• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
SOI2012
 
  • 1,092 views

 

Statistics

Views

Total Views
1,092
Views on SlideShare
1,037
Embed Views
55

Actions

Likes
0
Downloads
1
Comments
0

2 Embeds 55

http://www.loga.la 52
http://loga.la 3

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    SOI2012 SOI2012 Presentation Transcript

    • State of the Industry Don BriggsThursday, January 26, 12
    • Office of the Press Secretary For Immediate Release - January 25, 2012 • To save the economy, President Obama will announce today that he is ordering the immigration department to start deporting old people in order to lower Social Security and Medicare costs • President Obama insist that old people are easier to catch and will not remember how to get back home.Thursday, January 26, 12
    • Roy Culle n Clint Murchison n hardso Sid Ric H.L. HuntThursday, January 26, 12
    • Thursday, January 26, 12
    • The advanced technology of hydraulic fracturing and lateral drilling has revolutionized the domestic oil and gas industryThursday, January 26, 12
    • 2012 Projected Global Crude oil demand & supply Million Barrels Per Day Global Demand 89.3 Global Supply 89.04 US Demand 18.96Thursday, January 26, 12
    • Global Top Five Producing & Consuming Countries Top five producing top five consuming countries countries countries Production countries consumption Million Barrels per day Million barrels per day Russia 10.2 million 12% United States 19.8 million 22% Saudi Arabia 10.1 million 12% China 8.3 million United States 9.6 million 11% Japan 4.6 million China 4.26 million 5.0% India 3.1million Iran 4.2 million 4.9% Russia 2.7 millionThursday, January 26, 12
    • Global Top Five Producing & Consuming Countries Top five producing top five consuming countries countries countries Production countries consumption Million Barrels per day Million barrels per day Russia 10.2 million 12% United States 19.8 million 22% Saudi Arabia 10.1 million 12% China 8.3 million United States 9.6 million 11% Japan 4.6 million China 4.26 million 5.0% India 3.1million Iran 4.2 million 4.9% Russia 2.7 millionThursday, January 26, 12
    • Global Top Five Producing & Consuming Countries Top five producing top five consuming countries countries countries Production countries consumption Million Barrels per day Million barrels per day Russia 10.2 million 12% United States 19.8 million 22% Saudi Arabia 10.1 million 12% China 8.3 million United States 9.6 million 11% Japan 4.6 million China 4.26 million 5.0% India 3.1million Iran 4.2 million 4.9% Russia 2.7 millionThursday, January 26, 12
    • OPEC Surplus Capacity WTI Average Crude Oil Price Price Million/BBl 110 6 5.54 104 98 100 Forecast Average Price / Barrel 88 91 Million Barrels 4.07 4 66 3.93 70 3.62 3.71 64 3.51 3.03 58 2.97 54 44 50 2.07 2 1.92 38 22 27 28 1.27 1.42 1.37 23 23 1 0 2000 2002 2004 2006 2008 2010 2012 EIA 1/10/2012Thursday, January 26, 12
    • Threat to the global oil market 14 Tankers carrying 15.5 million barrels of crude oil pass through the strait every day. Represents 35% of the world’s seaborne oil shipments, and 20% of oil traded worldwide, in 2011 One of the worlds most strategically important choke pointsThursday, January 26, 12
    • U.S. Liquid Fuels Supply / Consumption 2011 Data Source EIA Liquid Fuels Source Million Barrels Percent per day of Total U.S. Crude Oil Production 5.6 29% Natural Gas Liquids 2.2 12% Refinery Processing Gains 1.1 6% Biofuels 0.9 5% Other 0.2 1% Total U.S. Liquid Fuel Supply 10.0 Net Imports 8.9 47% Total U.S. Liquid Fuel Supply 18.9 100% Total U.S. Liquids Consumption 18.9Thursday, January 26, 12
    • source: EIA 1/23/12Thursday, January 26, 12
    • Primary Energy Consumption by Source and Sector (Quadrillion BTU) Source EIA Source Sector 37% Percent of Sources Percent of Sectors 27 71 94 Transportation Petroleum 22 2 5 4 1 40 20 25% 3 41 Industrial 33 8 Natural Gas 34 18 11 76 30 1 11 Residential & Commercial 6 21% 8 <1 1 40 19 Coal 92 28 8 48 14 10 Electric Power 50 21 8% Renewable Energy 100 9% Nuclear Electric PowerThursday, January 26, 12
    • Thursday, January 26, 12
    • Levelized Cost of New Electricity Generation Capacity Entering Service in 2016 400 Value Cost per Megawatt Hour ($) 311.8 300 243.2 221.7 200 103.5 97 100 94.8 63.1 SolarThermal SolarPV OffshoreWind NaturalGas 0 Wind AdvancedNuclear ConventionalCoalSource: EIA Cost Estimates in 2009 DollarsThursday, January 26, 12
    • Average Annual US Rig Count 1949 - 2012 3974 4,000 3974 3105 2909 3,200 2641 2683 2614 2623 2547 2509 2429 2428 2259 2175 2232 2,400 2156 20742016 2001 1980 2000 1923 1879 1879 1760 1747 1768 1641 1662 1656 1649 2016 1501 1502 1388 1475 1383 1546 1,600 1273 1196 1196 1172 1134 1107 1156 1192 1027 1089 974 1010 1032 964 936 936 943 918 869 860 843 755 779 754 723 722 830 800 625 625 0 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 YEARThursday, January 26, 12
    • AVERAGE OIL & NATURAL GAS PRICES 2000 - 2012 Oil Trend 1 Gas Title 110 9 Natural gas prices 82.5 6.75 Oil Prices 55 4.5 27.5 2.25 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EIAThursday, January 26, 12
    • AVERAGE OIL & NATURAL GAS PRICES 2000 - 2012 Oil Trend 1 Gas Title 110 9 98 100 100 91 Natural gas prices 82.5 6.75 70 64 Oil Prices 58 54 55 50 4.5 38 27 28 27.5 23 23 2.25 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EIAThursday, January 26, 12
    • AVERAGE OIL & NATURAL GAS PRICES 2000 - 2012 Oil Trend 1 Gas Title 110 8.67 9 7.98 98 100 100 91 6.81 Natural gas prices 82.5 6.11 6.75 5.94 70 5.48 64 Oil Prices 58 4.34 54 55 3.94 50 4.18 4.5 3.66 3.55 3.53 3.26 38 27 28 2.45 27.5 23 23 2.25 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EIAThursday, January 26, 12
    • Average January Drilling Rig Activity Oil rigs vs. Gas 1988 - 2012 OIl GasThursday, January 26, 12
    • Average January Drilling Rig Activity Oil rigs vs. Gas 1988 - 2012 1500 1452 1411 OIl 1267 Gas 1219 1191 1125 1063 957 919 862 877 781777 744 750 710 706 633 627 574 532 515 475488 480 466 427 442425 427 392375 409 404 356357328 363366 375 313 297 316346 279 244 243 158 177 133 138127147 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 yearThursday, January 26, 12
    • Average January Drilling Rig Activity Oil rigs vs. Gas 1988 - 2012 1500 Natural Gas Rigs 1452 1411 OIl 2008 82% 1267 Gas 2012 42% 1219 1191 1125 1063 957 919 862 877 781777 744 750 710 706 633 627 574 532 515 475488 480 466 427 442425 427 392375 409 404 356357328 363366 375 313 297 316346 279 244 243 158 177 133 138127147 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 yearThursday, January 26, 12
    • The Game ChangerThursday, January 26, 12
    • Thursday, January 26, 12
    • Global Shift to unconventionl Energy • Energy companies are shifting their focus away from the Middle East and toward the West - with profound implications for the companies, global politics and consumers. • By 2020 shale sources will make up about a third of U.S. oil and gas production • By 2020 U.S. will be the top global oil and gas producer, passing Russia and Saudi Arabia.Thursday, January 26, 12
    • GLOBAL FRASER INSTITUTE PETROLEUM SURVEY • A total of 502 respondents completed the survey to evaluate 136 jurisdictions around the globeThursday, January 26, 12
    • Thursday, January 26, 12
    • NORTH AMERICA THE INVESTMENT CLIMATE HOT SPOT • #1 Mississippi • #5 Texas • #14 Louisiana • The Gulf of Mexico dropped from 11th in investment attractiveness this year to 60thThursday, January 26, 12
    • Thursday, January 26, 12
    • Institute for Energy Research in a recent study - North America holds the world’s largest combined oil, coal, and natural gas resources in the world,enough to fuel our present needs for 250 years.Thursday, January 26, 12
    • UNCONVENTIONAL ENERGY ➡“It’s the elixir of economic life, providing business longevity and renewal and ...apparently.....about to turn the US back into an industrial powerhouse” The Australian. ➡ "This shale gas development is a game-changer of huge proportions," said Dan DiMicco, chief executive officer of Nucor Corp ➡ “We are in the midst of a significant global shift as unconventional energy sources become more attractive to oil and gas companies” BDO USA ➡ Youngstown Steel & Tube building $650 million Plant in Youngstown, Ohio all made possible by cheap shale gas from PennsylvaniaThursday, January 26, 12
    • WORLD OIL POWERS BUY INTO U.S. SHALE PLAYSThursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • federal issues • Investment incentives • Hydraulic Fracturing • Gulf of Mexico • Keystone Pipe LineThursday, January 26, 12
    • Investment Incentives • Repeal expensing of intangible drilling cost • Repeal deductions for tertiary recovery • Repeal percentage depletion allowance for oil and gas wells • Repeal domestic manufacturing deductions for oil and gas companies • Increase geological and geophysical amortization for independent producers to 7 yearsThursday, January 26, 12
    • Hydraulic FracturingThursday, January 26, 12
    • Hydraulic Fracturing ➡First commercial “frac” job was conducted in 1947 ➡States regulate hydraulic fracturing ➡More than 1 million wells had been completed using this method by 1988 ➡Estimated that nearly 85% of wills drilled today are completed using hydraulic fracturing ➡Multiple federally funded studies have shown that there is no risk associated with hydraulic fracturingThursday, January 26, 12
    • Thursday, January 26, 12
    • Average Gulf of Mexico Rig Activity 2000 - 2012 GOM Rigs 148 150 136 Prior Macondo 109104 93 89 100 86 71 63 61 42 40 50 31 32 00 0 1 2 3 4 5 6 7 8 9 4/1/10 10 11 12Thursday, January 26, 12
    • Gulf of Mexico Unprecedented Uncertainty • GOM oil production has • Approval of exploration declined from 1.6 to 1.3 plans have slowed to 131 million barrels of oil per day days from a pre moratorium of 36 days • Regulatory web continues to be more burdensome and • “On Aggregate, in the 12 complex months following the lifting of the moratorium, the 51 • Safety & Environmental permits approved result in System (SEMS) 1 & 2, along an annual rate of approval with Idle Iron NTL 2010 will that was 32% of the send the independents historical average onshore (151)permits.” IHS-CERAThursday, January 26, 12
    • No to Standby Vessel Legislation • Landry Amendment to • The cost to industry will HR 2838 Coast Guard be in the $100s of millions. Reauthorization bill One company alone the would require operators cost will be $50 million in the GOM to have standby vessels near their • Industry has emergency facilities. supports systems, helicopters, field vessels, • The Standby Vessel emergency evacuation legislation will require an plans and drills, life estimated 200 additional saving equipment, crafts, vessels in the the GOM rafts daily.Thursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • What’s Wrong With this picture?? Spain Norway India Malaysia Vietnam Brazil Venezuela China Angola ChinaThursday, January 26, 12
    • Thursday, January 26, 12
    • Louisiana The Energy StateThursday, January 26, 12
    • Louisiana The Energy StateThursday, January 26, 12
    • US to Export LNGThursday, January 26, 12
    • BROWN DENSE Louisiana HAYNESVILLE SHALE COTTON VALLEY Shale & Ultra Deep Plays TUSCALOOSA MARINE SHALE/ EAGLE FORD LA SHALE WILCOX ULTRA DEEP FRONTIERThursday, January 26, 12
    • Haynesville ShaleThursday, January 26, 12
    • Haynesville Shale #1 Producing Natural Gas Field in US $14 Billion Est. Economic Impact in 2012 60,000 Plus Jobs Supported by Shale in 2012 1,700 Plus Producing Wells 2,207 Units as of 12/15/11Thursday, January 26, 12
    • Since 1997, more than 13,500 gas wells completed in the Barnett TextThursday, January 26, 12
    • Since October 2008, more than 1,690 wells have CLAIBORNE been completed in the Haynesville CADDOCaddo-Pine Island Field Haynesville Shale Gas Play Well Activity Map Producing Well (13) 1 Haynesville Shale Gas Play Well Activity Map Producing Well (1690) Dixie Field Bellevue Field 1 Permitted Well Sentell Field Permitted Well WOC*/Fracturing/ Testing/Other Operations (47) 11 Dixie " Waiting on Completion/Fracturing/ Testing/Other Operations (349) 11 BOSSIER Bellevue Permitted Well Drilling in Progress (35) 1 1 Field 1 " Sentell Field # Permitted Well * Drilling in Progress (96) 1 " Field Red Chute Bayou 1 " 1 " Permitted Well Not Drilling (65) Longwood 1Field 1 Field ! Permitted Well ! Not Drilling (241) 1 Longwood Field 160 Total Wells Permitted to Haynesville Shale 11 Willow Chute Field 1 20 § ¦ ¨ 2376 Total Haynesville Shale Wells * Waiting on Completion Haughton 220 20 1 Field Adopted Haynesville 1 1 1 1 Shreveport Field 1 Sibley Adopted Haynesville Shale Unit (174) 1 1 #111 * 1 1#* Field Shale Unit (2207) Bossier City 1 Sligo 1 Field WEBSTER "1 ! 1 1 1 111 1 Greenwood-Waskom " Field 1 11 Sligo Field 1 1 11 1 * 1 " 1 1 11 1 11 1 1 11 11 1 Cedar# 11 1 1 1# 111 1 " 1 1 1 * "1 "" 1 1 " 1 # " 1 20 111 1 Grove 1 Field " 1 1 !#! 1 1 1 !1 111 11 1 1 11 1 " 1 1 1 1 1 Grove111111 Shreveport Lake Bistineau 1 * * 1! 11 1 Elm 1 1 1 11 ! 111Field"11 1 Jamestown Greenwood-Waskom 1 1 Field1 1 1 Metcalf1 1 111111 1 1 " 1 1 "" ! Field1 " 1 1 1 1" 11# 111 1 1 Field Cedar Grove Field 1 11 11 11 1 1 Johnson Branch 111 1 * 11 1 1 " 1 11 1 "1 ! " Field 1 1 1 Field 111 " 111 1 " 111 1 " 1 1 1 "" 1 1" 1 1 "1 111 1 1 1 11 1 11Alabama1 1 11 11 "1 1 1 1 1 " 1 Bend 1 1 " 1 1 1 11 ! 1 1 1" "" " 1 1 1 111 1 1 111 1 1 "1 1 1 1 1 1 " " 1 11 1111 1 1 " Lake"1!11111 #1 11 1 " ! 1 Field *1 11 1 1 11 1 " " 11 1 11 1 1 1 11 1 1 1 1 11111 11 11 1 1 1"1 1 111 11 1 1 1 1 11111111 1 " !! " ! Metcalf Field Swan ! 1 1 1 BIENVILLE " ! " ! Elm Grove Field Caspiana " " 1 1 Field 1 1 1 1 1 1# 1 1 1 1 1 1 11# 1 # * " 1 11 1 1 111 1 1 1 " 1 1 1 Field 1 1! 11111 1 1 1" 1 111 1 1 1 11 1 ## 1 111 1 1 " * * " " *" 1 " "1 Woodardville * 1" 11 1 " 1 1 11 11 1 ! 1 1 1 1 1" 1 11#!1 1 1 1 Thorn1Lake 1 1"1 11!1 1 Madden Branch 1!! 1 " Johnson Branch Field ! " " 1 ! 1 Field 1 1 1 !*! 1 1 1 1 1 ! 1#1 1 1"11 Kingston"1 11#11 " 11111"1!1 # "1 " 1 ! 1 1 * 1 1" 1 ! " !1 !! 1" 11 #1#11 ##!! 1 * * **! 1 #! " *! 1"1 #! Field 1! 1 11 11 " 1 1 1 !11 11 1 1 11 1 Field 1111 " 1 1 11 1 1 " 1"!*! 1# 1 " ! 1 Field 1 !** * 1 " 111 1 * "* 1"" 1 1 11 1 1## # 1 1 1"11"1" "1#1# 1""1 1 1 11!""" 1 111 1 !1""! 1 " 1 !!! # ! * * " !* ! ! "! " !" * " ! #1 1 1 1 1 1 ! 1 "" 1 1" 11 1 #" 1 11 "1 " 1"" " ! 1 "1 1 "" ! 1 1 1 111*11 "1 1 11 1 1 " ! 1 1*#1 1 1 11 ! 1Field 1 1 1 1 1" 11111##11"1""11#11111 11 " 1!111 1 1111 1 ""!111 1 1 1 1 "1 ! * Bethany-Longstreet 1 11 1 1 1" !Holly#*#1# " 1* 11 1 1 ! 111 1 11 !1 1 1 !1 Caspiana Field Swan Lake ! ""# * " 11 1#* "*"#1 ## 1 "*" 1"* #1 1"" ** ! " " Field 11 1 1 1 ! ! 1 11 1 " "" * " ** #" * "! " # * 1 1 " 11 1 * 1"1 ! 111!11 !111 111 1 1 11!1 11 1 1111" 1 11 1 1 Bracky 1" 11 1 1 Ashland ! 1 1 #* 11 "1 1 1 11 11 Branch1 1 " ! *# # * "" " ! " 1# 1 ! " " * 1! 1 ! 11 # 1 1 Field ! 11 " # * 1 1 1 Bower " 1 111"1 Cane,11 1 1 1 1 1 * 1 * 1 1 111 1" # 111 " Martin 1 11111 1 1 " 1 1Grand11#11North 1 1 11 1 " # 11 1 # 1 11111 1111 11"Field 1 1Field 1 " 49 " 1 11 1 1 1 1 1 1 1 Field ! "1" Field 1 * 11Field 1 1111 1 1 "1 1 1 1 11 11 1 " Woodardville Field 1 1 !! " 1 1 1 1! 1 1 * ! " 1 111! " 1 1 1 1 Belle !! 1 1 1 ! 11 1 1 11 1 11 1 11 1 Creek Liberty ! Thorn Lake Field 1 11 1 11 11 1 " " 1 1 1 Carroll 1 " 1 1 1 11 1 Red11 Field 1Bayou!111 1 1 1 " # Field1 1 1 " # # * * 1 1 11 1 1 ! 11 11 1 1 " 1!FieldBayou 1 1 1 1 River-Bull ! 1! 1 Bethany-Longstreet Field 1 "Canadian! 1 1 Mansfield 1 1 1 ! #! 1 * 1 1 Field " 11 1 1 11 1Logansport 1 111Grand Cane1 1 1 1 1 1 111 "1 " 1 1 !1 !"11" 111 " " 11 1 1 1 " Field 1" " "1 1 1 !* 1 1 1 1 11 1 1 1 Gahagan ! 1 1 ! 1 " " !1 1 1 " 11 1 11 Field1 11 ! ! 11 1 11"1" 1 Field 1 1 11 1 1 1 1 1 #1 1"1111 1" " !1" ! 1 " Kingston Field 1 1 ! 1 " "" !! " " 1 1 1 1 1 " *! " 1 Field " "1 " ! " Holly Field " ! " Belle Bower Field Martin Field 1 1 !! 1 1 1 " "1 "#! 1 1 ! ! ! 1! !Field 11 Field1 1 Mile Bayou 1 ""1!1 1 1 1 1 Ten 1 1 " " " Spider " ! "! Trenton " # * * ! ! " ! !1 ! "# * 1 " " Alpha 11 ! 11 " 1 1"1 11"""1 1" 1 " 1 11"1 " 1 111 Field " " 11 Redoak Lake 1 Field 11 1 1 1 " " 1 1 " 1 " Chemard1 ! 1 1 Lake "1 1Field RED 1 1 1 ! 11 1 1 1 # 1 1 ! 11 1 1 1 1 1 !" 1 1 1 1 ! Brushy1111 1 " # ! ! ! !1 1 Red River - Bull Bayou Field * " " " Field " 1 1 1 " 1Bayou * ! ! ! 1 1 1 1!1 ! " 1 1 1 Benson ! 1 Field 1 1# *! § " 1 ¦ ¨49 North Grand Cane Field 1 11 ! ! 1 1 1 11 1 ! "1 11 1 1 !1! ! Field 1 1 # 11 1 1 1 1 1 Grogan 1" 1 11 1* ! ! 1 Field 11 Coushatta !1 1 1 1 " 1 " ! !1 1 !1!! 1 " ! 111 ! 1 1 King Hill RIVER Logansport Field Mansfield ! ! " Grand Cane Field 1 1 !" ! 1 ! 1 1 1#Pleasant Hill 1 " 11 1 " " 1 11 ! * 1 1 1 1 " " Field ! "" 1 1" ! " 11 1 1 11 1Field 1 1 " " 1! " 1 # " * " 1! "" 1 ! " ! 1# " " 1 1#" " "!" # ** " !" San1 Trenton Field 1 1 * 1 111 1"! " 1! " Miguel Creek " 1 Converse # # # 1 11 # Field 1 "" ** * " " * " " 1 "!Field Bayou San Miguel 1 " "# 1 1 " 1 " * ! " ! " Spider Field !! !" " " Field1 1 !" 1" 1 DE SOTO ! " ! !! " " " "" ± 1 ! 11 1 ! #! ! ! 1 1 * Benson Field 1 1 1 1 ! 1 1" "" ! ! ! King Hill Field 1 NATCHITOCHES ! 0 5 10 !! 1 Zwolle Field ! Pleasant Hill Field Miles 1 ! SABINE 0 5 10 Well data as of 12/08/2011Well data as of 10/30/08. NOTE: Data from this map areNOTE: Data from this map are not to be used for legal purposes.not to be used for legal purposes. MilesThursday, January 26, 12
    • Non-Consent / Risk • THE ISSUE • Smaller operators are being squeezed because they cannot afford to participate or pay the royalty • Royalty owners are not being paid timely • Risk charge is not consistent across all wells in a unit affecting the economics for those drilling the wells • LegislationThursday, January 26, 12
    • water • Ground Water • Surface Water • LegislationThursday, January 26, 12
    • Average North LA Rig Activity 2000 - 2012 150 North La Land Rig Activity 135 Trend 1 112.5 98 90 75 68 68 57 58 49 40 37.5 30 29 24 23 0 00 1 2 3 4 5 6 7 8 9 10 11 12Thursday, January 26, 12
    • Projected Economic Impact Haynesville Shale 2010 - 2014 Business Household Year Earnings Jobs Sales 2010 $17 Billion E $4 Billion 111,329 2011 $12 Billion $3 Billion 76,339 2012 $11 Billion $3 Billion 69,424 2013 $11 Billion $3 Billion 62,883 2114 $11 Billion $3 Billion 60, 637Thursday, January 26, 12
    • Lower Smackover Brown DenseThursday, January 26, 12
    • Lower Smackover Brown Dense Predominately North East Play Very early stages of development depths rage from 8,000’ to 10,000’Thursday, January 26, 12
    • Lower Smackover Brown Dense Predominately North East Play Very early stages of development depths rage from 8,000’ to 10,000’ Companies in The Dense Devon Southwestern Energy Vision ExplorationThursday, January 26, 12
    • Tuscaloosa Marine Shale / Eagle Ford LAThursday, January 26, 12
    • Tuscaloosa Marine Shale / Eagle Ford LAThursday, January 26, 12
    • Tuscaloosa Marine Shale / Eagle Ford LAThursday, January 26, 12
    • Tuscaloosa Marine Shale / Eagle Ford LA Amelia Anadarko Devon Indigo Minerals Resources Mid-Western El Paso Denbury States Encana Goodrich SwiftThursday, January 26, 12
    • Average Annual South LA Land Rig Activity 2000 - 2011Thursday, January 26, 12
    • Average Annual South LA Land Rig Activity 2000 - 2011 60 54 45 44 37 38 32 32 34 30 29 30 29 26 15 16 15 0 99 00 1 2 3 4 5 6 7 8 9 10 11Thursday, January 26, 12
    • Ultra-Deep Frontier 25,000’ - 35,000’ Middle/Lower Miocene - Wilcox - Frio - Tuscaloosa - Text Davy JonesThursday, January 26, 12
    • Ultra-Deep Frontier 25,000’ - 35,000’ Middle/Lower Miocene - Wilcox - Frio - Tuscaloosa - Text Davy JonesThursday, January 26, 12
    • Ultra-Deep Frontier 25,000’ - 35,000’ Middle/Lower Miocene - Wilcox - Frio - Tuscaloosa - COMPANIES IN THE FRONTIER McMoRan PLAINS Text CHEVRON Energy XXI Davy JonesThursday, January 26, 12
    • Ultra-Deep Unitization Legislation • Defines ultra-deep as structures encountered below 22,000’ • Allows units to be formed based from seismic data before a well is drilled • Allows for the orderly and economic development of the play • Current regulations did not contemplate wells of this magnitude in scope and costThursday, January 26, 12
    • Average Annual Inland Water Drilling Activity 2000 - 2011 30 26 25 23 24 20 19 20 18 16 16 16 15 14 14 10 9 5 0 0 1 2 3 4 5 6 7 8 9 10 11Thursday, January 26, 12
    • State Issues • Legacy Lawsuits • Horizontal Severance Tax Investment Incentive • WaterThursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • Source - Legacy Liability in Louisiana “Legacy Liability In Louisiana” South Texas College of Law Energy Law Institute for Attorneys and Landmen Sept 2006Thursday, January 26, 12
    • Source - Legacy Liability in Louisiana What is a legacy lawsuit? Plaintiffs A lawsuit to recover damages and clean up costs associated with big oil screwing up the environment since the 1030’s Defendants Residual lawsuit after the royalty payments have become small or have ceasedThursday, January 26, 12
    • Source - Legacy Liability in Louisiana corbello • $33,000,000 clean up costs for 120 acres (valued at $108,000) • Don’t have to use money to clean up • $4,000,000 for attorney feesThursday, January 26, 12
    • Source - Legacy Liability in Louisiana How do i locate areas where i may successfully litigate for environmental damages? Step 2 Locate these babies Locate the old fields that were producing during the early periods when open pits were used. Prepare an operator-ship chronology to insure at least one deep pocket is on the hook. If not place project on shelf for later consideration, if any.Thursday, January 26, 12
    • Source - Legacy Liability in Louisiana How do i locate areas where i may successfully litigate for environmental damages? Step 2 Locate these babies It’s best to narrow one’s search to Southern Louisiana since I can almost be assured of a rich environment of deep pockets: Chevron & Texaco Shell Oil company, BP America & Amoco & Vastar ExxonThursday, January 26, 12
    • Typical Legacy Lawsuit Chronology 33 Defendants Ex x o n M ob i l C orp.; Chevron U.S.A., Inc .; McCurdy Oil Co.; Cinder Production Co.; Gotham 1985, LP; Monroe Well Service, Inc.; V is t a C o r p . ; J AS A, I n c . ; R o s s E x p lo r a t io n , I n c . ; T r ic k le D o w n O il, Inc.; Omega Energy, Inc.; Standard Production Co.; Barnwell Oil Co., Inc.; Berry Petroleum Co.; Celeron Oil & Gas Co.; Phoenix Operating Co., Inc.; Southern Oil & Gas Co.; Bayou State oil Corp.; EOTT Energy Corp.; Abney Oil Co., Inc.; Frog Island, LLC; Legacy Resources Co., LP; Calumet Lubricants Co., LP; J.C. Trahan Drilling Contractor, Inc.; Shallow Oil Co., Inc.; Hilliard Petroleum, Inc.; Lyons, Hilliard & Watson, Inc.; Three Sisters Petroleum Inc.; Faith Energy, LLC; New American Petroleum AssThursday, January 26, 12
    • Legacy Suits Growth after Corbello 2002 • Since Corbello, 250 suits • Districts courts have have been filed with more implemented ACT 312 than 1,500 defendants differently than was intended by the • In 2006 Legislature passed legislature. Act 312 in attempt to handle lawsuits and move • Insurance companies are remediation forward now denying insurance to companies in Louisiana, • No remediation plans but not in Texas and have been adopted by the Mississippi court under Act 312.Thursday, January 26, 12
    • 2010 Louisiana Top Crude Producers Defendants in Legacy Sites Cases Rank Company Name Crude Oil 29 YUMA E&P 235,978 1 HILCORP ENERGY COMPANY 7,514,204 30 CONOCO PHILLIPS - BURLINGTON 232,748 2 SWIFT ENERGY OPERATING 3,866,557 31 ROYAL PRODUCTION COMPANY 226,546 3 TEXAS PETROLEUM INVESTMENT 2,103,542 32 AXIS ONSHORE 223,753 4 GULFPORT ENERGY CORPORATION 1,979,024 33 TORZA OPERATING 223,473 5 HELIS OIL & GAS COMPANY 1,827,009 34 MARINER ENERGY 210,940 6 CHEVRON U.S.A. 1,803,450 35 RODESSA OPERATING 209,809 7 XTO ENERGY 1,623,189 36 ALTA MESA SERVICES 209,195 8 APACHE CORPORATION 1,407,190 37 NEUMAN PRODUCTION COMPANY 207,909 9 MIDSTATES PETROLEUM 1,237,643 38 MUNOCO COMPANY 200,421 10 DENBURY ONSHORE 1,214,470 39 LIBERTY RESOURCES 189,752 11 STONE ENERGY CORPORATION 1,120,626 40 PRIZE PETROLEUM 189,681 12 ENERGY PARTNERS 950,011 13 DEVON ENERGY PRODUCTION 839,683 41 BRIDWELL OIL MANAGEMENT 189,318 14 FOREST OIL CORPORATION 750,649 42 J.P VANWAY . 185,832 15 ENERGYQUEST II 715,279 43 INEXCO OIL COMPANY 184,943 16 MARITECH RESOURCES 621,248 44 CASTEX ENERGY 179,295 17 COX OPERATING 572,574 45 JUSTISS OIL COMPANY 172,336 18 MCGOWAN WORKING PARTNERS 554,739 46 SUNLAND PRODUCTION 167,080 19 DUNE OPERATING COMPANY 553,788 47 NOBLE ENERGY 165,203 20 LOBO OPERATING 538,227 48 SOUTHERN BAY OPERATING 164,704 21 MILAGRO EXPLORATION 483,659 49 JAG OPERATING 154,588 22 CENTURY EXPLORATION 448,427 50 JGC ENERGY 146,570 23 DIMENSION ENERGY CO 333,523 24 BOPCO 328,890 STATE TOTAL PRODUCTION 49,114,795 25 THE MERIDIAN 281,658 TOP 50 TOTAL CRUDE OIL PRODUCTION 79% 38,715,580 26 CLAYTON WILLIAMS ENERGY 277,008 TOP 50 WITH LEGACY CASES 27,663,975 27 PETRO-HUNT 257,827 TOP 50 PERCENTAGE WITH LEGACY 56% 28 THREE SISTERS PETROLEUM 242,412Thursday, January 26, 12
    • 2010 Louisiana Top Crude Producers Defendants in Legacy Sites Cases Rank Company Name Crude Oil 29 YUMA E&P 235,978 1 HILCORP ENERGY COMPANY 7,514,204 30 CONOCO PHILLIPS - BURLINGTON 232,748 2 SWIFT ENERGY OPERATING 3,866,557 31 ROYAL PRODUCTION COMPANY 226,546 3 TEXAS PETROLEUM INVESTMENT 2,103,542 32 AXIS ONSHORE 223,753 4 GULFPORT ENERGY CORPORATION 1,979,024 33 TORZA OPERATING 223,473 5 HELIS OIL & GAS COMPANY 1,827,009 34 MARINER ENERGY 210,940 6 CHEVRON U.S.A. 1,803,450 35 RODESSA OPERATING 209,809 7 XTO ENERGY 1,623,189 36 ALTA MESA SERVICES 209,195 8 APACHE CORPORATION 1,407,190 37 NEUMAN PRODUCTION COMPANY 207,909 9 MIDSTATES PETROLEUM 1,237,64356% of the top 50 producers have legacy suits 10 11 DENBURY ONSHORE STONE ENERGY CORPORATION 1,214,470 1,120,626 38 39 MUNOCO COMPANY LIBERTY RESOURCES 200,421 189,752 Which represents 79% of the production of 40 PRIZE PETROLEUM 189,681 12 ENERGY PARTNERS 950,011 13 DEVON ENERGY PRODUCTION 839,683 41 BRIDWELL OIL MANAGEMENT 189,318 42 J.P VANWAY . 185,832 the top 50 producers 14 FOREST OIL CORPORATION 750,649 15 ENERGYQUEST II 715,279 43 INEXCO OIL COMPANY 184,943 16 MARITECH RESOURCES 621,248 44 CASTEX ENERGY 179,295 17 COX OPERATING 572,574 45 JUSTISS OIL COMPANY 172,336 18 MCGOWAN WORKING PARTNERS 554,739 46 SUNLAND PRODUCTION 167,080 19 DUNE OPERATING COMPANY 553,788 47 NOBLE ENERGY 165,203 20 LOBO OPERATING 538,227 48 SOUTHERN BAY OPERATING 164,704 21 MILAGRO EXPLORATION 483,659 49 JAG OPERATING 154,588 22 CENTURY EXPLORATION 448,427 50 JGC ENERGY 146,570 23 DIMENSION ENERGY CO 333,523 24 BOPCO 328,890 STATE TOTAL PRODUCTION 49,114,795 25 THE MERIDIAN 281,658 TOP 50 TOTAL CRUDE OIL PRODUCTION 79% 38,715,580 26 CLAYTON WILLIAMS ENERGY 277,008 TOP 50 WITH LEGACY CASES 27,663,975 27 PETRO-HUNT 257,827 TOP 50 PERCENTAGE WITH LEGACY 56% 28 THREE SISTERS PETROLEUM 242,412Thursday, January 26, 12
    • 1000 $130 900 Legacy Lawsuits Discourage South La Land Drilling $111 800 South La - Land 700 Texas $93 New Mexico Oklahoma 600 Wyoming Crude Oil ACT 312 $74 June 2006 500 Corbello June 2002 $56 400 300 $37 200 $19 100 0 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Thursday, January 26, 12
    • Legacy Legislation 2012 Regular Session • Will not impact landowners rights • Will not impact the jurisdiction of the district courts • Will allow operators to accept responsibility for regulatory remediation without accepting liability • Will establish timeframes to help move lawsuits through the judicial processThursday, January 26, 12
    • LOUISIANA LAWSUIT CLIMATE SECOND WORST IN NATION Lawsuit Climate 2010 Ranking the States Louisiana RANK LAWSUIT CLIMATE 49TH JUDGES IMPARTIALITY 49TH JUDGES COMPETENCE 49TH JURIES FAIRNESS 49TH U.S. CHAMBER INSTITUTE FOR LEGAL REFORMThursday, January 26, 12
    • LOUISIANA LAWSUIT CLIMATE SECOND WORST IN NATION Lawsuit Climate 2010 Ranking the States Louisiana RANK LAWSUIT CLIMATE 49TH JUDGES IMPARTIALITY 49TH JUDGES COMPETENCE 49TH JURIES FAIRNESS 49TH U.S. CHAMBER INSTITUTE FOR LEGAL REFORMThursday, January 26, 12
    • Horizontal Severance Tax Investment IncentiveThursday, January 26, 12
    • Horizontal Severance Tax Investment Incentive • Qualified wells receive a suspension of severance tax for 2 years or until payout is reached (whichever is the lessor)Thursday, January 26, 12
    • Horizontal Severance Tax Investment Incentive • Qualified wells receive a suspension of severance tax for 2 years or until payout is reached (whichever is the lessor) • Enacted in 1994Thursday, January 26, 12
    • Horizontal Severance Tax Investment Incentive • Qualified wells receive a suspension of severance tax for 2 years or until payout is reached (whichever is the lessor) • Enacted in 1994 • Estimated in 2010 that the state gave up $125.3 million with the incentive, but gained $367.7 million in revenue generated from the associated drillingThursday, January 26, 12
    • Horizontal Severance Tax Investment Incentive • Qualified wells receive a suspension of severance tax for 2 years or until payout is reached (whichever is the lessor) • Enacted in 1994 • Estimated in 2010 that the state gave up $125.3 million with the incentive, but gained $367.7 million in revenue generated from the associated drilling • Simply put - the state gains $2.94 for every dollar of incentive grantedThursday, January 26, 12
    • CNGThursday, January 26, 12
    • Roy Culle n Clint Murchison n hardso Sid Ric r d lia Hil C .P. H.L. HuntThursday, January 26, 12
    • Thursday, January 26, 12
    • Thursday, January 26, 12
    • www.loga.la iPhone (free): search “Oil & Gas News” @LaOilGasAssoc facebook.com/LouisianaOilGasAssociationThursday, January 26, 12
    • Water • 2 different water types • Groundwater - water below the surface of the earth • Surface water - water that is either running or not that is contained above ground • Groundwater - managed by the Office of Conservation - • ownership is determined by the “rule of capture” • Water wells are to be permitted by OOC • Surface Water - • Not under anyones direct ownership and is the property of the state in trust for the people of Louisiana • Any citizen of Louisiana has the right to use of the waterThursday, January 26, 12
    • Water cont... • Historically, the state has never charged for use of surface waters (i.e. the Mississippi River) see R.S. 9:1101 • Until recently, there was no mechanism for the state to charge, even if it would have wanted to • Early 2010 the Atty General issued 4 opinions that claimed the State of Louisiana owned the running waters of the state. • If the state OWNED the running waters, they then must charge Fair Market Value for the water )louisiana Constitution Art. VII, Sec 14) • In Response to AG, DNR passed legislation that allowed for companies to participated in Cooperative Endeavor Agreements. Expires June 2012Thursday, January 26, 12
    • Thursday, January 26, 12
    • • End of .45 cent blender tax credit ends, mandate in still in place, Ethanol consumer will pay 4-5 cents Mandates a Bust • It takes 1.5 gallons of gasoline to produce 1 gallon of ethanol. (independent Cornell University analysis) • It takes 1,700 gallons of water to produce 1 gallon of ethanol. • EPA - ethanol mandates will increase carbon emissions in the short term and may need to be in effect for 100 years before significant reductions are realized.Thursday, January 26, 12
    • “Resource Play” The low to no risk and the size is what allow a company to pay high bonuses per acre and 25% royalty compared to conventional play lease terms of $100/acre and 18.75% royalty.Thursday, January 26, 12
    • Legacy Lawsuits Discouraged Exploration in South LAThursday, January 26, 12
    • value of the severance tax investment incentive For every dollar of severance taxes given up under the horizontal incentive the state gained $2.94 in revenues to the treasury. $1.00 = $2.94Thursday, January 26, 12
    • Non Conventional Conventional Resource PlayThursday, January 26, 12
    • Ridiculous Louisiana Lawsuits • Opelousas - St. Landry Man Blows • Jefferson Parish - Jury Awards Up His Home, Then Sues The Gas Cook $1 Million over Spilled Company Beans Carl Jones Sr. broke the lock and A man recently sued his daughter’s jerry-rigged a gas connection to his school after she was burned in a home after it was cut off due to non- cooking accident. During a fair, Daniel payment. The home exploded the Lirette was preparing a pot of beans next day. The jury found the gas in the school kitchen with the help of company 50% at fault and his 12-year-old daughter. When he awarded the Jones family $15 left the kitchen, his daughter million. attempted to remove the beans from the oven and accidentally spilled • Kenner - Shopper Awarded $1.5 them on herself. Mr. Lirette sued the Million after a “Trip” to the school alleging negligence in failing to Grocery supervise the kitchen. vIncredibly, Cheryl Bourgeois tripped on a the jury awarded the Lirette family concrete bumper in the parking lot of nearly $1 million. a Rouses grocery store. Alleging the bumper defective, she blamed the store for failing to maintain its premises. A jury awarded Mrs. Bourgeois more than $1.5 million.Thursday, January 26, 12
    • U.S. Petroleum and Other Liquid Fuels Facts for 2011 Source:EIA 1/10/12 Gulf of Mexico Fact Sheet Million barrels Share of Total U.S. Source: U.S. Energy Information Administration per day Liquid Fuels Consumed Liquid Fuels Production 9.8 51% U.S. Crude Oil Production 5.6 29% Total Offshore Production 1.7 9% Gulf of Mexico Production 1.6 8% Natural Gas Plant Liquids 2.1 11% Refinery Processing Gain 1.1 6% Biofuels 0.9 5% Others 0.3 2% Stocks Withdrawn 0 0% Net Imports 8.5 45% Gross Imports into Gulf Coast 4.9 26% Total U.S. Liquid Fuels Consumed 18.9 100% Offshore share of U.S. crude oil production 32% Gulf of Mexico offshore share of U.S. crude oil 29% productionThursday, January 26, 12
    • U.S. Petroleum and Other Liquid Fuels Facts for 2011 Source:EIA 1/10/12 Gulf of Mexico Fact Sheet Million barrels Share of Total U.S. Source: U.S. Energy Information Administration per day Liquid Fuels Consumed Liquid Fuels Production 9.8 51% U.S. Crude Oil Production 5.6 29% Total Offshore Production 1.7 9% Gulf of Mexico Production 1.6 8% Natural Gas Plant Liquids 2.1 11% Refinery Processing Gain 1.1 6% Biofuels 0.9 5% Others 0.3 2% Stocks Withdrawn 0 0% Net Imports 8.5 45% Gross Imports into Gulf Coast 4.9 26% Total U.S. Liquid Fuels Consumed 18.9 100% Offshore share of U.S. crude oil production 32% Gulf of Mexico offshore share of U.S. crude oil 29% productionThursday, January 26, 12
    • U.S. Petroleum and Other Liquid Fuels Facts for 2011 Source:EIA 1/10/12 Gulf of Mexico Fact Sheet Million barrels Share of Total U.S. Source: U.S. Energy Information Administration per day Liquid Fuels Consumed Liquid Fuels Production 9.8 51% U.S. Crude Oil Production 5.6 29% Total Offshore Production 1.7 9% Gulf of Mexico Production 1.6 8% Natural Gas Plant Liquids 2.1 11% Refinery Processing Gain 1.1 6% Biofuels 0.9 5% Others 0.3 2% Stocks Withdrawn 0 0% Net Imports 8.5 45% Gross Imports into Gulf Coast 4.9 26% Total U.S. Liquid Fuels Consumed 18.9 100% Offshore share of U.S. crude oil production 32% Gulf of Mexico offshore share of U.S. crude oil 29% productionThursday, January 26, 12
    • Thursday, January 26, 12
    • State of the Industry 2012Thursday, January 26, 12
    • Non-Consent / Risk • When a unit is formed there are often companies and individuals that hold leases from royalty owners • Existing owners have options on how to move forward • Negotiate with operator • Participate in the well (statutory) • Go non-consent (statutory)Thursday, January 26, 12
    • “Conventional Play” Risk level high - as much as 50 -90% 1. Find Zone 2. Reservoir Quality Characteristics 3.Trapping Mechanism 4. Source for Oil and Gas to Migrate into the Trap 5. If just one of these Characteristics is missing you have just drilled a dry hole.Thursday, January 26, 12
    • Non-Consent / Risk • If they elect to participate in the well they will pay their proportionate share of the well costs and will receive their share of the well profits equal to their ownership • If they elect to go non-consent, they will be subject to a risk charge of 200% and still pay the royalty • Once the risk charge has been assessed, they will receive their share of the well profits equal to their ownershipThursday, January 26, 12
    • Percentage of Water Used by Sectors Irrigation 37% Domestic 1% Aquaculture 2% Industrial 5% Mining and Oil & Gas 1% Public Supply 12% Thermoelectric 41% Livestock 1%Thursday, January 26, 12
    • Percentage of Water Used by Sectors Irrigation 37% Domestic 1% Aquaculture 2% Industrial 5% Mining and Oil & Gas 1% Public Supply 12% Thermoelectric 41% Livestock 1%Thursday, January 26, 12