The State of U.S. Tight Oil Activity During the Downturn - PowerPoint PPT Presentation

The State of U.S. Tight Oil Activity During the Downturn OPEC/IEA/IEF Workshop Trisha Curtis – Co-Founder, PetroNerds, LLC trisha@petronerds.com March 15, 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 1

About PetroNerds PetroNerds, LLC is a Denver, CO based energy analytics and consulting firm with a focus on oil, gas, and biofuels. We are committed to providing detailed, data-driven, and actionable insights into the activity of energy companies, markets, and policy developments. PetroNerds combines its experience, knowledge, analytical skills and access to proprietary data and tools to provide some of the most detailed and accessible upstream insights available. Much more than high-level forecasts, 30,000 ft summaries, or macro-models. PetroNerds seeks to work closely with its clients and provided personalized services. We tailor our projects to the exact requirements of our clients, large and small. The founders of PetroNerds have nearly 15 years of experience in the oil and gas industry. They have led research contracts with US Department of Defense and US Department of Energy, presented at some of the world’s foremost oil and gas venues and universities, published in publications such as Oil & Gas Journal and World Oil , and been quoted by the Economist and the Financial Times. PetroNerds LLC | www.petronerds.com | 970-329-1645 2

Some of PetroNerds Services • Upstream Oil and Gas Production Analysis and Asset Evaluations on a Wells-up Basis. • Midstream Markets and Crude Oil Transportation Market Guidance • Downstream/Refining Economics and Policy, Biofuels/Ethanol Analysis and Advising • Geopolitics and International Crude Markets. Putting US production in context. • Public policy and economic reports • Equity Analysis, Project Economics, Due Diligence • Custom Economic Models + Software PetroNerds LLC | www.petronerds.com | 970-329-1645 3

Overview • U.S shale market overview • What is keeping production so robust? • Play breakout • Financial state of the shalers PetroNerds LLC | www.petronerds.com | 970-329-1645 4

Summary • Larger operators and lenders are in the same boat. Both have an interest in maintaining the status quo (keeping credit lines open and avoiding default) to survive the downturn. • Most bankruptcies thus far have affected only small producers…although that could change. • The continued availability of credit is partially responsible for stronger than expected shale oil production volumes. • Core oil plays doing far better than condensate and gas plays. PetroNerds LLC | www.petronerds.com | 970-329-1645 5

U.S. Production and Forecast Production and Forecast (assuming 100,000 b/d decline per month through 2016) 12,000 10,000 Thousand Barrels Per Day 8,000 Dec 2015 9.262 mbd 6,000 4,000 2,000 - U.S. Field Production of Crude Oil U.S. Production Forecast Source: EIA. PetroNerds forecast estimate PetroNerds LLC | www.petronerds.com | 970-329-1645 6

Primary Shale and Tight Oil Plays Source: DrillingInfo raw data PetroNerds LLC | www.petronerds.com | 970-329-1645 7

U.S. Production by State Production from Major U.S. Oil Producing States and Gulf of Mexico Peak 3,644 mbd 4,000 3,500 Dec 2015 Texas 3,340 mbd 3,000 Thousand Barrels Per Day 2,500 2,000 1,500 1,000 500 - Jan-81 Nov-81 Sep-82 Jul-83 May-84 Mar-85 Jan-86 Nov-86 Sep-87 Jul-88 May-89 Mar-90 Jan-91 Nov-91 Sep-92 Jul-93 May-94 Mar-95 Jan-96 Nov-96 Sep-97 Jul-98 May-99 Mar-00 Jan-01 Nov-01 Sep-02 Jul-03 May-04 Mar-05 Jan-06 Nov-06 Sep-07 Jul-08 May-09 Mar-10 Jan-11 Nov-11 Sep-12 Jul-13 May-14 Mar-15 North Dakota - Bakken Oklahoma - Anadarko Basin Wyoming - Powder River Basin Colorado - DJ Basin Federal Offshore - Gulf of Mexico New Mexico - Permian Basin Texas - Permian Basin and Eagle Ford Source: EIA PetroNerds LLC | www.petronerds.com | 970-329-1645 8

All new wells brought online in 2015 2015 - A very strong year for well additions Source: DrillingInfo, March 10, 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 9

Severe rig count decline continues despite modest price rebound U.S. Rig Count and WTI 2,500 160 386 rigs drilling for oil 140 2,000 120 100 1,500 # of Rigs $/Barrel 80 1,000 60 40 500 20 0 0 Importance of contracts! Oil Gas Total Cushing OK WTI Spot Price FOB $/bbl Source: Baker Hughes, EIA PetroNerds LLC | www.petronerds.com | 970-329-1645 10

Just over 500 rigs currently drilling in the U.S. • 514 rigs currently drilling in the U.S. • Only 40 dry gas rigs • 341 horizontal • 76 vertical rigs still drilling Source: DrillingInfo, March 12, 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 12

All wells completed since June 1, 2015 Source: DrillingInfo, March 12, 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 13

Reduction in filed permits 7,937 permits filed in past 90 days as of March 12, 2016 vs. 12,657 permits filed (past 90 days) March 11, 2015 Permitting is noticeably thinner in areas where assets are better delineated, developed, and held by production – Bakken and Eagle Ford Source: DrillingInfo, permits filed in past 90 days, March 12, 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 14

The major shale oil plays continue to shed rigs 600 DJ - Niobrara Eagle Ford 500 Marcellus Permian 400 Utica Williston # of rigs 300 200 100 0 Source: Baker Hughes PetroNerds LLC | www.petronerds.com | 970-329-1645 16

Production by Play: Bakken, Permian, and Eagle Ford PetroNerds LLC | www.petronerds.com | 970-329-1645 17

Williston Basin Production Total Williston Basin and North Dakota (share) Production and Well Count ND - 1.3 mbd 1,800,000 20,000 18,000 1,600,000 16,000 1,400,000 14,000 1,200,000 Barrels Per Day 12,000 # of Wells 1,000,000 10,000 800,000 8,000 600,000 6,000 400,000 4,000 200,000 2,000 - - 1/1/2000 7/1/2000 1/1/2001 7/1/2001 1/1/2002 7/1/2002 1/1/2003 7/1/2003 1/1/2004 7/1/2004 1/1/2005 7/1/2005 1/1/2006 7/1/2006 1/1/2007 7/1/2007 1/1/2008 7/1/2008 1/1/2009 7/1/2009 1/1/2010 7/1/2010 1/1/2011 7/1/2011 1/1/2012 7/1/2012 1/1/2013 7/1/2013 1/1/2014 7/1/2014 1/1/2015 7/1/2015 WCNT ND WCNT LIQ ND LIQ Source: Raw data from HPDI PetroNerds LLC | www.petronerds.com | 970-329-1645 18

Bakken Production Concentration • Williston Basin Production Concentration High grading is taking place – 1,400,000 running out of steam at $30 - 1,174,458 1,200,000 Barrels Per Day $40 oil 1,000,000 835,993 800,000 600,000 338,465 400,000 • Only a handful of companies 200,000 - aggressively added wells the Total Production Top 10 Producers All Others Combined Production second half of 2015 – Hess Top 10 Williston Basin Producers (89), Exxon (85), 160,000 ConocoPhillips (62) 140,000 Barrels Per Day 120,000 100,000 • 80,000 …EOG..? Only 13 60,000 40,000 20,000 • 2016 well additions - dramatically cut by major operators Source: PetroNerds, March 2016 PetroNerds LLC | www.petronerds.com | 970-329-1645 19

Permian Basin Production 2,500,000 160,000 Usually revised upwards as additional 140,000 data comes in 2,000,000 120,000 Output has 100,000 Barrels Per Day 1,500,000 stayed # of wells 80,000 relatively flat at around 1,000,000 60,000 1.9 mbd (Texas + New 40,000 500,000 Mexico 20,000 Permian) for the past - - 1/1/2000 8/1/2000 3/1/2001 10/1/2001 5/1/2002 12/1/2002 7/1/2003 2/1/2004 9/1/2004 4/1/2005 11/1/2005 6/1/2006 1/1/2007 8/1/2007 3/1/2008 10/1/2008 5/1/2009 12/1/2009 7/1/2010 2/1/2011 9/1/2011 4/1/2012 11/1/2012 6/1/2013 1/1/2014 8/1/2014 3/1/2015 10/1/2015 several months Texas Well Count New Mexico Well Count Texas Liquid New Mexico Liquid Source: PetroNerds, Raw data DrillingInfo PetroNerds LLC | www.petronerds.com | 970-329-1645 20

Permian Basin Production by Drill Type 1,200,000 180,000 1,200,000 14,000 160,000 12,000 1,000,000 1,000,000 140,000 10,000 Barrels Per Day 800,000 800,000 120,000 Barrels Per Day # of Wells 8,000 # of Wells 100,000 600,000 600,000 6,000 80,000 400,000 4,000 400,000 60,000 200,000 2,000 40,000 200,000 20,000 - - 1/1/2000 3/1/2001 5/1/2002 7/1/2003 9/1/2004 11/1/2005 1/1/2007 3/1/2008 5/1/2009 7/1/2010 9/1/2011 11/1/2012 1/1/2014 3/1/2015 - - 1/1/2000 2/1/2001 3/1/2002 4/1/2003 5/1/2004 6/1/2005 7/1/2006 8/1/2007 9/1/2008 10/1/2009 11/1/2010 12/1/2011 1/1/2013 2/1/2014 3/1/2015 Permian Basin Horizontal Well Count Permian Basin Horizontal Production Permian Basin Vertical Well Count Permian Basin Vertical Liquids Production Source: PetroNerds, Raw data DrillingInfo 21 PetroNerds LLC | www.petronerds.com | 970-329-1645