per barrel than WTI) makes it a very promising play

Photo Source: NASA

Page 5: Investing in the Tuscaloosa Marine Shale

Loads of Activity in TMS

Photo Source: NASA

Page 6: Investing in the Tuscaloosa Marine Shale

The Big Players

Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com

Page 7: Investing in the Tuscaloosa Marine Shale

Halcón Resources

Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com

Page 8: Investing in the Tuscaloosa Marine Shale

Halcón ResourcesWhat you Need to Know:• Halcón’s net acreage in Tuscaloosa Marine Shale—314,000 acres—

is greater than all of its other holdings combined

• Apollo Global Management recently bought $150 million in preferred stock for Halcón to develop Tuscaloosa Marine position, could become a $400 million deal

• Company has been searching for third position to supplement its production in Bakken/Three Forks and El Halcón (East Eagle Ford) for several years, looks like TMS could be that third play

Photo Source: NASA

Page 9: Investing in the Tuscaloosa Marine Shale

Goodrich Petroleum

Photo Source: NASA

Page 10: Investing in the Tuscaloosa Marine Shale

Goodrich Petroleum

Photo Source: NASA

Photo Credit: Wes Peck via Flickr. com

What you Need to Know:• Goodrich is the most levered company to TMS, acreage position 3x

larger than any other holding for the company

• 80% of 2014 capital budget dedicated to developing TMS ($225-$300 million

• Overall production at the company has declined since 2011 because company is shifting away from natural gas production in Haynesville-Bossier shale to more oil production from Eagle Ford and TMS shales

Page 11: Investing in the Tuscaloosa Marine Shale

Encana

Photo Source: NASA

Page 12: Investing in the Tuscaloosa Marine Shale

Encana

Photo Source: NASA

What you Need to Know:• ECA’s 200,000 acres is rather small position compared to its other

holdings in Canadian Shale (750,000+ acres in the Montney and Duvernay shales)

• Taking it slow in TMS, only $125-$150 million for 2014 while it de-risks acreage, about 5% of total budget

• Could become more important part of production portfolio as company shifts away from low margin natural gas to oil. ECA estimates its acreage could sustain oil production of 50,000 barrels per day

Page 13: Investing in the Tuscaloosa Marine Shale

What does this all mean to me?

Goodrich Petroleum, Halcon Resources, and Encana have all posted very promising well results, suggesting that they have “cracked the code” in the Tuscaloosa Marine Shale. Each company is likely to hit some bumps along the road in developing this shale play, but long term it will likely provide each company with strong production similar to Encana’s estimate (50k bpd) in high-margin oil. For Goodrich and Encana, it will help to move their production portfolios away from gas and more towards oil. Halcón’s position should help it maintain its astronomical production growth

Photo Source: NASA