Energy Markets Update

Transcription

1 FPA Dallas/Fort Worth: Energy Markets Update November 6, 2018 Presented by: Austin F. Zaunbrecher, CFA, CMT Vice President Senior Portfolio Manager NOT BANK GUARANTEED NOT A DEPOSIT MAY LOSE VALUE NOT FDIC INSURED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

2 Agenda Energy Markets Supply and Demand US Shale Revolution Natural Gas and LNG Energy Equities

3 Pundits Source: HedgeEye

4 Energy Markets

5 Historical Prices $160 Historical US Oil Prices Adjusted for Inflation $140 $120 $100 $80 $60 $55.08 $72.85 $40 $20 $- Nominal Inflation Adjusted Average Real Price Average( ) Average(2000-Current) Source: Bloomberg, HHF

6 Familiar Pattern % Historical Drawdowns 140% 120% Return (indexed to 100) 100% 80% 60% % 20% 0% Source: Bloomberg, HHF Months Since Peak 6

7 King Dollar Source: HedgeEye

8 WTI vs USD Source: Bloomberg 8

9 Contributions to WTI Returns USD Rise Source: Bianco Research

10 Oil Futures Near WTI moves into Contango Bearish? Source: Bloomberg

11 Supply and Demand

12 Oil Price Blastoff? Source: HedgeEye

13 Supply / Demand vs. Price 3 Crude Demand Less Supply vs. Price 120 Estimated Crude Demand less Supply (MMBD) Oversupply Undersupply Demand vs. Supply (LHS) WTI Price (RHS) Source: Bloomberg, HHF 13

14 Market Supply and Futures Source: Bloomberg Intelligence 14

15 US Leader of Supply Growth Source: ISI Evercore

16 US Regional vs. Global Imports Source: Strategas

17 OPEC Compliance has been Strong 32,800 32,600 32,400 32,200 32,000 31,800 31,600 31,400 31,200 31,000 Cuts originally set to expire after 1H16. mbpd Monthly Output (Secondary Sources) Ceiling Ceiling (Adj.) Source: OPEC Source: Morningstar

18 Supply Troubles? US Sanctions Round 2? Economic Free Fall Source: Bianco Research

19 OPEC Spare Capacity??? Source: EIA

20 Falling US Inventories Source: Bianco Research

21 Global Demand Source: ISI Evercore

22 Asian Demand Source: Evercore ISI Energy Research??? Source: ISI Evercore

23 US Gasoline Demand Slowing Source: Bloomberg Intelligence 23

24 Developed Markets Electricity Sources Source: Shell

25 US Shale Revolution

26 The Long-Term View 8 Years to New All Time Highs! 40 Years of Decline Source: Bloomberg

27 Major US Shale Plays Source: EIA

28 Growth by Basin Source: EIA

29 Ample Good Acreage Remaining Source: Morningstar, Rystad, Company Filings Over 60 Years at $45 Breakeven in Permian alone Source: Morningstar

30 Rig Count Slowing Source: Wolfe Research; As of

31 Shift in Drilling Rigs Source: ISI Evercore

32 US Efficiencies Increasing Drilling days per well Bakken Eagle Ford Permian U.S. Average Source: Morningstar, Rystad Source: Morningstar

33 Multi-Well Pad Has Room to Grow 100% 90% %of North American Horizontal Wells Completed %of 2017 Horizontal Wells Completed 100% 90% Wells Per Pad 80% 70% Wells Per Pad 80% 70% 8+ 5 to 7 60% 50% 40% 8+ 5 to 7 3 to % 50% 40% 3 to % 1 30% 20% 20% 10% 10% 0% % Source: Morningstar, Rystad Source: Morningstar

34 Frack Growth and Efficiencies Source: Crandall, Pierce & Company More Water and Sand per Well More Frac Stages per Well Source: Wolfe Research

35 Break Evens Leveling??? Source: ISI Evercore

36 Drilled but Uncompleted Wells Source: Bianco Research

37 Midland/Cushing Differentials Source: Bloomberg

38 Permian Pipeline Constraints Source: Evercore ISI

39 Natural Gas and LNG

40 Natural Gas Production Largely in NE Source: LNG Allies, The US LNG Association,

41 US is Natural Gas Independent Source: LNG Allies, The US LNG Association,

42 LNG Export Capacity to Grow Considerably Source: LNG Allies, The US LNG Association,

43 Long-Term LNG Export Forecasts Source: LNG Allies, The US LNG Association,

44 Potential LNG Shortfall Source: Cheniere Iinvestor Presenation Source: Cheniere Investor Presentation; October 2018

45 Energy Equities

46 Commodity and Equity Returns 5 Years Source: Bloomberg

47 Commodity and Equity Returns 2 Years Source: Bloomberg

48 Disconnect Between Stocks and Commodity Source: Bloomberg 48

49 Oil Equities Source: HedgeEye

50 Energy as Percentage of S&P 500 Source: Bloomberg

51 Relative Energy Weighting Source: Crandall, Pierce & Company Source: ISI Evercore

52 Energy Pledger Returns Source: ISI Evercore

53 Sector Relative Performance Source: Wolfe Research

54 Energy Sector Relative P/B Sources: Wolfe Research Portfolio Strategy, Compustat, Thompson Reuters, Standard & Poor s, and Bloomberg. Source: Wolfe Research

55 Summary Oil price levels near historical average levels USD and oil prices have strong negative correlation Supply / Demand have roughly moved in equilibrium Supply concerns (bullish) include Iran and Venezuela Demand concerns (bearish) include slowing global growth US shale has been game changer and efficiencies continue to grow US natural gas abundant LNG long-term opportunity Energy equities have bifurcated from commodity prices and relatively attractive

56 Trust & Asset Management Team Austin Zaunbrecher, CFA, CMT Vice President Senior Portfolio Manager Austin Zaunbrecher is the fund manager for Hancock Horizon Investments Dynamic Asset Allocation Fund and Burkenroad Small Cap Fund. Additionally, he a senior portfolio manager and the lead equity analyst for the energy and utility sectors for high net worth individuals, endowments and foundations. Austin has been in the banking industry for 11 years, with 6 years as a member of the Hancock Whitney team. Prior to joining Hancock Whitney, he spent 5 years working at Equitas Capital Advisors and Merrill Lynch. Austin has a Bachelor s of Arts in History and a Masters of Business Administration with a concentration finance and international business from Tulane University. He holds the Chartered Financial Analyst designation and the Chartered Market Technician designation. NOT BANK GUARANTEED NOT A DEPOSIT MAY LOSE VALUE NOT FDIC INSURED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY