gtl: exploiting remote gas discoveries nasdaq: synm jack holmes ipaa oil & gas investment...
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GTL: Exploiting Remote Gas Discoveries
Nasdaq: SYNM
Jack Holmes
IPAA Oil & Gas Investment Symposium
April 19, 2004
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Forward Looking Statements
This presentation includes forward-looking statements as well as historical information. These forward-looking statements may include statements relating to the Syntroleum Process and related technologies, liquefied natural gas development, the GTL Barge and other gas-to-liquids plants based on the Syntroleum Process, anticipated costs to design, construct and operate these plants, anticipated costs to make products from these plants, the timing of commencement and completion of the design and construction of these plants, obtaining required financing for these plants, the economic construction and operation of gas-to-liquids plants, the value and markets for plant products, testing, certification, characteristics and use of plant products, the continued development of the Syntroleum Process (alone or with partners), anticipated capital expenditures, anticipated revenues and any other statements regarding future growth, cash needs, operations, business plans and financial results. When used in this presentation, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that expectations reflected in these forward-looking statements are reasonable, these kinds of statements involve risks and uncertainties. Actual results may not be consistent with these forward-looking statements. For discussion of these risks and uncertainties we refer you to the risks described under “Risk Factors” in our Annual Report on Form 10-K.
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Syntroleum Investment Profile
NASDAQ: SYNM (Common) SYNMW
(Warrants)
Shares O/S (Mil): 39.4
Warrants O/S (Mil): 2.6
Market Cap (Mil $): 250
Float (Mil): 24.0
Research: Merrill Lynch
Management & Insiders: 39%
Institutional: (1) 36%
Retail: 25%
Top Institutional Holders:• Oakmont Corporation (2)
• Wellington Management • Southern Fiduciary Group• Strong Capital Management• Sterling Johnston Capital
(1) Excludes Oakmont Corporation(2) Sits on the Board of Directors, owns 18%
Investor Relations Contact:
Ron Stinebaugh, VP Corp Finance
(918) 592-7900 or (281) 873-6392
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History of GTL Synthetic Fuels
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Syntroleum Gas To Liquids Process
RefiningDieselNaphthaLPG
Air
Natural Gas
Reformer
CO + 2 H2
Syngas
Fischer-Tropsch
Normal paraffin
Waste Heat = Power, Desalination
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GTL Product Distributions
Raw Products from the FT Reactor:
Light FT Syncrude Liquid at Room Temp.
Heavy FT Syncrude Solid at Room Temp.
Refined Products from Light and Heavy FT Syncrude after upgrading:
LPG C3 – C4
Naphtha C5 – C9
Middle Distillate Refinery output consisting of jet fuel/kerosene, diesel.
Jet/Kerosene C8 – C15
Diesel C10 – C20
C20C5C1 C60
Light FT Syncrude
Heavy FT Syncrude
Volu
me %
FT REACTOR OUTPUT
C20C5C1 C60
Die
sel
Jet
Fu
el
Nap
hth
aLP
G
Volu
me %
PRODUCT UPGRADING OUTPUT
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Syntroleum Technology Advantage
• Unique air-based design eliminates costly oxygen plant to make syngas
• Air offers safety advantages and is scalable to small plant sizes
• Over 100 patents - issued and pending
• 20 years of R&D and over $100 million invested
Simplified Syntroleum Process
Shaded areas show eliminated oxygen-based equipment
8
Syntroleum Experience
• Over 3,000 hrs of pilot plant data at plant design conditions
Syntroleum’s 2 Bpd Pilot Plant Tulsa, Oklahoma, USA
Syntroleum $60 million Catoosa GTL Demonstration Plant, 70 Bpd – Tulsa, Oklahoma, USA
• Co-funded by Syntroleum, U.S. DOE and Marathon
• Clean fuels for testing• Train operators for commercial plants• First fuels shipped March 2004
Diesel fuel being shipped in 6,000 gal iso-container
Pilot Scale Demonstration Scale
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S. America – 250 Tcf
N. America –252 Tcf
Africa– 418 TcfAsia & Australia – 445
Tcf
CIS & Europe – 2156 Tcf
World Gas Overview
Source: BP Statistical Review of World Energy 2003
Middle East – 1980 Tcf
TOTAL = 5,500 Tcf Stranded Gas > 2,500 Tcf
1 Tcf of Natural Gas = 100 Million Barrels of GTL Fuels
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Plenty of Gas for Both GTL & LNG
Current 136
Firm New Commitments 65 72 3%
Planned 200 220 9%
2010 LNG Plant Capacity(1)
Million Tonnes/y
r
20 Yr. Gas Reserves, Tcf
% of 2,500 Tcf
GTL Plant Capacity (2)
Million Barrels/d
Planned 1 73 3%
% of 2,500 Tcf
(1) Source: CERA
(2) Source: BP
20 Yr. Gas Reserves, Tcf
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Markets for Stranded Gas
Methanol Ammonia LNG Middle Distillates
25 Million Bpd
Million BOE/d
1.5 Million BOE/d
0.5 Million BOE/d
Sources: 2001- American Methanol Association, Fertecon Ltd., 2003 - BP Statistical Review of World Energy
2.6
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Clean Fuels, Easily Sold
Syntroleum GTL Diesel –– Can be sold in existing markets – Compatible with existing infrastructure
(pipelines, storage terminals, retail pumps)– No sulfur or aromatics – Performs better than conventional diesel– Valuable blending stock to meet new guidelines
2006EPA
Diesel
Sulfur (PPM) 350 10 50 0
Aromatics (%) 30 30 N/ A 0
Cetane Number 45 45 49 >74
Property
Current EPA
Diesel
Syntroleum GTL Diesel
Current E.U.
Diesel
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Integrated GTL Projects Include Full Wellstream
Well Head
Condensate (API >50o) Produced at well head
5 – 20 barrels per Mmscf
Minimal capital cost per daily barrel
5 – 20 million barrels per Tcf
Liquefied Petroleum Gas (LPGs) – Propane, Butane etc Stripped from natural gas stream
2 - 5 gallons per mcf (gpm)
$ 800 to $ 1,200 capital cost per daily barrel
48 – 110 million barrels per Tcf
Methane – CH4 Converted to GTL Fuels
13 to 1 - 10 to 1* conversion ratios
$33,000 to $ 20,000 capital cost per barrel
75 - 100 million barrels per Tcf
Natural Gas
* 10 to 1 conversion indicates that 10 mcf of gas converts to 1 barrel of GTL fuel
• GTL Plants with access to only Methane need to be large and efficient to be economic
• With LPGs and condensates, smaller GTL plants provide great economic returns
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Range Of Current Capital And Gas Reserves For GTL
0
1
2
3
4
5
- 25 50 75 100 125 150 Uni
t Cap
ital C
ost (
1000
$/B
pd)
GTL Capacity Barrels Per Day (GTLs Only)10
15
20
25
30
35
Tota
l Cap
ital C
ost (
Bil
$) GTL Barge (Only GTLs)
20-year Reserves, Tcf
2 4 6 8 100
GTL Barge (w/ LPGs)
Smaller plants have a higher chance to access full wellhead gas stream
* Based on AMEC engineering cost estimates on Syntroleum plant designs
15
0
2
4
6
8
10
0 5 10 15 20 25
20 Year Reserves (in Tcf)
Capi
tal C
ost (
Billi
on $
)
GTLLiquefaction Only
Liquefaction + Shipping
Liquefaction + Shipping + RegasLNG
GTL Niche Is Easier To Enter – Requires Less Capital And Less Gas
LNG Cost Basis - Liquefaction & Shipping(Qatar to U.S.) - Greenfield - $225/Tonne, Brownfield - $200/Tonne; Regas - $40/Tonne
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GTL Barge Based on DoD Project Experience
• GTL Barge design utilizes experience from Syntroleum’s Department of Defense Barge project– $3.5 million project cost funded by the U.S. Department of
Defense– Engineering work performed by , Bath Iron Works
(General Dynamics) and American Bureau of Shipping
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GTL Barge Details
Natural Gas 177 Mmscf/d
Barge produces into a moored FSO or to a loading buoy
Ultra Clean Diesel
8,700 Bpd
Naphtha
7,300 Bpd
LPG
4,400 Bpd
Barge Statistics Barge Size 250’ x 450’ x 11’ draft Barge Weight 35,000 Dwt
Barge Costs Capital $400 Million Operating Cost $72,000/ day
LPG Plant GTL Plant
Diesel 0 8,700
Naptha 4,100 3,100
LPG 4,000 400
Total 8,200 12,200
Total GTL Barge Products = 20,400 Bpd
20 Year Production = 140 Million Barrels
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Typical Syntroleum GTL Barge Project
Barge Construction
Far East
Diesel
NY Harbor
Naphtha
Europe
LPGS. America
Installed Barge
W. Africa
Barge Dry Haul
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GTL Barge Targets 1-3 Tcf Gas Fields
Syntroleum GTL Barge’s niche opportunity is smaller fields.
LNG and World scale GTL projects only target larger fields
*Source: IHS Energy Group, 1998
World’s Gas Fields by Size (Outside N. America)*
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Initial Sample of Gas Fields Show 8 Billion Bbl Opportunity
– Screening criteria
• Uncontracted gas, 1-3 Tcf range, proximity to shore, low delivery cost
– 40 locations in 15 countries
– GTL Barge only GTL process capable of monetizing these fields
*Wet gas that includes LPGs
CountryLong
No. of Attractive
Fields
GasReserves
(Tcf)*
Oil & Condensate
(Mmbbls)
Africa 13 12 457Australasia 13 31 221Latin America 5 7 390Middle East 9 13 317Total 40 63 1,385
1 Tcf = 100 million barrels
63 Tcf = 6.3 billion barrels Plus 1.4 billion barrels of oil and condensate
8 billion barrels of liquids
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Exploiting Discovered Gas With GTL Competes With Typical E&P
The Syntroleum GTL Barge monetizes stranded gas reserves at finding, development and production costs of $12.52 per barrel of finished fuels.
This compares to the 2002 average finding, development & production costs of $11.52 per barrel of crude oil*.
The cost to refine this crude oil into fuels is another $5.00 per barrel.
*Source: 2003 John S. Herold, Inc. , Herold Global Upstream Performance Review
(Book basis) $/BOEGas Field Development Cost and Lease Operating Cost (@ $0.70/mcf) 5.85$ Plant Capital Cost 2.88$ Plant Operating Cost 3.79$ Total 12.52$
(Book basis) $/BOEFinding & Development Cost 5.82$ Production Cost 5.70$ Total Cost For Crude Oil 11.52$
Refinery Crack Spread 5.00$ Total Cost For Fuels 16.52$
Typical E&P Development
Development Using GTL
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0
2
4
6
8
10
12
14
0 2 4 6 8 10 12 14 16 18 20
Finding & Development Costs
Pro
du
ctio
ns
Co
sts $11.52/Bbl Isocost Line
GTL Barge Can Help Improve Costs
1) 90 companies - large and mid size 2) 18 (20%) companies plot off the
chart
*Source: John S. Herold, Inc. Global Upstream Performance Review 2003 Data
1) 90 companies - large and mid size 2) 18 (20%) companies plot off the
chart
GTL Barge
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GTL Barge Produces Steady, Long Term Cash Flow
Barge Capital Cost = $400 mil Gas Cost =$0.70/MCF
Operating Cost = $72,000/day LPG Content = 2 GPM*
WTI =$25/Bbl (Unescalated) Pre-Tax Annual Cash Flow = $110 million/year
*GPM stands for gallons of Liquefied Petroleum Gas per 1000 cubic feet of gas.
(250)
(200)
(150)
(100)
(50)
-
50
100
150
2004 2007 2010 2013 2016 2019 2022 2025
Millio
n $
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2 GPM3 GPM5 GPM
15%25%35%45%55%65%
15 20 25 30 35
WTI $/Bbl
IRR
2 GPM
3 GPM5 GPM
100
400
700
1,000
1,300
1,600
15 20 25 30 35
WTI $/Bbl
NPV
-10 M
il $
GTL Barge Economics
Economic Sensitivity to WTI Price vs. LPG Content at $0.70/MCF Gas Cost to Plant
NPV and IRR are on a Pre-Tax and Unlevered Basis
Base Case
Base Case
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GTL Barge Business Models
• Tolling arrangement – GTL Barge converts gas to liquids for a fee
• Purchased gas – GTL Barge purchases gas from producer for GTL
conversion. Fields that are currently flaring gas are ideal for this
model.
• Integrated Field Development – GTL Barge acquires gas
reserves to develop an integrated field/GTL Barge project, which
includes both gas production and GTL conversion
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GTL Barge Development Team
• Contribute technology license
• GTL Barge design• Invest equity
TI Capital
GTL Barge
• Acquire natural gas reserves exclusively for Syntroleum
• Cost verification• Engineering & construction• Equity investment
• Product transport and marketing
• Equity investment
Developer and owner of GTL technology
Successful track record worldwide with focus on W. Africa
Sub of ACS, one of the largest European EPC Co
Financing arm of Middle-East crude shipping co.
27
Qatar Leads In GTL Project Activity
Marathon 120,000 Bpd GTL Plant to be located at Ras Laffan and use
gas from the North Dome Field
CompanyProject Status
Capacity1000 Bpd
Sasol* Construction 34+Chevron Announced 66+Chevron Planned 130
Shell HOA/FEED 140
Conoco LOI 160
Marathon** LOI/Feasibility 90-120650
* Project financing by Royal Bank of Scotland
** Uses Syntroleum FT under license
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Partners: Gazprom, Lukoil
Status:Studies underway
Project Scope:Gazprom: GTL on 12 fields with potential for 30,000 - 230,000 bpd Lukoil: Associated gas processing
Russia – Syntroleum and Partners
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Syntroleum Well Positioned In Emerging GTL Industry
• GTL is a “game changing” technology • Huge stranded gas reserves with little geologic risk
– U.S. gas shortage focusing attention on these reserves• Enormous fuel market
– Increasing environmental pressure for clean fuels• Improving GTL economics evidenced by Qatar projects
– Shell, SasolChevron, ConocoPhillips, Marathon• Syntroleum’s air blown process provides high barriers to
entry• Management focused on project implementation• Syntroleum is a pure play on emerging GTL industry