2014 OCS Advisory Board Workshop Jackson M. Sandeen Research Analyst – Deepwater Gulf of Mexico The Woodlands, TX 23 January 2014 Trusted commercial intelligence www.woodmac.com
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Wood Mackenzie Upstream Research These slides have been prepared using the following Wood Mackenzie products: Upstream Service Forward-looking commercial analysis at the country and asset level from our regional experts. Contains 120+ country reports, 3,000+ asset reports. Covers exploration, development, production, transportation, fiscal and regulatory framework. Upstream Data Tool Global E&P database and mapping tool containing over 700 commercial and technical attributes for: » 150 countries » 140,000 wells » 67,000 blocks » 30,000 fields Wood Mackenzie portal: http://portal.woodmac.com/web/woodmac/home-page For a copy of the entire presentation or additional information on Wood Mackenzie, please contact Felecia Williams via email (felecia.williams@woodmac.com) or telephone (713-470-1692). 3 Trusted commercial intelligence www.woodmac.com
Agenda 1. Deepwater GoM rig market then and now 2. Gulf production leaders and key areas of growth 3. Production profile and capex forecast by play-type 4. Key emerging plays 5. Global rig supply and demand 4 Trusted commercial intelligence www.woodmac.com
Deepwater GoM rig market then and now Several operators experienced a rig crunch in mid-2012 Inadequate rig positions and inequitable distribution Lack of available rig slots and elevated day rates Increased global competition particularly within the Golden Triangle Permitting delays impacted smaller independents’ contracting strategy By 2014, the deepwater GoM rig market has loosened up Operators turned to the newbuild market Rig contract extensions improved rig positions Rig sharing between operators continues Rig fleet has been high-graded in terms of specifications 5 Trusted commercial intelligence www.woodmac.com
Agenda 1. Deepwater GoM rig market then and now 2. Gulf production leaders and key areas of growth 3. Production profile and capex forecast by play-type 4. Key emerging plays 5. Global rig supply and demand 6 Trusted commercial intelligence www.woodmac.com
Future growth lies predominantly in the frontier protraction areas of Keathley Canyon and Walker Ridge 80 Desoto Canyon 7% 42 Mississippi Canyon 800 40 573 28 498 600 2% 400 200 0 0 Garden Banks Atwater Valley Green Canyon 120 East Breaks 80 158 160 800 51 538 526 -12% 120 80 -19% 600 0.4% -25% 40 80 23 400 28 46 40 5 40 200 0 0 0 0 Keathley Canyon Alaminos Canyon Walker Ridge 218 160 480 240 341 96 120 360 84 160 -2% 58% 35% 80 240 57 40 80 120 14 Production (‘000 boed) 0 0 Protraction Area 0 CAGR % Source: Wood Mackenzie Upstream Data Tool (UDT) 2014 2020 7 Trusted commercial intelligence www.woodmac.com
Agenda 1. Deepwater GoM rig market then and now 2. Gulf production leaders and key areas of growth 3. Capex forecast and production profile by play-type 4. Key emerging plays 5. Global rig supply and demand 8 Trusted commercial intelligence www.woodmac.com
Lower Tertiary displaces Subsalt Miocene as key investment area as region approaches new capex peak in 2016 Development capex by play (2008-2020) Pleisto/Plio Miocene Subsalt Miocene Lower Tertiary Subsalt Plio/Mio Jurassic 20 Development capex (US$ billions) 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Wood Mackenzie Upstream Data Tool (UDT) 9 Trusted commercial intelligence www.woodmac.com
Drilling moratorium results in production deferment which is finally trending upwards Commercial production by play (2008-2020) Pleisto/Pilo Miocene Subsalt Miocene Lower Tertiary Subsalt Plio/Mio Jurassic 2 Production (mmboed) 1.5 1 0.5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Wood Mackenzie Upstream Data Tool (UDT) 10 Trusted commercial intelligence www.woodmac.com
Agenda 1. Deepwater GoM rig market then and now 2. Gulf production leaders and key areas of growth 3. Capex forecast and production profile by play-type 4. Key emerging plays 5. Global rig supply and demand 11 Trusted commercial intelligence www.woodmac.com
Two key emerging plays: Lower Tertiary and Jurassic Lower Tertiary High yet-to-find volumes driven by commercial success to date Marginal economics given current low recovery factors HP/HT technology and EOR will be key driver to unlocking value Jurassic Limited commercial success with fewer than 10 wells drilled Appomattox field potentially a one-off discovery in terms of recoverable reserves Uncertainties regarding near-term success, aerial extent and Eastern Gulf leasing Economics favorable given higher permeability/porosity and shallower reservoir depths relative to the Lower Tertiary 12 Trusted commercial intelligence www.woodmac.com
Agenda 1. Deepwater GoM rig market then and now 2. Gulf production leaders and key areas of growth 3. Capex forecast and production profile by play-type 4. Key emerging plays 5. Global rig supply and demand 13 Trusted commercial intelligence www.woodmac.com
Global rig supply and demand 2016 could potentially result in a pinch point for rig demand Can rigs be built? » 90 currently being built but a further 95 required to meet demand Can service sector and construction meet demand » 170 new floating facilities and 220 sub sea tie-backs » Not to mention the hiring and training of staff New era of deepwater cost inflation on the horizon……… 14 Trusted commercial intelligence www.woodmac.com
Jackson M. Sandeen Research Analyst – Deepwater Gulf of Mexico Jackson is currently a Research Analyst working on the Deepwater Gulf of Mexico Upstream Research team. In this role he performs asset valuations, assists with consulting projects and publishes topical reports on key regional trends. He has spent his time focusing on rig market constraints, play-level economics and the commercial impact of emerging plays. Jackson earned dual degrees in Economics and Broadcast Journalism from Boston University. 15 Trusted commercial intelligence www.woodmac.com
Disclaimer Strictly Private & Confidential This report has been prepared for OCS Advisory Board Workshop 2014 by Wood Mackenzie Limited. The report is intended solely for the benefit of audience members and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission. The information upon which this report is based has either been supplied to us or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them. 16 Trusted commercial intelligence www.woodmac.com
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