Gas Supply Focus on Northwest US February 19 & 20, 2013
Cautionary Language Regarding Forward-Looking Statements This presentation contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions or pay dividends are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Kinder Morgan Energy Partners, L.P., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., and Kinder Morgan, Inc. may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic, competitive and regulatory conditions and developments; technological developments; capital and credit markets conditions; inflation rates; interest rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of business development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement. 2
Agenda • KM Overview • Shale Revolution • Rockies Supply • Canadian Supply • Macro Modeling • US Supply Dynamics 3
Kinder Morgan Assets 4 4
West Region Assets 5
Ruby Basin Access Big Horn Powder River O R E G O N Basin GTN Basin I D A H O Malin Wind River Green River PG&E Basin Basin CIG RUBY Opal Hub Tuscarora Denver / Gold Pan Julesburg Delivery WIC W Y O M I N G C A L I F . Paiute Cheyenne Cheyenne U T A H Plains Uinta N E V A D A Basin Piceance Basin Kern River C O L O R A D O Raton Basin 6
Shale Revolution 7
North American Shale Plays Major US Gas Shale Plays 8
Gas Flows Within the US Major US Gas Shale Play 9
US Dry Natural Gas Production Shale Gas Boom Tcf/yr 10 Source: EIA Annual Energy Outlook 2013 Early Release
Shale Gas Boom Shale Gas Boom 100.0 90.0 Previous Record L48 Production in Bcf/d 59.3 Bcf/d 80.0 (1973) 70.0 60.0 50.0 40.0 30.0 20.0 10.0 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Conventional Tight Gas CBM Shale Gas 11 Source: Wood Mackenzie Source: Wood Mackenzie
Growth of Major Shale Plays Production volumes in Bcf/d Marcellus 12.0 9.9 10.0 8.9 7.8 8.0 6.4 5.5 6.0 3.4 4.0 Haynesville 1.6 8.0 2.0 6.6 6.3 5.7 6.1 6.6 7.2 0.1 0.5 7.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 6.0 5.0 3.7 4.0 3.0 2.0 1.2 MARCELLUS 1.0 0.1 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Eagle Ford 5.0 3.9 HAYNESVILLE 4.0 3.4 2.9 3.0 2.6 Others: 1.9 2.0 Utica, Woodford, 1.0 1.0 Fayetteville, Barnett 0.2 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 EAGLE FORD 12 Source: Wood Mackenzie
Henry Hub Price Forecast • Prices are expected to rise in 2013 on supply/demand rebalancing followed by stable increases thereafter • Future prices before shale revolution were over $8/Dth – New resource has lowered gas prices by $3 to $4 per Dth long-term 13
Rockies Supply 14
Rockies Supply Summary • Base case incremental wellhead supply growth from 2012 to 2022 = 2.0 Bcf/d – Current Production = 11 Bcf/d • Growth basins are Piceance, Uinta, Denver, and Green River (account for 2.5 Bcf/d growth ) • Anticipate 30+ years of Rockies production growth • Liquids Rich Gas Upside – Niobrara • Resource/Production ratio = 100+ Years 15
Rocky Mountain Supply Gas Bubble Flat $2 Gas Improving Prices & Technologies 12.0 Low Gas Prices 11.0 10.0 9.0 8.0 Production (Bcf/d) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Overthrust Big Horn Wind River Powder River Denver Green River Piceance Uinta 16
Rockies Wellhead Vintage Production 13 250 Associated Gas 2.5 Bcf/d/Yr 12 7% in 2009 22.7% Decline 10% in 2012 11 200 10 9 8 150 Gas Rigs Bcf/d 7 6 100 5 4 3 50 2 1 0 0 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 17
Active Rigs in the Rockies 250 50% • Shift in drilling oil/liquids plays with horizontal wells – Denver, Uinta & Powder 45% River basins • Over 50% of rigs drilling horizontal wells 200 40% Flat gas production since 2009 35% % Horizontal Rigs 150 30% Number of Rigs 25% 100 20% 15% 50 10% 5% 0 0% Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Apr-09 Apr-10 Apr-11 Apr-12 Gas Oil Horizontal Rigs % Horizontal Rigs 18 Source: Rig Information from Baker Hughes
Active Rigs in the Rockies Opal/Cheyenne Hubs Area • 55 Active Gas Rigs • 74 Active Oil Rigs 19
Niobrara in the Rockies Areas of encouraging Niobrara drilling results 20
Rockies Rig Productivity 30 60 • Gas well drilling efficiency increases – 2011 average rig drilled twice the number of wells per year compared to 2006 25 50 – Last 3 years average wells productivity increased 40% – Rig productivity up by almost 150% from 2006 Wells Drilled per rig per year 20 40 MMcf/d/yr/rig 15 30 10 20 5 10 0 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Rig Productivity Wells Drilled per Rig 21
Mcf/d per Well 1000 1200 200 400 600 800 Rockies Type Curve – w/o CBM 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 0 1000 2000 3000 4000 5000 6000 22 Wells Drilled
PGC Resource and Gas Prices Total Potential Gas Resources (Mean Values) 3,000 IHS CERA Shale Resource Estimate (additional to PGC) PGC Shale Resource Estimate 2,500 Non-Shale Resources Total Potential Resources 2,000 Proved Reserves 1,500 Tcf 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: EIA, PGC, IHS CERA. Note: Tcf = trillion cubic feet. Henry Hub Gas Prices Gas Prices ($/Dth) 14.00 Traditional Gas Coalbed Gas Total Pot. Traditional Resources Resources Resources Proportion PGC Area (Mean, Tcf) (M.L., Tcf) (Tcf, rounded) of Total US 12.00 Gulf Coast 506.0 3.4 509.3 29.0% 10.00 Atlantic 353.6 17.3 370.9 20.3% 8.00 Rocky Mountain 344.0 51.9 395.9 19.7% 6.00 Mid-Continent 272.2 7.5 279.8 15.6% 4.00 Pacific 54.0 2.6 56.6 3.1% 2.00 North Central 21.6 11.6 33.3 1.2% 0.00 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Total Lower 48* 1,551.2 94.3 1,739.2 Alaska 193.8 57.0 250.8 11.1% 23 Henry Hub Kiodex Future Prices Total U.S. (means)* 1,739.2 158.6 1,897.8 Data source: Potential Gas Committee, Gas Daily, and Kiodex, CERA
EIA Proved Reserves • Rockies has a high Proved Resource in relation to other state across the US • Proved resource continues to grow • Reserve additions driven by shales 24
Rockies Long-Term Hedging Deals • Nucor JV with Encana – Piceance Basin – A recent agreement with Nucor which is designed to support Nucor's increased use of natural gas for its facilities, such as its direct reduced iron facility currently under construction in Convent, Louisiana – Nucor expects to invest $542 million over 3 years and $3.64 billion over the agreement’s estimated 13 -22 years – The agreement will enable Encana to drill up to 4,000 new wells over 20 years – Mesaverde development only – Dry gas, long-term hedging – volumes up to 100 MMcf/d • NW Natural JV with Encana – Jonah Field – Gross investment of approximately $250 million – Agreement provides gas for 30 years with majority flowing in first 10 years – Working interest will provide 8- 10 percent of NWN’s supply over first 10 years • Marketing firms working on other deals 25
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