MARKET UPDATE. Julie Afanasiff Mark McRae. November 15, 2017

Transcription

1 MARKET UPDATE Julie Afanasiff Mark McRae November 15, 2017

2 THE GLOBAL BACKDROP

3 Millions of Barrels / Day The Global Backdrop ANNUAL GLOBAL DEMAND Annual Global Demand Growth from E E Source: EIA 3

4 Millions of Barrels / Day The Global Backdrop DEMAND VERSUS PRODUCTION Balancing Expected Throughout Global Demand Global Production Source: EIA 4

5 Q Q Q Q Q Q Q Q4 2017F Q1 2018F Q2 2018F Q3 2018F Q4 2018F Millions of Barrels / Day The Global Backdrop INCREMENTAL CRUDE PRODUCTION VERSUS Q Incremental Crude Production for the United States, Russia, OPEC, and Canada United States Russia OPEC Canada Global Production Global Demand Source: EIA 5

6 $ per Barrel The Pricing Environment CRUDE PRICING Historical Crude Pricing $120 $100 $80 $60 Consensus Analyst 2018 Forecast: $52.58 $40 $20 $0 $45.01 Consensus Analyst 2018 Forecast: WTI ($USD) WCS ($CAD) Source: S&P, Analyst Reports 6

7 $ per Barrel The Pricing Environment CRUDE PRICING Forward WTI Pricing $120 $100 $80 $60 Consensus Analyst 2018 Forecast: $52.58 $40 $20 12 Month Strip $56.79 $0 WTI ($USD) WTI Futures ($USD) Source: Capital IQ, DOB 7

8 $ per mcf The Pricing Environment NATURAL GAS PRICING Historical Natural Gas Pricing $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 Consensus Analyst Forecast $3.91 $2.58 Consensus Analyst Forecast Henry Hub ($CAD/mcf) AECO ($CAD/mcf) Source: FirstEnergy, Analyst Reports 8

9 $ per Barrel The Pricing Environment NGL PRICING Historical U.S Natural Gas Liquid Composite Price $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 NGL Composite Price ($USD/bbl) Source: EIA 9

10 THE FUTURE OF OIL AND GAS?

11 Millions Barrels / Day The Future of Oil and Gas PROJECTED GLOBAL OIL DEMAND Projected Oil Demand by Product E 2025E 2030E Diesel Gasoline LPG Jet Kero Naphtha Fuel Oil Other Source: IEA, Goldman Sachs 11

12 Millions Barrels / Day The Future of Oil and Gas PROJECTED GLOBAL OIL DEMAND Projected Oil Demand by Sector E 2025E 2030E Transportation Petrochemicals Residential Industrial Electricity Others Source: IEA, Goldman Sachs 12

13 The Future of Oil and Gas THE BIG PICTURE Drivers and Restraints of Projected Oil and Gas Demand Population Growth Economic Development Energy Intensity Electric Vehicles Energy Efficiency Source: EIA, Goldman Sachs 13

14 Population (Millions) The Future of Oil and Gas THE MAIN DRIVERS POPULATION GROWTH 9,000 8,000 7,000 Projected Global Population Growth Population Growth % 33% 6,000 5,000 4,000 3,000 2,000 18% 13% 14% 2% 1,000 11% North America Europe China India Other Asia Middle East Africa South America 1% Source: EIA, Oxford Economics 14

15 GDP (Billions of Inflation Adjusted USD) The Future of Oil and Gas THE MAIN DRIVERS ECONOMIC GROWTH 180, , , , ,000 80,000 60,000 40,000 Projected Global Economic Growth Economic Growth % 66% 55% 47% 101% 82% 22% 20,000 32% North America Europe China India Other Asia Middle East Africa South America Source: EIA, Oxford Economics 15

16 YoY Change in Oil Demand Intensity per Unit of GDP (%) The Future of Oil and Gas THE MAIN RESTRAINTS YOY CHANGE IN ENERGY DEMAND PER UNIT OFGDP Energy Intensity Year over Year Change in Energy Demand per Unit of GDP 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5% -4.0% -4.5% Source: IEA, Goldman Sachs 16

17 Global Car Sales Annually (Millions) The Future of Oil and Gas THE MAIN RESTRAINTS GLOBAL ANNUAL VEHICLES PURCHASED Projected Penetration of Electric and Hybrid Vehicles 140 Electric Vehicles Internal Combustion Hybrid Plug-in Hybrid Electric Source: IHS, Goldman Sachs 17

18 Global Gasoline Consumption (Millions Barrels / Day) The Future of Oil and Gas THE MAIN RESTRAINTS GLOBAL GASOLINE CONSUMPTION Projected Gasoline Consumption 40 Energy Efficiency 35 Base Gasoline Consumption Efficiency Savings Electric and Plug-in Hybrid Vehicle Savings Hybrid Vehicle Savings Source: IEA, Goldman Sachs 18

19 Millions Barrels / Day The Future of Oil and Gas INCREMENTAL ANNUAL GLOBAL OIL DEMAND Baseline Projected Oil Demand Growth EIA Projected 2050 Demand of MM Barrels / Day Source: IEA, EIA, Goldman Sachs 19

20 PREDICTIONS THROUGHOUT HISTORY

21 Average Annual Domestic US Crude Pricing Predictions Throughout History THE BAD AND THE UGLY Predictions vs. U.S. Crude Oil Price, $100 $90 $80 $70 $60 $50 $40 $30 $20 Energy Modelling Forum 1980 Prediction: $50/bbl $65/bbl Economist, March 1999: $10 might actually be too optimistic. We may be heading for $5 Goldman Sachs, March 2008: "New 'superspike" might mean $200 a barrel oil" $10 $0 Source: Gizmodo, EIA 21

22 Predictions Throughout History THE BAD AND THE UGLY "In meeting the world's needs, however, the oil from the United States will continue to occupy a less and less dominant position, because within the next two to five years the oil fields of this country will reach their maximum production and from that on we will face an ever increasing decline. On the future of U.S. Oil & Gas Oil and Gas News October 23, Production: 2,000,000 bbl/day 2016 Production: 9,000,000 bbl/day Source: Gizmodo, EIA 22

23 Predictions Throughout History THE BAD AND THE UGLY In 1957, the City of Tulsa buried a 1957 Plymouth Belvedere as part of a time capsule to commemorate the State s 50 year anniversary, with the intent of unearthing it in A can of gasoline was buried with the car, in case this was no longer used as a fuel in 50 years. On the future of gasoline as a fuel Source: Gizmodo 23

24 CANADIAN ACTIVITY

25 Capex (C$bln) Canadian Activity PRODUCER CAPEX BY YEAR Canadian Conventional and Oil Sand Capital Spending $90 $80 $70 $60 $50 $40 $30 $20 20% 8% $10 $ E 2018E Conventional Oil Sands Source: Analyst Reports 25

26 Wells Drilled Canadian Activity DRILLING ACTIVITY BY KEYRESOURCE PLAY 1,600 1,500 1,400 1,300 1,200 1,100 1, Annual Drilling Activity by Key Resource Play E Montney Viking Cardium Bakken Spirit River Duvernay Source: Analyst Reports 26

27 Canadian Activity TTM WELL SPUDS BY REGION Q to Q Well Spud by PSAC Region SK3 10% SK2 20% SK1 6% MB 3% BC2 7% Alberta 54% AB6 25% AB7 9% AB2 32% AB5 10% AB4 15% AB3 9% Source: DOB 27

28 Wells Canadian Activity WELLS DRILLED BY TYPE Annual Canadian Wells Drilled by Type vs. Non-Mining BOE Production 26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, E 2018E Oil Gas Dry/Susp Forecast Western Canada Non-Mining O&G Production Production (Millions of BOE/d) Source: CAPP, PSAC, NEB 28

29 TRANSACTIONS IN TODAY S ENVIRONMENT

30 IPOs Mergers & Acquisitions Transactions in Today s Environment THEMES Rationalization Consolidation Focus on core business Primarily cash transactions Vertical Integration Emerging theme amongst drillers Focus on differentiation Hostile and Friendly Non-cash consideration Technology Acquisition Big players focusing on new technologies Institutional money exiting Outside the Box Asset swaps Partnering opportunities Window of Opportunity Late 2016/Early 2017 Next window? Caveat Emptor Many undersized public offerings Moderate rebounding post IPO 30

31 Transactions in Today s Environment WHO ARE THE BUYERS Buyer Location Buyer Type 2% 1% 7% 12% 10% 59% 6% 15% 81% 7% Alberta British Columbia Eastern Canada USA International Undisclosed Strategic Financial Backed Strategic Financial Undisclosed Source: S&P Capital IQ, Company Releases 31

32 Transactions in Today s Environment RATIONALIZATION Sale of Acquired To October 2017 All Cash September 2017 All Cash Source: S&P Capital IQ, Company Press Releases, Company Filings 32

33 Transactions in Today s Environment CONSOLIDATION Hostile Takeover of Merged with Acquired Merged with June 2017 June 2017 March 2017 June 2017 Cash and Stock All Stock All Stock All Stock Source: S&P Capital IQ, Company Press Releases, Company Filings 33

34 Transactions in Today s Environment VERTICAL INTEGRATION Acquired Acquired Acquired Merged with Acquired August 2017 August 2017 August 2017 December 2016 September 2016 All Stock Cash, Stock and Earn Out Cash and Stock All Stock All Stock Source: S&P Capital IQ, Company Press Releases, Company Filings 34

35 Transactions in Today s Environment TECHNOLOGY ACQUISITION Acquired Formed a JV with Acquired July 2017 May 2017 January 2017 Source: S&P Capital IQ, Company Press Releases, Company Filings 35

36 Transactions in Today s Environment OUTSIDE THE BOX Acquired the Palliser Assets of Swapped assets with October 2017 All Cash December 2016 Cash and Assets Source: S&P Capital IQ, Company Press Releases, Company Filings 36

37 Transactions in Today s Environment IPOS Name Announced Target Size Status Comments Performance Sponsor Aqua Terra October 2017 $ 65,000,000 Pending Bregal Investments Preferred Sands, Inc. August 2017 $ 100,000,000 Pending KKR Quintana Energy Services Inc. August 2017 $ 100,000,000 Pending Quintana Capital BJ Services, Inc. July 2017 $ 100,000,000 Pending CSL Capital Ranger Energy Services, Inc. May 2017 $ 100,000,000 Closed Downsized 15% -21% CSL Capital Nine Energy Service, Inc. May 2017 $ 300,000,000 Pending SCF Partners Solaris Oilfield Infrastructure, Inc. March 2017 $ 175,000,000 Closed Downsized 31% 49% Yorktown Partners BOS Solutions Holdings Inc. March 2017 $ 90,000,000 Pending Advent International NCS Multistage Holdings, Inc. March 2017 $ 157,000,000 Closed At Target 25% Advent International Select Energy Services, Inc. March 2017 $ 175,000,000 Closed Downsized 30% 16% SCF Partners Liberty Oilfield Services Inc. February 2017 $ 250,000,000 Pending Oakmont Source Energy Services Ltd. February 2017 $ 300,000,000 Closed Downsized 42% -9% TriWest Capital FTS International, Inc. February 2017 $ 100,000,000 Pending RJJ Capital STEP Energy Services Ltd. February 2017 $ 200,000,000 Closed Downsized 50% 32% ARC Financial ProPetro Holding Corp. February 2017 $ 350,000,000 Closed At Target 18% Energy Capital Keane Group, Inc. December 2016 $ 301,000,000 Closed Upsized 70% -17% Cerberus Capital Smart Sand Inc. September 2016 $ 175,000,000 Closed Downsized 27% -31% Clearlake Capital Mammoth Energy Services, Inc. September 2016 $ 160,000,000 Closed Downsized 28% 33% Gulfport Energy Source: S&P Capital IQ, Company Press Releases, Company Filings Note: All denominated in USD excluding: Aqua Terra, Source Energy Services, and STEP Energy services 37

38 Executive Summary GOING FORWARD Strong and growing crude demand leading rebalancing Electric vehicles are not the end of oil 2018 to show modest improvement over 2017 Growing M&A activity; Clusters of IPO activity Cash is King but there s a Game of Thrones 38

39 WESTERN CANADA S TRANSACTION ADVISORS Calgary Edmonton Vancouver 39