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1 Williston Basin Greasing the Gears for Growth in North Dakota NDPA/NDIC Study Presented By: BENTEK Energy
Transcript of Williston Basin - - Get a Free Blog Here
1
Williston Basin Greasing the Gears for Growth in
North Dakota
NDPA/NDIC Study
Presented By:
BENTEK Energy
2 BENTEKENERGY.COM
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Pipelines, Utilities, Midstream
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Government, Associations, Consultants
3 BENTEKENERGY.COM
The Williston Basin Is Benefiting From the Significant Shift in Natural
Gas Dynamics as a Result of:
A Realignment of Producer Investment Criteria Toward Oil and
NGL Plays.
Reduction in Production From Neighboring, Less Economic
Producing Basins.
While Still Early, Current Data Suggests the Basin Could Yield
Higher Future Gas and NGL Volumes Due to a Rising Gas to Oil
Ratio (GOR).
Strong Drilling Economics, a Rising GOR and Greater Efficiency Will
Increase the Future Output From the Basin. Under BENTEK’s Base
Case Scenario, Oil Production Will Climb to 2.2 MMB/d and Gross
Gas Production Will Top 3.0 Bcf/d by the end of 2022.
Basin Conclusions
4 BENTEKENERGY.COM
Oil Prices and Oil Infrastructure Takeaway Capacity Are Primary
Drivers of the Strong Economics in the Region and Will Ultimately
Drive Growth.
Given Growth Expectations, Significant Midstream Investment Will
Be Required To Capture Natural Gas and NGL Value in the Basin.
Williston Basin Economics Enable Producers in the Region to
Sufficiently Compete on Price with Upstream Natural Gas Supply In
the Rockies and Canada for Space Out of the Region on Existing
Infrastructure.
Basin Conclusions (Continued)
5 BENTEKENERGY.COM
Canadian Imports/LNG/Storage
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Bcf/
d
US Dry Production US Consumption
Natural Gas Supply Growth is Changing The US Energy
Landscape
2011
3.75 Bcf/d 2000
11.34 Bcf/d 1990
3.74 Bcf/d
Source: EIA
6 BENTEKENERGY.COM
Source: ICE, EIA
Commodity Price Disparities Are Shifting Producer Behavior
• Higher Relative Oil and NGL
Prices Incentivize Producers
to Redirect Resources Toward
Assets With a Higher BTU
Content.
• Driving Capital into the
Williston Basin and Reducing
Competition For Space on
Existing Infrastructure Moving
Gas Out of the Area.
AND
ARE
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$/M
MB
tu E
qu
ivale
nt
HH MB NGL WTI
• Low Natural Gas Prices Are
Forcing Producers to
Revaluate Economics and
Investment in Conventional
and Even Unconventional
Lean Gas Assets.
7 BENTEKENERGY.COM
-20%
0%
20%
40%
60%
80%
100%
Bakken Earns Above Average Returns
Price Assumptions: Gas = 12 month forward average curve for each regional pricing point as of June, 2012 (price range $2.45-$2.86/Mcf)
Oil = 6 month average WTI +/- differential as of June, 2012 (price range $84.40-$100.43/barrel)
NGLs = weighted average $/barrel based on current Mt. Belvieu prices and the typical composition in each region (range $23.79-$45.22/barrel)
8 BENTEKENERGY.COM
New Economic Realities Challenge Basin Returns
Co
nven
tion
al
Un
co
nven
tio
nal 8
10
12
14
16
18
Bcf/
d
Alberta BC Other Saskatchewan Nova Scotia
0
2
4
6
8
10
Bc
f/d
DJ Other Piceance Powder River GR-O Uinta
Canada
Rockie
s
-
2
4
6
8
10
12
Bcf/
d
Haynesville Fayetteville
South
east
-
1
2
3
4
Bcf/
d
Woodford E. Tx Haynesville
Mid
con/T
X
9 BENTEKENERGY.COM
2168
+809
11/+3
228/+147
52/+24
91/+15
16/+5
7/+1
40/+15
25/-5
20/+11
96/+58
11/-18
3/+0
19/-4
265/+205
23/+19
6/-2
46/+28
30/+15
7/+4
Active rig count: June 15, 2012 / Change in rig count from Jan. 1, 2010
Rig Increases Dry Gas Focused Areas
Rig Increases Liquids-Rich/Oil Focused Areas
Rig Declines Source: Rig Data, BENTEK, June 2012
Plays With High Returns Attract Drilling Rigs
3/-9
96/+12
68/+9
48/+30
78/-31
22/-15 254/+131
521/+302
44/-49 37/-92
10 BENTEKENERGY.COM
0%
20%
40%
60%
80%
100%
0
50
100
150
200
250
% H
ori
zo
nta
l R
igs t
o T
ota
l
No
. o
f R
igs
Total Dir Ver Hor % Horizontal
Capital Moving to Oil - Williston Basin (MT and ND) Rigs
RigData: July 2012
Added 193 Rigs
Since May
2009
Rigs Reach All
Time High of 236
BENPOSIUM 2009 11
Williston Basin Forecasts
12 BENTEKENERGY.COM
0
50
100
150
200
250
300
350
400
450
b/d
Month
2012 2011 2010 2009 2008
2007 2006 2005 Type Curve
Williston ND Horizontal Oil Type Curve Converges
Yr Decline
1 65%
2 30%
3 22%
4 19%
5 16%
6 10%
7 10%
8 5%
9 5%
10 2%
30-day IP rate: 400 b/d
EUR: 459,000 bbls
Well Life: 25 years
13 BENTEKENERGY.COM
0
50
100
150
200
250
300
350
400
450
Mcf/
d
Month 2012 2011 2010
2009 2008 2007
2006 2005 Type Curve
Adjusted Type Curve
Older ND Wells Suggest a Flat Gas Type Curve
Yr Avg
Decline
Adj
Decline
1 58% 58%
2 30% 30%
3 26% 10%
4 15% 5%
5 15% 5%
6 10% 5%
7 10% 5%
8 6% 5%
9 4% 4%
10 2% 2%
30-day IP rate: 340 Mcf/d
EUR: 669,000 Mcf
14 BENTEKENERGY.COM
ND Model EURs Inline with Producers Expectations
Model
Oil: 459,000 Bbls
Gas: 111,500 Boe
----------------------------
Total: 570,500 Boe
CLR: 603 Mboe
Whiting:
450-900 Mboe
(Sanish)
Oasis:
450-750 Mboe
(Middle Bakken)
15 BENTEKENERGY.COM
Williston MT Horizontal Associated Gas Type Curves Reflect
Adjusted ND Type Curve
0
20
40
60
80
100
120
140
160
Mcf/
d
Months
2012 2011 2010 2009 2008
2007 2006 2005 2004 2003
2002 2001 2000 Type Curve
Yr Decline
1 40%
2 15%
3 15%
4 10%
5 5%
6 5%
7 5%
8 5%
9 5%
10 5%
30-day IP rate: 139 Mcf/d
EUR: 369,000 Mcf
16 BENTEKENERGY.COM
Stronger Gas Oil Ratio (GOR) Expected For ND Horizontal Oil Wells
0.0
0.5
1.0
1.5
2.0
2.5
Mcf/
bb
l
Month
2012 2011 2010 2009
2008 2007 2006 2005
GOR Adjusted GOR
17 BENTEKENERGY.COM
0
5
10
15
20
25
30
35
Days
Avg. Drill Time Per Well Basin Avg. 2010 to 2012
PAD Drilling Leads to a Reduction in Drill Time of 11 Days
Source: RigData
18 BENTEKENERGY.COM
0
50
100
150
200
250
300
350
400
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
No
. R
igs
No
. W
ells
Rigs-ND Rigs-MT Wells- ND Wells-MT
Base Case- Level of Activity Remains
At Current Levels For the Next 10 years
Reserve Requirement:
22 Billion Boe
CLR: 24 Billion
Boe Technically
Recoverable Oil
and Gas
19 BENTEKENERGY.COM
Nine New Pipeline Expansions or New Build Slated in the Next Six Years;
One Refinery Expansion
1,155 Mb/d of Additional
Pipeline Capacity
*map does not include Banner and
Sandpiper projects
20 BENTEKENERGY.COM
High Case Scenario-Consistently Tests Oil Takeaway
Capacity, Stressing Prices and Producers
0
50
100
150
200
250
300
350
400
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
No
. R
igs
No
. W
ells
Rigs-ND Rigs-MT Wells- ND Wells-MT
Reserve Requirement:
28 Billion Boe
21 BENTEKENERGY.COM
Drilling Economics Struggle @ $50 Oil
0%
20%
40%
60%
80%
100%
120%
140%
$50 $60 $70 $80 $90 $100 $110
IRR
Oil $/barrel
IRR Sensitivities to Changes in Oil Prices
Anad-Miss
Bakken
Eagle Ford Oil
Granite Wash
Montney
Niobrara
Permian
Uinta
Note: Assumes NGL: Oil price ratio 50%; IP(oil/gas/ngl): 700 B/d, 400 Mcf/d, 60 b/d; 1,300 BTU; D&C Costs $8.5 Mil
22 BENTEKENERGY.COM
Williston Growth Can Be Maintained at Low Prices
0%
20%
40%
60%
80%
100%
120%
140%
160%
400 500 600 700 800 900 1,000
IRR
Oil IP Rate (B/d)
Williston IRR Sensitivities: Oil IP Rates/Oil Prices
$50/bbl
$60/bbl
$70/bbl
$80/bbl
$90/bbl
$100/bbl
$110/bbl
Oil Price
23 BENTEKENERGY.COM
$50 Oil Challenges Fringe Economics
0
10
20
30
40
50
60
0%
10%
20%
30%
40%
50%
60%
Ac
tive
Rig
s
IRR
IRR Active Rigs $50 Oil
Other counties with active rigs
that see reduced activity include:
Bowman, Roosevelt, Richland,
Golden Valley, Burke
24 BENTEKENERGY.COM
Low Case – Driven By Low Oil Prices
0
50
100
150
200
250
300
350
400
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
No
. R
igs
No
. W
ells
Rigs-ND Rigs-MT Wells- ND Wells-MT
Reserve Requirement:
13 Billion Boe
25 BENTEKENERGY.COM
Comparison of Oil Production Based on Various Scenarios
• High Case:
Consistently Tests Oil
Takeaway Capacity,
Stressing Prices and
Producers.
• Base Case: Provides
Strong Consistent
Growth For the Basin
Without Straining
Takeaway Capacity
Until Around 2022.
• Low Case: Suggests
a Significant Pullback
in Activity Due to
Falling Oil Prices.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
MM
b/d
High BaseLow CapacitySandpiper Project
26 BENTEKENERGY.COM
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Bcf/
d
North Dakota Gross Gas Production
ND_High Case ND_Base Case ND_Low Case
North Dakota Gross Gas Production Set To Climb
BENPOSIUM 2009 27
Bring Gas Supply to Market
28 BENTEKENERGY.COM
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Bcf/
d
Gross Production Flared Processing Capacity
Plains Ross Plant
ONEOK Stateline I
ONEOK Stateline II
HESS Tioga Plant Expansion
New Frontier Midstream
ONEOK Garden Creek
New Processing and Midstream Infrastructure Needed to
Meet Growing Gas Production in the Williston
545 MMcf/d of Planned
Processing Expansions
Over Next Two Years
29 BENTEKENERGY.COM
Open Capacity Leaving N. Dakota Is Tight
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Bcf/
d
Northern Border Flows
Flows Capacity
0.0
0.5
1.0
1.5
2.0
2.5
Bcf/
d
Alliance
Flows Capacity
• Northern Border and Alliance Serve As the
Primary Routes to Transport Gas From the
Region.
• Each Have Limited Open Mainline Capacity to
Carry Additional Williston Supply.
30 BENTEKENERGY.COM
WBI Provides Local Demand Support
0.0
0.1
0.2
0.3
Bcf/
d
WBI Deliveries
End User DemandLDC MuniPower Plant
-0.1
0.0
0.1
0.2
0.3
0.4
Bcf/
d
WBI State Receipts
WY MT SD
• Total Deliveries off of WBI Have Not Increased
Substantially Over the Last Several Years
• Receipts Into the WBI System From MT, WY
and SD Have Already Been Reduced.
31 BENTEKENERGY.COM
Inlet Flows Currently Losing Market Share
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Bcf/
d
Northern Border – Port of Morgan
Flows Capacity
0.0
0.1
0.2
0.3
0.4
0.5
0.6
Bcf/
d
Bison
Flows Capacity
• Declining PRB Production and Increased
Competition For Space Has Resulted in
Reduced Flows on Bison.
• Canadian Inflows Into Northern Border Have
Remained Relatively Strong, But Have
Experienced Displacement in the Past and Now.
32 BENTEKENERGY.COM
Port of Morgan: The Rex Effect
From 2008 – 2010, Rex Deliveries
Into The Midwest Pushed out
Existing Inflows From Canada.
Once Rex Completed Zone Three
Into the Northeast, Canada
Resumed Stronger Flows Into the
U.S. on Northern Border.
0.0
0.5
1.0
1.5
2.0
2.5
2008 2009 2010 2011 2012
Bc
f/d
Port of Morgan Average Daily Flow
0.0
0.5
1.0
1.5
2.0
2.5
Bc
f/d
Port of Morgan Flows REX East Flows
REX East
33 BENTEKENERGY.COM
Contract Holders and Expirations Provide Latitude
Northern Border Alliance
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Bcf/
d
Expirations
LDC 11%
Marketer 34%
Pipeline 6%
Producer 49%
Type of Shipper
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Bcf/
d
Expirations
End User 6%
LDC 24%
Marketer 34%
Pipeline 5%
Producer 31%
Type of Shipper
34 BENTEKENERGY.COM
New Residue Volumes Move In on Canada
Garden Creek Deliveries Into
Northern Border Have Ramped Up
Quickly, Effectively Displacing Other
Receipts Into the System.
Other New Facilities That Are Coming
Online in the Williston Basin Have the
Potential to Displace Canadian
Supplied Gas.
Williston Basin Supply Has A
Competitive Advantage When
Competing For Access to Pipeline
Space.
North Dakota
Port of Morgan
Garden Creek Plant
-
20
40
60
80
100
MM
cf/
d
Garden Creek Processing Plant
35 BENTEKENERGY.COM
Canada Continues to Lose U.S. Market Share
0
2
4
6
8
10
12
Bc
f/d
Net Imports from Canada
Northeast
West
Midwest
SE/Gulf 0.12$
Bakken 0.16$
Midcon 0.16$
Rockies 0.22$
Canada 0.24$
Variable Transport Cost To
Chicago @ $4.00 per MMBtu• In Addition to An IRR Economic
Advantage, Williston Basin Producers
Also Have Transport Advantage Versus
Canadian Suppliers.
• In a Low Gas Price Environment, The
Marginal Suppliers Gets Pinched at the
Wellhead.
36 BENTEKENERGY.COM
Canadian Spreads Narrow to Surrounding Markets
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
($1.00)
($0.80)
($0.60)
($0.40)
($0.20)
$0.00
$0.20
Hen
ry H
ub
Pri
ce
Basis
Pri
ce
Market Price Forecasts
CIG Basis Ventura Basis AECO Basis Chicago Basis Henry Hub Spot
37 BENTEKENERGY.COM
The Williston Basin Is Benefiting From the Significant Shift in Natural
Gas Dynamics as a Result of:
A Realignment of Producer Investment Criteria Toward Oil and
NGL Plays.
Reduction in Production From Neighboring, Less Economic
Producing Basins.
While Still Early, Current Data Suggests the Basin Could Yield
Higher Future Gas and NGL Volumes Due to a Rising Gas to Oil
Ratio (GOR).
Strong Drilling Economics, a Rising GOR and Greater Efficiency Will
Increase the Future Output From the Basin. Under BENTEK’s Base
Case Scenario, Oil Production Will Climb to 2.2 MMB/d and Gross
Gas Production Will Top 3.0 Bcf/d by the end of 2022.
Basin Conclusions
38 BENTEKENERGY.COM
Oil Prices and Oil Infrastructure Takeaway Capacity Are Primary
Drivers of the Strong Economics in the Region and Will Ultimately
Drive Growth.
Given Growth Expectations, Significant Midstream Investment Will
Be Required To Capture Natural Gas and NGL Value in the Basin.
Williston Basin Economics Enable Producers in the Region to
Sufficiently Compete on Price with Upstream Natural Gas Supply In
the Rockies and Canada for Space Out of the Region on Existing
Infrastructure.
Basin Conclusions (Continued)
39 BENTEKENERGY.COM
BENTEK Energy
BENTEK is an energy market analytics company, focused
on the natural gas market and related energy sectors.
Justin Carlson
Jodi Quinnell
Jennifer Van Dinter
Contact Any Analyst Direct at
(303) 988-1320
DISCLAIMER. THIS REPORT IS FURNISHED ON AN “AS IS”BASIS. BENTEK DOES NOT WARRANT THE ACCURACY OR CORRECTNESS OF THE REPORT OR THE
INFORMATION CONTAINED THEREIN. BENTEK MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE USE OF ANY INFORMATION CONTAINED IN THIS REPORT IN
CONNECTION WITH TRADING OF COMMODITIES, EQUITIES, FUTURES, OPTIONS OR ANY OTHER USE. BENTEK MAKES NO EXPRESS OR IMPLIED WARRANTIES AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANT- ABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
RELEASE AND LIMITATION OF LIABILITY: IN NO EVENT SHALL BENTEK BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFIT) ARISING OUT OF OR RELATED TO THE ACCURACY OR CORRECTNESS OF THIS REPORT OR THE INFORMATION CONTAINED
THEREIN,WHETHER BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY.
