OFS Industry Insights 2017 Cautious Optimism Presented by: Jeremy - - PowerPoint PPT Presentation

Presented by: Date: Jeremy Rondeau, MNP Oilfield Services Leader February 8, 2017

OFS Industry Insights 2017 Cautious Optimism

Rig photos courtesy of Beaver Drilling Ltd.

Page 2

Agenda

• Introduction
• Saskatchewan
• State of the Industry
• Forecast
• Uncertainty
• USA and Donald Trump
• Conclusion and wrap up

Page 3

Introduction

• Jeremy Rondeau, CPA, CA
• Based out of Swift Current, Sask
• National Oilfield Service Niche Lead effective June 1, 2016
• My background

Page 4

Common Misconceptions about Saskatchewan

• Saskatchewan is flat and boring

Page 5

State of the Industry

Billions of Cdn$ 2013 2014 2015 2016 F Change Total CAPEX $74 $81 $48 $31

• 35%

CAPEX – 4 Year Summary

Source: CAPP (http://www.capp.ca)

Page 6

State of the industry CAODC

2014 2015 2016 F Change from ‘14 Wells 11,226 5,394 3,562

• 7,664

Utilization 46% 24% 17%

• 29%

Operating Days 131,021 64,851 40,403

• 90,618

Source: CAODC State of the Industry, 2016 Review & 2017 Forecast http://www.caodc.ca/

Page 7

STATE OF THE INDUSTRY PSAC Drilling

2013 2014 2015 2016 F Change Wells Drilled 11,074 11,204 5,378 3,315

• 38%

Meters Drilled (millions) 22.9 25.2 13.6 8.8

• 35%

Rig Operating Days 104,387 112,922 61,540 38,033

• 38%

Days Per Well 9.4 10.1 11.4 11.5 +1.0% Meters Per Well 2,068 2,248 2,536 2,650 +4.4%

Source: PSAC (http://www.psac.ca/)

Page 8

State of the industry wrap up

• E&P (Exploration and production) Impact

– Reduced margins as a result of lower prices – Reduced spending on exploration and production/service – 95 fewer E&P companies vs. 3 years ago (533 remain) – Of those 60% are challenged

• OFS (Oilfield Service)

– Provide service to E&P – Trickle down effect – Volume and pricing significantly impacted – Heavily dependent on E&P companies in geographic regions serviced

Page 9

State of the industry wrap up

• Jobs lost

– Drilling and service (CAODC & PSAC) 33,568 – 100,000+ overall including E&P

• 2014 – 2016 (have we hit the bottom?)
• 2017???

Page 10

2017 Forecasts

• CAPP forecasted approx. 20-25% increase in capital expenditures ($37 billion)
• CAODC
• Utilization increase to 23% vs 17% in 2016 (139 active rigs vs. 112 in ‘16)
• Total number of wells 4,665 vs 3,562
• PSAC

– Total wells 4,175 (225 more than forecast for 2016)

• BOE report – Baker Hughes rig count

– Jan 2017 301 vs. Jan 2016 192

Page 11

2017 Forecasts

• Shift in drilling

– Saskatchewan expected to out drill Alberta this year – Why? Quicker shallower wells – 1,940 in SK vs. 1,900 in AB

• Pipeline Approval

– Enbridge Line 3 – Trans Mountain – Keystone XL

• Forecast summary

– Moderate upswing

Page 12

Uncertainty

• Is the OPEC production freeze sustainable?
• Pipelines In Limbo?

– Northern Gateway – Energy East

• Impact of Lobbyists

– Celebrities (Jane Fonda, Leo DiCaprio) – Environmentalists

• Where will capital come from?

– Free Cash flow? Is there any? – Who will lend?

Page 13

USA and Donald Trump

• No to Carbon tax

– US does not appear to be in favor of the carbon tax – Alberta implementation – does this drive investment south of the border? Or away from Canada

• 16,000 km of pipeline built since Paris Agreement and lifted 40 year ban on
• il exports
• Trump wants the US to be energy independent
• Customer? Competitor? Partner?
• BAT (Border Adjustment Tax) on imports to the US?

Page 14

Conclusion

• The world needs oil

– International Energy Agency (IEA) forecasts we’ll consume 40% more energy by 2040

• 2017 will be marginally better than 2016
• Our Newsletter

– Reinstated newsletter – partnering with JWN – First issue released in January – Sign up to receive by email – http://www.mnp.ca/en/oilfield-services – Visit MNP.ca for more info

Page 15

Conclusion

• http://www.mnp.ca/en/oilfield-services

Page 16

Contact information

Jeremy Rondeau, CPA, CA Vice President, Oilfield Services DIRECT: 306.770.3679 EMAIL: jeremy.rondeau@mnp.ca