oil presentation8 anexaminationofprivateoilcompanygrowth rarnott 2003
TRANSCRIPT
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An Examination of Private Oil CompanyAn Examination of Private Oil CompanyGrowthGrowth
Rob ArnottRob Arnott
OIES Internal SeminarOIES Internal Seminar
2525thth November 2003November 2003
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Private oil company growthPrivate oil company growth
Overview of global industry trendsOverview of global industry trends
Regional costs and capital migrationRegional costs and capital migration
Industry costs and implicationsIndustry costs and implications
Why is further consolidation likely?Why is further consolidation likely?
Company specific growthCompany specific growth
Where will growth come from?Where will growth come from?
ConclusionsConclusions
How much more risk are companies taking on?How much more risk are companies taking on?
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Capital growth is key to equity investorsCapital growth is key to equity investors
Source: LSE, NYSE
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Reserve growth influences share priceReserve growth influences share price
Source: LSE, NYSE, Morgan Stanley
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US, Canada and Europe overheatedUS, Canada and Europe overheated
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0$14.0
Europe Latin
America
Asia-Pacific Canada US Africa/Middle
East
Proved Acquisition Cost ($/boe) Finding and Development Cost ($/boe)
Companies overpaying to achieve growthCompanies overpaying to achieve growth
Source: Company data, JS Herold
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Migration of capital away from USMigration of capital away from US
-24%
-8%
47%
69%
40%
-40%
-20%
0%
20%
40%
60%
80%
US Canada Europe Africa/Middle
East
Asia-Pacific
Spending changes 2000Spending changes 2000--20022002
Source: Company data, Harrison Lovegrove
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Private oil company growth targetsPrivate oil company growth targets
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Chevron Texaco
BP
ConocoPhillips
ExxonMobil
Royal Dutch Shell
Total
ENI to 2008
to 2007
to 2008
2002-2008
Source: Company data
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The real cost of growthThe real cost of growth
-10
-5
0
5
10
15
20
$3.00 $5.00 $7.00 $9.00 $11.00 $13.00 $15.00
Spending per boe produced
Ann
ualproductiongrowth(
%
Majors
E and P companies
Smaller companies chase growth at shareholders expenseSmaller companies chase growth at shareholders expense
Source: Company data, JS Herold
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Growth without acquisitions unrealisticGrowth without acquisitions unrealisticEven revised targets are unlikely to be achievedEven revised targets are unlikely to be achieved
0
2
4
6
810
12
14
1618
20
80% 100% 120% 140% 160% 180%
3-Year F&D Replacement %
3-YearAvg.F
&DCost$/boe
0% 3% 5%
Super-majorsInt.-Integrated
Int.-EP
Can.-EPCan.-Int
US.-Int
Small US.-EP
Super-EPMid US.-EP
Large US.-EP
Source: Company data, JS Herold, OIES
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Decline versus growthDecline versus growth
More and more growth projects are needed to infill decline
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Chevron Texaco BP ConocoPhillips ExxonMobil Royal Dutch
Shell
Total ENI
A
nnualdeclinerate(%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
%
new
growthu
sedup
Annual decline 2002-2007 (%) % of new growth used infilling decline
Source: Company data, OIES
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BPs oil production growth 2002BPs oil production growth 2002--20072007
-400
-200
0
200400
600
800
10001200
1400
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Russia Total
Productionmboe/d
Reliance on Russia a high risk strategy?Reliance on Russia a high risk strategy?
Source: Company data, OIES
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Shells oil production growth 2002Shells oil production growth 2002--20072007
-300
-200
-100
0
100
200
300
400
500
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Russia Total
Production
mboe/d
Growth reliant on Nigeria (Bonga, NLNGGrowth reliant on Nigeria (Bonga, NLNG
liquids)liquids)
Source: Company data, OIES
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Exxons oil production growth 2002Exxons oil production growth 2002--20072007
Growth from Bonga (Nigeria) + Kizomba/Dalia (Angola)Growth from Bonga (Nigeria) + Kizomba/Dalia (Angola)
-2000
200
400600
800
1000
1200
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Other Total
Production
mboe/d
Source: Company data, OIES
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Totals oil production growth 2002Totals oil production growth 2002--20072007
-100
-500
50
100
150
200
250
300
350
400450
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Other Total
Productionm
boe/d
Deepwater Africa the key (Nigeria: BongaMain, Congo:Deepwater Africa the key (Nigeria: BongaMain, Congo:
Moho, Angola: Dalia)Moho, Angola: Dalia)
Source: Company data, OIES
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BPs gas production growth 2002BPs gas production growth 2002--20072007
-150
-100
-50
0
50
100
150
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Russia Total
Production
mboe/d
A switch from Europe and North America to Egypt, AlgeriaA switch from Europe and North America to Egypt, Algeria
and Trinidad LNGand Trinidad LNG
Source: Company data, OIES
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Shells gas production growth 2002Shells gas production growth 2002--20072007
-150-100
-50
0
50
100
150
200
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Russia Total
Productionmboe/d
NW shelf Australia and Nigeria LNG the driversNW shelf Australia and Nigeria LNG the drivers
Source: Company data, OIES
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Exxons oil production growth 2002Exxons oil production growth 2002--20072007
-150
-100
-50
0
50100
150
200
250
300
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Other Total
Production
mboe/d
Middle East gas project (Middle East gas project (RasGasRasGas LNG trains 3 and 4 + Qatar)LNG trains 3 and 4 + Qatar)
driving growthdriving growth
Source: Company data, OIES
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Totals gas productionTotals gas production growthgrowth 20022002--20072007
-100
-50
0
50
100
150
200
250
300
Europe North
America
Africa Latin
America
Asia-
Pacific
Middle
East
Other Total
Productionm
boe/d
A more even spread from Indonesia, Venezuela (Yucal),A more even spread from Indonesia, Venezuela (Yucal),
Argentina (Carina/Aries),Argentina (Carina/Aries),
Source: Company data, OIES
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Oil regaining share of production mixOil regaining share of production mix
Only in Total does gas increase proportionatelyOnly in Total does gas increase proportionately
0.0%
5.0%10.0%
15.0%
20.0%
25.0%30.0%
35.0%
40.0%
45.0%
50.0%
BP Chevron Texaco ConocoPhillips ENI ExxonMobil Royal Dutch
Shell
Total
%G
as
2002 2007 Source: Company data, OIES
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OPEC exposure is increasingOPEC exposure is increasing
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
BP Chevron Texaco ConocoPhillips ENI ExxonMobil Royal Dutch
Shell
TotalOPEC
Oilasaperce
ntageoftotal
producti
on
2002 2007
3.6 million b/d out of 15.8 million b/d will come from OPEC3.6 million b/d out of 15.8 million b/d will come from OPEC
in 2007in 2007
220
628
270
553
639719
581
Figure show oil production mb/d
Source: Company data, OIES
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The equity market expects growth butThe equity market expects growth but
delivery is at riskdelivery is at risk
Source: Morgan Stanley
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More access on easier terms please!More access on easier terms please!
Further consolidation inevitableFurther consolidation inevitable
US, Canada and Europe are exUS, Canada and Europe are ex--growthgrowth
Acquisition costs still below FD costsAcquisition costs still below FD costs
Oil continues to drive POC production growthOil continues to drive POC production growth
Companies are not shifting to gasCompanies are not shifting to gas
Increasing differentiation between companiesIncreasing differentiation between companies
Capital flowing from low risk to high riskCapital flowing from low risk to high risk OPEC exposure increasingOPEC exposure increasing
Technical and political risk increasingTechnical and political risk increasing
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An Examination of Private Oil CompanyAn Examination of Private Oil CompanyGrowthGrowth
Rob ArnottRob Arnott
OIES Internal SeminarOIES Internal Seminar
2525thth November 2003November 2003