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www.boyarmiller.com
Perspectives on the Energy Industry Breakfast Forum
March 21, 2013
David Pursell
March 21, 2013
**IMPORTANT DISCLOSURES ON PAGE 9 OF
THIS DOCUMENT**
Regulatory Overview or:
How I Learned to Stop
Worrying and Love the EPA?
Regulatory Overview or: How I Learned to Stop
Worrying and Love the EPA?
What do we care about today:
□ Keystone
□ Hydraulic fracturing
□ Rin – No really?
Party is not important. D’s and R’s equally inept.
Political cycles are much shorter than energy
cycles.
Keystone Kops….err….Pipeline
Keystone will happen or
□ Keystone existing pipes will be reversed
□ Rail will transport oil to Gulf Coast
□ Or both
Unintended Consequences of Government
1Q`12 - US carbon emissions hit a 20-year low
Reduced CO2 emission over the past 5 years
Last 5 years – Power generation from coal down 25%, from natural gas +35%
Source: Forbes, EIA
Rin – Renewable Identification Numbers
Government mandates an amount of ethanol sales
Companies do not want to blend more than 10% ethanol into gasoline
Companies either buy credits or export gasoline (without ethanol)
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
2013 RIN Price
2012 RIN Price
Source: EIA
Shales Are Disruptive…but a Policy Win! For Gas
45
50
55
60
65
70
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
U.S
. N
atu
ral G
as
Pro
ducti
on (
bcf/
d)
Source: EIA
… And Crude Oil!
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
U.S
. O
nsh
ore
Oil P
roducti
on (
kbpd)
Source: Bloomberg, TPH
Location, location, location
“According to this map we have gone
4 inches” Harry, Dumb & Dumber
Analyst Certification:
I, Dave Pursell, do hereby certify that, to the best of my knowledge, the views
and opinions in this research report accurately reflect my personal views
about the company and its securities. I have not nor will not receive direct or
indirect compensation in return for expressing specific recommendations or
viewpoints in this report.
Important Disclosure:
The above mentioned analyst does not own any securities mentioned in this
report.
Ratings: B = buy, A = accumulate, H = hold, T = trim, S = sell, NR = not rated
For detailed rating information, distribution of ratings, price charts and other
important disclosures, please visit our website at www.tudorpickering.com.
To request a written copy of the disclosures please call 800-507-2400 or write
to Tudor, Pickering, Holt & Co. Securities, Inc. 1111 Bagby, Suite 5000,
Houston, TX 77002.
Institutional Communication Only. Under FINRA Rule 2210, this
communication is deemed institutional sales material and it is not meant for
distribution to retail investors. Recipients should not forward this
communication to a retail investor.
Copyright 2013, Tudor, Pickering, Holt & Co. This information is confidential
and is intended only for the individual named. This information may not be
disclosed, copied or disseminated, in whole or in part, without the prior
written permission of Tudor, Pickering, Holt & Co. This communication is
based on information which Tudor, Pickering, Holt & Co. believes is
reliable. However, Tudor, Pickering, Holt & Co. does not represent or warrant
its accuracy. This message should not be considered as an offer or solicitation
to buy or sell any securities.
OTHER DISCLOSURES
Trade Name
Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering,
Holt & Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide.
Legal Entities Disclosures
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& Co. International, LLP is authorized and regulated by the Financial
Services Authority. Registered in England & Wales No.
OC349535. Registered Office is 5th Floor, 6 St. Andrew Street,
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The information contained herein is not, and under no circumstances is to
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construed as investment advice in any province or territory of Canada and
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See http://www.tudorpickering.com/Disclosure/ for further information on
regulatory disclosures including disclosures relating to potential conflicts of
interest.
RESEARCH
Oil Service / E&C
Jeff Tillery
713.333.2964
Joe Hill
713.333.2963
Byron Pope
713.333.7690
George O’Leary
713.333.2973
Klayton Kovac
713-3333866
Macro
Dave Pursell
713.333.2962
Coal & Power
Brandon Blossman
713.333.2994
George O’Leary
713.333.2973
Utilities
Neel Mitra
713.333.3896
TRADING - Houston 800.507.2400SALES
Houston
Clay Coneley
713-333-2979
Mike Bradley
713.333.2968
Mike Davis
713.333.2971
Oliver Doolin
713-333-2989
John Hurd
713.333.2951
Josh Martin
713.333.2982
Paige Penchas
713.333.2969
Scott McGarvey
Seth Williams
Todd Wood
‡ Chris Wellesley
+44 20 3427 5833/4
‡ Harry Grist
+44 20 3427 5832
Denver
Chuck Howell
303.300.1902
Jason Foxen
303.300.1960
New York
Chris Hart
212-610-1657
Ken Johnson
212-610-1650
*London
Jon Mellberg
+44 20 3008 6430
Win Oberlin
+44 20 3008 6431
‡ Jonathan Wright
+44 20 3008 6436
Midstream
Brad Olsen
713.333.7693
Joe Herman
713.333.3925
Integrated Oils / Refiners
Robert Kessler
713.333.7696
Brandon Mei
713.333.7689
Clay Rynd
713.333.3867
E&P
Brian Lively
713.333.2970
Brad Pattarozzi
713-333-2993
Matt Portillo
713-333-2995
Hubert van der Heijden
713-333-3983
*London- E&P
Anish Kapadia
+44 20 3008 6433
Shola Labinjo
+ 44 20 3008 6437
*Office of Tudor, Pickering, Holt & Co. International, LLP.
Anish Kapadia and Shola Labinjo are employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and arenot registered/qualified as research analysts with FINRA. Mr. Kapadia and Mr. Labinjo are not associated persons of Tudor, Pickering, Holt & Co. Securities, Inc. and as such are not subject to NASD Rule 2711 restrictions on communications with subject companies, public appearances and trading securities held by a research analyst account.
‡ Employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and is not registered/qualified with FINRA and is not an associated person of Tudor, Pickering, Holt & Co. Securities, Inc.
TRADING- New York
*TRADING- London
Perspectives on the Energy Industry Capital Markets
Tom Hargrove Managing Director
GulfStar Group
Oil & Gas Services
Pipeline Services
Petrochemical / Refining Services
OVERVIEW
Public companies’ stock prices at attractive levels with high cash balances
Large universe of private equity buyers with liquidity
Lenders relatively aggressive and return of cash flow based lending
Source: PitchBook
6.0x 6.0x 5.9x
6.1x 6.2x
0
50
100
150
200
250
5.0x
5.5x
6.0x
6.5x
2008 2009 2010 2011 2012
Nu
mb
er o
f D
eals
Tran
sact
ion
Mu
ltip
le
TEV/EBITDA Number of Deals
Middle Market ($10-$250mm) EV/EBITDA and Deal Count
MIDDLE MARKET M&A ACTIVITY
Source: GF Data
Middle Market EV/EBITDA by Total Enterprise Value
TEV ($MM) 2008 2009 2010 2011 2012
$10-25 5.4 5.5 5.3 5.3 5.6
$25-50 6.0 6.0 6.2 5.8 6.1
$50-100 6.7 6.5 6.6 7.1 6.8
$100-250 6.7 7.2 6.2 7.7 7.5
MIDDLE MARKET M&A ENVIRONMENT
LENDING ENVIRONMENT
Source: GF Data
Yearly Debt Multiples to EBITDA
2.3x 1.8x
2.3x 2.4x 2.4x
1.0x
1.0x
0.7x 1.0x 1.0x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
2008 2009 2010 2011 2012
Senior Debt Sub Debt
Senior Debt to LIBOR spread is widening
Subordinated Debt pricing relatively flat
Source: PitchBook
Private Equity Capital Invested and Cumulative Overhang
$0
$100
$200
$300
$400
$500
$600
$0
$5
$10
$15
$20
$25
2005 2006 2007 2008 2009 2010 2011 2012
Cu
mu
lati
ve O
verh
ang
($ in
Bill
ion
s)
Tota
l Cap
ital
In
vest
ed
($
in B
illio
ns)
Cumulative Overhang Under $250M $250M-$500M $500M-$1B
PRIVATE EQUITY ENVIRONMENT
Source: Baker Hughes, Goldman Sachs Research estimates
Historical and Projected Rig Count
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13E3Q13E1Q14E3Q14E
DOMESTIC RIG COUNT
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
0
500
1,000
1,500
2,000
2,500
Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13
% N
on
-Ver
tica
l Dri
llin
g
No
rth
Am
eric
an O
nsh
ore
Rig
Co
un
t
Directional Horizontal Vertical % Non-Vertical
Source: Baker Hughes
DOMESTIC RIG COUNT BY TRAJECTORY
Continued high activity in North American oil exploration
⁻ Eagle Ford
⁻ Bakken
⁻ Permian
⁻ Mississippi Lime
Horizontal drilling continues to drive more service revenue
⁻ More horizontal drilling in Permian and Mississippi Lime
⁻ Drilling increasing in efficiency
⁻ Fracing continuing to increase in scope
Gulf of Mexico market has recovered from Macondo
⁻ Deep water activity
⁻ New build rigs entering market
Forecasted increase in NAM rig count in 2013
Oil and gas prices appear range-bound but generate good levels of profitability on oil projects
OIL AND GAS SERVICE COMPANIES
Aging pipeline infrastructure creating good maintenance market
⁻ Stable recurring revenues
⁻ Stricter DOT regulations and enforcement
⁻ Heightened concern over pipeline safety and maintenance with several high profile incidents
⁻ Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011
⁻ Hydrostatic testing and repairs on all pipelines constructed before 1970
Unconventional oil and gas plays require new pipeline infrastructure
⁻ New pipelines needed to get oil and gas from exploration areas to market
⁻ New pipeline infrastructure required at new or expanded petrochemical facilities
⁻ Shale development wells fall off rapidly after initial production, resulting in more wells drilled and infrastructure needed
⁻ Pipeline construction needed to reduce bottlenecks; GOM crude priced at Brent versus WTI (est. $110 vs. $95)
PIPELINE SERVICE COMPANIES
Pipeline construction miles are projected to increase to approximately 41,000 in 2013, up from 36,000 in 2012
Total pipeline construction expenditures are projected to increase to over $41 billion in 2013, up from $34 billion in 2012
These increases are driving the growth of all ancillary pipeline service, maintenance and construction spending
NEW PIPELINE CONSTRUCTION
Low natural gas prices and availability have resulted in robust petrochemical growth
Increased domestic oil availability is providing domestic refineries with price advantaged crude oil but requires plant retrofits to process light crudes
Market for petrochemical / refining services being driven by several factors:
⁻ The resurgence and growth of domestic crude production and domestic natural gas production
⁻ Rising global demand for refined products
⁻ Attractive economics for U.S. petrochemical plants
⁻ Continued aging of current infrastructures
Capital spending (routine maintenance, turnarounds and general spending) anticipated to reach $17.6 billion in 2013 and grow to $19.9 billion by 2017
PETROCHEMICAL AND REFINING SERVICES
PETROCHEMICAL / REFINING CONSTRUCTION
Announced Plant Expansions through 2017
Project Plant Location Value Est. Completion Date
LyondellBasell Feedstock Channelview, TX $500 million 2013
Tesoro SLC Refinery Salt Lake City, UT $180 million 2013
Exxon Port Allen Port Allen, LA N/A 2013
INEOS Chocolate Bayou Alvin, TX N/A 2013
Exxon Baton Rouge Baton Rouge, LA $215 million 2014
LyondellBasell Ethylene La Porte, TX $500 million 2014
Exxon Mobil Plastics Mont Belvieu, TX N/A 2014
Valero McKee Sunray, TX N/A 2014
Celanese Corp Methanol Clear Lake, TX $1 billion 2015
Exxon Mobil Baytown, TX N/A 2015
Chevron Phillips Baytown Baytown, TX $5 billion 2017
Chevron Phillips Old Ocean Sweeny, TX $5 billion 2017
Dow Brazosport Freeport, TX $4 billion 2017Valero Three Rivers Three Rivers, TX N/A N/A
CONFIDENTIAL AND PROPRIETARY
CONFIDENTIAL AND PROPRIETARY
BoyarMiller Breakfast Forum
Private Equity - Perspectives on the
Energy Industry
James Wallis
March 21, 2013
CONFIDENTIAL AND PROPRIETARY
27
Energy Private Equity
Asset Managers
Our investors are pensions, endowments, and charities
Source of Capital
Patient
Experienced
Disciplined
Strategic Partners
Relationship-focused
Energy Finance Expertise
Well-connected to capital, M&A, and talent markets
Prior lessons and relationships applied across the portfolio
What is Energy Private Equity?
CONFIDENTIAL AND PROPRIETARY
28
Competitors
Energy Private Equity – It’s Competitive
OCCASIONAL DIRECT COMPETITORS
OTHER ENERGY PRIVATE EQUITY INVESTORS
ALL ENERGY
SECTORS
UPSTREAM OIL
AND GAS:
SERVICE, E&P
PRIMARILY SERVICE OR
SERVICE TECHNOLOGY
PRIMARILY US
E&P AND
MIDSTREAM
ACQUIRE AND
DIRECTLY
OPERATE
First Reserve (8.9)
Riverstone (6.0)
ArcLight (3.5)
Denham (3.0)
Cadent (0.5)
Quintana (0.7)
EIG Partners (4.1)
Barclays Nat. Res (0.9)
Harvest Partners
Arcapita
Clearlake Capital
ESS
White Deer (1.3)
HitecVision (1.4)
4D (0.2)
Kerogen (E&P) (1.5)
SCF (0.5)
Energy
Ventures (0.4)
Intervale (0.3)
Basin
Kenda/Shell
OFS Energy
Statoil
Chesapeake NG
Ventures
Energy Capital
Mgmt./SAEV
Altira (0.2)
epiV (0.1)
NGP Tech. (0.3)
Pelican (0.1)
Global Energy
Capital (0.2)
CSL (0.3)
CTV
CoP/ETV
Turnbridge
EnCap (5.0)
Kayne Anderson (1.6)
NGP (3.6)
Quantum (2.5)
Scotia Waterous
SFC Partners (0.7)
Yorktown (1.3)
EnerVest (1.5)
KKR/Premier
Merit Energy (0.9)
Quantum Res. (1.2)
Scout Energy
Sheridan (1.8)
Urban (0.1)
White Rock
MIDSTREAM POWER GENERALISTS
Energy Spectrum (0.6)
EnCap Flatrock (0.8)
Haddington (0.2)
Energy & Minerals
Group (1.4)
Energy Capital
Partners (4.3)
Tenaska (2.4)
Energy Investors
Fund (EIF) (1.4)
Rockland Power
Partners (0.3)
LS Power
Apollo (14.7)
Goldman (20.3)
KKR (17.6)
3i
Gen. Atlantic
Blackstone
Warburg (15.0)
Pine Brook Road
(1.4)
TPG (17.8)
Wexford (0.5)
Advent (1.7)
Avista (2.0)
Kelso (5.1)
Parenthetical numbers represent total capital commitments of most recently raised relevant fund in billions of dollars, if available.
CONFIDENTIAL AND PROPRIETARY
29
Lime Rock
Who is Lime Rock?
Founded in 2005
Acquires oil and natural gas properties
U.S. strategy: E&P only
Directly operates properties
Targeting lower-risk, mature, currently
producing, high PDP reserves
Headquartered in Houston with field
offices in Texas, Oklahoma, and New
Mexico
Founded in 1998
Invests in companies
Global strategy: E&P and energy
service
E&P portfolio companies operate
properties
E&P investments target higher-risk,
unconventional resource or
exploration- oriented projects
Global team in five locations:
Westport, Houston, Aberdeen,
London, and Dubai
Energy-focused asset managers with two distinct private equity fund strategies
$5 billion of total private capital under management
CONFIDENTIAL AND PROPRIETARY
30
World economies are fragile
Global deleveraging cycle will be a drag on growth everywhere
Europe is a mess with no resolution in sight
China is a black box – possibly headed for a “hard landing”
U.S. recovery is nascent, slow, and hooked on fiscal stimulus
Politicians not inspiring confidence
Despite this, U.S. stock market is hitting new highs and debt yields are very low
Timing the markets is incredibly difficult
Not a time for bold, market-calling theme bets
Diversification within energy is prudent – timing, geography, and commodity
“Teams over themes”
U.S. Oil & Gas Renaissance is providing a big tailwind
Macro Uncertainty Abounds
Today’s Investment Environment
CONFIDENTIAL AND PROPRIETARY
31
Everyone Has Heard the News…
U.S. ANNUAL CRUDE OIL PRODUCTION, 1980-
2012 (million barrels per day, excludes NGLs)
U.S. ANNUAL DRY GAS PRODUCTION, 1990-
2012 (billion cubic feet per day)
40
50
60
70
1990 1993 1996 1999 2002 2005 2008 2011
4
6
8
10
1980 1984 1988 1992 1996 2000 2004 2008 2012
Source: EIA
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
32
Basic Technologies Are Well Known and Understood
Source: CERA
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
33
But the Technologies Are Not New
HORIZONTAL DRILLING RIGS AS A PERCENTAGE OF U.S. TOTAL RIG
COUNT, 1991-2012
Source: Baker Hughes
0%
25%
50%
75%
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
34
Pop Quiz: Who was the NFL champion the
year of the first hydraulic fracturing
operation?
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
35
Since the first hydraulic fracturing operation in 1947, conducted by Halliburton,
there have been 1.1 million separate fracturing jobs, most in the United States.
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
36
So What’s New?
Simultaneous hydraulic fracturing and “zipper fracs”
Real-time microseismic
Nano-scale reservoir analysis
Advanced fracturing fluids
Automated AC drilling rigs
Pad drilling
Extended laterals
Geosteering
Source: CERA
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
37
Four reasons that this supply renaissance
has changed the game.
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
38
1. For U.S. Natural Gas, Upending the Cost Curve:
“Bad” Reservoirs Are Cheaper than “Good” Reservoirs
THAT WAS THEN (FEB. 2007): Could conventional basins compete with ~$4-6/MCF
LNG breakeven import price?
THIS IS NOW: When will we need more supply than can be
supplied by ~$3.00-$3.50/MCF Marcellus Shale
breakeven price?
Source: Pickering Energy Partners
LNG VERSUS U.S. NATURAL GAS BASIN ECONOMICS (breakeven gas price, $/mcf)
NYMEX BREAKEVEN PRICE FOR 10% AFTER-TAX RATE OF
RETURN
Source: Tudor Pickering Holt & Co.
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
39
Source: ITG Investment Research, raw data provided by didesktop, Ventyx.
“Big Three” Gas Giants – Historical Production vs. Rig Count
0
50
100
150
200
250
300
350
400
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Horizonta
l R
igs
Bcfe
/d
Barnett Haynesville Marcellus Barnett Rigs Haynesville Rigs Marcellus Rigs
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
40
Remaining Low-Cost Gas Inventory is Mind-Boggling
Source: ITG Investment Research, raw data provided by didesktop and state agencies.
Barnett
• 5 million acres
• ~12,000 wells produce 5 Bcf/d
Marcellus
• 19 million acres
• ~3,000 wells produce 7 Bcf/d
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
41
2. Goodbye, Peak Oil…
Source: BP Energy Outlook 2030
DEMAND SUPPLY
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
42
Investing in the U.S. Oil and Gas Renaissance
U.S. Share of Worldwide Oil Production Growth
CONFIDENTIAL AND PROPRIETARY
43
3. United States Is Moving to Either Energy
Independence or Energy Less-Dependence
PIPELINE LNG
IMPORTS
AS % OF
DEMAND
2007 8.0 1.4 14.9%
2012
(Jan-Oct)
4.0 0.4 6.4%
NATURAL GAS IMPORTS (billion cubic feet per day)
OIL DEMAND, FIELD PRODUCTION, AND NET
IMPORTS
(million barrels per day)
Per Credit Suisse, by 2020, the U.S. will have 5.7 BCF per day of LNG export capacity
DEMAND
FIELD
PROD-
UCTION
NET
IMPORTS
2007 20.7 6.9 12.0
2012
(Jan-
Oct)
18.7 8.8 7.7
Forecast range from ~4.5 to ~6.5 million barrels/day of incremental production through 2020, including crude oil, NGLs, and biofuels
Source: EIA for import data
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
44
U.S. Energy Less-Dependence
Investing in the U.S. Oil and Gas Renaissance
Historical Projected
CONFIDENTIAL AND PROPRIETARY
45
4. There Are Potential Major Implications for the U.S.
Economy and Competiveness
JOBS CAPITAL INVESTMENT
~467,000 in oil and gas
extraction including
support roles
Citibank forecasts
doubling of direct jobs but
others are more skeptical
Tremendous amount will
be spent on well
construction, pipelines,
processing plants,
supporting services and
equipment, rail, road
infrastructure, etc
ENERGY/FEEDSTOCK
BALANCE OF
PAYMENTS
U.S. more competitive in
chemicals and fertilizer
where oil and gas are
direct fedstocks
Lower energy and basic
material costs lead to
more competitive
manufacturing
Citibank estimates
potential for up to 2
million indirect jobs
Lower current account
deficit—strengthen U.S.
dollar
Foreign policy
implications
DIRECT INDIRECT
CUMULATIVE IMPACT ON U.S. REAL GDP, 2012E-2020E
Source: Citi Investment Research and
Analysis
Estimate of U.S. Unconventional Oil and Gas Capital
Expenditures and Job Creation
(Through 2020)
Category Investment Jobs Created
(billions) (thousands)
Exploration and Production $60 – $70 440 – 480
Pipelines $50 – $65 800 – 920
NG Processing Plants $35 – $45 450 – 550
LNG $20 – $30 260 – 370
Manufacturing $70 – $80 920 – 985
Rail and Other Infrastructure $10 – $20 125 – 200
Total $245 – $305 3,000 – 3,505
Source: Forbes.
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
46
The Big Questions: Will Prices Be High Enough to
Continue to Make This Volume Growth Possible?
GAS: A QUESTION OF DEMAND
U.S. GAS CONSUMPTION, 1970-2012E (billion cubic feet per day)
Source: EIA
40
50
60
70
80
1970 1975 1980 1985 1990 1995 2000 2005 2010
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
47
The Big Questions: Will Prices Be High Enough to
Continue to Make This Volume Growth Possible?
OIL: QUESTIONS OF DEMAND… AND SUPPLY
ANNUAL CHANGE IN OIL DEMAND (million barrels per day)
Source: IEA
U.S. OIL PRODUCTION AND TWO-YEAR GROWTH
UNDER DIFFERENT PRICE SCENARIOS (million barrels per day)
Source: Simmons & Co.
-1.5
-0.8
0.0
0.8
1.5
2008 2009 2010 2011 2012 2013E
U.S. China Rest of World
2012 Production $70/ B Oil $85/ B Oil $100/ B Oil
Williston 762 96 236 325
Eagle Ford 468 230 318 435
Permian 1,216 303 446 582
DJ 85 1 11 23
Anadarko 127 53 104 126
Alaska 579 -20 -20 -20
Gulf of Mexico 1,359 3 3 3
Other 1,838 -30 -16 0
Total 6,434 636 1,082 1,474
Two Year Production Growth Under
Various Scenarios
Investing in the U.S. Oil and Gas Renaissance
CONFIDENTIAL AND PROPRIETARY
48
People – Always #1
E&P
Focus on the lowest cost molecules, period
Capital discipline and profitability are priorities
Everyone is land rich – be prepared to stay in longer
Oilfield Service
North American equipment overbuilt and underutilized – for now
North American margins are stabilizing; International margins increasing
Infrastructure
Bottlenecks everywhere; $300+ billion needed through 2035 just for pipelines
Completion technology
Export the resource revolution abroad
Specific Energy Investment Themes
Investing in the U.S. Oil and Gas Renaissance
Questions & Answers
