GSRMS Ben Broussard


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Presentation to GSRMS 2013 by LOGA Director of Marketing Ben Broussard on May 1st, 2013

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  • Introduction: Ben Broussard, Louisiana Oil & Gas Association LOGA is a 20 yr old organization that represents the independents & service companies, working to create an environment in Louisiana where companies are encouraged & incentivized to work & drill here. Our membership consists of over 1,650 member individuals from all ends of the spectrum - all have a vested interest in the success of Louisiana ’ s industry. We will cover: Louisiana ’ s resources & state of activity / rig counts economic impacts of emerging plays new technologies State & federal Issues Making sense of it all
  • Many parts: -Haynesville: NW portion of state into TX -Tuscaloosa Marine Shale (Louisiana EagleFord): Central LA -Brown Dense -Conventional land -State & Federal Waters
  • As a nation we are currently sitting at 1754 active rigs. -Down 191 from last year We ’ ve come a long way from the early 1980 ’ s: -Height of 3974 *S. LA had presence of all of the majors *115 rigs running in S. LA alone... Depths: 1999 - The year I graduated high school. Great year for Reg UNL to be .99/gal. Yikes.
  • Lets take a look around the state & try to understand why things are the way that they are: -new Haynesville activity in Bossier Parish - Drillers BHP Billiton reported new drilling in Bossier ’ s Elm Grove Field. -Anadarko began completion of their well in the Caddo Pine Island field, taking one rig offline for now. -Desoto Parish stands alone in Louisiana with 15 active drilling projects -Red River parish 9 projects *Encana, BHP Billiton, Shell & BMR Oil & Gas.
  • (Incorrect numbers for Red River & DeSoto) Lincoln: Wildhorse Resources in several fields - all 3 rigs Union: Southwestern in Brown Dense Webster: XTO
  • As of April 17th, 39 rigs in N. LA , down from a height of 143 in July 2010. Avg now sitting at 57. Not many of us were interested back in 1992 when there were (yes) 5 rigs running in N. LA. Fluctuations dictated by market prices... Market is king. When the market is good, its good - evidenced by 2008-2012 activity (Haynesville)
  • Thanks to the Haynesville & other natural gas shale plays - America is sitting on a 100-yr reserve of Natural gas. (Bring in other chart) -Haynesville leads the production charge - #1 producing natural gas field in the nation in 2012 - 10 yr supply GAS for US . -Economic boon w/ impact, jobs & development -Total $40B in direct & indirect economic growth (5 parishes alone)
  • Since 2008, more than 2,435 wells have been drilled & 2,195 have been completed and are producing wells. Do the math on that: 2,435 wells drilled and 2,195 completed & producing. Thats a success rate of 90.1%. Ask any investor, thats great odds. Not done yet : CHK, BHP, Encana & newcomer Anadarko (among others) are still committed. Some have commitments to deliver natural gas, others are in search of NGL ’ s in the gas rich region.
  • We ’ ve got ALOT of Natural Gas: Natural Gas is to the Petrochemical Industry as FLOUR IS TO THE BAKER
  • sponsored by American Natural Gas Alliance and LOGA Study says it all
  • sponsored by American Natural Gas Alliance and LOGA Study says it all
  • Quick touch on the Brown Dense (or Lower Smackover formation), Considered an unconventional oil reservoir underlying Claiborne, Union & Morehouse parishes / portions of S. Arkansas. -Est Depths btwn 8,000ft - 11,000ft Upper smackover has produced oil & gas for 90 years. Suggested that the “ Brown dense ” formation is the source rock for the upper smackover reserves and could be a viable play w/ all the modern drilling technologies utilized in other shale plays. Bottom line: Extremely early stages of development.. Not much is known about this. Southwestern: 460,000 acres
  • New one on the block. (Not new, we ’ ve always known about it.) Tuscaloosa Marine Shale / Austin Chalk - Suggested that TMS has same characterisitcs & geologic age as the eagleford shale in TX, thus the “ LA Eagleford ” moniker. Comprised of 2.7 million acres 3 rd attempt at this play: 1 st was the late wildcatter/& geophysical engineer Alfred C. Moore pioneered and led the first focused campaign to produce the formation in 1970 Initial test well results are very positive & encouraging, things look to be economical to produce. Still a bit early - not sure where the sweet spot is... Depths: -15,000ft - 19,000ft w/ TMS which can present some integrity issues w/ equipment @ such high temperatures. -In HS, first 2 years, companies got used to the deeper drilling - learned from barnett & applied to HS. Same scenario -Initial costs per well in the HS has gotten down to 8-12m/well, will be a bit more expensive because of the depths.
  • Area: As opposed to the 5-6 parish HS, we ’ ve got a swath here. Again, while both the TMS & Austin Chalk are considered in their early development stages, results are positive.
  • after a good bit of test drilling in 2012, Things have been really slow in there... Billy ’ s email*Vernon Parish. It was bound to happen: EOG Resources - Avoyelles Parish in Vick Field (NW). Good news - Rig up. Bad news - no waiting permits.
  • Another email - Damon: “ Why are things so historically low in S. LA? ” Happy to report - South Louisiana ended up gaining for the third week in a row and kept it - *Kash Oil & Gas rigged up in the Harmony Church field in Allen Parish this week *Smith Production who started up in Cameron Parish ’ s Little Cheniere field *Badger Energy who spud in Lafourche ’ s Golden Meadow field and drilled to 3,400ft *Clayton Williams spud in the South Chauvin field in Terrebonne Parish.
  • South LA Land has seen a steady decline from its heyday in the later 20th century (Early 80 ’ s: 100+ rigs in S. LA) Offshore uncertainty in 2010-2012 had a positive effect on S. LA land. Companies who couldnt afford to play offshore (smaller independents) chose to move onshore. S. LA is an OIL RICH area - which, with the prices we have ($108/bbl LLS), we should be seeing companies coming back to S. LA Land... However, we aren ’ t. 3 reasons S. LA land is struggling: -Competition with emerging shale plays -Investment climate - wall street moving away from conventional projects - Legal climate makes it expensive - Legacy Lawsuits
  • (Lead in to ULTRA DEEP) Fascinating - Ultra Deep well in Cameron Parish (Land Based) Chevron remains at 29,000ft and worked at making a detailed record of the ultra deep geologic formations - better known as logging. Highly expensive - $100m wells Davy Jones - 10ft water
  • Low hanging fruit - Shallow water Lots of natural gas. Enough to pay. Quick Note on Ultra Deep: SW LA is home to “ Davy Jones ” -Onshore & offshore play -potentially one of the largest nat res discoveries in decades -While being an on & off shore play, most wells will be drilled to depths greater than 22,000ft (5+ miles!) - up to 6.0 Tcf of natural gas -Until this, shallow water gulf seemed to have all the low hanging fruit picked... -Further exploration will depend on nat gas prices - could be a major boon to drilling contractors & service companies in S LA.
  • Inland water - One of the brightest spots in Louisiana ’ s industry. -Gulfport Energy -Apache -Swift -Energy XXI -Hilcorp -Manti -EPL -Helis
  • Inland water is seeing a positive trend as well. Up to 23. -one of the strongest segments of LA ’ s oil & gas industry Down to 9 in 2009 - Height of shale boom, much of the industry turned to Natural Gas. Good news: Healthy bit of the permits being issued each week are for S. LA.
  • Finally, OCS federal waters were steady as well, holding out at 44 active deepwater projects - 52 if you count the workover activity. Deepwater: Anything deeper than 500ft water. Deepest active project, you may ask? Its the Petrobras Chinook rig at Walkers Ridge Block 425 in water depths of 8,843ft.
  • Interesting to see where we came from when averaging 148 rigs in the GOM. Business is creeping back up. With gas prices so volatile and hinging on our dependence on foreign countries who, quite frankly, could care less about us or our “ western ways ” , we expect the eastern GOM to eventually be opened. Good news there is that South LA will stand to provide the service, expertise & infrastructure to properly explore.
  • We could sell the GOM all day long...
  • Access remains the #1 issue:
  • Another issue, hitting more closely to home is the Rigs to Reefs issue.
  • Why all of the changes over the past 5 - 10 years? With finite equipment & resources – we as an industry are competing with each other. -Not the same Gulf Coast / GOM industry of the 1950 ’ s. Coupled with the conventional plays of yesteryear, we now have the unconventional plays: Economics are different in each Haynesville: 10,000 - 12,000 ft deep TMS: 15,000 - 19,000 ft deep Different technical & mechanical issues for each depending on the depth & geology Some are gas, some are oil. Economy driven exploration at its finest.(END)
  • Not only do we have this seemingly brand new landscape of exploration potential, we have new technology with it. Hydraulic Fracturing has brought these changes on. -Nationally speaking, its a huge issue - fairly controversial (DO NOT EXPLAIN HF YET...)
  • Hotly contested. Lots of misinformation. Lovers & haters on both sides of the story.
  • Reason for all of this activity & the drastic changes you ’ ve seen in the domestic industry is HYDRAULIC FRACTURING -HF is a highly technological innovative process where a mixture of sand, water & a small amount of chemicals are pumped downhole at very high pressures to effectively fracture or break the shale rock open and allow produced gas & oil to flow to the surface. Estimated that nearly 85% of wells drilled today are completed using hydraulic fracturing
  • Currently states regulate HF. We ’ d like to keep it that way.
  • Issues : Liberal push for regulation to be moved to EPA rather than various state agencies. -Current EPA study underway -We expect it staying in hands of state -LA has new HF disclosure regulation -every well w/ HF, companies are required to disclose chemical component of HF Fluid on publicly accessible database. -Enacted Oct 20th, 2011 - Viewed at FracFocus or through SONRIS -Less a response to public outcry & more following suit w/ other states, companies being proactive We have nothing to hide. 99% of Frac fluid is water. Marcellus: Bans, outcry. Ohio: earthquake fears... Preliminary study by EPA is full of holes. -Range Resources fines by EPA - after final analysis, EPA found Range was not liable. EPA tends to be overreactive. Here in LA: Beaureguard/Vernon parish police jurys.
  • Hwy 175 in DeSoto Parish... First time I noticed the piping strewn into peoples front yards. Takes a lot of water to frac a well. LA Drought over summer/fall 2011 created integrity issue w/ groundwater wells (Carizzo/Wilcox - drinking water) Significant drop in availability of carrizzo wilcox, some wells went dry in S. Caddo parish. Sparked a lot of concern: Is industry depelting water supply? (END)
  • LA Atty Gen recently opined on the issue. Not law , simply stated that “ running waters of the state belong to the state & there is a constitutional provision against gratuitous donations of state resources. -Agriculture & aquaculture do not pay for water SO... If industry wants to use water, they ’ d need to enter into a cooperative endeavor agreement with the state & agree to 1. pay fair market value for water or 2. explain economic development (Severance taxes - local taxes - etc) that state is receiving as benefit Bottom line is: We (Industry) need the water, this is what the state will get (large tax revenues) **** The benefits far outweigh what the state gives, thus it is NOT a gratiutous donation. Hopefully those in charge can see with objective eyes. Some have suggested that this is more of an attempt to plug budget holes - though state wouldn ’ t make any money with it at current fair market value. Some think this is that this would set the stage for a larger groundwater management resources program within the state that will eventually be a money maker. Economic Development & Incentives (Movie Industry - same w/ O&G) Enough about that... --END--
  • Be one of the larges industry in the US and the state, brings with it many challenges
  • Finally the question remains: What to do with all of this gas? -Drive with it. *CNG Movement -Heat homes with it. *Thats all we got? Gas is below 3/mcf... -Make power with it *coal plants currently follow grandfathered federal EPA Standards, would be subject to newer more stringent ones if plants were retooled. Money is there... -Feedstock to PetroChemical industry *Big part of it... -Export it. *Cheniere is moving forward with plans to expand Cameron operations & a new LNG export plant in San Patricio County, TX, near Corpus. *LA project 1st phase will cost $5B, Texas roughly $7.5B. How about that? Natural gas as an american export. For all the things we buy from other countries... (Just walk around Wal-Mart) Locally (Lafayette)... We ’ re pumped..
  • Lafayette is already on board... -12 buses since January 2012 -Until a few months back, driving to Baton Rouge to fill up...
  • LOGA is on board... We can ’ t just talk the talk, we gotta walk it too. 2011 Ford Expedition Conversion package - roughly $10k -State of LA 50% tax rebate on conversion Efficiency: 16mpg, same as regular gasoline Two 4.6 gal tanks on this one...
  • So I get 16mpg, same as gasoline? And its cleaner burning, less emissions, abundant, and best of all AMERICAN? (Click mouse) This is the best part... WHY IS IT SO CHEAP?
  • This. The game changer. Hydraulic Fracturing, allowing us to move closer to energy security & independence.
  • Quick plug: If you don ’ t receive it already, check out LOGA ’ s drilling report, produced weekly. Keeps you up to date on a lot of the info I covered here today. -Rig Counts -State & Federal permits
  • In closing: Louisiana is still & always will be the energy state. LOGA will fight for the industry as long as we are breathing. Its an industry that will always have a target on our backs - but look at us? The largest economic driver in Louisiana - better jobs, higher pay, vital to transportation & national security. Rain or shine, We ’ re not going anywhere. I ’ m Lafayette born & raised (and hopefully never leaving), but admittedly very blessed to not have to move out of state to get a good job to support my wife & two boys. I ’ m hoping that our industry will not just survive but thrive & keep more jobs here for the high school & college grads to come. Questions?
  • GSRMS Ben Broussard

    1. 1. State of the Industry:LouisianaWednesday May 1st, 2013Ben BroussardDirector of Marketing & membership DevelopmentLouisiana Oil & Gas Association (LOGA)
    3. 3. Average Annual US Rig Count1949 - 20133974625
    4. 4. North LA - 40North LA - 40
    5. 5. 4040
    6. 6. Average North LA Rig ActivityAverage North LA Rig Activity2000 - 20122000 - 2012
    7. 7. HaynesvilleShale#1 Producing Natural Gas Field in US$14 Billion Est. Economic Impact in 2012$14 Billion Est. Economic Impact in 201260,000 Plus Jobs Supported by Shale in 201260,000 Plus Jobs Supported by Shale in 20121,700 Plus Producing Wells1,700 Plus Producing Wells2,207 Units as of 12/15/112,207 Units as of 12/15/11
    8. 8. Since October 2008, almost 2,200 wells haveSince October 2008, almost 2,200 wells havebeen completed in the Haynesvillebeen completed in the Haynesville
    9. 9. The big winnersThe big winners•PetrochemicalIndustry•Industrial•Consumers•Power Generation
    10. 10. Revolutionary Impacton LA Manufacturing•Statewide Impacts:•More than $26.7 billion in economic output over a nine-year period (2011-2019)•A cumulative increase of some 193,069 job-years•$9.4 billion increase in wages over a nine-yearconstruction period.•Regional Impacts:•Over $20 Billion in output•143,000 in job-years•$6.5 billion in wages
    11. 11. BrownDenseCompanies in The Dense-Devon-Southwestern EnergyPredominately North East PlayVery early stages of developmentdepths rage from 8,000’ to 11,000’
    12. 12. Tuscaloosa MarineShale / Eagle Ford LA
    13. 13. Tuscaloosa Marine Shale - 1
    14. 14. South LA Land - 19
    15. 15. Average Annual South LA LandAverage Annual South LA LandRig Activity 2000 - 2011Rig Activity 2000 - 2011
    16. 16. South LA Land - 19
    17. 17. Ultra-DeepFrontier 25,000’ -35,000’Middle/Lower Miocene - Wilcox - Frio -Tuscaloosa -Davy Jones
    18. 18. Inland Waters - 24
    19. 19. Average Annual Inland WaterAverage Annual Inland WaterDrilling Activity 2000 - 2013Drilling Activity 2000 - 2013
    20. 20. Gulf of Mexico - 45May 7, 2013
    21. 21. Prior MacondoPrior MacondoAverage Gulf of Mexico RigAverage Gulf of Mexico RigActivityActivity2000 - 20132000 - 2013
    22. 22. Gulf of MexicoGulf of Mexico
    23. 23. PermittingPermitting
    24. 24. PermittingPermitting
    26. 26. Squeezing gas from a stone
    27. 27. Hydraulic FracturingHydraulic FracturingHydraulic FracturingHydraulic Fracturing
    28. 28. Hydraulic FracturingFirst commercial “frac” job wasconducted in 1947States regulate hydraulicfracturingMore than 1 million wells hadbeen completed using thismethod by 1988Estimated that nearly 85% ofwills drilled today are completedusing hydraulic fracturingMultiple federally funded studieshave shown that there is no riskassociated with hydraulicfracturing
    29. 29. Water
    30. 30. Percentage of Water Used by Sectors
    31. 31. Governor JindalIncome TaxRepealGovernor JindalIncome TaxRepeal• Corporate Income Tax• Corporate Franchise Tax• Personal Income TaxREPEAL
    32. 32. Revenue NeutralThe Devil is in thedetailsCorporate Income TaxPersonal Income Tax Sales TaxExemptions$2.92 Billion Eliminate/Change468 ExemptionOil/Gas 23Increase Sales TaxRepeal
    33. 33. US to Export LNG
    34. 34.
    35. 35.