Williston Basin Greasing the Gears for Growth in North Dakota NDPA/NDIC Study Presented By: BENTEK Energy 1
BENTEK Energy Who We Are 5% • Based in Evergreen, CO 40% 33% • 120+ People • 500+ Customers • Reports, Data, Consulting, and Tools 22% • Subsidiary of McGraw-Hill/Platts Majors, Producers, Mktrs, Industrials Pipelines, Utilities, Midstream Financial and Hedge Government, Associations, Consultants BENTEKENERGY.COM 2
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
New Economic Realities Challenge Basin Returns 18 12 10 Southeast 16 Canada 8 Bcf/d Bcf/d 14 6 12 4 10 2 Unconventional 8 - Conventional Alberta BC Other Saskatchewan Nova Scotia Haynesville Fayetteville 4 10 Midcon/TX 8 3 Rockies Bcf/d 6 2 Bcf/d 4 1 2 0 - Woodford E. Tx Haynesville DJ Other Piceance Powder River GR-O Uinta BENTEKENERGY.COM 8
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
Capital Moving to Oil - Williston Basin (MT and ND) Rigs 250 Rigs Reach All 100% Time High of 236 % Horizontal Rigs to Total 200 80% No. of Rigs Added 193 Rigs 150 60% Since May 2009 100 40% 50 20% 0 0% Total Dir Ver Hor % Horizontal RigData: July 2012 BENTEKENERGY.COM 10
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
Williston MT Horizontal Associated Gas Type Curves Reflect Adjusted ND Type Curve 160 30-day IP rate: 139 Mcf/d Yr Decline 140 EUR: 369,000 Mcf 1 40% 120 2 15% 100 3 15% Mcf/d 80 4 10% 60 5 5% 6 5% 40 7 5% 20 8 5% 0 9 5% 10 5% Months 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Type Curve BENTEKENERGY.COM 15
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
PAD Drilling Leads to a Reduction in Drill Time of 11 Days 35 30 25 Days 20 15 10 5 0 Avg. Drill Time Per Well Basin Avg. 2010 to 2012 Source: RigData BENTEKENERGY.COM 17
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
Nine New Pipeline Expansions or New Build Slated in the Next Six Years; One Refinery Expansion 1,155 Mb/d of Additional Pipeline Capacity * map does not include Banner and Sandpiper projects BENTEKENERGY.COM 19
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
Drilling Economics Struggle @ $50 Oil IRR Sensitivities to Changes in Oil Prices 140% Anad-Miss 120% Bakken 100% Eagle Ford Oil IRR 80% Granite Wash Montney 60% Niobrara 40% Permian 20% Uinta 0% $50 $60 $70 $80 $90 $100 $110 Oil $/barrel Note: Assumes NGL: Oil price ratio 50%; IP(oil/gas/ngl): 700 B/d, 400 Mcf/d, 60 b/d; 1,300 BTU; D&C Costs $8.5 Mil BENTEKENERGY.COM 21
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
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