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Warlick International WCLI Presentation 8 Oct2009

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A brief overview of North American Unconventional Gas and Future Trends. A presentation by Don Warlick on October 8, 2009 at the WCLI conference in Santa Barbara, California.

A brief overview of North American Unconventional Gas and Future Trends. A presentation by Don Warlick on October 8, 2009 at the WCLI conference in Santa Barbara, California.

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  • 1. A Brief Overview of U.S. Unconventional Gas Development – and Future Trends West Coast Land Institute 27 th Annual Conference Santa Barbara, California – October 8, 2009 www.WarlickEnergy.Info
  • 2. Agenda
    • Unconventional Playbook – a Summary
    • Quick Flyover of the U.S.
    • Gas Demand Near-Term/Long-Term
    • Supply, Largely Driven by Gas Shale Evolution
    • Looking Ahead
    www.WarlickEnergy.Info
  • 3. 1. Unconventional Playbook – a Summary
    • Well planned early-stage geoscience and leasing are keys to success
    • Sound geological assessment is critical to strategic evaluation of big unconventional prospects in North America today
    • A must: Very astute leasing strategy (e.g. Fayetteville Shale)
    • Then comes smart drilling & production in unconventional plays
    • The unconventional endgame is typified by the Barnett Shale – it has now become all engineering and real estate
    www.WarlickEnergy.Info
  • 4. Typical Unconventional Play Rollout
    • Geological evaluation
    • Launch the landmen
    • Execute leasing program, mass up holdings
    • Drill test and delineation wells
    • Go horizontal…and fast!
    • But throughout …you must secure oceans of cash
    • Build on your success
    www.WarlickEnergy.Info
  • 5. 2. U.S. Flyover -- Leading Gas Shale Basins www.WarlickEnergy.Info
  • 6. Leading Tight Gas Plays www.WarlickEnergy.Info
  • 7. Leading Coalbed Methane Basins www.WarlickEnergy.Info
  • 8. 3. Gas Demand Near Term/Long Term
    • Since late 2008, pessimism about U.S. and Canadian economies has been pervasive
    • That’s true in natural gas also with the tremendous decline in prices
    • However… economic data since mid-summer is improving
    • Natural gas is looking better, despite little help from weather or better economic activity
    • The Administration’s emphasis is on wind, solar and…natural gas
    www.WarlickEnergy.Info
  • 9. Electric Power – Critical to Growth in Gas Demand
    • We are now transitioning from economic recession to economic recovery , albeit slowly
    • Underlying this in the near term and long term will be faster growth in the demand for electric power
    • A big reason: More natural gas at attractive prices that can fuel natural gas-fired infrastructure that already exists
    • Base load and peak load will be critical in the recovery – solar and wind power are not counted on in either category
    • Summary: Gas-fired electric power generating facilities already in place make gas demand the easiest to grow
    www.WarlickEnergy.Info
  • 10. 4. Supply, Largely Driven by Gas Shale Evolution
    • Significant improvements in technologies for drilling, completion and subsurface evaluation have helped ramp up gas production
    • We think LNG into U.S. will not pose earlier-perceived threats to gas production -- and imports from Canada will remain measured
    • Natural gas from Alaska will not be significant until the pipeline across Canada is built…well off into the future
    • On the upside, about half of natural gas consumed comes from wells drilled in the US during the last 3 ½ years
    • Overriding this picture is the “Green“ perspective of future legislation and emission-oversight requirements
    www.WarlickEnergy.Info
  • 11. Supply Mix in the U.S.
    • Conventional sources are declining, Alaska “bump” ~ 2020 anticipates pipeline completion
    • But onshore unconventional gas will be saving the day
    www.WarlickEnergy.Info
  • 12. Gas Shale Capacity Ramping Up
    • Gas shale development (in green) is producing big results
    • Barnett began the trend, newer shales using the technology
    www.WarlickEnergy.Info
  • 13. Comparing Three Notable Gas Shales
    • We compare the Barnett to the newest gas shales with promise
    • Early science/tech development in the Barnett is paying off
    www.WarlickEnergy.Info
  • 14. Haynesville Shale www.WarlickEnergy.Info
  • 15. Haynesville in Early Growth Phase
    • It all began just recently, in late 2007 when Cubic Energy and Chesapeake announced good news about good wells
    • Then came a land rush followed by vertical wells, which are now trending to horizontal
    • A big plus: Options to drill into other attractive formations like the Cotton Valley Sand, Cotton Valley Lime, Smackover, Travis Peak and James Lime
    • The Haynesville has tremendous potential, drawing gas portfolio players like Chesapeake/Plains, Petrohawk, Goodrich, EnCana and others
    • Quite possible for drilling to triple this year and continue up in 2010
    www.WarlickEnergy.Info
  • 16. A Plus in the Haynesville . . . multiple pay zones www.WarlickEnergy.Info
  • 17. Marcellus Shale www.WarlickEnergy.Info
  • 18. Marcellus is in Very Early Phase, Much More to Come
    • The Appalachian has a very long drilling history, none of which focused on the Marcellus until recently
    • Early lease payments were $150-$200 per acre in Pennsylvania, jumped to ~ $3,000 by 2008 with royalty levels 12.5% to 18.75%
    • It has great advantage in its proximity to Eastern US gas markets
    • There is need for infrastructure buildup for increasing gas takeaway
    • Early results on these wells are excellent
    • Accordingly, there is influx big players like Chesapeake/StatoilHydro, Range Resources, Cabot, EQT and many others
    • At midyear, Marcellus drilling was 2X that of 2008 and should continue; a great development future is in the cards
    www.WarlickEnergy.Info
  • 19. 5. Looking Ahead
    • The natural gas sector has a ways to go yet, but there is anticipation of improved prices, declining production and slowly-recovering economic conditions into 2010
    • Unconventional gas will be a bulwark for future supply, while LNG landed in North America is dependent upon world economies’ economic recovery and Eastern Hemisphere LNG demand
    • Gas imports to the U.S. from Canada should remain at present or lesser levels
    • That leaves a bigger role for unconventional gas development in future years
    • For the immediate we anticipate supply/demand balance coming soon as demand improves and production declines
    • 6. Result: Firming prices, slightly better conditions for development showing up late-2009 and improvement in 2010
    www.WarlickEnergy.Info
  • 20. End of Presentation www.WarlickEnergy.Info

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