quarterlymarketupdates q42015 final
TRANSCRIPT
-
7/23/2019 Quarterlymarketupdates q42015 Final
1/96
QUARTERLY MARKETUPDATES Q4 2015
November 3, 2015
-
7/23/2019 Quarterlymarketupdates q42015 Final
2/96
This event is fully streamed. You will hear
audio via your media player only.At any point during the presentation, if you
have a question, please submit it on the left
side of your screen.
Questions will be answered following the
presentation. If we dont get to all
questions, we will follow-up via email.
A copy of todays presentation is available for
download in the Resource List located on the
right.
WEBINAR LOGISTICS
-
7/23/2019 Quarterlymarketupdates q42015 Final
3/96
FUTURE WEBINARS
Platts Analytics
Bringing together all our analytical capabilities under a single portfolio Platts A
Strengthening our capabilities for you, our customers, and to showcase the full r
pricing, news, and analytical services we have to offer.
Look for more information, but the next Quarterly Market Updates webinar will tr
this new naming convention.
-
7/23/2019 Quarterlymarketupdates q42015 Final
4/96
OUR SPEAKERSHenan XUEnergy Analyst Natural GasBentek Energy
David XuEnergy Analyst Crude Oil
Bentek Energy
Jennifer Van DinterManager, NGL Analytics and Consulting ServicBentek Energy
-
7/23/2019 Quarterlymarketupdates q42015 Final
5/96
QUARTERLY MARKETUPDATES:
NATURAL GAS
Henan [email protected] Analyst
mailto:[email protected]:[email protected] -
7/23/2019 Quarterlymarketupdates q42015 Final
6/96
SUMMER RECAP
1.
-
7/23/2019 Quarterlymarketupdates q42015 Final
7/96
SUMMER 15 VS. SUMMER 14
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Bcf/d
Source: Bentek Cell Model
Power Demand Bcf/d
Growth from 2014 3.99
Growth from 2012 0.26
Records Broken:
Power Burn 29.4 Bcf/d (June)Production 72.6 Bcf/d (April)
Mexican Exports 3.2 Bcf/d (July)*monthly average
-
7/23/2019 Quarterlymarketupdates q42015 Final
8/96
POWER BURN CONTINUES TO TREND ABO
YEAR AVERAGE
-
2
4
6
8
10
Bcf/d
West Power Burn Demand
5 Year Range 2015 year-to-date
5 Year Average CellCast
-
5
10
15
20
25
Bcf/d
East Power Burn D
5 Year Range 20
5 Year Average Ce
-
5
10
15
Bcf
Midcontinent Power Burn Demand
5 Year Range 2015 year-to-date5 Year Average CellCast
0
2
4
6
8
10
12
14
$/MMBtu
Chicago Pri
Source: Bentek Power Burn
-
7/23/2019 Quarterlymarketupdates q42015 Final
9/96
0
100
200
300
400
500
600
700
GWh/d
Midcon Wind Generation
MISO
SPP
ERCOT
2014 YTD Average
2015 YTD Average
230 MMcf/d gas equivalent stronger in 2015
$-$2.00$4.00$6.00$8.00
$/MMBtu
East Power Burn Deviations Normalized
Deviation from Normal Do
Henry Hub Cash
0
50
100
150
200
250
300
350
400
450
GWh/d
BPA and CAISO Hydro Gen
CAISO 2015
BPA 2015
Five Year Average
700 MMcf/d gas
equivalent over
summer
Temperature deviation from normal
Month Northwest Rockies Southwest
5 6.26 -0.59 -0.46
6 7.29 4.44 1.847 4.29 -2.53 0.66
8 2.88 0.58 2.52
9 -0.37 5.29 4.27
10 4.55 6.45 6.08
Source: Bentek Power Burn
-
7/23/2019 Quarterlymarketupdates q42015 Final
10/96
EXPORTS TO MEXICO DRIVEN BY LNG IMPO
FALL-OUT
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bcf/d
Exports to Mexico
5 Year Range 5 Year Average 2014
2015 CellCAST
Net Mexico expansion (1.1 Bcf/d) and
the adjoining Los Ramones Phase II
projects
- late 2015 and mid 2016
Roadrunner Phase I (0.17 Bcf/d)
- Q1 2016
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Jan Feb Mar Apr May Jun Jul Au
Bcf/d
Mexico LNG Imports
5 Year Range 2015 5 Year A
Source: Bentek Short Term Market Call
Southeast/Gulf/Texas Observer
-
7/23/2019 Quarterlymarketupdates q42015 Final
11/96
LNG IMPORTS DISPLACED TO THE GLOBAL
MARKET
LNG Displaced to East
Asia
LNG DisplaA
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bcf/d
Manzanillo LNG Imports
5 Year Range 2015 5 Year Average 2014
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Jan Feb Mar Apr May Jun Jul
Bcf/d
Altamira LNG Impo
5 Year Range 2015 5 Ye
-
7/23/2019 Quarterlymarketupdates q42015 Final
12/96
CANADIAN IMPORTS STRONGER THAN 2014GIVEN STRONG PRODUCTION AND LESS INJEC
-200
-1000
100
200
300
400
500
600
Outflow to MiconMarket
Net Inflow fromNortheast
MMcf/d
Summer 2015 vs.
-400
-300
-200
-100
0
100
200
300
400
500
Demand Production Net Inflow Net Outflow Impliedstorage
MM
cf/d Summer 2015 vs. Summer 2014
Source: Bentek Cell Model
-
7/23/2019 Quarterlymarketupdates q42015 Final
13/96
HALF-CYCLE NATURAL GAS BREAK-EVEN
154%
63%
Utica Dry $2.94
Haynesville$3.07
Arkoma-Wood
$3.65
$2.11
Green River
$3.69
Dry Gas
Play
$4.66
$3.35Barnett
Fayetteville
$4.32 Piceance
$4.21$2.09Montney
Duvernay
October 2015 Price Assumptions: Gas = 12 month forward average curve for each regional pricing point (range $1.79 - $2.89/Mcf)
Oil = 12 month forward average WTI +/- differential (range $35.41- $50.87/barrel)NGLs = weighted average $/barrel, 12-mo forward average Mt. Belvieu prices (range $17.59 - $23.
Sourc
-
7/23/2019 Quarterlymarketupdates q42015 Final
14/96
WHATS LIKELY TO HAPPEN THIS WINTER
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
$/MMBtu
Northeast v.s. West Canadian gas in the Midwest (Bentek's basisforecast)
Chicago -(Dominion+Transportation low) Chicago - (AECO+Transportation)
-800
-600
-400
-200
0
200
400
Outflow toMicon
Market
MMcf/d
Winter 2015-22014
400
450
500
550
600
650
MMcf/d
Niagara
Source: Bentek Mark
-
7/23/2019 Quarterlymarketupdates q42015 Final
15/96
THE EFFECT OF FOREIGN EXCHANGE RAT
0
10
2030
40
50
60
70
80
0
0.2
0.40.6
0.8
1
1.2
1.4
1.6
10/1/2013
1/1/2014
4/1/2014
7/1/2014
10/1/2014
1/1/2015
4/1/2015
7/1/2015
RUB
CAD,
AUD
Foreign Exchange Rate
(Suppliers)
CAD/USD
AUD/USDRUB/USD
0.5
0.5
0.6
0.6
0.6
0.6
0.6
0
20
40
60
80
100
120
140
10/1/2013
1/1/2014
4/1/2014
7/1/2014
10/1/2014
1/1/2015
4/1/2015
7/1/2015
JPY,
MXN
Foreign Exchange
(Consumers)
Bad for the US!
Source: S&P Capital IQ
-
7/23/2019 Quarterlymarketupdates q42015 Final
16/96
PRODUCTION CAME CLOSE TO LAST YEAR
LEVEL
56
58
60
62
64
66
68
70
72
74
76
Total US Production
2014
2015
Source: Bentek Cell Model
-1.5
-1-0.5
00.5
11.5
22.5
33.5
Bcf/d
October 2015 vs. Octo
Sourc
-
7/23/2019 Quarterlymarketupdates q42015 Final
17/96
WHERE IS IT HAPPENING?
0.0
0.20.40.60.81.01.21.41.61.82.0
Bcf/d
Northeast ToPR
Oct 2015 v
(400)
(350)
(300)
(250)
(200)
(150)
(100)
(50)
0
TX GulfCoast
Onshore East TXAnadarko
TX
MMcf/
d
Texas Top Declining PRAsOct 2015 vs. Oct 2014
(350)
(300)
(250)
(200)
(150)
(100)
(50)
0Haynesville
Fayetteville
LouisianaOffshore
MMcf/d
Southeast Top Declining PRAsOct 2015 vs. Oct 2014
Source: Bentek P
-
7/23/2019 Quarterlymarketupdates q42015 Final
18/96
NORTHEAST PRODUCTION SET NEW RECO
0
5
10
15
20
25
Bcf/d
Northeast Production Driven by Growth inAppalachian Ohio
Northeast Production Sample_Production_App_OH
Record Daily Production: 21.1Bcf/d on Oct 1
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Flow to EastCanada
Flow to theMidwest
FlowSout
Bcf/d
Summer 15 vs. Sum
Source: Bentek Cell Model
-
7/23/2019 Quarterlymarketupdates q42015 Final
19/96
TAKEAWAY PROJECTS UTILIZATION
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Bc
f/d
REX East to West
Eureka HUnter / REX Cameron
RICE/REX GUNSLINGER
East Ohio - REX - Clarington
Seneca Plt
LEBANON HUB TO CHANDLERSVILLE-E2W
Capacity
81% utilized in
Oct 20151.1 Bcf/d of
growth
compare to Oct2014
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
0
50
100
150
200
250
300
350
400
450
9/1/2015 10/1/2015
MMcf/d
Uniontown to Gas City
Net Flows at Gas City
Capacity into PEPL
Capacity Util
0
100
200
300
400
500
600
MMcf/d TETCO MainF
Sarahsville
More th
MMcf/dgrowth
project
online
Source: Bentek NoReport
-
7/23/2019 Quarterlymarketupdates q42015 Final
20/96
Northeast Expansion Projects
Project Name Est. ISD Capacity (MMcf/d)
TGP Broad Run Flexibility Project 11/1/15 590TETCO OPEN 11/1/15 550
NFG Northern Access 2015 Expansion 11/1/15 140
ANR Sulphur Springs Expansion 11/1/15 134
Transco Leidy 12/1/15 525
1,939
COMING EXPANSIONS TO BOOST PRODUC
1.7 Bcf/d of growth
from Oct to DecVS.
19.50
20.00
20.50
21.00
21.50
22.00
22.5023.00
10/1/2015 11/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/2016
Bcf/d
Northeast
49.50
50.00
50.50
51.00
51.50
10/1/201511/1/2015 12/1/2015 1/1/2016 2/1/2016 3/1/
Bcf/d
Rest of the US
Source: Bentek Northeast Expansion Report
-
7/23/2019 Quarterlymarketupdates q42015 Final
21/96
WHAT HISTORY HAS TAUGHT US
20132014
NY-NJ
Expansion
Team South
0.0
0.2
0.4
0.6
0.8
Bc
f/d
TETCO NY-NJ Ex700 MMcf/
AGT to TETCO at Hanover
0.0
0.2
0.40.6
0.8
1.0
1.2
1.4
Bc
f/d
TETCO Team South300 MMcf/d
TETCO South at Berne Capacity
A WARM WINTER AND A NEAR CAPACITY
-
7/23/2019 Quarterlymarketupdates q42015 Final
22/96
A WARM WINTER AND A NEAR-CAPACITY
STORAGE?
Source: NOAA, Customweather
-
7/23/2019 Quarterlymarketupdates q42015 Final
23/96
BE MINDFUL ABOUT INVENTORY LEVELS
0
1
1
2
2
3
3
4
4
5
Tcf
Storage Inventory to end the
season at 3.9 Tcf
5-year range
5-year Average
2014
2015 0
50
100
150
200
250
300
350
400
Bcf
Salt Storage Inven
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
Jul-15 Aug-15 Sep-15 Oct-15
$/MMBtu
Benteksforecast as o2015
Source: Bentek Storage Report, Bentek
Market Call
REMINDERS FROM PIPELINES AND STORA
-
7/23/2019 Quarterlymarketupdates q42015 Final
24/96
Columbia (TCO) would like to remind its customers that the storage bounce OFO (opera
orders) for operating areas 2, 4, & 8issued on March 24, 2015, is still in effectthe OFO w
effect until storage positions, market, and supply levels can accommodate incremental
impacted operating areas, which may be as late as November or DecemberDue to li
capacity, TCO is unable to accommodate the creation of transportation imbalances in th
bounceinto storage.
Dominion Transmission Due to current and anticipated system conditions, customers a
their requirement to monitor contractual storage entitlements, and take the necessary s
deliveries within those firm entitlements. Transportation customers and Title Transfer T
operators are likewise reminded of their requirement to equalize receipts and deliveries imbalances on DTI's system......
Southern star (producing region) Due to current system operating conditions with stora
capacity and the forecasted mild weather outlook, Southern Star requests that shippers
continue adhering to the following criteria..These restrictions are expected to remain
November 10, 2015
REMINDERS FROM PIPELINES AND STORA
FACILITIES
-
7/23/2019 Quarterlymarketupdates q42015 Final
25/96
Texas Gas
Columbia Gulf
ANR
TETCO
Trunkline/Rover
Creole Trail
NGPL
Transco (Gulf Trace)
KM Louisiana
Sale and purchase agreement (SPA)
Take-or-pay structure
Fixed costs and receipts
Built into Chenieres financing
20-year term + 10-year options
Short-term contracts
Multi-year
Lower volumes Customized volume, pricing
Spot sales
Cheniere Marketing
Remaining capacity
Market prices
LNG CONTRACTS
FT capacity to Sabine Pass ~4.2 Bc
Upstream capacity
1.4 Bcf/d of gas supply already term
varying terms (1-7 year), $0.10 disco
average
-
7/23/2019 Quarterlymarketupdates q42015 Final
26/96
CONTRACTSSPAS
0.758 0.483 0.483 0.483 0Bcfe/d
Cheniere Marketing and ENGIE (Oct 28, 2015)
5-Year LNG Sale and Purchase Agreement (SPA)
Ex-ship basis ("DES") primarily to the Montoir de Bretagne LNG regasificin France or to alternative delivery points as determined by ENGIE.
Delivery of up to 12 cargoes per year, or up to approximately 222 million
from 2018 to 2023.
Contract prices linked to Northern European indices.
Volumes will be sourced from Sabine Pass and Corpus Christi.
-
7/23/2019 Quarterlymarketupdates q42015 Final
27/96
EDF:
Priced at Dutch TitFacility (TTF) index
Delivery ex-ship at
Also purchased LN
Christi facility as S
InterEnergy:
Non-binding supp
CONTRACTSSHORT TERM
Diversification for Cheniere as contracts are indexed to different
hubs
However Cheniere is taking on the spread risk between HH and
market hubs. Cheniere has retained cancellation options on the
EDF contract.
-
7/23/2019 Quarterlymarketupdates q42015 Final
28/96
Panama Canal
Panamax restricts out 90% of 395 hull LNGC fleetNew Panamaxearly 2016
LNGCs will pass
Request for for Q-Flex (164 ft beam)
No Q-Max (180 ft beam)
Sabine-Neches Waterway
Channel Improvement to meet Panamax
4048 ft deep (Q-flex and Q-max: 39 ft draft)
Complete by 2028
PANAMA CANAL
Shipping cost to Asia can be
reduced by about $0.8/MMBtu
-
7/23/2019 Quarterlymarketupdates q42015 Final
29/96
EUROPE A BETTER DESTINATION THIS W
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15
$/MMBtu
LNG Netbacks
Sabine Pass Tolling Fee Europe Asia (via PC) Asia
Source: Southeast/Gulf/Texas Observer,
Bentek Short Term Market Call
-
7/23/2019 Quarterlymarketupdates q42015 Final
30/96
Seasonality of Asian and Eu
demand LNG dispatch based on mar
suppliers
Iterations of Henry Hub fore
dispatch until an equilibrium
LNG EXPORTS LONG TERM
0.0
1.02.0
3.0
4.0
5.0
6.0
7.0
8.0
9.010.0
02/01/16
06/01/16
10/01/16
02/01/17
06/01/17
10/01/17
02/01/18
06/01/18
10/01/18
02/01/19
06/01/19
10/01/19
02/01/20
06/01/20
10/01/20
Bcf/d
LNG Exports
Previous Forecast Current Forecast
Source: Bentek Long Term Market Call
-
7/23/2019 Quarterlymarketupdates q42015 Final
31/96
FIVE YEAR OUTLOOK
2.
-
7/23/2019 Quarterlymarketupdates q42015 Final
32/96
SUPPLY FORECAST
50
55
60
65
70
75
80
85
90
2015 2016 2017 2018 2019 2020
Bcf/d
Production
0
1
2
3
4
5
6
2015 2016 2017 2018 2019 2
Bcf/d
Imports
0
5
10
15
2015 2016 2017 2018
Bcf/d
Northeast Pipeline Expansion Project
Shippers By Year
Producer Power
LDC Marketer
LNG Uncommitted Capacity
62
%
60% 25%
80%held by
producers
Source: Bentek Cellcast, Bentek Lon
Term Market Call
-
7/23/2019 Quarterlymarketupdates q42015 Final
33/96
DEMAND FORECAST
0
10
20
30
40
50
60
70
80
90
2015 2016 2017 2018 2019 2020
Bcf/d
Demand
Pipe Loss
ResComm Demand
Industrial Demand
Power Demand
0
2
4
6
8
10
12
14
2015 2016 2017 2018 2019 2020
Bcf/d
Exports
0
500
1000
1500
2000
2500
3000
3500
4000
4500
TWh
Load
Source: Bentek Cellcast, Bentek Long
Term Market Call
-
7/23/2019 Quarterlymarketupdates q42015 Final
34/96
QUARTERLY MARKETUPDATES:
CRUDE OIL
David [email protected] Analyst Crude Oil
mailto:[email protected]:[email protected] -
7/23/2019 Quarterlymarketupdates q42015 Final
35/96
03 November 2015
Themes from Q3
Expect short term risks to suppress prices (China, Iran)
Debt levels and financial constraints increasingly play role in production
Non-OPEC supply risks overcorrection, will likely continue to help balance market
Fed rate hike continues to loom on the horizon, remains a big unknown to demand
speculation
Themes for Q4
Crude quality of glut shifts toward heavier grades, demand mismatch
Shale producers on the precipice of a deleveraging cycle
U.S. seen as global aggregate demand savior, importer of global deflation
Premature price rally will undo demand growth needed to balance market, revive s
An overdue price rally could leave market undersupplied for years ahead
KEY TAKEAWAYS FOR Q4
G O C
-
7/23/2019 Quarterlymarketupdates q42015 Final
36/96
(0.50)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
MMbbl/d
EIA OPEC IEA
GLOBAL BALANCE
03 November 2015
Source: EIA, IEA, OPEC, Bentek Energy; Note: Assumes OPEC maintains Q3 15 production
unless forecasted by institution
Q PRICE MOVEMENTS AND Q FORECAST
-
7/23/2019 Quarterlymarketupdates q42015 Final
37/96
03 November 2015 Source: Bentek Energy, Platts
Q3 PRICE MOVEMENTS AND Q4 FORECAST
$40
$50
$60
$70
$80
$90
$100
$110
$120
WTI Brent WTI Forecast Brent Forecast
-
7/23/2019 Quarterlymarketupdates q42015 Final
38/96
CRUDE QUALITY MISMATCH
SECTION NO. 1
GLOBAL GROWTH REMAINS STAGNANT
-
7/23/2019 Quarterlymarketupdates q42015 Final
39/96
03 November 2015 Source: CEIC Data, Bentek Energy; Note: 10-yr moving avg. real GDP growth
0%
2%
4%
6%
8%
10%
12%
1970 1975 1980 1985 1990 1995 2000 2005
Developed Economies Growth
France United States Germany United Kingdom Japan
GLOBAL GROWTH REMAINS STAGNANT
EMERGING MARKETS IN TURMOIL
-
7/23/2019 Quarterlymarketupdates q42015 Final
40/96
03 November 2015 Source: CEIC Data
EMERGING MARKETS IN TURMOIL
-10%
-5%
0%
5%
10%
15%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Emerging Economics Growth
Brazil China Russian Federation India
DIMINISHING MARGINAL VALUE OF CREDIT
-
7/23/2019 Quarterlymarketupdates q42015 Final
41/96
03 November 2015 Source: Federal Reserve, BIS
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
1980 1985 1990 1995 2000 2005
USD(trillions)
Total Credit to Private Non-Financial Sector Real U.S. GDP
DIMINISHING MARGINAL VALUE OF CREDIT
CHINESE DEVALUATION SETS OFF REBAL
-
7/23/2019 Quarterlymarketupdates q42015 Final
42/96
03 November 2015 Source: Federal Reserve, CEIC data
6.05
6.10
6.15
6.20
6.25
6.30
6.35
6.40
6.45
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-
USD-RMB
CHINESE DEVALUATION SETS OFF REBAL
GLOBAL INDUSTRIAL RECESSION?
-
7/23/2019 Quarterlymarketupdates q42015 Final
43/96
03 November 2015Sources: ISM, HSBC, Markit, JP Morgan Chase, National Bureau of Statistics of China,
China Federation of Logistics & Purchasing, JMMA, Statista, CEIC data
GLOBAL INDUSTRIAL RECESSION?
45
50
55
60
Aug '14 Sep '14 Oct '14 Nov '14 Dec '14 Jan '15 Feb '15 Mar '15 Apr '15 May '15 Jun '15 Jul '1
PMI(50-neutral)
U.S. Eurozone Japan China Russia Brazil Glob
MIDDLE DISTILLATE GLUT
-
7/23/2019 Quarterlymarketupdates q42015 Final
44/96
660
670680
690
700
710
720
730
740
750
760
770
1Q2014 2Q2014 3Q2014 4Q2014 1Q2015
Barrels(millions)
OECD Middle Distallite Inventories
MIDDLE DISTILLATE GLUT
03 November 2015 Source: IEA
FUTURE PRODUCTION GROWTH SHIFTING
-
7/23/2019 Quarterlymarketupdates q42015 Final
45/96
03 November 2015 Source: Bentek, Platts, EIA
0
100
200
300
400
500
600
Gulf of Mexico Western Canada Iran
Mbbl/d
2016 Potential Supply Additions
HEAVIER GRADES
U S LTO OFFSHORE PRODUCTION DECOU
-
7/23/2019 Quarterlymarketupdates q42015 Final
46/96
03 November 2015 Source: EIA, DrillingInfo
U.S. LTO, OFFSHORE PRODUCTION DECOU
4.0
4.1
4.2
4.3
4.4
4.5
4.6
4.74.8
4.9
5.0
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15
MMbbl/d
U.S. LTO Production (LHS) Gulf of Mexico Production (RHS)
CRUDE YIELDS
-
7/23/2019 Quarterlymarketupdates q42015 Final
47/96
CRUDE YIELDS
03 November 2015 Source: Haverly, Platts, Bentek
0%
10%
20%
30%
40%
50%
60%
70%80%
90%
100%
WCS (21) Basrah Light(28.8 API)
Mars (29.2) WTI (37) LLS (38) Brent (38) Bakken (4
Residue (1000+) VGO (680-1000) Diesel (450-680) Kerosene (330-450) Naphtha (C5-330)
LIGHT-HEAVY SPREADS SHOULD REMAIN
-
7/23/2019 Quarterlymarketupdates q42015 Final
48/96
03 November 2015 Source: Platts, Bentek
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15
LLS-Mars
LIGHT-HEAVY SPREADS SHOULD REMAIN
CRACKING MARGINS TIGHTEN
-
7/23/2019 Quarterlymarketupdates q42015 Final
49/96
03 November 2015 Sources: Platts, Turner Mason
CRACKING MARGINS TIGHTEN
-$5.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
LLS Cracking Netback Margin Mars Cracking Netback Margin
-
7/23/2019 Quarterlymarketupdates q42015 Final
50/96
SHALE DELEVERAGING
SECTION NO. 2
FREE CASH FLOW DOESNT LIE
-
7/23/2019 Quarterlymarketupdates q42015 Final
51/96
03 November 2015Source: Capital IQ, Bentek; Note: U.S. E&P companies with market capitalization over
$50MM as of 11/2/2015
FREE CASH FLOW DOESN T LIE
-30-20-10
010203040506070
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014 2
USD(billions)
Cash Flow from Ops. Capital Expenditures Unlevered Free Cash Flow
ENERGY ISSUANCE
-
7/23/2019 Quarterlymarketupdates q42015 Final
52/96
03 November 2015 Source: Capital IQ, Platts
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
USD(billions)
Debt Issuance (LHS) Equity Issuance (LHS) WTI (RHS)
ENERGY ISSUANCE
SHALE BOOSTED BY CREDIT CREATION
-
7/23/2019 Quarterlymarketupdates q42015 Final
53/96
03 November 2015 Source: Capital IQ, EIA, Rigdata
$0
$50
$100
$150
$200
$250
$300
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q2201
USD(billions)
U.S. E&P Net Debt (LHS) Wells Drilled (RHS) U.S. Field Production (RH
SHALE BOOSTED BY CREDIT CREATION
REVOLVER RUNWAY
-
7/23/2019 Quarterlymarketupdates q42015 Final
54/96
03 November 2015 Source: Capital IQ
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
USD(billions)
Revolver Drawdown Undrawn Revolving Credit
REVOLVER RUNWAY
WTI STRUCTURE OFFERS LITTLE HEDGINGOPPORTUNITY
-
7/23/2019 Quarterlymarketupdates q42015 Final
55/96
03 November 2015 Source: Platts, ICE, Bentek
OPPORTUNITY
$40
$42
$44
$46
$48
$50
$52$54
$56
$58
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21Forward Month
7/31/2015 10/30/2015
-
7/23/2019 Quarterlymarketupdates q42015 Final
56/96
U.S.: GLOBAL IMPORTER OF
DEFLATION
SECTION NO. 3
INVENTORIES AT CUSHING EASING
-
7/23/2019 Quarterlymarketupdates q42015 Final
57/96
03 November 2015 Source: EIA
INVENTORIES AT CUSHING EASING
6.00
6.20
6.40
6.60
6.80
7.00
7.207.40
7.60
7.80
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15
MMbbl/d
Cushing Inventories (RHS) Lower 48 Production (LHS)
WTI-BRENT
-
7/23/2019 Quarterlymarketupdates q42015 Final
58/96
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Jan-
11
Mar-
11
May-
11
Jul-
11
Sep-
11
Nov-
11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
MMbbl/d
U.S. LTO Production North Sea
03 November 2015 Source: EIA
WTI-BRENT SPREADS TIGHTEN
-
7/23/2019 Quarterlymarketupdates q42015 Final
59/96
03 November 2015 Source: Platts, Marketview, NYMEX
-$12.00
-$10.00
-$8.00
-$6.00
-$4.00
-$2.00
$0.00
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-1
Brent-WTI
LIGHT CRUDE IMPORTS ON THE RISE
-
7/23/2019 Quarterlymarketupdates q42015 Final
60/96
03 November 2015 Source: EIA
0%
5%
10%
15%
20%
25%
30%
Jan-
10
Mar-
10
May-
10
Jul-10
Sep-
10
Nov-
10
Jan-
11
Mar-
11
May-
11
Jul-11
Sep-
11
Nov-
11
Jan-
12
Mar-
12
May-
12
Jul-12
Sep-
12
Nov-
12
Jan-
13
Mar-
13
May-
13
Jul-13
Sep-
13
Nov-
13
Jan-
14
Mar-
14
May-
14
Jul-14
Sep-
14
Light Crude Imports as Percent of Total
WORLD LOOKS TO U.S. TO SUCK UP DEMA
-
7/23/2019 Quarterlymarketupdates q42015 Final
61/96
1
1.1
1.2
1.3
1.4
1.5
Jan-
13
Feb-
13
Mar-
13
Apr-
13
May-
13
Jun-
13
Jul-13
Aug-
13
Sep-
13
Oct-
13
Nov-
13
Dec-
13
Jan-
14
Feb-
14
Mar-
14
Apr-
14
May-
14
Jun-
14
Jul-14
Aug-
14
Sep-
14
Oct-
14
Nov-
14
Dec-
14
Jan-
15
Feb-
15
Mar-
15
Apr-
15
May-
15
EUR-USD
03 November 2015 Source: Federal Reserve, CEIC Data
STRONGER DOLLAR WEIGHS ON GROWTH
-
7/23/2019 Quarterlymarketupdates q42015 Final
62/96
03 November 2015 Source: Bureau of Labor Statistics, Federal Reserve
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Non-Farm Employment Additions (LHS) Trade Balance (RHS)
-
7/23/2019 Quarterlymarketupdates q42015 Final
63/96
DEMAND AND PRICESSECTION NO. 4
ENERGY INTENSITY OF GROWTH
-
7/23/2019 Quarterlymarketupdates q42015 Final
64/96
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
WorldGDPtoOilDemandGrowth
03 November 2015 Source: IMF, EIA, Bentek Energy
LOW PRICES RESULT IN HIGHER DEMAND
-
7/23/2019 Quarterlymarketupdates q42015 Final
65/96
1.12% 1.32%0.87%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2012 2013 2014
Oil Demand Growth Estimated Demand Growth from Inten
Estimated Demand Growth from Price Change World GDP Growth (adjusted for excha
03 November 2015 Source: IMF, IEA, Bentek Energy
PREMATURE RALLY JEOPARDIZES BALAN
-
7/23/2019 Quarterlymarketupdates q42015 Final
66/96
Price
03 November 2015
Demand Supply
-
7/23/2019 Quarterlymarketupdates q42015 Final
67/96
CONCLUSIONS
SECTION NO. 5
KEY TAKEAWAYS FOR Q4
-
7/23/2019 Quarterlymarketupdates q42015 Final
68/96
03 November 2015
Takeaways for Q4
Crude quality mismatch will put pressure on crude market in 2016
Shale producers on the precipice of a deleveraging cycle U.S. seen as global aggregate demand savior, importer of global deflation
Premature price rally will undo demand growth needed to balance market, revive s
An overdue price rally could leave market undersupplied for years ahead
-
7/23/2019 Quarterlymarketupdates q42015 Final
69/96
QUARTERLY MARKET
UPDATES:
NGLS
Jennifer Van Dinter, PhD, [email protected], NGL Analytics
KEY TAKEAWAYS
mailto:[email protected]:[email protected] -
7/23/2019 Quarterlymarketupdates q42015 Final
70/96
NGL production continues to set new records and is expreach 4.4 MMb/d by 2020, representing a slower growth
compared to July. Northeast could be heavily reliant on export markets if a
Mariner East projects, including expansions, come to fru
Feedslate switching will start in 2017 to relieve pressuretightening ethane market.
Growing demand for propane in the domestic cracker phave a ripple effect; expect propane export volumes to sthrough 2020.
NGL PRICES HAVE DISCONNECTED FROM CRUDPRICES
Mont Belvieu NG
-
7/23/2019 Quarterlymarketupdates q42015 Final
71/96
0
50
100
150
200
250
300
Cents/gallon
Mont Belvieu NGL Prices
Ethane Propane
Butane Isobutane
Source: Platts; Prices un
0%
50%
100%
150%
Mont Belvieu NGa % of W
Ethane
Butane
THE ECONOMICS OF DEVELOPING NEW NGLASSETS ARE CHALLENGING
-
7/23/2019 Quarterlymarketupdates q42015 Final
72/96
($3)
($2)
($1)
$0
$1
$2$3
$4
$5
$/MMbtu
NGL Frac Spread by Region
Marcellus/Utica Rockies
Williston Eagle Ford
Plant Name Owner/
Operator
Region
Petersburg I/II Blue Racer Northeas
Buffalo* Martin Permian
TBD* Targa
Badlands
Williston
Knox ONEOK Anadarko
Demicks Lake ONEOK Williston
Bronco ONEOK Powder R
Cancelled & Delayed Proces
US NGL PRODUCTION CONTINUES TOREACH RECORD HIGHS
-
7/23/2019 Quarterlymarketupdates q42015 Final
73/96
0.0
1.0
2.0
3.0
4.0
Mb/d
NGL Production from gas plants
In 2013-2015, growth is driven by production growth i
rich plays such as the Eagle Ford, Wet Marcellus and
PRODUCTION GROWTH IS FINALLYREFLECTING LOWER COMMODITY PRICES
G i G
-
7/23/2019 Quarterlymarketupdates q42015 Final
74/96
S B k M k t C ll N th A i NGL 4Q2015
-
2.0
4.0
6.0
2011 2012 2013 2014 2015 2016 2017 2018
MMb/dNGL Production from Gas Plants
Forecast Comparison
4Q2015 Forecast 1Q2015 Forecast
NGL GROWTH DRIVEN BY KEY BASINS: EAGLEFORD
, MARCELLUS/UTICA, WILLISTON
-
7/23/2019 Quarterlymarketupdates q42015 Final
75/96
Marcellus
(Appalac
Williston
Permian
Eagle Ford
Anadarko
0.0
0.5
1.0
Eagle Ford Appalachia Williston Permian Anadarko
MMb/d
NGL production in selected basins(prior to ethane rejection)
2015 2020 Previous 2020 Forecast
Source: Bentek Market Call:
PROCESSING GROWTH MAINLY IN THE NORTHEAST, PERMAND ANADARKO
Processing
-
7/23/2019 Quarterlymarketupdates q42015 Final
76/96
Current US gas processing capacity
~ 87 Bcf/d and set to increase to
94 Bcf/d by end-2016Source: Bentek NGL Facilities Databank
Anadarko
10.99.8
g
(Bcf/d)2.01.4
Williston
Permian
10.88.8
Eagle Ford/
Texas Gulf Coast
10.710.7
SW Marcell
8.3
DJ
1.91.9
FRACTIONATION IN THE NORTHEAST IS ON TRASURPASS CONWAY
-
7/23/2019 Quarterlymarketupdates q42015 Final
77/96
Williston
SW Ma
Eagle Ford/
Gulf Coast TX
726 9
Current 20
Source: Bentek NGL Facilities Databank
Conway575 575
93 119
Current US fractionation capacity
~ 5.1 MMb/d and set grow by 21% to
6.0 MMb/d by end-2016
Fractionation
(Mb/d)
2 5323,152
NORTHEAST NOT LACKING FOR PROPOSEDTAKEAWAY PROJECTS
-
7/23/2019 Quarterlymarketupdates q42015 Final
78/96
Centennial (100 Mb/d)
EPD Connector (40-60 Mb/d)
WITH MARINER EAST EXPANSIONS,NORTHEAST COULD BE OVERBUILT
-
7/23/2019 Quarterlymarketupdates q42015 Final
79/96
0
500
1000
2011 2012 2013 2014 2015 2016 2017 2018 2019
Mb/d
Northeast C3+ Production, Pipeline Takeawa
PADD 1 C3+ Production Mariner East 1Mariner East 2 Mariner East 2XUTOPIA East UTOPIA West
S M k C ll N h A i NGL NGL F ili i D b k
THE STORAGE SURPLUS IS AN INDICATION OF SUPPLY OUTPACING DEMAND80
Total US Butane/ButyTotal US Propane/Propylene Stocks
-
7/23/2019 Quarterlymarketupdates q42015 Final
80/96
0
20
40
60
80
MMBbls
20
70
M
MBbls
0
20
40
60
MMBbls
Total US Ethane/Ethylene Stocks
0
10
20
30
MMBbls
Total US Pentane P
+8%
++54%
Eth l M i
ETHYLENE PRODUCTION MARGINS AND FEEDSOPTIMIZATION
-
7/23/2019 Quarterlymarketupdates q42015 Final
81/96
0
200
400
600
8001,000
1,200
Monthly
Average,
Mb/d
Feedsto
Ethane Propane Bu
-20
0
20
40
60
80
/lb
Ethylene ProductionMargin5-day moving average
Ethane Propane Butane Lt Naphtha
Source: Bentek Dail NGL Market Monitor Source: Jacobs C
525
LPG EXPORTS PEAKED AT 755 MB/D IN JULY2015
Propane and Butane Exports
-
7/23/2019 Quarterlymarketupdates q42015 Final
82/96
-
100200
300
400
500
600
700
800
Mb/d
Propane and Butane Exports
Propane/propylene exports Normal butane/butylene exports Isobutane/Isobu
2014 Avg: 497 Mb/d
Reco
2012 Avg: 197 Mb/d
Sour
-
7/23/2019 Quarterlymarketupdates q42015 Final
83/96
DEMAND OUTLOOK
THROUGH 2020
Exports required to
balance US NGL markets
PETROCHEMICALS AND EXPORTS WILL DRIVELONG-TERM NGL DEMAND GROWTH
NGL Demand ComponentsDemandSh
-
7/23/2019 Quarterlymarketupdates q42015 Final
84/96
-
1
2
3
4
5
6
MMb/d
NGL Demand Components
Petchem Exports Motor Gasoline
Res/Com Other
Share
20143.9 MMb/d
Gasolin15
Res/Com
14%
O
DemandShare
20204.8 MMb/d
Exports27%
Gasoline12%
Res/Com
10%
2 5MMb/d US Ethane Supply/Demand Balance
ETHANE REJECTION WILL DECLINE QUICKLYSTARTING IN 2017
-
7/23/2019 Quarterlymarketupdates q42015 Final
85/96
-
0.5
1.0
1.5
2.0
2.5
2012 2013 2014 2015 2016 2017 2018 2019 2020
US Ethane Supply/Demand Balance
Source: BentekMarket Call: North American NGLs 4Q2015
CAN FEEDSLATE SWITCHING SAVE THEETHANE MARKET?
-
7/23/2019 Quarterlymarketupdates q42015 Final
86/96
0
500
1,000
1,500
2,000
Mb/d
Ethane Cracker Demand
3Q2015 4Q2015
0
100
200
300
400
500
Mb/d
Propane Cracker
3Q2015 4
Source: Market Call: No
BENTEK IS TRACKING 16 PROJECTS TO BUILDGREENFIELD CRACKERS IN THE US
B dl d NGL ND
-
7/23/2019 Quarterlymarketupdates q42015 Final
87/96
Total Petrochemicals, TX
Williams Ge
Badlands NGL, ND
PTT Glob& Marub
ChevronPhillips
ExxonMobil
Dow Sasol
Odebrech
Braskem,
Air permitUnder
Formosa
Oxy
S
Applied for
Axiall &Lotte
6 unde 1 recei
4 subm
3 anno
2 smalleAnnounced
ADRIFT IN A SEA OF ETHANE: WATERBORNE ETHANEEXPORTS TO BEGIN IN 2015
Petchem
Petchem
Company Ship Owner
-
7/23/2019 Quarterlymarketupdates q42015 Final
88/96
Company
INEOS
Borealis
SABIC
Versalis
Reliance
Company
INEOS
Borealis
SABIC
Versalis
Reliance
Ship Owner
Evergas
Navigator Gas
Ocean Yield
NA
Mitsui
-
500
Mb/d
US Ethane
Ship
ETHANE REJECTION TO FALL SIGNIFICANTLY B2018 DUE TO INCREASED DEMAND
Ethane Reject
-
7/23/2019 Quarterlymarketupdates q42015 Final
89/96
-
100
200
300
400
500
600
Mb/d
Ethane Reject
Williston PADD
PADD 2 PADD Ethane rejection decreases first in areas
closest to market due to lower
transportation costs.Source: BentekMarket Call: North Americ
EXPORTS BECOME LARGEST SOURCE OF DEMAFOR PROPANE IN 2015
2 0MMb/d US Propane Supply/Demand Balance
-
7/23/2019 Quarterlymarketupdates q42015 Final
90/96
0.0
0.5
1.0
1.5
2.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
US Propane Supply/Demand Balance
Source: BentekMarket Call: North American NGLs 4Q2015
US WILL EXPORT NEARLY 25% OF BUTANE SUPBY 2020
Mb/d US Mixed Butanes Supply/Demand Balance
-
7/23/2019 Quarterlymarketupdates q42015 Final
91/96
0
100200
300
400
500
600
700
800
2012 2013 2014 2015 2016 2017 2018 2019 2020
Mb/d pp y
Source: BentekMarket Call: North American NGLs 4Q2015
LPG EXPORT TERMINAL CONSTRAINTS TO BE
ALLEVIATED THIS YEAR
1 600LPG Exports vs. Export Terminal Capacity
C P j t N
-
7/23/2019 Quarterlymarketupdates q42015 Final
92/96
-
200
400
600
800
1,000
1,200
1,400
1,600
Mb/d
Mixed Butanes Exports
Propane Exports
Total US LPG Export Capacity
Source: Benteks Market Call: North American NGLs 4Q2015 BentekNGL Facilities Databank com an re ort
Company Project Name
Existing LPG Export Terminals
Enterprise Enterprise
Enterprise Enterprise Expansion I
Enterprise Enterprise Expansion II
Targa Galena Park
Targa Galena Park Expansion I
Targa Galena Park Expansion II
Sunoco Logistics Marcus Hook
Sunoco Logistics Marcus Hook Expansion I
DCP Midstream Chesapeake
Petrogas Ferndale
Sunoco Logistics Mariner South
Brownfield Expansions
Enterprise Enterprise Expansion III
Sunoco Logistics Marcus Hook Expansion II
Greenfield -- New Builds
Occidental Chemical Ingleside
Pembina West Coast Terminal
Phillips 66 Freeport LPG
Waterside Energy WA Storage & Transfer
DILUENT DEMAND DRIVES US NATURAL GASOLMARKET
600Mb/d US Natural Gasoline Supply/Demand Balance
-
7/23/2019 Quarterlymarketupdates q42015 Final
93/96
0
100200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018 2019 2020Source: BentekMarket Call: North American NGLs 4Q2015
KEY TAKEAWAYS
-
7/23/2019 Quarterlymarketupdates q42015 Final
94/96
NGL production continues to set new records and is expreach 4.4 MMb/d by 2020, representing a slower growth
compared to July. Northeast could be heavily reliant on export markets if a
Mariner East projects, including expansions, come to fru
Feedslate switching will start in 2017 to relieve pressuretightening ethane market.
Growing demand for propane in the domestic cracker phave a ripple effect; expect propane export volumes to sthrough 2020.
-
7/23/2019 Quarterlymarketupdates q42015 Final
95/96
THANK YOU FOR JOINING US TODAY!
-
7/23/2019 Quarterlymarketupdates q42015 Final
96/96
Reminder: a video replay will be available th
via BENport. Questions, please contact
mailto:[email protected]:[email protected]