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Bernard duroc danner's presentation slides from the 2010 World National Oil Companies Congress

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Bernard duroc danner's presentation slides from the 2010 World National Oil Companies Congress that took place in June in London.

Bernard duroc danner's presentation slides from the 2010 World National Oil Companies Congress that took place in June in London.

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  • 1. The Role of Oil Field Services in the Energy Dynamic World National Oil Companies Congress, June 22, 2010 Bernard J. Duroc-Danner Chairman, President & Chief Executive Officer Weatherford International Ltd © 2010 Weatherford. All rights reserved.
  • 2. Oil & Gas Strategic Backdrop © 2010 Weatherford. All rights reserved.
  • 3. Inelasticity of New Oil Production 300,000 500 450 250,000 400 350 200,000 12% CAGR 300 k bbl/d $bn 150,000 250 200 100,000 2.8% CAGR 150 100 50,000 50 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Production Upstream Capex (2009 Real) Source: DOE, EIA, IEA, Deutsche Bank, *includes OPEC state companies © 2010 Weatherford. All rights reserved. 3
  • 4. Inelasticity (Relative) of New Gas Production (North America) 25,000 60 13% CAGR 50 20,000 40 15,000 mmcfd $bn 19% CAGR 30 10,000 20 5,000 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 US E&P natgas production (RHS) US E&P Capex spend (2009 Real) Source: Deutsche Bank © 2010 Weatherford. All rights reserved. 4
  • 5. Oil Production Spare Capacity Spare Capacity has not increased over the last 20 years in spite of 90 105 increased spending 80 99.9 % 100 70 60 Production as % of Capacity 95 Production (mbd) 94.5 % 50 92.5 % 40 90 30 87 % 20 85 10 0 80 1983 1990 2000 2009 Production (mbd) Production as % of Capacity Source: Deutsche Bank © 2010 Weatherford. All rights reserved. 5
  • 6. Reserves Required for Production to 2030 120,000 100,000 80,000 Total Production kbbl/d 60,000 Gap 2009 – 2030 ~ 380bn bbl 40,000 20,000 0 Base production DB demand forecast XOM demand est. IEA demand est. Source: EIA, IEA, Deutsche Bank, ExxonMobil © 2010 Weatherford. All rights reserved. 6
  • 7. Oil Reserves Steep Cost Curve: Too Steep ? 160 Canadian US Lower Oil Sands Tertiary (Tiber) Bitumen 140 Iran Venezuela EOR Cost with fiscal $/bbl Brazil 120 Pre-Salt Saudi Arabia 100 West Africa Kuwait (Jubilee) 80 UAE Iraq 60 $45/bbl 40 20 0 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Required oil development 380bn bbls Reserves (bn bbl) Source: IEA, Deutsche Bank © 2010 Weatherford. All rights reserved. 7
  • 8. Cost Curve is a Consequence of an Aging Phenomenon Depleting pressure Encroaching water Less attractive reservoirs Formation damage Corrosion Hot Lost circulation Treatment Deep Differential sticking Sand production Remote Production decline Lifting problems Complex Poor oil recovery Bypassed oil Viscous © 2010 Weatherford. All rights reserved. 8
  • 9. Oil Field Services Context and Relevance: Passenger or Conductor ? © 2010 Weatherford. All rights reserved.
  • 10. Relevant Attributes of OFS 1. OFS to E&P: Squirrel to Elephant 2. Poor Return Economics 3. OFS has a heavy burden: • Job shop • Operation shop • Technology shop © 2010 Weatherford. All rights reserved. 10
  • 11. Oil Field Services and Operating Companies – Scale The four major One company: Oil Field Services ExxonMobil Companies Total Market $122bn* $282bn Capitalization Total Return on 7.5% 14.4% Capital Total Employees 250,700+ 120,000+ *Total OSX Market Capitalization: $180 bn © 2010 Weatherford. All rights reserved. 11
  • 12. Oil Field Services Technology Strength Four major OFS companies Shell ExxonMobil Chevron 0 100 200 300 400 500 2009 Patents Issued Source : Issued US Patents Int'l Class. E21b from USPTO Website © 2010 Weatherford. All rights reserved. 12
  • 13. R&D Spend as % of Revenues The four major One company: Oil Field Services ExxonMobil Companies 2009 2.82% 0.34% 2008 2.37% 0.18% 2007 2.49% 0.20% © 2010 Weatherford. All rights reserved. 13
  • 14. Passenger or Conductor ? © 2010 Weatherford. All rights reserved.
  • 15. OFS Must Lower the Cost Curve = Productivity Pursue technology Comprehensive imperative Accelerate adoption Within ourselves Drive for efficiency Within life cycle Require Effective Methods of delivery Partnership Consolidation Change industry Division of Labour structure - Joint Operations - Divestments © 2010 Weatherford. All rights reserved. 15
  • 16. Technology Drilling Rigs Incremental Wireline Drill bits Directional Drilling All Types Historical Subsea equipment Evolutionary Timing Top drives Too Long Logging while drilling Reservoir simulation Step Change 3D Seismic Partnership Roles → Define Need → Steer Design → Assist with Testing → Use in early form for Value © 2010 Weatherford. All rights reserved. 16
  • 17. Drive for Efficiency Within Ourselves Within Lifecycle Overhead Manage Volatility Supply Chain Cultural Change Global E&P spend: Shifts to the East NAM Inte rna tio na l 2009 Peak Trough Delta Peak Trough Delta 2008 WFT 2007 Revenue 1,180 571 (52%) 1,457 1,447 (1%) 2006 Margin 26.5% (1.0%) (275 bps) 23.3% 10% (133 bps) 2005 2004 SLB 2003 Revenue 1,556 819 (47%) 4,801 4,010 (16%) 2002 Margin 22.2% 9.5% (130 bps) 29% 22% (70 bps) 2001 US 2000 Canada HAL Rest of World 1999 Revenue 2,246 1,285 (43%) 2,668 2,057 (23%) $0 $100,000 $200,000 $300,000 $400,000 $500,000 Margin 25.3% 2.9% (224 bps) 24.3% 13.5% (108 bps) Source: Barclays Capital US $ millions © 2010 Weatherford. All rights reserved. 17
  • 18. Example: Methods of delivery Integration Productivity Land Rigs Planning + Optimize Design & Engineering Streamline Logistics Directional Drilling + Executing Secure Drilling™ Services Coordination + Reduce NPT Well Construction Reduce Redundancies Single Point Accountability Equipment & Services Improve Safety + Completion Sustaining + Lower Execution Cost Curve Production Systems Free-up Scarce Talent © 2010 Weatherford. All rights reserved. 18
  • 19. Change Industry Structure and Attitude Supply Chain Supply Chain Consolidation Overhead Overhead • Baker Hughes + BJ Services Infrastructure Infrastructure • Schlumberger + Smith R&D R&D • Schlumberger + Geoservices Cost of Capital Cost of Capital All down All down Division of Labour Joint Operations • Sonatrach ENTP – Weatherford • Sonatrach Enerfor - Schlumberger Resource Allocation Resource Allocation • QPC – Weatherford Dedication Dedication Divestments Planning Planning • BP-TNK OFS – Weatherford • Gazpromneft OFS – TBD • Slavneft OFS - TBD © 2010 Weatherford. All rights reserved. 19
  • 20. Synthesis: Operator Needs to • Use OFS technology early for Pursue technology maximum value imperative • Collaborate in technology development • Use different forms of integration • Supply chain has no borders Drive for efficiency • Plan through the cycle • Collaborate through the cycle – master/slave not productive • Don’t fight consolidation Adapt market • Encourage opportunities for division of infrastructure labour © 2010 Weatherford. All rights reserved. 20