Planning for the Future

Transcription

1 Planning for the Future An Integrated Approach to Field Development Planning GeoConvention John Kingsbury, P.Eng. Principal Gas Processing Management Inc. (403) Matthew Tymchuk, P.Eng. Manager, Engineering Sproule (403) Copyright 2017

2 About the Presenters John Kingsbury, P.Eng, has over 46 years of experience in the Oil and Gas industry, most recently as a Founding Principal with GPMi. Matthew Tymchuk, P.Eng. has worked in wide range of upstream Oil and Gas roles. He is the Manager of Engineering at Sproule. Copyright 2017

3 Presentation Objectives To demonstrate the need for an integrated approach to field development planning Copyright 2017 Page 3

4 Integrated plan from Reservoir to Market Plant to Market Market Analysis Commercial Arrangements Long Term Commitments Markets Reservoir Reservoir to Wellhead Mineral Rights Geology Prospectivity Productivity Reserves and Resource Potential Infrastructure Wellhead to Plant Infrastructure Commercial Arrangements Area Potential Copyright 2017 Characteristics Updated periodically From cradle to grave Understanding of uncertainty/risk/opportunities/options Robust economics, responsive to change Page 4

5 Key Messages A well thought out field development plan (FDP) can add value to a project and could be the difference between success and failure An integrated approach is needed: - Understand the Resource: It all starts with the rocks - Understand the Markets: How to profit from the resource - Assess the Infrastructure: Link between Resource and Markets We will show you the benefits of an integrated FDP Copyright 2017 Page 5

6 Why Create a Field Development Plan? Inter-related uncertainties - Understand Reservoir, Infrastructure and Markets - Recognize the risks and uncertainties within each - Recognize the inter-dependencies between each It s Complex Any new field development requires significant capital; a good FDP can materially increase the value of a project Copyright 2017 Page 6

7 Understand the Resource Unconventional reservoirs are driving industry growth Many uncertainties related to: - Short and long term productivity type curve development - Composition - Heterogeneity - Well spacing and depletion strategy - Cost to develop and produce - Surface constraints, environmental issues, regulatory issues Uncertainties must be recognized and planned for Copyright 2017 Page 7

8 Type Curves Bracket Uncertainty Copyright 2017 Page 8

9 Understand the Markets Paradigm Shift in North America Natural gas glut Collapse of commodity prices Markets are demand constrained Copyright 2017 Page 9

10 Understand the Markets Understanding the future outlook for gas and NGL markets is a critical step in determining what infrastructure is required and what markets to sell into - Sales Gas AECO (TCPL) vs Alliance (Chicago) - NGL s High recovery vs low recovery Pipeline take away specification o TCPL vs Alliance C3+ delivered to Fort Saskatchewan vs Alliance vs fractionate in the field Copyright 2017 Page 10

11 Natural Gas Prices Western Canadian gas prices remain significantly discounted to US prices - Transportation cost is >$US 1.00 / mmbtu We are a price taker because our main market is the U.S. Copyright 2017 Page 11

12 Natural Gas Prices US$/MMBtu $4 Henry Hub & Chicago vs AECO US$/MMBtu $4 $3 $3 $2 $2 $1 $1 $0 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 $0 HH-AECO Chicago-AECO Henry Hub Chicago AECO Copyright 2017 Source: GPMi NGL Report Page 12

13 Revenue and Operating Margins Methane is still the largest revenue and margin component Ethane is near breakeven Propane is near or below breakeven Butanes and pentanes+ are profitable in Alberta The best strategy now is to keep ethane and propane in the sales gas stream Copyright 2017 Sproule Page 13

14 Revenue $/GJ $5 WCSB Extraction - Component Revenue $4 $3 $2 $1 $0 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Gas Ethane Propane Butane Pentanes + Copyright 2017 Sproule Source: GPMi NGL Report Page 14

15 Operating Margins $/GJ $5 WCSB Extraction - Component Op Income $/GJ $5 $4 $4 $3 $3 $2 $2 $1 $1 $0 $0 -$1 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Gas Ethane Propane Butane Pentanes + Total Margin -$1 Copyright 2017 Sproule Source: GPMi NGL Report Page 15

16 Propane Netbacks $Cdn/GJ $6 Propane Available Netback Over Shrinkage $4 $2 $0 -$2 -$4 -$6 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Edm - Chi Edmonton Chicago Copyright 2017 Sproule Source: GPMi NGL Report Page 16

17 Propane Netbacks Negative propane netbacks at Edmonton after fractionation and transportation The uplift from Edmonton to some other markets can be significant Copyright 2017 Sproule Page 17

18 Revenue and Operating Margins The reality is that the US no longer needs Canada to supply gas and NGLs This is a fundamental, permanent shift The glut will last until we develop alternative markets Copyright 2017 Sproule Page 18

19 Egress Considerations Surplus of liquids flowing into the Edmonton hub Option to deliver liquids rich gas to Alliance Access to both require large take or pay commitments TCPL has in place firm export commitments In Summary: Difficult for an individual producer to make long term commitments given reservoir and pricing uncertainties An integrated exploration, development and market FDP team will make more informed decisions Copyright 2017 Sproule Page 19

20 Understand the Infrastructure Types of Infrastructure Typical Configurations Staged Modular Development Commercial Options - Fee versus ownership - Firm versus interruptible access to capacity Cost and Timing Uncertainty Copyright 2017 Sproule Page 20

21 Understand the Infrastructure Wellsite Field Infrastructure Processing Market Connections Copyright 2017 Sproule Page 21

22 Infrastructure Planning Components Well Sites Field Handling and Measurement Water Handling Field Infrastructure Gathering Fluid Handling Compression Processing Liquids Recovery Acid Gas Removal Water Handling Compression Market Connection Sales Gas Liquids Pipe/Rail/Truck Copyright 2017 Page 22

23 Infrastructure Integration Reservoir Infrastructure Market Porosity Frac Size Fluid Composition # of Stages Permeability Compressibility Type Curve Water Saturation Copyright 2017 Page 23

24 Why an Integrated Approach Reservoir, Infrastructure and Market considerations are inter-related - Starts with reservoir uncertainty on volumes, rates, and compositions - Coupled with market egress uncertainty on securing capacity for uncertain product volumes into the future - All of which creates uncertainty regarding the optimal size, cost, type and timing of gathering and processing infrastructure An integrated approach ensures all inter-related components are explicitly recognized and planned for Copyright 2017 Sproule Page 24

25 Duvernay FDP Case Study Evaluated Reservoir: Low, Best, and High production cases were estimated A single egress option Various infrastructure development options considered Scenario 1: Full Upfront Build Scenario 2: Staged Build Scenario 3: Staged plus 3 rd Party Build based on the High case prediction of reservoir performance Build in stages, allow for future expansion if needed Staged development, include 3 rd party volumes Copyright 2017 Sproule Page 25

26 Duvernay Study Area Copyright 2017 Sproule Page 26

27 Duvernay Study Results High Reservoir Results Low Reservoir Results Net Present Value (discounted 10%) -729 MM$ Difference Low vs High -45 MM$ vs. Scenario MM$ Difference Low vs High +100 MM$ vs. Scenario 1 +5 MM$ vs. Scenario MM$ Difference Low vs High +145 MM$ vs. Scenario 1 Scenario 1 Scenario 2 Scenario 3 Copyright 2017 Sproule Page 27

28 Summary Field Development Plans It s Complicated but required and doable An integrated approach is required Uncertainties are always present, but the impact can be mitigated Many other factors must be considered, some are unique to each development situation A well thought out FDP can be the difference between success and failure of a project Copyright 2017 Sproule Page 28

29 Disclaimer This material is private. It does not take into account any specific business objectives of the recipient. The information herein does not constitute advice, nor an offer to buy or sell instruments, products or services. Dealing in commodities, financial instruments, derivatives or other products involves risk. The recipient of this material should not deal in these products unless it understands their nature and its exposure. It should seek independent advice before making any investment or other decision. While every effort has been made to ensure the information herein is accurate, its accuracy cannot be guaranteed. The author accepts no liability for any damages (including, but not limited to, lost profits) arising from reliance upon this material. Unauthorized copying of this material is strictly prohibited without the prior written consent of the author This presentation contains forward-looking information and statements (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation, concerning the outlook of commodity prices and the potential impact these could have on industry netbacks. Forward-looking statements include, but are not limited to, statements with respect to the estimation of commodity prices, permitting time lines, currency exchange rate fluctuations, government regulation of oil and gas exploration and development activities, environmental risks, and judicial ruling. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative connotations thereof. All such forward-looking statements are based on the opinions and estimates of the relevant management as of the date such statements are made and are subject to important risk factors and uncertainties, many of which are beyond the Corporation's ability to control or predict. Copyright 2017 Sproule Page 29

30 Questions? John Kingsbury, P. Eng. GPMi (403) Matthew Tymchuk, P. Eng. Sproule (403) Copyright 2017 Sproule Page 30