6. Average North LA Rig ActivityAverage North LA Rig Activity
2000 - 20122000 - 2012
7. Haynesville
Shale
#1 Producing Natural Gas Field in US
$14 Billion Est. Economic Impact in 2012$14 Billion Est. Economic Impact in 2012
60,000 Plus Jobs Supported by Shale in 201260,000 Plus Jobs Supported by Shale in 2012
1,700 Plus Producing Wells1,700 Plus Producing Wells
2,207 Units as of 12/15/112,207 Units as of 12/15/11
8. Since October 2008, Over 2,200 wells haveSince October 2008, Over 2,200 wells have
been completed in the Haynesvillebeen completed in the Haynesville
9. The big winnersThe big winners
•Petrochemical
Industry
•Industrial
•Consumers
•Power Generation
10.
11. Revolutionary Impact
on 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-year
construction period.
•Regional Impacts:
•Over $20 Billion in output
•143,000 in job-years
•$6.5 billion in wages
12. Brown
Dense
Companies in The Dense
-Devon
-Southwestern Energy
Predominately North East Play
Very early stages of development
depths rage from 8,000’ to 11,000’
39. 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
fracturing
43. Revenue Neutral
The Devil is in the
details
Corporate Income Tax
Personal Income Tax Sales Tax
Exemptions
$2.92 Billion Eliminate/Change
468 Exemption
Oil/Gas 23
Increase Sales TaxRepeal
Introduction: Ben Broussard, Louisiana Oil & Gas Association (Love getting the after lunch speaking spot as my presentations work much better than any sleep aid, less expensive, non habit forming)... Just to let you know - Had breakfast with my Father this morning -former helicopter pilot -2 tours in Vietnam -He wanted to come & speak to you instead of me -No one wants to hear about your “ bounce & gos ” , “ Hard landings ” or “ Jungle Treetop Rotor Shrub maintenance ” He ’ s not here today... 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 1762 active rigs. -Down 221 from last year We ’ ve come a long way from the early 1980 ’ s: -Height avg of 3974 in 1981 (Highest ever was 4530 in December 1981) *S. LA had presence of all of the majors *115 rigs running in S. LA alone... Depths: 1999, averaging 625 - 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: A year ago we ’ d think that the Haynesville was dead. Its not. -new Haynesville activity in Bossier Parish: BHP Billiton -Anadarko activity in the Caddo Pine Island field -Desoto Parish stands alone in Louisiana with 18 active drilling projects -Red River parish 16 projects: Shell *Encana, BHP Billiton, Shell
Lincoln: Wildhorse Resources in several fields - all 3 rigs All in all, (Believe it or not) North Louisiana is the brightest shining spot in Louisiana ’ s industry...
As of May 29th, 47 rigs in N. LA , down from a height of 143 in July 2010. 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)
Each Square = Shale Unit (640 acres - 1 sq mile) Since 2008, more than 2,435 wells have been drilled & 2,217 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.
Because of the Haynesville: 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
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... (Introduce LOGA Drilling Report) Billy ’ s email*Vernon Parish. It was bound to happen: EOG Resources - Avoyelles Parish in Vick Field (NW). Good news - 1 permit (EOG). Bad news - no activity.
Another email - Damon: “ Why are things so historically low in S. LA? ” We ’ ll get to that... Only real news to mention was in Cameron Parish where Smith Production transitioned from drilling to completion in Little Cheniere, thus taking one rig off the map. South Louisiana land exited stage left down one project at 18 rigs.
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
Low hanging fruit - Shallow water Lots of natural gas. Enough to pay. Quick Note on Ultra Deep: SW LA is home to “ Davy Jones ” - Davy Jones - 10ft water S. Marsh Island -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 42 active deepwater projects - 52 if you count the workover activity. 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.
We here at LOGA could sell the GOM all day long... The common sense statement (or sentiment) is that ( NEXT SLIDE ): Its amazing what American offshore energy can do.
KEEPS THE ECONOMY GROWING... -What other industry can say that 95% of ops spending & capital investment stays right here? -What other industry contributes $32B to Americas GDP? -What other industry puts almost $80B in federal coffers in a 10 year span?
PUTS AMERICANS TO WORK Huge employer offshore oil & gas industry is. Nice to know that number could almost double if our Government decided to open restricted areas to exploration...
IN TERMS OF NATIONAL SECURITY... Securing a reliable energy future: But I don ’ t have to sell you on this... You already know all that.
Access to areas of exploration remains the #1 issue: Areas in BLUE, available for E&P Areas in ORANGE - (Funny), they are technically available for E&P ops but closed to leasing... -Government likes studies. Lots of access issues remains tied up in bureaucracy. -Interesting to know, in an age where we all would like to be energy independent from foreign sources: -101 billion barrels of oil (technically recoverable) is enough to power 65 million cars & trucks for 60 years -650 trillion cubic feet of natural gas could heat 60 million homes for 160 years. Access to all of THIS is going to help us get there.
Regulatory uncertainty is another huge issue. (Next slide)
The oil & gas industry enjoyed a great working relationship with the MMS for a very long time. Deepwater horizon & the thumb of the federal government changed that. -Wait times are longer, making the process much more time consuming (thereby more expensive). -Now only a special type of operator can afford the wait. Permitting drop *2008 - Recession. Companies had lost everything in the mid 80s. They werent going to do that again. Instead, just pull back a bit & ride it out. *2009 - getting better If you were paying attention on March 30th, 2010... (Next Slide)
Yeah, that didn ’ t last 3 weeks before Deepwater Horizon hit. Back to square one. Shallow water permitting has really taken a hit. Question being is there a wait time issue or an applicant issue? -Competition with shale plays & moving back out to deepwater? $$$$- Shallow water gulf of mexico is one of the most expensive places to drill for a barrel of oil in the world -However geopolitically speaking, it was beginning to become one of the safer bets, thus the ramp up in 2006.
Another issue, hitting more closely to home is the Rigs to Reefs issue. -For some operators, this is a program that largely benefits their operation. -Oil companies are required by law to remove platforms that are no longer in production or pose a safety hazard to vessels -Created in the mid-80s by coastal states & federal government created RIGS TO REEF, allowing companies to donate platform jackets as permanent reefs Many benefits... (Next)
Another issue weeding out a lot of companies from doing business in the Gulf of Mexico is insurance costs. Insurance costs and settlement following hurricanes -List out major storms & disruptions Rita 2006 - 6.37 Billion Ivan 2005 - 8.32 Billion Gustav 2008 - 6.6 Billion Ike 2008 - 13.1 Billion Katrina 2005 - 46.59 Billion Flowlines, rigs, man hours lost, fill in the blanks. Costs have skyrocketed, major deterrent to doing business out there.
How about just the cost of doing business out there in general? -Per my good friend who is head of deepwater purchasing for a larger independent: -52 week wait time on integral parts & equipment -300 day contract on supply boats, if you can find them -Long waits = lots of money. Digress...
Industry has changed dramatically 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 Ex. Haynesville: 10,000 - 12,000 ft deep - TMS is 5,000-7,000 deeper Geology is different in each. 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 GOM Fracing: use of a "Frac Boat", which are extremely hard to find these days, being that there are only about 4-5 available for GOM Sounds like a business opportunity to me...
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.
Be one of the larges industry in the US and the state, brings with it many challenges
We ’ ve talked about: -Counts -Offshore issues -Technologies - 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.
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?