Natural Gas Study 47 Basin Conclusions The Williston Basin Is - PowerPoint PPT Presentation

Natural Gas Study 47

Basin Conclusions The Williston Basin Is Benefiting From the Significant Shift in Natural Gas Dynamics as a Result of:  A Realignment of Producer Investment Criteria Toward Oil and NGL Plays.  Reduction in Production From Neighboring, Less Economic Producing Basins. While Still Early, Current Data Suggests the Basin Could Yield Higher Future Gas and NGL Volumes Due to a Rising Gas to Oil Ratio (GOR). Strong Drilling Economics, a Rising GOR and Greater Efficiency Will Increase the Future Output From the Basin. Under BENTEK’s Base Case Scenario, Oil Production Will Climb to 2.2 MMB/d and Gross Gas Production Will Top 3.0 Bcf/d by the end of 2022. BENTEKENERGY.COM 3

Basin Conclusions (Continued) Oil Prices and Oil Infrastructure Takeaway Capacity Are Primary Drivers of the Strong Economics in the Region and Will Ultimately Drive Growth. Given Growth Expectations, Significant Midstream Investment Will Be Required To Capture Natural Gas and NGL Value in the Basin. Williston Basin Economics Enable Producers in the Region to Sufficiently Compete on Price with Upstream Natural Gas Supply In the Rockies and Canada for Space Out of the Region on Existing Infrastructure. BENTEKENERGY.COM 4

Natural Gas Supply Growth is Changing The US Energy Landscape 70.0 65.0 60.0 55.0 50.0 Bcf/d 2011 45.0 3.75 Bcf/d 2000 40.0 1990 11.34 Bcf/d 35.0 3.74 Bcf/d 30.0 25.0 20.0 US Dry Production US Consumption Canadian Imports/LNG/Storage Source: EIA BENTEKENERGY.COM 5

Commodity Price Disparities Are Shifting Producer Behavior • Low Natural Gas Prices Are $30.00 $30.00 Forcing Producers to Revaluate Economics and $/MMBtu Equivalent $25.00 $25.00 Investment in Conventional and Even Unconventional Lean Gas Assets. $20.00 $20.00 AND $15.00 $15.00 • Higher Relative Oil and NGL Prices Incentivize Producers $10.00 $10.00 to Redirect Resources Toward Assets With a Higher BTU $5.00 $5.00 Content. ARE • Driving Capital into the $0.00 $0.00 Williston Basin and Reducing Competition For Space on Existing Infrastructure Moving HH MB NGL WTI Gas Out of the Area. Source: ICE, EIA BENTEKENERGY.COM 6

Bakken Earns Above Average Returns 100% 80% 60% 40% 20% 0% -20% Price Assumptions: Gas = 12 month forward average curve for each regional pricing point as of June, 2012 (price range $2.45-$2.86/Mcf) Oil = 6 month average WTI +/- differential as of June, 2012 (price range $84.40-$100.43/barrel) NGLs = weighted average $/barrel based on current Mt. Belvieu prices and the typical composition in each region (range $23.79-$45.22/barrel) BENTEKENERGY.COM 7

Plays With High Returns Attract Drilling Rigs 228/+147 7/+4 3/+0 20/+11 7/+1 25/-5 46/+28 91/+15 23/+19 96/+58 11/+3 40/+15 19/-4 48/+30 3/-9 254/+131 22/-15 6/-2 52/+24 11/-18 44/-49 78/-31 37/-92 16/+5 521/+302 30/+15 68/+9 2168 Rig Increases Dry Gas Focused Areas +809 265/+205 96/+12 Rig Increases Liquids-Rich/Oil Focused Areas Rig Declines Source: Rig Data, BENTEK, June 2012 Active rig count: June 15, 2012 / Change in rig count from Jan. 1, 2010 BENTEKENERGY.COM 9

Williston Basin Forecasts BENPOSIUM 2009 11

Williston ND Horizontal Oil Type Curve Converges 450 Yr Decline 30-day IP rate: 400 b/d 400 EUR: 459,000 bbls 1 65% 350 2 30% 300 3 22% 250 4 19% b/d 5 16% 200 6 10% 150 7 10% 100 8 5% 50 9 5% 0 10 2% Well Life: 25 years Month 2012 2011 2010 2009 2008 2007 2006 2005 Type Curve BENTEKENERGY.COM 12

Older ND Wells Suggest a Flat Gas Type Curve 450 30-day IP rate: 340 Mcf/d Yr Avg Adj 400 EUR: 669,000 Mcf Decline Decline 350 1 58% 58% 300 2 30% 30% 250 3 26% 10% Mcf/d 200 4 15% 5% 5 15% 5% 150 6 10% 5% 100 7 10% 5% 50 8 6% 5% 0 9 4% 4% 10 2% 2% Month 2012 2011 2010 2009 2008 2007 2006 2005 Type Curve Adjusted Type Curve BENTEKENERGY.COM 13

ND Model EURs Inline with Producers Expectations Model Oil: 459,000 Bbls CLR: 603 Mboe Gas: 111,500 Boe ---------------------------- Total: 570,500 Boe Whiting: 450-900 Mboe (Sanish) Oasis: 450-750 Mboe (Middle Bakken) BENTEKENERGY.COM 14

Stronger Gas Oil Ratio (GOR) Expected For ND Horizontal Oil Wells 2.5 2.0 1.5 Mcf/bbl 1.0 0.5 0.0 Month 2012 2011 2010 2009 2008 2007 2006 2005 GOR Adjusted GOR BENTEKENERGY.COM 16

Base Case- Level of Activity Remains At Current Levels For the Next 10 years 4,000 400 Reserve Requirement: 22 Billion Boe 3,500 350 3,000 300 CLR: 24 Billion Boe Technically No. Wells 2,500 250 Recoverable Oil No. Rigs and Gas 2,000 200 1,500 150 1,000 100 500 50 - 0 Rigs-ND Rigs-MT Wells- ND Wells-MT BENTEKENERGY.COM 18

High Case Scenario-Consistently Tests Oil Takeaway Capacity, Stressing Prices and Producers Reserve Requirement: 4,000 400 28 Billion Boe 3,500 350 3,000 300 No. Wells 2,500 250 No. Rigs 2,000 200 1,500 150 1,000 100 500 50 - 0 Rigs-ND Rigs-MT Wells- ND Wells-MT BENTEKENERGY.COM 20

Williston Growth Can Be Maintained at Low Prices Williston IRR Sensitivities: Oil IP Rates/Oil Prices 160% Oil Price 140% $50/bbl $60/bbl 120% $70/bbl 100% $80/bbl 80% IRR $90/bbl $100/bbl 60% $110/bbl 40% 20% 0% 400 500 600 700 800 900 1,000 Oil IP Rate (B/d) BENTEKENERGY.COM 22

$50 Oil Challenges Fringe Economics 60% 60 Active Rigs 50% 50 40% 40 IRR 30% 30 20% 20 10% 10 0% 0 IRR Active Rigs $50 Oil Other counties with active rigs that see reduced activity include: Bowman, Roosevelt, Richland, Golden Valley, Burke BENTEKENERGY.COM 23

Low Case – Driven By Low Oil Prices 4,000 400 Reserve Requirement: 13 Billion Boe 3,500 350 3,000 300 No. Wells 2,500 250 No. Rigs 2,000 200 1,500 150 1,000 100 500 50 - 0 Rigs-ND Rigs-MT Wells- ND Wells-MT BENTEKENERGY.COM 24

Comparison of Oil Production Based on Various Scenarios • 3.0 High Case: Consistently Tests Oil 2.5 Takeaway Capacity, Stressing Prices and Producers. 2.0 MMb/d • Base Case: Provides 1.5 Strong Consistent Growth For the Basin 1.0 Without Straining Takeaway Capacity 0.5 Until Around 2022. 0.0 • Low Case: Suggests a Significant Pullback in Activity Due to High Base Falling Oil Prices. Low Capacity Sandpiper Project BENTEKENERGY.COM 25

North Dakota Gross Gas Production Set To Climb North Dakota Gross Gas Production 3.5 3.0 Bcf/d 2.5 2.0 1.5 1.0 0.5 0.0 ND_High Case ND_Base Case ND_Low Case BENTEKENERGY.COM 26

Bring Gas Supply to Market BENPOSIUM 2009 27

New Processing and Midstream Infrastructure Needed to Meet Growing Gas Production in the Williston 3.5 3.0 ONEOK Garden Creek 2.5 Plains Ross Plant New Frontier Midstream 2.0 Bcf/d HESS Tioga Plant Expansion ONEOK Stateline II 1.5 ONEOK Stateline I 1.0 545 MMcf/d of Planned 0.5 Processing Expansions Over Next Two Years 0.0 Gross Production Flared Processing Capacity BENTEKENERGY.COM 28

Source: BENTEK Energy July 2012 Report

Open Capacity Leaving N. Dakota Is Tight Northern Border Flows 3.0 2.5 Bcf/d 2.0 1.5 1.0 0.5 0.0 Flows Capacity Alliance 2.5 2.0 • Northern Border and Alliance Serve As the 1.5 Bcf/d Primary Routes to Transport Gas From the 1.0 Region. 0.5 0.0 • Each Have Limited Open Mainline Capacity to Carry Additional Williston Supply. Flows Capacity BENTEKENERGY.COM 29

Inlet Flows Currently Losing Market Share Northern Border – Port of Morgan 3.0 2.5 Bcf/d 2.0 1.5 1.0 0.5 0.0 Flows Capacity Bison 0.6 0.5 Bcf/d 0.4 • Declining PRB Production and Increased 0.3 Competition For Space Has Resulted in 0.2 Reduced Flows on Bison. 0.1 • Canadian Inflows Into Northern Border Have 0.0 Remained Relatively Strong, But Have Experienced Displacement in the Past and Now. Flows Capacity BENTEKENERGY.COM 31

North Dakota Pipeline Authority North Dakota Petroleum Council Annual Meeting September 20, 2012 – Medora, ND

North Dakota Type Curves* *Based on the July 2012 BENTEK Natural Gas Study 3

September 2012 Forecast Assumptions 10

September 2012 Forecast Assumptions 11

Production curve for the Bakken and Three Forks, US Williston Basin. Source: BENTEK Energy July 2012 Report

Only horizontal wells shown on map

1980’s - 90’s Bakken Development 8

GOR 3,000 CUFT/BBL GOR 1,000 CUFT/BBL 9

Forecasting Williston Basin Oil Production, BOPD Today Production forecast is for visual demonstration purposes only and should 13 not be considered accurate for any near or long term planning.

Williston Basin Oil Production & Export Capacity, BOPD Today Production forecast is for visual demonstration purposes only and should 21 not be considered accurate for any near or long term planning.

Williston Basin Gas Production Production forecast is for visual demonstration purposes only and should 34 not be considered accurate for any near or long term planning.

North Dakota NGL Potential Assumptions • No Flaring • 8 Gal/MCF • All liquids extracted 43

Case 1: ND NGL Potential* 13.51% 9.55% 6.98% 28.33% 41.64% *Using NGL breakdown from the July 2012 BENTEK Natural Gas Study 44