Mayer
Brown's9th
9thAnnual
Annual
Mayer Brown's
Global Energy
Global
EnergyConference
Conference
>PANEL
NORTH
AMERICAN
ENERGY
PANEL
I: I:
NORTH
AMERICAN
ENERGY
ABUNDANCE AND INNOVATION
ABUNDANCE AND INNOVATION
1
Mayer Brown Global
Energy Conference
David C. Carroll
President and CEO
May 15, 2014
2
NATURAL GAS LEADERSHIP
U.S. Energy Production
Natural Gas now leading energy source produced in the U.S., with an
increasingly bullish domestic resource base outlook. The success of
shale gas production can enable the benefits of natural gas to be more fully
realized throughout the world.
DOE-EIA AEO 2014; Potential Gas Committee (2013)
3
World Energy Outlook:
An Expanded Role for Natural Gas
ExxonMobil (2014 Outlook for Energy)
4
World Energy Outlook
Power
Industrial
Transportation
Expanding use of natural gas for
electricity generation—including
off-setting coal use.
Expanding industrial natural gas
and NGL use—especially for
chemicals.
More heavy-duty vehicle use—natural
gas provides economic value and
emission benefits.
ExxonMobil (2014 Outlook for Energy)
5
Moving Forward on Key Fronts…
Markets
Social License
Technology
a Critical
Enabler
Access
6
International Gas Union
84 Countries Working Together to Advance Global Industry
USA Presidency
2015-2018
26th World Gas
Conference
June 1-5, 2015
7
Roy Lipski, CEO
May 15, 2014
Smaller scale GTL
Mayer Brown Global Energy Conference
Velocys
Leader in smaller scale GTL
• Leader in smaller scale gas-to-liquids technology
— 15 years and >$300 million invested in product development
— Exhaustive global patent protection (>7,500 granted GTL patent claims)
• First class partners offering a complete GTL solution
— Haldor Topsøe, Ventech, Hatch, Toyo, Mourik, SGS, Shiloh
• Commercial roll-out underway
Solena GreenSky London
GTL JV
Ashtabula GTL
• Well capitalised with strong resources
— Commercial center in Houston, Texas; technical centers near Columbus,
Ohio and Oxford, UK
— Permanent pilot plant in operation
2
• Shale revolution ushering “age
of gas surplus”
• Growing demand for liquid
fuels, especially diesel and jet
• Long-term stability of gas-oil
arbitrage expected
Energy price ($/MMBTU)
Market environment
Ripe for smaller scale GTL
• Decentralized production
underpinned by poor transportability
of gas
Diesel
40
35
Historical data Projections
Natural gas
30
25
20
15
10
Source: EIA dataata
5
0
• Environmental benefits e.g. lower emissions, flare elimination and
carbon footprint reduction (bio-to-liquids)
• Strong location-specific economic and strategic factors
• Shell and Sasol plants in Qatar showcase viability of GTL
3
Large-scale economics at smaller scales
Velocys enables smaller plants
Velocys FT reactor
Cost advantage
$k/bpd
k/bpd capacity
Conventional slurry reactor
Velocys microchannel reactor
Conventional FT Reactor
Velocys microchannels − cost range
0
2000
2,000
4000
6000
6,000
8000
10000
10,000
12000
14000
15,000
Plant capacity (bpd)
e.g. Sasol
Microchannel technology offers strong benefits at smaller scales
4
GTL for the mainstream of the industry
Velocys modular GTL
• Broader range of sites
— 1,500-15,000 barrels per day
— Suitable for remote locations
• Lower risk
— Smaller investments
— Less risk of cost over-runs
• Reduced costs
— Standardized modules and reactors
— Possible integration with existing facilities
• Easier to execute and expand
— Quicker plant construction (18-24 months)
— Easier to permit, supply, build and operate
— Additional trains can be added later
1,400 bpd FT process unit
designed by Ventech Engineers
90 ft L x 46 ft H x ~40 ft W
5
Many applications
From low-value gas to high-value fungible products
• Source of new demand for abundant shale
gas in North America
• Economic route to market for stranded
gas (over 30% of world reserves are
otherwise uneconomic to bring to market)
• Solution to problem of associated gas (5%
of natural gas production is flared)
• Valuable products for existing and new
applications
— Ultra low-sulfur diesel (70 cetane) & jet
— Waxes, lubricants and solvents
• Not just gas: also biomass and coal
6
Velocys enables winning economics
Taking the plant to the opportunity
Costs & proceeds ($/barrel of liquid
products)
$150
$125
Premium from sale of diesel
Oil (WTI)
OPEX
Depreciation
Natural gas
$100
$75
$50
$25
Co-location reduces
capex & opex e.g.
downstream
Lower gas
costs if
stranded or
associated
Increased
product value
if specialties
e.g. lubricants /
waxes or if
producing
refined products
in remote
locations
Added value
from unlocking
restrained oil
production
$0
Costs of Velocys enabled Proceeds from production of
GTL plant
liquid fuels
7
Summary
Velocys smaller scale GTL
• GTL “for the mainstream”
— Attractive for wide variety of situations and players
• Practical
— Easier to finance, permit, supply and build
• Manageable risks
— Shorter project lifecycle; less in-field build; phased investment
• Profitable
— Capture gas/oil spread; unlock resources; leverage existing
infrastructure
• Available now
— Complete GTL solution; being deployed by customers
8
Thank you
Roy Lipski
CEO, Velocys
+1 713 275 5840
[email protected]
Changing the way fuels are made
Convening Across the Industry
GE & Unconventional Resources
John Westerheide
General Manager, Unconventional Resources
May 15, 2013
Imagination at work.
GE technologies from drill bit to burner tip
Upstream
Exploration
Fracturing/
Well stimulation
Drilling
•
•
•
•
•
• Healthcare & Industrial CT
Well Control Equipment (BOPs)
Power Generation
Motors & Power Control
Drilling Measurement Tech.
Wellheads & Flow Control
•
•
•
•
Pumping Power gen.
Water Treatment & Mgmt.
Wireline services
Frac Trees & Service
Mid/Downstream
Transportation
•
•
•
•
•
Processing
Pipeline Compression
Pipeline Power gen.
Pipeline Inspection
Flow Measurement & Sensing
Flow Regulators & Controls
•
•
•
•
•
Compression
Pumping
Separation Tech.
Gas treatment
Macro to Small-scale LNG
Mayer Brown Energy Conference | 15 May 2014
Completion/
Gathering
•
•
•
•
•
•
•
Distribution
•
•
•
•
•
Pipeline Compression
Pipeline Power gen.
Pipeline Inspection
Flow Measurement & Sensing
Flow Regulators & Control
Logging services (WS)
Production Trees & Service
Downhole Sensors & Tools
Produced Water Treatment/ Mgmt.
Sensing & Measurement
Artificial Lift Tech.
Chemical Injection Systems
Consumption
•
•
•
•
Power generation
Household consumption
NGV Transportation Infra.
Petrochemicals
GE Proprietary Information
2
One team with a multi-dimensional approach
Unconventional
Resources Team
Cross-GE organization
dedicated to an
industry, instead of
a specific product or
technology
Investment
R&D
GE
Unconventional
Tech,
Partners
Resources
Systems
& Services
Team
Services
Venture
Capital
3
First GE R&D center focused on O&G
•
•
•
•
Established in 2013
Will employ 130 employees
Permanent facility in 1H 2015
Customer-focused, collaborative
research environment
• Accelerate key Oil & Gas tech
solutions available
• Devon TCA signed May 13
GE Oil & Gas Technology Center
Oklahoma City, Oklahoma
Title or Job Number | XX Month 201X
© 2014 General Electric Company - All rights reserved
See tutorial regarding
confidentiality disclosures.
4
Driving natural gas demand with partnerships
E&P natural gas fueling
Last MileTM Fueling solution
Ferus Natural Gas Fuels (CNG)
Small-scale LNG fueling network
Eagle LNG Partners
Energy services, expertise in supply
and delivery of cryogenic products
Largest U.S. natural gas fuel provider,
small LNG plant construction and
operational expertise
Natural gas expertise and solutions,
capital and commercial investment
Energy services, expertise in supply
and delivery of cryogenic products
NG fueling solutions and expertise,
capital and commercial investment
Industry collaboration to provide reliable, turnkey natural gas solutions
Mayer Brown Energy Conference | 15 May 2014
5
Closing thoughts
GE’s goals in the unconventional resources space…
•
… deepen and affirm meaningful customer partnerships
•
… collaborate internally & externally to solve problems faster
•
… invest multi-dimensionally to deliver complete solutions
•
… educate and transfer technology/ solutions to drive global potential
•
… build GE’s reputation as important industry thought leader
6
GE Title or job number
5/13/2014
Mayer Brown Global Energy
Conference
May 15, 2014
Brandon Blossman
Managing Director, Research
[email protected]
713.333.2994
**IMPORTANT DISCLOSURES BEGIN ON PAGE 8**
Supportive Commodity Price Environment
16
140
WTI
14
120
HHub
12
Not Bad!
80
10
8
60
Good Enough…
6
Sources: EIA, Bloomberg, TPH forecast
2019
2020
2018
2017
2015
2016
2012
2013
2011
2008
2010
2007
2006
2004
2005
0
2003
0
2001
2002
2
2000
20
1998
1999
4
1997
40
2014
$/bbls
100
$/mmbtu
160
2
Resource Triangle – Same Ol’ Framework
Easy to find…hard to produce
Hard to find…easy to produce
Source: Holditch
3
Drilling Efficiencies Continue To Drive Well Count Growth
Hz Rig Count
Barnett
Eagle Ford
Fayetteville
Haynesville
Marcellus
Permian
Williston
1.8
1,400
1,200
1.4
1,000
1.2
1.0
800
0.8
600
0.6
400
Horizontal Rig Count
Horizontal Days to Drill (indexed)
1.6
0.4
200
0.2
0
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
0.0
Source(s): Baker Hughes, DrillingInfo, RigData, Tudor, Pickering, Holt & Co.
4
Recent Energy IPO Performance (IPOs Since 2013)
C-Corps
MLPs &
Trusts
Source: FactSet as of 5/9/2014.
ATHL
AR
RSPP
RICE
JONE
FI
EPE
(0.7%)
HELI (39.0%)
EMES
PSXP
VLP
TEP
WNRL
SXCP
USAC
KNOP
PAGP
DLNG
CQH
ARCX
MEP
ENBL
SRLP
CELP
NSLP
QEPM
CVRR
WPT
FISH
98.4%
45.8%
37.6%
36.0%
13.3%
10.3%
Market
continues to
reward new
issues…
380.1%
136.2%
127.5%
68.6%
58.2%
51.8%
50.0%
29.3%
26.4%
26.3%
24.7%
21.1%
20.1%
17.3%
16.6%
13.8%
11.5%
6.5%
3.2%
…with no end
in sight for
yield
appetite
(1.1%)
(6.8%)
5
Upstream U.S. M&A Activity - Slowing to a “New Normal”?
Volume ($B)
$100
Resource Volume
Conventional Volume
$110,577
Annual Activity(1)
($ in billions, unless otherwise noted)
$98,850
$80
$79,912
$60
Proved $/Boe/d
$83,333
$67
$82,192
$70,513
$56
$60
$47
$40
$60
$43
$9
$96,500
$72
$17
$23
$96,000
$57
$20
$78,391
$46
$44
$55
$25
$9
2006
% Resource: 0%
$48,000
$17
$31
$27
$-
$72,000
$22
$47
2008
2009
19%
63%
84%
2010
65%
2011
76%
___________________________________
Source: IHS Herold.
(1) Deal value >$50 million, excludes Ch. 11 transactions and reflects transactions where United States is listed as primary country.
(2) Yellow highlighting indicates Joint Ventures.
2012
35%
2013
54%
$24,000
$9
$7
2007
$120,000
$88
$102,711
$16
$37
$/boe/day
$-
2014 YTD
43%
6
Midstream M&A Activity – Plateaued?
($ in billions)
Total Midstream Annual Activity(1)
$80

Midstream asset A&D market is extremely active
□
□


…been strong for
awhile
$70
More buyers than sellers
MLPs with strong currency and desperate need to grow
/ diversify
$60
Private equity owners are increasingly seeking to take
advantage of the current asset market
$40
Numerous corporate M&A discussions, but always face
hurdles
$20
$51
$47
$50
$30
$67
$49
$42
$23
$18
$12
$7
$10
$1
$0
2005
Sector Deal Count(1)
G&P
Pipeline
2006
2007
2008
2009
2010
2011
2012
2013
2014
YTD
Sector Transaction Volume(1)
Diversified
Terminals / Storage
G&P
30
Pipeline
Diversified
Terminals / Storage
$50
25
$40
20
$30
15
$20
10
$10
5
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
YTD
$0
2005
2006
2007
2008
___________________________________
Source: Dealogic, IHS Herold as of 2/23/2014.
(1) Includes corporate and asset transactions. Deals with disclosed value of >$50 million. Reflects transactions where United States listed as primary country.
2009
2010
2011
2012
2013
2014
YTD
7
Analyst Certification:
I, Brandon Blossman, do hereby certify that, to the best of my knowledge, the views and opinions in this research report accurately reflect my personal views about the company and its securities. I have not nor will
I receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report.
Important Disclosures:
The analyst above (or a member of his household) does not own any securities mentioned in this report.
For detailed rating information, distribution of ratings, price charts and disclosures regarding compensation policy and investment banking revenue, please visit our website at http://www.TPHco.com/disclosure or
request a written copy of the disclosures by calling 713-333-2960 (United States).
OTHER DISCLOSURES
Trade Name
Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering, Holt &Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide including Tudor, Pickering, Holt & Co. International, LLP.
Legal Entities Disclosures
U.S.: TPHCSI is a member of FINRA and SIPC. U.K.: Tudor, Pickering, Holt & Co. International, LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. OC349535.
Registered Office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE.
Canada
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buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a
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3AE. Tudor, Pickering, Holt & Co. International, LLP (TPH International) is authorised and regulated by the Financial Conduct Authority, and is a separate but affiliated entity of Tudor, Pickering, Holt & Co.
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institutional sales material and it is not meant for distribution to retail investors. Recipients should not forward this communication to a retail investor.
8
RESEARCH
SALES
Oil Service / E&C
Macro
Houston
Denver
Jeff Tillery
713-333-2964
[email protected]
Dave Pursell
713-333-2962
[email protected]
Clay Coneley
713-333-2979
[email protected]
Win Oberlin
303-300-1919
[email protected]
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713-333-7690
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Midstream
Mike Bradley
713-333-2968
[email protected]
Jason Foxen
303-300-1960
[email protected]
Mike Davis
713-333-2971
[email protected]
New York
George O’Leary
713-333-2973
[email protected]
Klayton Kovac
713-333-3866
[email protected]
Integrated Oils / Refiners
Robert Kessler
713-333-7696
[email protected]
Brandon Mei
713-333-7689
[email protected]
Clay Rynd
713-333-3867
[email protected]
Coal / Power / Macro
Brandon Blossman
713-333-2994
[email protected]
Brad Olsen
713-333-7693
[email protected]
James Brideau
713-333-3925
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E&P
Matt Portillo
713-333-2995
[email protected]
Michael Rowe
713-333-3983
[email protected]
Oliver Doolin
713-333-2989
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John Hurd
713-333-2951
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Aly McCaffrey
713-333-2983
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Ken Johnson
212-610-1650
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*London
TRADING - Houston 800.507.2400
Scott McGarvey
[email protected]
Seth Williams
[email protected]
TRADING- New York
Todd Wood
[email protected]
*TRADING- London
‡ Harry Grist
[email protected]
+44 20 3427 5832
Jon Mellberg
+44 20 3008 6430
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‡ Jonathan Wright
+44 20 3008 6436
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713-333-7549
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*London- E&P
Utilities & Power
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*Office of Tudor, Pickering, Holt & Co. International, LLP
Anish Kapadia, Shola Labinjo, and David Gamboa are employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and are not registered/qualified as research analysts with FINRA. Mr.
Kapadia, Mr. Labinjo, and Mr. Gamboa are not associated persons of Tudor, Pickering, Holt & Co. Securities, Inc. and as such are not subject to NASD Rule 2711 restrictions on communications with subject
companies, public appearances and trading securities held by a research analyst account.
9
‡ Employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and is not registered/qualified with FINRA and is not an associated person of Tudor, Pickering, Holt & Co. Securities, Inc.