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Kristian JohansenCEOSeptember 2020
Barclays’ CEO Energy Conference 2020
Forward-looking statements
2
All statements in this presentation other than statements of historical fact, are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. These factors include TGS’ reliance on a cyclical industry and principal customers, TGS’ ability to continue to expand markets for licensing of data, and TGS’ ability to acquire and process data products at costs commensurate with profitability. Actual results may differ materially from those expected or projected in the forward-looking statements. TGS undertakes no responsibility or obligation to update or alter forward-looking statements for any reason.
©2018 TGS-NOPEC Geophysical Company ASA. All rights reserved
Highlights
©TGS-NOPEC Geophysical Company ASA. All rights reserved 3
Challenging market conditions near-term
Long-term drivers intact – increased exploration efforts needed to meet future oil and gas demand
Structural changes to the industry needed
TGS continuing to invest counter-cyclically in key areas
Energy transition creates opportunities for TGS
Challenging market in the near-term
• COVID-19 and sharp oil price drop have led to deep cuts in 2020 E&P spending budgets
• On average E&P companies has revised their 2020 budgets down by 25%* leading to a 26%* reduction relative to 2019
• Discretionary (uncommitted) spending down significantly more than overall spending
• Most planned near-term seismic purchases put on hold
©TGS-NOPEC Geophysical Company ASA. All rights reserved 4
-49%
-37%
-34%
-33%
-30%
-29%
-27%
-26%
-26%
-25%
-23%
-20%
-20%
-20%
-20%
-19%
-11%
-60%-50%-40%-30%-20%-10%0%
Occidental
Apache
Murphy Oil
Exxon
Kosmos Energy
Noble Energy
Hess Corp.
Suncor
Eni
BP
Talos
Total
Shell
Chevron
Aker BP
Equinor
ConocoPhillips
Change from original 2020 budget
2020 capex revisions selected E&P companies
Average 25%*
* Based on public announcements from 60 E&P companies since 10 March 2020
Source: ABG
A more balanced oil market going forward
• A growing number of countries are slowly getting back to normal following the lock-downs in the initial phase of the COVID-19 crisis
• Global oil demand has started to recover following the sharp drop seen in Q1 and Q2• Global oil supply has been scaled down significantly and is expected to recover at a slower pace than demand
resulting in a more balanced market going forward
©TGS-NOPEC Geophysical Company ASA. All rights reserved 5
80
85
90
95
100
105
110
Mbb
l/day
World liquid fuels production and consumption
Production Consumption
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Cha
nge
mbb
l/day
World liquid fules implied stock build/(draw)
Source: EIA Short-Term Energy Outlook July 2020
More oil and gas resources needed to meet future demand
• Average decline rates developed supply at 8% p.a. for oil and 6% p.a. for gas
• Even when taking the most optimistic energy transition scenarios into account substantial amounts of new oil and gas production are required for meeting demand and compensating for decline
©TGS-NOPEC Geophysical Company ASA. All rights reserved 6
Global supply and demand scenarios to 2040
0
20
40
60
80
100
120
M b
bl/d
Oil
Minimum supply from onstream fields
Minimum supply gap to meet 2°C scenario2
Additional supply gap to base case scenario1
50-95mbbl/d in 2040
0
20
40
60
80
100
120
M b
oe/d
Gas
Minimum supply from onstream fields
Minimum supply gap to meet 2°C scenario2
Additional supply gap to base case scenario1 35-65m
boe/d in 2040
1. The energy transition outlook (ETO) represents WoodMac’s base case view of the energy world, broadly consistent with a 3°C global warming view2. The accelerated energy transition 2-degree scenario (AET-2) represents how the world can augment efforts towards deep decarbonization with a credible pathway to reach a 2°C global warming trajectory by 2050.
Source: Wood Macenzie
Exploration to play an important role in closing the supply gap
• Explorers, on average, tend to find better resources through exploration than the legacy assets that still await development
• I.e. exploration for new resources is a competitive alternative to developing already discovered resources
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0 5 10 15 20
Proven developed oil
Onstream oil incremental
Oil under development
Pre-FID oil
Oil exploration
Proven developed gas
Onstream gas incremental
Gas under development
Pre-FID gas
Gas exploration
Average point-forward cost USD/boe
Point-forward costs of oil and gas supply by development status
Source: Wood Macenzie
Industry not creating long-term value – structural changes neededTGS a notable exception
©TGS-NOPEC Geophysical Company ASA. All rights reserved 8
0
500
1,000
1,500
2,000
2,500
Jun-
00
Jun-
01
Jun-
02
Jun-
03
Jun-
04
Jun-
05
Jun-
06
Jun-
07
Jun-
08
Jun-
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Jun-
10
Jun-
11
Jun-
12
Jun-
13
Jun-
14
Jun-
15
Jun-
16
Jun-
17
Jun-
18
Jun-
19
Jun-
20
Total Shareholder ReturnPhiladelphia Oil Service Index (OSX) / TGS
OSX TGS USD - rebased
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Return on Capital Employed1
Oil Service2 / Seismic3 / TGS
Oil service Seismic TGS
Avr. 10% p.a
Avr. -5% p.a
Avr. 31%Avr. 7%Avr. 9%
1. EBIT ex. impairments / (Net Debt + Equity)2. 37 international oil service companies across a variety of different sub-segments3. PGS, CGG, Polarcus, Dolphin, Spectrum, Seabird Source: Bloomberg, Factset, ABG
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Declining Industry Concentration Chasing Returns
Return on Capital Concentration*
Structural changes needed
©TGS-NOPEC Geophysical Company ASA. All rights reserved 9
• This last decade the number of OFS companies has grown by 14%
• There are only 2.5% fewer companies today than there were at the 2015 peak
• Too many companies chasing market share to compensate for stagnating organic growth – industry returns suffering
Source: Evercore ISI Source: Evercore ISI
280283
294
303
311
326 328 326323 321 320
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
No. of firms operating with Oilfield Services
* Herfindahl-Hirschman Index (HHI) indexed to 2008
Counter-cyclical investments key to long-term value creationContinuing to invest in selected areas despite difficult market conditions
©TGS-NOPEC Geophysical Company ASA. All rights reserved 10
Continuing to invest in the South Atlantic basin
Continuing to invest in next generation data (OBN) in US GoM
Extending Atlantic margin portfolio
Curbing onshore investments due to market conditions
2020 multi-client investments expected to be approximately USD 325 million
Key R&D Achievements
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Dynamic Matching Fullwave Inversion
• Dynamic Matching Fullwave Inversion uses seismic reflection and refraction information to automatically update the velocity model
• Enabling high-quality images in geologically complicated areas
• Reduce imaging cycle time and interpretation ambiguity – leading to less risk
SaltNet
• SaltNet is a software tool which allows interpreters to integrate machine learning to generate quality interpretations in a forward-thinking manner
• Cutting-edge tool and a step towards drastically reducing cycle time in seismic processing.
Well Performance
• Well Intel is a unique collection of insights, forecasts and analysis derived from the industry’s most extensive subsurface data library
• Find Well Intel series at https://info.tgs.com/well-intel
Moving towards a fully integrated data companyEnergy transition offers opportunities for expansion into new areas
• Technology offers opportunities for expanding through the value chain from “data” towards “decision”
• Potential for duplicating business model into other industries with extensive data needs
• Renewables• Carbon capture and storage• Offshore mineral exploration
• Applying core competencies for a wider purpose
• G&G• Data processing• Data collection and management• Data analytics• HPC
©TGS-NOPEC Geophysical Company ASA. All rights reserved 12
Summary
©TGS-NOPEC Geophysical Company ASA. All rights reserved 13
Challenging market conditions near-term
Long-term drivers intact – increased exploration efforts needed to meet future oil and gas demand
Structural changes to the industry needed
TGS continuing to invest counter-cyclically in key areas
Energy transition creates opportunities for TGS
Thank you
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