a lower 48 review tight oil: past, present, future benjamin shattuck strategy with substance
TRANSCRIPT
A Lower 48 Review
Tight oil: past, present, future
Benjamin Shattuck
Strategy with substance
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Trusted commercial intelligence
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2
North America’s major growth plays
Trusted commercial intelligence
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3
Conventional
Deepwater
LNG
Oil sands
Shale gas
Tight oil
0
5
10
15
20
25
30
0 100 200 300 400 500W
eig
hte
d A
ve
rag
e I
RR
(%)
Capex Investment in Greenfield projects 2006-2020 (US$Billion)
0
50
100
150
200
250
300
2007 2009 2011 2013 2015 2017 2019
WM
Up
str
ea
m C
ap
ex
(U
S$
Bill
ion
)
Conventional LNG Deepwater Oil Sands Heavy Oil
Tight Oil Shale Gas Tight Gas Others
*Capital Spend is the net investment in new projects (nominal terms). It does not include investment in fields which are already onstream or newfield developments that fall under tax ring fences which are already onstream. Therefore the capital spend is less than total corporate capital spend and the average IRR may not
reflect the full economic picture. Data for all Corporate Service companies.
Source: Wood Mackenzie
Capital flowing into tight oil, boosting returnsHuge resource, superior returns and good visibility to investors
Development spend by resource theme Greenfield project IRR
Increasing spend
Declining spend
Trusted commercial intelligence
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4
How much is being spent on US Tight Oil?
US spend and breakout by top plays20
10
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tight Oil
Conventional Oil
Heavy Oil
Tight Gas
Shale Gas
Conventional Gas
Coalbed Methane
Source: Wood Mackenzie
Haynesville US$2.1 bn
Niobrara US$6.1 bn
Source: Wood Mackenzie
Other Lower 48~US$50 bn
Eagle FordUS$27.5 bn
Bakken/Three Forks
US$16.0 bn
WolfcampUS$15 bn
Bone SpringUS$5.0 bn Utica
US$4.4 bn
MarcellusUS$10.9 bn
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5
A retrenchment to core plays is inevitable - over the past three years, the largest US plays have become even more important
Reserve upgrades in the top 30 plays have been substantial
Lower 48 Commercial Reserves
Source: Wood Mackenzie NACPAT
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 300
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
2012
2013
2014
Cumulative Play Count
Re
ma
inin
g (
mm
bo
e)
Trusted commercial intelligence
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6
North America production outlook
Oil supply growing by ~6 million b/d from 2010-2020
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
18,000.0
US Canada Mexico
mil
lio
n b
arre
ls p
er d
ay
Source: Wood Mackenzie
Trusted commercial intelligence
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7
Value and returns concentrated in top sub-plays
Value concentrated in 10 sub-plays Over 25% of the Lower 48’s remaining NPV10 lies across
just 10 sub-plays, four of which lie in the Eagle Ford.
Acreage from these 10 sub-plays only accounts for roughly 5% of total leased acreage in the U.S.
Per-well NPV10 and well costs Parshall-Sanish provides a similar NPV10 to the Utica’s
Southern Wet Gas, lower well costs
Karnes Trough has the cheapest wells amongst sub-plays with the highest per-well NPV10
5.2% 3.1%3.0%
2.5%2.3%2.2%
2.0%
1.9%1.7%
1.7%
74.4%Eagle Ford Karnes Trough Wolfcamp Ozona
Eagle Ford Edwards Condensate Eagle Ford Hawkville Condensate
Wolfcamp Deep Basin Bakken West Nesson
Eagle Ford Maverick Condensate Eagle Ford Black Oil
Marcellus Bradford Area Bakken Parshall Sanish
OtherSource: Wood Mackenzie
Bak
ken
Par
shal
l San
ish
Utic
a S
outh
ern
Wet
Gas
Eag
le F
ord
Kar
nes
Tro
ugh
Bak
ken
Nes
son
Ant
iclin
e U
tica
Con
dens
ate
Cor
eB
akke
n F
ort
Ber
thol
dM
arce
llus
Sus
queh
anna
Cor
eT
hree
For
ks N
esso
n A
ntic
line
Eag
le F
ord
Edw
ards
Con
den.
..B
akke
n W
est
Nes
son
Bak
ken
Nor
ther
n M
ount
rail
Bak
ken
Will
iam
s C
ore
Thr
ee F
orks
For
t B
erth
old
Mar
cellu
s S
outh
wes
t R
ich
Gas
Bak
ken
Dun
n C
ount
yE
agle
For
d S
outh
wes
t G
asE
agle
For
d H
awkv
ille
Con
den.
..H
ayne
svill
e C
aspi
ana
Cor
eB
one
Spr
ing
Pec
os R
iver
Re.
..E
agle
For
d B
lack
Oil
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0NPV10 (US$ million) Well cost (US$ million)
NP
V10
(U
S$
mill
ion)
Wel
l Cos
t (U
S$
mill
ion)
Source: Wood Mackenzie
Trusted commercial intelligence
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8
Bakken IP heat map
Max month rates from the Bakken core drive value
CANADA
Ward
Dunn
Dawson
McLean
McKenzie
Williams
Richland
Stark
Mountrail
Divide Burke
Sheridan
Roosevelt
Morton
Mercer
Billings
McHenry
Prairie
Bottineau
Oliver
Wibaux
Renville
BurleighGoldenValley
1
2
3
11
13
12
9 4
7
5
8
610
102°W
102°W
104°W
104°W
106°W
106°W
48°N
48°N
0 40 8020km Source: Wood Mackenzie
ND
SD
MT Bakken
CANADA
Max month,IP 30High : 2,400
Low : 0
Mid: 350
1 - North Williston
2 - Dunn County
3 - West Nesson
4 - Northern Mountrail
Bakken
5 - Williams Core
6 - Parshall Sanish7 - Fort Berthold
8 - West McKenzie
9 - Williams Perimeter
10 - Nesson Anticline
11 - Southern Bakken Fringe
12 - Elm Coulee
13 - Montana Frontier
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9
Eagle Ford IP heat map
Operators target the ‘Goldilocks Zone’ for high IP rates with high liquids yield
Texas
Gulf Coast B
asin
Houston
MEXICO
Austin
Gulf of Mexico
MaverickBasin
Caldwell
Guadalupe
Bexar
San Antonio
Corpus Christi
Webb Duval
Frio
Bee
Zavala
Dimmit
La Salle
Milam
Lee
Maverick
Lavaca
Atascosa
Goliad
Fayette
Live Oak
Wilson
Victoria
McMullen
Walker
Bastrop
Gonzales
Grimes
Colorado
Austin
JimWells
Brazos
Burleson
MadisonRobertson
DeWitt
Karnes
WallerWashington1
2
5
6
8
97
43
96°W
96°W
98°W
98°W
100°W
100°W
30°N
30°N
28°N
28°N
0 40 8020km Source: Wood Mackenzie
1 - Northeast
2 - Black Oil
3 - Karnes Trough Condensate
4 - Edwards Condensate
5 - SE Gas
6 - SW Gas
7 - Maverick Condensate
8 - Maverick Oil
9 - Hawkville Condensate
Max Month (boe/d)High (>3,000)
Low (<300)
Mid (1,500)
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10
Type well IRRs and remaining resource by US oil sub-play
Source: Wood Mackenzie
Sub-plays representing more than half of the remaining resource generate 30% plus rates of return under our base-case scenario
0 10 20 30 40 50 60 70 80 90 100
110
120
130
140
150
160
170
180
190
200
-10%
0%
10%
20%
30%
40%
50%
60% Bakken Nesson Anticline
Eagle Ford Karnes Trough
Bakken Parshall Sanish
Three Forks Nesson Anticline
Bakken West Nesson
Bakken Fort Berthold
Utica Southern Wet Gas
Bakken Williams Core
Bakken Northern Mountrail
Utica Condensate Core
Eagle Ford Edwards Condensate
Bakken Dunn County
Niobrara Extension
Eagle Ford Southwest Gas
Eagle Ford Black Oil
Bone Spring Pecos River Region
Bakken Elm CouleeRemaining Reserves (mmboe)
IRR
US tight oil: core of the core delivers returns
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11
Tight Oil doubles L48 production by 2020• “Big 3” add almost 2 mmbbl/d by 2020
• Smaller plays still add more than 500,000 b/d by 2020
Eagle Ford and Bakken drive liquids growth Eagle Ford liquids set to grow 47% over next five years Unconventionals will produce half of the Lower 48’s 12
mmbbl/d of liquids by 2020
Lower 48 production
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000Other Tight Oil
Emerging/New Plays
Utica
Bone Springs/Wolfcamp
Niobrara
Eagle Ford
Bakken/Three Forks
Conventional
Oil
and
Con
dens
ate
Pro
duct
ion
(mbb
l/d)
Source: Wood Mackenzie
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Other Tight Oil
Emerging/New Plays
Utica
Niobrara
Bone Springs/Wolfcamp
Eagle Ford
Bakken/Three Forks
Oil
and
Con
dens
ate
Pro
duct
ion
(mbb
l/d)
Source: Wood Mackenzie
Trusted commercial intelligence
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12
Barnett3%
DJ Niobrara3%
Eagle Ford20%
Fayet-teville
1%
Granite Wash
6%
Hay-nesville
3%
Marcel-lus7%Miss. Carbonates
7%
Permian15%
Utica2%
Bakken16%
Wood-ford(s)
4%
Others13%
Barnett2% DJ Niobrara
4%
Eagle Ford16%
Fayet-teville
1%
Granite Wash
5%
Hay-nesville
3%
Marcel-lus6%
Miss. Car-
bonates7%
Permian22%
Utica3%
Bakken14%
Wood-ford(s)
4%
Others15%
What’s emerging: the current shift is to Unconventional 3.0 – exploiting underexplored rock volume using 1.0 and 2.0 techniques
Smaller niche plays and the redevelopment of existing fields
2013 Rig Count 2014 Rig Count
Source: Wood Mackenzie, Baker Hughes
Trusted commercial intelligence
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13
Which North American play types are the highest cost?
Future oil sands mining projects and the fringes of unconventional plays potentially offer big rewards, but are under threat if oil prices fall further
North American breakevens by play and theme
0
20
40
60
80
100
120
140
US Deepwater
Montney
Cardium
GoM-Lower Tertiary
Oil Sands (SAGD)
Utica
Alaska North Slope
Eagle FordBone Spring
BakkenWolfcamp
Duvernay
Niobrara
Oil Sands (mining)
Commercial oil and condensate reserves -- undrilled locations and future projects only (mmbbl)
Bre
nt
bre
akev
en (
US
$/b
bl)
Source: Wood Mackenzie, note US Deepwater excludes Lower Tertiary
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14
Tight oil supply and oil prices
Source: Wood Mackenzie
Supply growth sensitive below US$80/bbl
2015 2016 2017 2018 2019 20200
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
GT 95 90-95 85-90 80-85 75-80 70-75 65-70 60-65 LT 60
Source: Wood Mackenzie
© Wood Mackenzie 15
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