BoyarMiller Energy eBook 2014 State of the Industry

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We've brought together the top insights into energy industry trends and best practices in our downloadable eBook, State of the Energy Industry.

A helpful resource of industry-leading insights on gas and crude production, job growth, the current regulatory and political environment, capital and technology, and the pulse on the global markets.

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BoyarMiller Energy eBook 2014 State of the Industry

  1. 1. PERSPECTIVES ON THE ENERGY INDUSTRY 2014 State of the Industry
  2. 2. Chairman’s Letter To Our Readers, As part of our commitment to knowing our energy clients’ business, we collect insights from some of the best minds in the industry. This understanding contributes to how we deliver counsel that exceeds our clients’ expectations and our ability to help them make strategy decisions about their business. The information in this ebook has been invaluable to us and to our clients, and we hope that it will benefit you as well. Read some of the trends and best practices gathered from industry-leading clients and our own energy team. If you find value in it and would like to hear more, join us for our next BoyarMiller Breakfast Forum. Sincerely, Chris Hanslik Firm Chairman 1
  3. 3. TABLE OF CONTENTS 2 State of the Industry UNITED STATES MARKET GLOBAL MARKETS Practice Leaders Expert Insights REGULATORY & POLITICAL CLIMATE CAPITAL & TECHNOLOGY: SHAPING THE FUTURE OF ENERGY GLOBAL MARKETS: A MANUFACTURER’S PERSPECTIVE
  4. 4. UNITED STATES MARKET Oil & gas industry has created 3.9M new jobs 1 MARCELLUS 2 UTICA 3 EAGLE FORD Areas will see enough growth through the end of the decade to support LNG exports – up to 3.5 billion cubic feet by 2020 STATE OF THE INDUSTRY 3 REFINERS BENEFIT FROM OVERSUPPLY OF LIGHT, SWEET CRUDE THAT CANNOT BE EXPORTED 1 2 3 Oil & gas production – boosted by shale – CONTRIBUTES APPROXIMATELY 3.5% TO U.S. GDP •Basin •Shale Gas Plays 250 and above 110 to 250 50 to 110 less than 50 Operable refinery location and capacity volumes as of January 1, 2012 (thousands of barrels per day) *SOURCE: U.S. Energy Information Administration *SOURCE: EIA, “The Long-term Outlook for Natural Gas”, Feb 2011 Metros with the highest concentrations of oil & gas jobs (a location quotient of 1.0 equals the national average) *SOURCE: EMSI 2013.4 Class of Worker Shale has given the U.S. a structural, long-term COMPETITIVE ADVANTAGE in the natural gas and electricity markets
  5. 5. 4 STATEOFTHEINDUSTRY GLOBAL MARKET 5 EUROPE The resolution of the conflict involving Ukraine and Russia will have a major,long-term impact on manufacturers in the U.S., U.K. and the rest of the world 3 GLOBAL OFFSHORE Global offshore market is currently strong, but may decline because of comparatively low cost of land rigs 2 LATIN AMERICA Instability in the government and currencies of Venezuela and Argentina have made them lukewarm marketsat best 1 3 2 4 5 7 State of the Industry, continued 1 NORTH AMERICA By 2035, natural gas in the U.S. will cost halfwhat it costs in Europe or Asia Cautious optimism about North American fracturing because the oversupply situationcauses pricing pressures 4 MIDDLE EAST/AFRICA North Africa’s instability for the past several years has made it an area of concern Not a promising well service market because of the anti-fracing regulations Middle East has lots of drilling and well service activity, and will continue to be a STRONG market for the near term 7 AUSTRALIA significant growth predicted in the near future from Chevron’s large projects Gorgon and Wheatstone 6 ASIA China will be a BIGopportunity for years to come, especially as they potentially sit on the largest shale reserves in the world Malaysia, Indonesia and Vietnam have seen modest but steadygrowth
  6. 6. EXPERT INSIGHT 55 Regulatory Political Climate “Outside of the U.S., there is no oil production growth. What’s going on in the U.S. is miraculous.” 2014 INSIGHTS David Pursell, Managing Director Head of Securities, Tudor, Pickering, Holt Co. • THERE CAN BE NO LNG EXPORTS WITHOUT HYDRAULIC FRACTURING: It’s been suggested that the U.S. use LNG exports to project power globally, but that supply is simply not possible with- out hydraulic fracturing. Allowing natural gas exports and fracturing are regulations that go hand in hand. • MARCELLUS, UTICA AND EAGLE FORD ARE THE KEY: All basins outside of Marcellus, Utica and Eagle Ford are in decline – but in a $5 gas world, those basins don’t need to grow. The three key basins will show significant enough growth through the end of the decade to support exports. • HYDRAULIC FRACTURING SAVED THE U.S. INDUSTRIAL SECTOR: With natural gas prices at $4 in the U.S., compared to $12 in Europe or $16 in Japan, U.S. manufacturing has a distinct advan- tage. Steel, glass, paper – any number of industries benefit from low gas and power prices. • OIL PRICES ARE HIGH BECAUSE THE GLOBAL MARKET IS TIGHT: The market is not oversupplied, as some analysts suggest. Inventories are actually near ten-year lows, and the U.S. is the only place in the non-OPEC world where oil production is growing. • WHEN WE CAN’T EXPORT CRUDE, BIG OIL WINS: With a surplus of light, sweet crude in the U.S., domestic supplies will be priced significantly lower than the global market, meaning a loss for oil producers. The winners will be refiners like Shell, BP and Exxon – “Big Oil.” As Managing Director and Head of Securities, David Pursell is responsible for TPH’s analysis of global oil gas markets, including inventory and price forecasts, supply/demand modeling and rig count/production relation- ships. He is a board member of private energy companies Oxane Materi- als and Unconventional Gas Resources. He holds a BS and MS in Petroleum Engineering from Texas AM University.
  7. 7. 6 EXPERTINSIGHT Capital Technology: Shaping the Future of Energy “Shale plays are secular, not cyclical; their economic impact is huge; and they will last a generation or longer.” 2014 INSIGHTS Thomas Bates, Co-Chair Energy MBA Advisory Board, Neeley School of Business, TCU • UNCONVENTIONAL PLAYS HAVE HAD A MASSIVE ECONOMIC IMPACT: Depending on which economist you listen to, the economic impact of shale in the U.S. is between $500 billion and $700 billion annually. They probably contributed 3.5% to the U.S. GDP last year and will generate more than 3.9 million new jobs. • LOW NATURAL GAS PRICES ARE A BIG WIN FOR AMERICAN CONSUMERS: Low gas prices and electric power prices benefit residential, commercial and industrial markets. In fact, high domestic production and low prices delivered an estimated $250 billion annual benefit to the American consumer. • U.S. COMPETITIVE ADVANTAGE: PLENTY OF CHEAP NATURAL GAS: We have a potential 150- year supply of natural gas in this country, which can be produced for 75% less than the cost we currently pay for imported crude oil. This is a structural, long-term competitive advantage for our nation’s economy. • AS OUR OIL IMPORTS GO DOWN, CHINA’S GO UP: Domestic oil production is up 60% in only 6 years – and total imports have dropped from 13 million barrels a day to 7 million. Meanwhile, China moved from importing virtually no oil in the mid-1990s to 6 million barrels a day last year. • BECAUSE OF SHALE, WE COULD BECOME ENERGY INDEPENDENT: If through improved mileage standards and substitution of CNG and LNG for gasoline and diesel we could drop con- sumption of oil derivatives in the transportation market from 12 million to 6 million barrels a day. We would then drop to 1 million barrels a day imported and would be virtually energy independent!. Tom Bates has more than 25 years of experience in oil service management and operations. He serves on the boards of directors of Hercules Offshore, TETRA Technologies, Southwest Oilfield Products, Independence Contract Drilling and Wellflex Energy Solutions. He is Adjunct Professor of Finance and co-chair of the Energy MBA Advisory Board at the Neeley School of Business at Texas Christian University. Tom received the 1995 University of Houston/American Society of Engineers OTC Award for outstanding leadership and citizenship.
  8. 8. 7 EXPERTINSIGHT Global Markets: A Manufacturer’s Perspective “What we’re seeing is the renaissance in technology for land drilling. Companies that don’t keep up with the curve are going to struggle in years to come.” 2014 INSIGHTS Paul DeWeese, CEO, Southwest Oilfield Products • TECHNOLOGICAL ADVANCES MEAN FEWER RIGS, MORE OIL AND GAS: Technology like pad drilling, walking rigs, AC rigs and improved mud pump systems mean faster, more efficient drilling. Fewer rigs are able to drill more feet and ultimately discover more oil and gas. • CHINA IS KEEPING U.S. MANUFACTURING ON ITS TOES: Because of increased ease of transport and long-term relationships with U.S. companies, China is putting heavy pressure on U.S. manufacturing companies to stay competitive. Manufacturing is a heavy-hitting, contact sport. • THE BIG CREW CHANGE ADDS SERIOUS HURDLES: With many of the best employees in the industry retiring out of the business, companies are in dire need of good, young talent. The cost and unavailability of talent makes many critical positions a challenge to fill. • COMPARATIVELY INEXPENSIVE LAND RIGS MAY HURT OFFSHORE MARKET: Due to lower operating cost, U.S. land rigs have a significant cost-advantage versus offshore rigs. While the global offshore market is currently strong, we may see a downtick in rig count offshore over time. • STABILITY OF A MARKET IS KEY: The political and currency stability of Asia has made it a solid market, while Latin American markets like Venezuela and Argentina are only lukewarm now because of uncertainty and instability in politics and economy. Paul DeWeese has more than 18 years’ experience in the oil and gas field services industry, running both public and private equity-backed companies headquartered domestically and internationally. He is the CEO of Southwest Oilfield Products, a domestic, US-based leader of pump and well service equipment production, and an OEM manufacturer of frac pumps, and mud pump fluid ends and consumables. Paul holds a Bachelor in Business Administration from Regis University and an MBA from the University of Michigan.
  9. 9. 8 Chris Hanslik Firm Chairman Represents companies in all aspects of the energy sector, both domestically and international, in disputes ranging from breach of contract and fraud to misappropriation of trade secrets and employment-related disputes. Has secured favorable results in both state and federal courts, as well as international arbitration proceedings for energy clients. Gary Miller Founding Shareholder, Business Group Represents numerous domestic and offshore-based companies in connection with acquisitions and divestitures, financings, joint ventures and general corporate matters in the United States. ENERGY PRACTICE LEADERS Bill Boyar Founding Shareholder, Business Group Represents the various parties involved in the acquisition, disposition, capitalization and financing of national and international businesses. Served as lead counsel for numerous complex, multi-party acquisi- tions and project financings with significant experience in corporate finance, mergers and acquisitions, private equity and structure finance.
  10. 10. PRACTICELEADERS 9 Steve Kesten Shareholder, Business Group Represents multiple international energy and energy services clients with outbound expansion (i.e., U.S. companies expanding internationally) and inbound expansion (international companies expanding to the U.S.), including start-up expansion or expansion by acquisition, as well as in connection with financing and merger and divestiture transactions. Gus Bourgeois Shareholder, Business Group Represents clients doing business domestically and internationally in connection with mergers and acquisitions, customer and vendor contracts – including master services agreements – technology licensing, employment agreements and related matters. Craig Dillard Shareholder, Litigation Group Handles litigation in both state and federal courts, as well as on appeal, for both domestic and international oil and gas clients who have been sued in the United States or in arbitration. Specializes in litigation of commercial contracts, including indemnity obligations; technology protection, including trademark infringement claims, trade secret misappropriation claims and intellectual property disputes; and enforcement of oil and gas companies’ non-compete, confidentiality and other employment agreements. Energy Practice Leaders, continued
  11. 11. boyarmiller.com BoyarMiller 4265 San Felipe, Suite 1200 Houston, Texas 77027 TEL 713.850.7766 FAX 713.552.1758

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