Market Presentation Jerry Morris VP Bus. Dev. & Strategic Planning Donny King Project Manager Bus. Dev. Dale Sanders Proje...
Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organiza...
AIG Highstar Fund Summary <ul><li>AIG Highstar Portfolio (March 2003) </li></ul><ul><ul><li>Eight investments : average si...
AIG Highstar Capital, L.P.  (“AIG Highstar”) Fund Summary <ul><li>Private equity fund formed to make structured equity inv...
AIG Highstar Fund Summary <ul><li>Sponsored by AIG and managed by AIG Global Investment Corp. (AIGGIC) </li></ul><ul><ul><...
Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organiza...
Operational Overview <ul><li>Southern Star Central Pipeline is a FERC-regulated interstate natural gas pipeline company pr...
Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organiza...
S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I  N  E <ul><li>Western Frontier History ...
99 Years of Continuous Quality Service S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I ...
Challenges <ul><li>Drilling Timing - Environmental Constraints </li></ul><ul><li>Issuance of Drilling Permits – originally...
Opportunities <ul><li>Wyoming Pipeline Authority (WPA) </li></ul><ul><ul><li>Production Aggregator </li></ul></ul><ul><ul>...
Energy Information Administration Natural Gas Monthly October 2000 Quote for Rocky Mountain Region  “Expanding coal-bed me...
 
99 Years of Continuous Quality Service S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I ...
Rockies Production Growth <ul><li>“ Production in Wyoming totals about 4.2 Bcfd now and if environmental and regulatory de...
Major Natural Gas Producing Basins and Pipeline Transportation Corridors to Market Areas   Source: Energy Information Admi...
99 Years of Continuous Quality Service S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I ...
99 Years of Continuous Quality Service S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I ...
<ul><li>Mid-Continent Production </li></ul><ul><li>Richard Sharples, President of Anadarko Energy Services on the status o...
<ul><li>Atmos, Kansas LDC Seeks Gas from Rockies </li></ul><ul><li>“ Atmos has determined that declining gas supplies in t...
99 Years of Continuous Quality Service S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I ...
 
Insert map Southern Star KMI Kansas Gas PEPL ANR NNG Trailblazer CIG NGPL PSC Colorado Medicine Bow <ul><li>540-1,000 MDth...
S  O  U  T  H  E  R  N  S  T  A  R  C  E  N  T  R  A  L  G  A  S  P  I  P  E  L  I  N  E <ul><li>540,000 - 1,000,000 Dth/d...
<ul><li>Project Activities Completed </li></ul><ul><ul><li>Pipeline Route Established </li></ul></ul><ul><ul><li>Aerial Ph...
<ul><li>540,000 Dth/day </li></ul><ul><li>Echo Springs/Wamsutter to Cheyenne Hub </li></ul><ul><li>186 Miles 30” P/L </li>...
Spot Natural Gas Price Scenarios   Sources: History: Natural Gas Week;  Projections: Short-Term Energy Outlook, June 2003....
Conclusions <ul><li>Gas Market will Remain Tight in Near Term </li></ul><ul><li>Leaves Market Vulnerable to Price Volatili...
<ul><li>Why Western Frontier? </li></ul><ul><ul><li>Mid-Continent Supply Basins Declining </li></ul></ul><ul><ul><ul><li>A...
<ul><ul><li>Contact Information </li></ul></ul><ul><ul><li>Jerry Morris – (270) 852-4660 </li></ul></ul><ul><ul><li>[email...
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  • One development that could generate higher prices than expected in our base case is the weather. An abnormally hot summer followed by a cold winter could push natural gas deliverability to the limit and cause record average prices this winter. The severe weather case considered here is an extreme case but one that merits attention given the lack of a storage cushion. Another development that could shift average prices well above our base case would be lower natural gas production. Our model indicates that for every 1 percent that monthly production falls below our base case assumptions, we can expect 5-10 percent higher peak prices this winter. These estimated average impacts mask the potential for more dramatic spikes in prices for short periods (a few days to a few weeks). Such spikes are characteristic of net demand surges in the context of low natural gas storage. Thus, current and prospective conditions in the U.S. natural gas market significantly increase the probability of very sharp short-term spikes on top of generally high levels of natural gas prices.
  • PowerPoint Version

    1. 1. Market Presentation Jerry Morris VP Bus. Dev. & Strategic Planning Donny King Project Manager Bus. Dev. Dale Sanders Project Manager Bus. Dev. 99 Years of Continuous Quality Service
    2. 2. Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organizational Overview Western Frontier Pipeline Company, LLC
    3. 3. AIG Highstar Fund Summary <ul><li>AIG Highstar Portfolio (March 2003) </li></ul><ul><ul><li>Eight investments : average size $42MM; 84% energy, 16% transportation </li></ul></ul><ul><ul><li>Energy : natural gas storage, interstate natural gas pipeline, power generation, waste-to-energy </li></ul></ul><ul><ul><li>Transportation : logistics, asset management, and construction materials </li></ul></ul>
    4. 4. AIG Highstar Capital, L.P. (“AIG Highstar”) Fund Summary <ul><li>Private equity fund formed to make structured equity investments in infrastructure projects and operating companies </li></ul><ul><li>$406 million in capital commitments (approx. $330 million committed as of March 2003) </li></ul><ul><li>Limited partners include multi-national corporations, financial services companies, and industry-focused funds </li></ul>
    5. 5. AIG Highstar Fund Summary <ul><li>Sponsored by AIG and managed by AIG Global Investment Corp. (AIGGIC) </li></ul><ul><ul><li>AIG is one of the world’s leading U.S.-based international insurance and financial services organization </li></ul></ul><ul><ul><li>AIG Global Investment Group, AIGGIC’s parent, has $329 billion in assets, including over $53 billion of external client assets, under management.* </li></ul></ul>* Source: AIG Global Investment Corp. and its affiliates. AIGGIG is a holding company whose subsidiaries and investment affiliates provide asset management services (the &quot;AIGGIG Companies&quot;). The assets under management for AIGGIG refers to assets advised or sub-advised by AIGGIG Companies. Assets sub-advised to third party managers are not included in this report, but will be available upon request.
    6. 6. Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organizational Overview Western Frontier Pipeline Company, LLC
    7. 7. Operational Overview <ul><li>Southern Star Central Pipeline is a FERC-regulated interstate natural gas pipeline company providing transportation and storage services in seven states in the central U.S., including major metropolitan areas in Kansas and Missouri </li></ul><ul><li>Transportation capacity of approximately 2.3 Bcf/day </li></ul><ul><li>On-system working gas storage capacity of 43 Bcf </li></ul><ul><li>Assets: </li></ul><ul><ul><li>6,076 miles of mainline, branch, and storage pipelines </li></ul></ul><ul><ul><li>41 compressor stations 223,916 HP </li></ul></ul><ul><ul><li>8 on-system storage fields </li></ul></ul><ul><ul><li>31 Pipeline Interconnects </li></ul></ul><ul><li>Headquartered in Owensboro, Kentucky </li></ul><ul><ul><li>457 total employee complement </li></ul></ul><ul><li>15 Operating Districts </li></ul><ul><ul><li>330 field employees </li></ul></ul>Overview Operational Overview Southern Star Central Pipeline Map
    8. 8. Organizational Overview AIG Highstar Southern Star Central Pipeline Southern Star is wholly owned by AIG Highstar Organizational Overview Western Frontier Pipeline Company, LLC
    9. 9. S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E <ul><li>Western Frontier History </li></ul><ul><li>Filed with FERC October 2001 </li></ul><ul><li>Design 540,000 Dth/day </li></ul><ul><li>Cheyenne Hub to Mid-Continent </li></ul><ul><li>400 Mile 30” Pipeline </li></ul><ul><li>Financial Distress of Previous Parent Forced Project to be Shelved </li></ul><ul><li>FERC Filing Withdrawn in June 2002 </li></ul><ul><li>AIG Highstar Acquired Southern Star Central & Western Frontier in November 2002 </li></ul><ul><li>Financial Capabilities now Stronger than Ever </li></ul><ul><li>Open Season Announced August 18 th 2003 </li></ul>
    10. 10. 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E <ul><li>Reasons For Suspending the Project </li></ul><ul><ul><li>Recession </li></ul></ul><ul><ul><li>Cautious Capital Markets </li></ul></ul><ul><ul><li>Enron debacle </li></ul></ul><ul><ul><li>Williams Communications demise </li></ul></ul><ul><ul><li>Williams overall financial woes </li></ul></ul><ul><li>Current Status </li></ul><ul><ul><li>Western Frontier is Back </li></ul></ul><ul><ul><li>Financially Capable of Implementing Project with Market Support </li></ul></ul>
    11. 11. Challenges <ul><li>Drilling Timing - Environmental Constraints </li></ul><ul><li>Issuance of Drilling Permits – originally a 75 day process currently taking 175 days </li></ul><ul><li>Producers Subscribing to Capacity in today’s market for 10 year terms </li></ul><ul><li>State Commissions </li></ul><ul><li>Lack of Risk Management Services </li></ul><ul><li>FERC Certification Process </li></ul><ul><li>Short Term Outlook on a Long Term Market Place </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    12. 12. Opportunities <ul><li>Wyoming Pipeline Authority (WPA) </li></ul><ul><ul><li>Production Aggregator </li></ul></ul><ul><ul><li>Risk Management </li></ul></ul><ul><li>State of Wyoming </li></ul><ul><ul><li>700-750 MMcfd Royalty Gas Potential </li></ul></ul><ul><ul><ul><li>State Lands (2 Section in Every Range) </li></ul></ul></ul><ul><ul><ul><li>50% of all Federal Royalty </li></ul></ul></ul><ul><ul><ul><li>Severance Tax In-Kind (Legislative Action Required) </li></ul></ul></ul><ul><ul><ul><li>AdValorem Tax In-Kind (State Constitutional Amendment Required) </li></ul></ul></ul><ul><li>Competitive Pipeline Alternative in the Rockies </li></ul><ul><li>Gas Price Volatility Nation Wide </li></ul><ul><li>Declining Supply Deliverability in the Mid-continent & Canada </li></ul><ul><li>Tremendous Production Growth Potential in the Rockies </li></ul><ul><li>Substantial Work Already Completed on Western Frontier </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    13. 13. Energy Information Administration Natural Gas Monthly October 2000 Quote for Rocky Mountain Region “Expanding coal-bed methane production has outpaced the development of long-haul capacity to carry the gas to end-use markets. Capacity constraint problems exiting the production areas have resulted in the region having the lowest average natural gas spot prices in the nation.” 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E Market Opportunity?
    14. 15. 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    15. 16. Rockies Production Growth <ul><li>“ Production in Wyoming totals about 4.2 Bcfd now and if environmental and regulatory delays can be cleared, could grow to in excess of 6 Bcfd over the next 5 years” </li></ul><ul><li>Wyoming state budget is “heavily dependent upon revenues received from mineral production produced from state & federal lands. During the past 5 years, natural gas production has grown almost 50% in the state, with limited additions to the infrastructure to export growing production ” </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E Source: WPA GD 7/9/03
    16. 17. Major Natural Gas Producing Basins and Pipeline Transportation Corridors to Market Areas Source: Energy Information Administration, GasTran Gas Transportation Information System 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    17. 18. 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E   Total Production Change 1 Year -9% 5 Year -33%
    18. 19. 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E   Total Production Change 1 Year -2% 5 Year -7%
    19. 20. <ul><li>Mid-Continent Production </li></ul><ul><li>Richard Sharples, President of Anadarko Energy Services on the status of Mid-continent supplies: </li></ul><ul><li>“ The Mid-continent is so mature that it doesn’t matter how much you drill, you won’t increase production” </li></ul><ul><li>From Gas Daily Friday, February 16, 2001 </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    20. 21. <ul><li>Atmos, Kansas LDC Seeks Gas from Rockies </li></ul><ul><li>“ Atmos has determined that declining gas supplies in the Mid-continent region, including gas supplies it currently purchases from wells in the Kansas Hugoton and Panoma Council fields, threaten Atmos’ ability to continue to provide and maintain a reliable source of gas.” </li></ul><ul><li>“ This along with increased demand due to gas-fired electric generation, has resulted in increased pressure on the price of gas produced in the Mid-continent region” </li></ul><ul><li>“ Historically, Rocky Mountain gas supplies have been less expensive than Mid-continent gas supplies due primarily to lower finding costs.” </li></ul><ul><li>From Gas Daily Tuesday, August 26, 2003 </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    21. 22. 99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    22. 24. Insert map Southern Star KMI Kansas Gas PEPL ANR NNG Trailblazer CIG NGPL PSC Colorado Medicine Bow <ul><li>540-1,000 MDth/day </li></ul><ul><li>Cheyenne Hub to Mid-Continent </li></ul><ul><li>400 Mile P/L </li></ul><ul><li>Targeted In-Service date 2006-2007 </li></ul><ul><li>Mid-continent Hub 6.8 Bcfd of interstate takeaway capacity </li></ul>
    23. 25. S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E <ul><li>540,000 - 1,000,000 Dth/day </li></ul><ul><li>Cheyenne Hub to Mid-Continent </li></ul><ul><li>400 Miles 30”-36” P/L </li></ul><ul><li>30,000-60,000 HP </li></ul><ul><li>100% LF Rate Range to pipeline hub is $0.25-0.35 </li></ul><ul><li>Anticipated Fuel at 1% or Less </li></ul><ul><li>Targeted In-Service 2006-2007 Timeframe </li></ul><ul><li>Mid-continent Hub 6.8 Bcfd of interstate takeaway capacity </li></ul>
    24. 26. <ul><li>Project Activities Completed </li></ul><ul><ul><li>Pipeline Route Established </li></ul></ul><ul><ul><li>Aerial Photography </li></ul></ul><ul><ul><li>Detailed Land Survey </li></ul></ul><ul><ul><li>Biological and Archeological Study </li></ul></ul><ul><ul><li>Over 26% of Right-of-Way Acquired </li></ul></ul><ul><ul><li>Station Site Acquired </li></ul></ul><ul><li>Project Activities Underway </li></ul><ul><ul><li>Project Engineering Review and Estimate Refinement </li></ul></ul><ul><ul><li>Non-binding Open Season August 18 th - October 10 th </li></ul></ul><ul><ul><li>Western Frontier Website Available – www.sscgp.com/westernfrontier </li></ul></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    25. 27. <ul><li>540,000 Dth/day </li></ul><ul><li>Echo Springs/Wamsutter to Cheyenne Hub </li></ul><ul><li>186 Miles 30” P/L </li></ul><ul><li>41,000 HP </li></ul><ul><li>Greater Green River Takeaway Capacity </li></ul><ul><li>Targeted In-Service Date of 2006-2007 </li></ul>
    26. 28. Spot Natural Gas Price Scenarios Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook, June 2003. Nightmare or Opportunity? It’s Your Choice
    27. 29. Conclusions <ul><li>Gas Market will Remain Tight in Near Term </li></ul><ul><li>Leaves Market Vulnerable to Price Volatility </li></ul><ul><li>Long Term Focus is Key </li></ul><ul><li>State Commission Education Necessary </li></ul><ul><li>If Environmental & Regulatory delays can be cleared Wyoming Production could Grow from the current 4.2 Bcfd to in excess of 6 Bcfd over the next 5 years </li></ul><ul><li>New Infrastructure will be required to get this gas to Market </li></ul><ul><li>Supply Diversification Needed in the Mid-continent </li></ul><ul><li>Rockies Gas can provide Long Term Solution for Mid-continent Markets </li></ul><ul><li>Western Frontier Project Situated to meet Market Needs Quickly & Efficiently with Market Support </li></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    28. 30. <ul><li>Why Western Frontier? </li></ul><ul><ul><li>Mid-Continent Supply Basins Declining </li></ul></ul><ul><ul><ul><li>Anadarko 2-5% Annually </li></ul></ul></ul><ul><ul><ul><li>Hugoton 7-9% Annually </li></ul></ul></ul><ul><ul><ul><li>Supply Diversification Necessary </li></ul></ul></ul><ul><ul><li>Rockies Supply Prolific needs Additional Market Access </li></ul></ul><ul><ul><li>Basin Diversification </li></ul></ul><ul><ul><ul><li>Cheyenne Hub </li></ul></ul></ul><ul><ul><ul><li>Denver Julesburg (DJ) Basin </li></ul></ul></ul><ul><ul><li>Average Differential Between Rockies-Cheyenne Hub and Mid-Continent Inception to Present= $0.80 </li></ul></ul><ul><ul><li>Dynamic Operating Hub - Additional Infrastructure Needed out of Cheyenne Hub </li></ul></ul><ul><ul><li>Diverse Market Access Providing Liquidity </li></ul></ul><ul><ul><li>Market Growth </li></ul></ul><ul><ul><ul><li>Oklahoma Intrastate Market </li></ul></ul></ul><ul><ul><ul><li>Southwest Missouri </li></ul></ul></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E
    29. 31. <ul><ul><li>Contact Information </li></ul></ul><ul><ul><li>Jerry Morris – (270) 852-4660 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>Donny King – (270) 852-4663 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>Dale Sanders – (270) 852-4666 </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>99 Years of Continuous Quality Service S O U T H E R N S T A R C E N T R A L G A S P I P E L I N E

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