north american energy updatean energy update · sources: eia drilling productivity report –...
TRANSCRIPT
Presenter Name / Date
North American Energy Updatean Energy Update BP Energy Company March 2016
Copyright ©. All rights reserved. Contents of this presentation do not necessarily reflect the Company’s views.
This presentation and its contents have been provided to you for informational purposes only. This information is not advice on or a recommendation of any of the matters described herein or any related commercial transactions.
BP is not responsible for any inaccuracies in the information contained herein. BP makes no representations or warranties, express or implied, regarding the accuracy, adequacy, reasonableness or completeness of the information, assumptions or analysis contained herein or in any supplemental materials, and BP accepts no liability in connection therewith. BP deals and trades in energy related products and may have positions consistent with or different from those implied or suggested by this presentation.
This presentation may also contain forward-looking statements. Any statements that are not historical facts, including statements about BP's beliefs or expectations, are forward-looking statements. These statements are based mostly on publicly available information, estimates and projections and you should not place undue reliance on them. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast, suggested or implied in any forward-looking statements in this presentation due to a variety of factors. Factors which could cause actual results to differ from these forward-looking statements may include, without limitation, general economic conditions; conditions in the markets; behavior of customers, suppliers, and competitors; technological developments; the implementation and execution of new processes; and changes to legal, tax, and regulatory rules. The foregoing list of factors should not be construed as exhaustive. BP disclaims any intention or obligation to publicly or privately update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Participants should seek their own advice and guidance from appropriate legal, tax, financial and trading professionals when making decisions as to positions to take in the market.
Disclaimer
North American energy prices: Shifting signal
Source: Platts, NYMEX, OPIS, 03-09-2016
Oil & products
Ethane
Nat Gas
Coal
Propane
4
The Supply Picture
5
U.S. gas storage inventories: Average overall, but different regional trends
Source: EIA, 02-05-2016
6
North American rig counts continue to move lower
Source: Baker Hughes 03-04-16
7
Production per Rig
Source: EIA Drilling Productivity Report, February 2016
8
Rigs don’t tell the entire story: well backlog could continue to support production in the short term
U.S. gas supply: EIA projecting a slow down in growth
Source: EIA Short Term Energy Outlook, March 2016
Steep ramp up in overall production due to associated gas and Northeast growth
More moderate growth trend due to less oil drilling??
Bcf
d
U.S. oil production trend shifting in key plays
Sources: EIA Drilling Productivity Report – March 2016; Baker Hughes Rig Counts
On a monthly basis, rigs in 4 key shale oil basins have fallen by over 800 since November 2014. EIA expects oil and gas production to decline. Oil production in these plays has declined from a
high of 5.3 MMb/d in March 2015 to 4.8 MMb/d in March 2016
11
CAPEX has fallen by 41% since Q3 2014
Source: Morning Star & Company Filings, Q3 2015
12
Short and long term debt increased over $50 billion since the Q3 2014
Source: Morning Star & Company Filings, Q3 2015
13
Rates of return: Can producers achieve additional cost reductions?
Source: RBN Energy, December 2015
14
How will efficiency gains play in? Gas basin examples
Sources: EIA Drilling Productivity Report – February 2016, Baker Hughes Rig Counts
Marcellus production growth remains resilient despite a flat to declining rig count since the beginning of 2013; Utica is still in its infancy.
15
Changing Flow Dynamics
16
Northeast production growth is having a big impact on regional flows
Dominion South
TET
TGT
REX
TGP
12/7/2015 2,253YTD 2015 1,204YTD 2014 193
YTD Change 1,011
Northeast Flows
12/7/2015 813YTD 2015 1,366YTD 2014 1,563
YTD Change -197
East Canada Flows
12/7/2015 -401YTD 2015 -254YTD 2014 226
YTD Change -480
Texas Flows
12/7/2015 1,976YTD 2015 3,560YTD 2014 3,150
YTD Change 410
Rockies Flows
12/7/2015 3,169YTD 2015 3,445YTD 2014 3,852
YTD Change -407
West Canada Flows
12/7/2015 -2,033YTD 2015 -543YTD 2014 418
YTD Change -961
NE Flows from SE
12/7/2015 940YTD 2015 1,747YTD 2014 2,862
YTD Change -1,115
Midcon Flows from SE
Gulf Flows to Premium SE 2/4/2016 2,585 YTD 2016 3,138 YTD 2015 4,366
YTD Change -1,228
NGPL
17
Gas pipeline infrastructure: A closer look at regional dynamics
Source: EV, Bentek
Announced and Under Construction Export Capacity
To Midwest – 5.9 Bcf/d To GCSE – 15.7 Bcf/d
To NE and CAN – 6 Bcf/d
Industrial Power
LNG/MX exp
Power
Power
18
The Demand Picture
19
Gas demand trends
Source: Energy Information Administration, January 2016
Natural gas generation rises as prices have decreased
South East Power Generation Share Midwest Power Generation Share
Source: EIA Natural Gas Monthly – February 2016
% %
*Wisconsin, Illinois, Indiana, Ohio, Michigan, Pennsylvania, New York, New Jersey
*West Virginia, Maryland, Virginia, North Carolina, South Carolina, Kentucky, Tennessee, Georgia, Alabama, Mississippi, Florida
California ISO (CAISO)
Electric Reliability Council of Texas
(ERCOT)
Southwest Power Pool
(SPP)
Midcontinent ISO (MISO)
PJM
New York ISO (NYISO)
New England ISO (ISO-NE)
WECC (Including CA)
SERC
• Graph represents new builds under construction and proposed retirements
• Large renewables additions across the West, ERCOT, and SPP
• Watch nuclear space; potential for more retirement announcements
21
More generation capacity changes are coming: 2016-2020 announcements
Source: Energy Velocity December 2015
Coal Gas Renew Nuclear Hydro Petro
22
Low gas prices to prompt an industrial revolution?
• Low-cost gas and growing market for end products spurring new industrial capacity
• Timely permits, financing, and costs will influence the number that break ground
• 70-75% of projects proposed in Gulf Coast
Source: Wood Mackenzie Q4 2015 *Note: Forecast aggregated from public company announcements
Proposed Industrial Projects Incremental Gas Demand
23
Large gas pipeline expansions proposed from U.S. to Mexico
Operating Pipelines Pipelines completed in 2014-2015
Pipelines under construction Awarded Pipelines
CFE Planned Pipelines Compression Station
Source: Sener, January 2016
1
5
2
3
4
Brownsville to Tuxplan : 2.6 Bcf/d – May 2018
Columbia to Escobedo: 0.5 – 1.2 Bcf/d: Jul 2017
Waha to San Elizario: 1.1 Bcf/d – Jan 2017
Waha to Presidio: 1.4 Bcf/d – Mar 2017
NET Mexico / Los Ramones: 2.1 Bcf/d – Dec 2014
1
2
3
4
5
Mmcf/d
*Data up to Nov 2015
24
Over 9 Bcfd of U.S. LNG export projects currently under construction
Sources: Department of Energy, Federal Energy Regulatory Commission, various companies websites
Source: Cheniere Investor Presentations, 2015
25
Will US LNG exports be competitive in the global market?
**All prices are for illustrative purposes only. Assumes a shipping charge of $1/MMBtu to Europe and $3.50 MMBtu demand charge**
12% Crude indexation at $75/BBL
8% Crude indexation at $50/BBL
115% HH
Shipping
Demand Charge
26
The Price Outlook
Source: NYMEX, Various External Consultants, 02-10-2016
27
Long-Term Henry Hub spot price outlooks
View of crude oil prices, competing fuels, supply costs, production growth, structural demand trends and global trade flows will influence gas price outlook
Nymex Henry Hub Prompt Month History
28
Range of the Nymex Contracts Mar16 – Jan21 since 2013
29
Mar16-Jan 21 Near the All Time Bottoms!
30
31
Questions? Answers?