EIA November 16, 2017 New Era Of Energy In America Requires Even - - PowerPoint PPT Presentation

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Oct 20, 2023 244 likes •402 views

EIA November 16, 2017 New Era Of Energy In America Requires Even More Sophisticated Methods Of Forecasting EIA data is on a world stage as the U.S. is now the worlds swing producer. American Energy U.S. in Perceived Terminal Decline

SLIDE 1

November 16, 2017

EIA

SLIDE 2

New Era Of Energy In America Requires Even More Sophisticated Methods Of Forecasting

EIA data is on a world stage as the U.S. is now the world’s swing producer.

Source: EIA.

U.S. in Perceived Terminal Decline American Energy Renaissance

SLIDE 3

EIA Still Overstating 2017 Exit Rate Forecasts

8.77 9.12 9.16 9.10 9.23 9.20 2016 Exit Rate Apr-17 May-17 Jun-17 Jul-17 Aug-17 (Aug-17) (Sep-17) (Oct-17) (Nov-17)

9.82 9.69

1.05

Y/Y Growth

0.92

Y/Y Growth

9.69

0.92

Y/Y Growth

0.95

Y/Y Growth

9.72 Although EIA reduced their forecasts in September after DEPA’s August presentation, they remain on the high side by 220,000 bbls or more.

2017 Exit Rate EIA Forecasts

(Aug-17) (Sep-17) (Oct-17) (Million Barrels per Day)

Actual Production Very Flat

(Nov-17)

SLIDE 4

0.02 0.33 0.46 $53 $43 $40 $42 $44 $46 $48 $50 $52 $54 $56 31.8 31.9 32.0 32.1 32.2 32.3 32.4 32.5 32.6 32.7

WTI Price ($/bbl) OPEC Crude Oil Production (mbbl/d)

Price Impact Of Libya/Nigeria Adding 400,000 Bbl/d Price Decreased By $10 (20%) From April – June 2017

Base OPEC Production Unexpected Libya/Nigeria Production

SLIDE 5

U.S. Oil Rig Count

500 550 600 650 700 750 800

Sources: Baker Hughes.

SLIDE 6

U.S. Production By Public Reporting Companies: 2Q 2017

Raised 443,385 Boe/d

28 Companies Down 582,870 Boe/d 13 Companies

Total 2Q17 Production:

139,485 Boe/d

Down .78%

Sources: Company Public Filings.

SLIDE 7

U.S. Production By Public Reporting Companies: 3Q 2017

Raised 300,000 Boe/d

12 Companies Down 357,300 Boe/d 27 Companies

Total 3Q17 Production:

57,300 Boe/d

Down .53%

Sources: Company Public Filings.

SLIDE 8

Source: Bloomberg.

Unrealistic Growth Projections Disadvantage U.S. Market

Brent, the overseas benchmark, trades at an artificially elevated

premium to WTI because U.S. growth is overstated.

This is a 10% disadvantage.
This puts America last, not first.

SLIDE 9

What Has The Forecast Cost the U.S. in 2017?

$4 Billion In Revenue, Royalties And Associated Tax Dollars

Sources: EIA, Bloomberg.

Spread should have tightened, but high EIA U.S. production estimates kept WTI depressed Today’s Cushing inventory levels imply a $2-$3 spread, not $7 Harvey caused a further increase to the spread, but much of the damage to perception was already done

SLIDE 10

EIA Must Be Responsive To Changing Dynamics On A Timely Basis

Considering that the U.S. energy industry has the

capability to oversupply the market, the EIA should engage industry to understand and respond to critical market dynamics.

Capital markets have changed. Shareholders want

return on their investment. Growth at any cost / cash flow neutral no longer applies.

SLIDE 11

U.S. Production Growth Has Moderated

Exceptionally Large Growth Required To Catch Up To EIA’s Projections

Source: EIA.

59,100 bbl/d m/m Actual Growth Rate 129,400 bbl/d m/m EIA Projected Growth Rate 11 From Feb-Aug 2017, growth has been a total of 130,000 bbl/d

SLIDE 12

20,000 40,000 60,000 80,000 100,000 120,000 Bbl/d Growth m/m Forecasted Avg. Permian m/m Growth = 59,600 Bbl/d

Permian Growth Per EIA Drilling Productivity Report (Nov-17)

Actual Avg. Permian m/m Growth = 40,400 Bbl/d

SLIDE 13

Well Performance Projections Are Overstated

Sources: Oil and Gas Journal, WoodMac.

Many in the industry expected new well productivity gains to continue by as much as 120% per well this year. But as plays mature, new well productivity has declined as more child infill wells have been drilled on pads.

These parent wells were unbounded.
Child wells have underperformed parent wells 15-20% in all the shale plays except the

Bakken.

SLIDE 14

The Market Is Taking Notice Of EIA Discrepancies

Sources: EIA, Bloomberg, 11-9-2017 Daily Oil Brief.

SLIDE 15

Key Points To Integrate Into Forecasts Moving Forward

1. U.S. production growth has moderated
2. Performance projections are overstated
3. Efficiencies are peaking
4. Market pinch points are occurring that limit

production (oil and gas pipelines, water handling, infrastructure, etc.)

5. Shareholders are demanding return on investment