can us shale survive? · 2020-04-03 · global oil demand impact analysis covid-19 –effective...
TRANSCRIPT
CAN US SHALE SURVIVE?
ARTEM ABRAMOV
APRIL 2, 2020
CHALLENGES AND OPPORTUNITIES AHEAD
US light tight oil production doubled between 2016 and late-2019
*Vintage is defined as the year of first oil productionSource: Rystad Energy ShaleWellCube
US light tight oil production from horizontal wells by vintage*
Thousand barrels per day
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
2019 2018 2017
2016 2015 2014
2013 2012 2011
Pre-2011 Dec-16 to Dec-19
+4.4 million bpd
2
Focus on free cash flow generation has become the standard business model for public E&Ps
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
2
4
6
8
10
12
14
16
18
20
CFO (LHS) Capex (LHS) % of companies with positive CFO-Capex (RHS)
*The peer group of 39 dedicated US shale oil companies adjusted for CRZO, JAG, SRC, EPEGSource: Company reporting, Rystad Energy research and analysis, February 2020
Quarterly CFO* vs capex for public US shale oil producersBillion USD Percent
Persistent pressure to reduce leverage ratios – E&Ps have to stay committed to FCF targets
*Peer group of 29 operators: APA, CPE, CHK, XEC, CXO, COP, CLR, DVN, FANG, ESTE, EOG, HES, HPR, LPI, MRO, MTDR, MUR, NBL, OAS, OVV, OXY, PE, PDCE, PXD, QEP, ROSE, SM, WLL, WPX Source: Company reporting, Rystad Energy research and analysis
Debt and interest by maturityBillion USD
$2
$13$15
$13
$18
$14$16
$8$7 $7
$4 $5
$1 $1 $0 $1
$5$2
$1
$4 $3 $3$2 $2
$5
$2 $3 $3 $4
$5
$7
$7
$6
$6
$5
$5
$4
$3 $3
$3 $3
$2$2 $2 $2
$2
$2
$2
$2$2 $1
$1$1
$1
$1$1 $1
$0
0
5
10
15
20
25
30
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
Maturing debt Interest
$133 billion of shale debt and
interested to be paid in 2020–2026
New target spend is 33% below the original guidance, still with $30 WTI in mind
CVX reflects Permian properties onlySource: Company reporting, Rystad Energy research and analysis
-3.6
-7.5
-2.0
-1.2
-0.9
-0.6-0.3 -0.2
2020originalcapital
UpdateMarch 16,
2020
UpdateMarch 19,
2020
CVX CLR Permian COP Niobrara AR 2020revisedcapital
Updated 2020 vs original
2020 budget
Updated 2020 vs
2019 actual spend
Revision March 16, 2020 -23% -30%
Revision March 19, 2020 -32.2% -39.9%
Chevron -50% -44%
Continental Resources -55% -55%
ConocoPhillips -19% -23%
WPX Energy -24% -28%
Laredo Petroleum -36% -32%
Centennial Resource -50% -62%
HightPoint Resources -74% -83%
Antero Resources -13% -21%
Bonanza Creek Energy -60% -59%
Rosehill Resources -70% -79%
All updated companies -33.7% -39.7%
Total US shale -25.7% -33.0%
Updated 2020 capital guidance vs original 2020 budget by companyBillion USD
Horizontal oil rig count gains from January-February 2020 have already evaporatedGas rig activity remains in decline, which started in June 2019
*Oil – Permian, Bakken, Eagle Ford, DJ Basin, SCOOP & STACK, other horizontal drilling targeting oilGas – Appalachia, Haynesville, other horizontal drilling targeting gasSource: Baker Hughes, Rystad Energy research and analysis, March 2020
Horizontal rig count by main hydrocarbon type*
Number of rigs
0
20
40
60
80
100
120
140
160
180
0
100
200
300
400
500
600
700
800
900
Oil (LHS)
Gas (RHS)
Jun 2019 – Mar 2020
-45%
Mar 2020
-10%
6
Even with WTI of $30, new well count should return to the level of 2016 already in 2020
Source: Rystad Energy research and analysis, Rystad Energy ShaleWellCube
US Land horizontal wells fracked & frac stages ($30/bbl WTI)
Thousands
7
11.8
14.715.9
18.8
13.9
8.2
11.9
15.014.3
8.3
3.8
0
100
200
300
400
500
600
0
5
10
15
20
25
30
35Horizontal wells fracked (lhs)
Horizontal frac stages (rhs)
More than 1 million bpd of the US oil production will be lost already by 4Q20
*All scenarios assume Henry Hub Gas and Mont Belvieu weighted average NGL prices of 1/20 and 0.35 of WTI oil priceSource: Rystad Energy research and analysis, Rystad Energy ShaleWellCube
US L48 ex.GoM oil production outlook
Thousand barrels per day
8
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21
Incremental new production (WTI@50) Incremental new production (WTI@40) Incremental new production (WTI@30) New production (WTI@20) Base production
Global liquids demand in 2020 to contract by 5.7% from 2019, 20% in Mar-May 2020
Global oil demand impact analysis Covid-19 – Effective Prevention Scenario (April 1, 2020)Million barrels per day
Source: Rystad Energy research and analysis
9
0
20
40
60
80
100
120
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Rest of World
North America
Europe
East Asia
Pre-virus
Previous forecast
Global stock build in 2Q cannot be absorbed by remaining storage capacity
Source: Rystad Energy research and analysis, OilMarketCube
1.1 1.6 1.4 1.6 0.3
-0.5 -0.5
0.5
-0.9 -1.8 -1.3 -1.2 -1.2 -0.4
0.7 1.7
-0.5 -0.1 -1.4
0.2 7.4 20.1 5.9 0.5
82
84
86
88
90
92
94
96
98
100
102
104
106
-5.0
0.0
5.0
10.0
15.0
20.0
25.0Implied stock change Liquids Supply (rhs) Products Demand (rhs)
Global liquids supply and demand balances, quarterlyMillion barrels per day Million barrels per day
ForecastHistory
Not possible in
practice
10
US L48 ex.GoM, stripper* well cash cost curve for 2020
*Stripper well is a well producing less than 10 barrels of oil per day, defined dynamically each monthSource: Rystad Energy ShaleWellCube, Rystad Energy research and analysis
Average half-cycle WTI PV0 breakeven by activity type and CountyDollars per barrel of economic oil equivalent*
*Assumes gas and NGL prices – 0.3 and 0.35 of oil price on energy equivalent boe basis**Well performance and costs are normalized to 10,000’ well designSource: Rystad Energy ShaleWellCube, Rystad Energy UCube, Rystad Energy research and analysis
0
10
20
30
40
50
60W
inkle
r
We
ld
Ward
Ho
wa
rd
Lea
Lo
vin
g
Pe
co
s
Ka
rne
s
De
Witt
Gonzale
s
Mid
lan
d
Ma
rtin
Ata
sco
sa
Up
ton
McM
ulle
n
Re
ve
s
Eddy
La
Sa
lle
Gla
sscock
Cu
lbe
rso
n
Du
nn
Dim
mit
Mo
un
tra
il
Reagan
Co
nve
rs
McK
en
zie
Irio
n
Will
iam
s
We
bb
PV0 Not Drilled
PV0 DUC
PV0 Just Completed
PV0 Just Completed, wellhead price
Total US E&P Chapter 11 scenarios by year and WTI oil priceNumber of cases
Source: Haynes and Boone Oil Patch Bankruptcy Monitor, Rystad Energy research and analysis
44
70
2428
42
437
730
140
393
73
170
10
100
1000
2015 2016 2017 2018 2019 2020 2021
History
WTI@10
WTI@20
WTI@30
Permian, wellhead flaring (LHS) and flaring-driven CO2 emissions (RHS)Million cubic feet per day KG CO2 per barrel of oil produced
*CO2 emissions include only emissions related to wellhead gas flaring in the PermianSource: Rystad Energy research and analysis, Rystad Energy ShaleWellCube March 2020
0
2
4
6
8
10
12
14
0
100
200
300
400
500
600
7001Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
3Q
20
4Q
20
Wellhead flaring (LHS)
History Forecast
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Contact: Artem AbramovHead of Shale [email protected]
Thank you for your attention