Monthly Broker Webinar. November 12, 2014

Transcription

1 Monthly Broker Webinar November 12, 2014

2 Monthly Broker Webinar Winter Weather Outlook Commodities Market Update Strategic Recommendations

3 Winter Weather Outlook Beau Gjerdingen, Senior Meteorologist 3

4 Update On November

5 Dec-Feb Outlook 14/15

6 Sea Surface Temperatures Mid Last Winter

7 Current Sea Surface Temperatures

8 Eurasian Snow Coverage

9 ENSO Forecast

10 Primary Uncertainties Influence of lingering impacts of November blocking/arctic outbreak No analogs for the degree of Pacific warmth currently observed Will El Nino see a typical late winter response, or will it be muted?

11 11 Questions?

12 Commodities Update Tim Bigler, Senior Market Strategist 12

13 Energy Discussion Topics Pre-Winter Update Natural Gas Production Basis Demand & Forward Price Discussion Power Generation Capacity Forward Price Discussion Key Points Discussion

14 Winter is coming Are you prepared?

15 Winter Back to Normal? MDA EarthSat

16 NG Pre-Winter Rally Minimal $ impact out the curve DEC 2014 JAN 2015 MDA EarthSat; CME/NYMEX; Bloomberg Finance L.P. END OCTOBER MID NOVEMBER NET CHANGE East Normal West Above East Normal West Above East Below West Less Above East Below West Less Above 2% % - 10Y 2% - 30Y 5% % - 10Y 4.5% - 30Y NYMEX SPOT $3.54 $4.54 $1.00 CALENDAR 2015 $3.62 $4.02 $0.40 CALENDAR 2016 $3.85 $3.99 $0.15 CALENDAR 2017 $4.03 $4.09 $0.06 CALENDAR 2018 $4.15 $4.17 $0.02

17 Winter Storage Demand Similar to ? EIA Weekly NG Storage (Bcf) Peak to Trough RECORD 3,012 Bcf 79% of PEAK volume EIA

18 Potential Wellhead Freeze Off Losses Supporting Winter NG $$ Bcf/d D-o-D Dry Gas Production (0.500) (1.000) (1.500) (2.000) (2.500) (3.000) Bentek Energy LLC

19 Jan15 Natural Gas Basis Update AGT Transco Z6 NY Transco Z6 NNY Bcf/M JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Chicago CG Bloomberg Finance L.P.

20 Northeast & U.S. Production Record Breaking Northeast record: ~17.8 Bcf/d 10/31/ Bcf/d Y-o-Y FLAT Y-o-Y LOWER Y-o-Y U.S. record: ~70.9 Bcf/d 10/29/ Bcf/d Y-o-Y Bentek Energy LLC

21 Natural Gas Price Advantage Spurs U.S./Regional/Global Demand Extreme case High WHAT case IS MISSING? EXPORTS 2 Bcf/d Mexico/Canada 2-7 Bcf/d LNG NYMEX NG Cal s 2015 = $ = $ = $ = $ = $4.29 Low Risk Premiums +35 cents 2015 to 19 (As of 11/11/14) WHAT IS MISSING? BASIS Bentek Energy LLC; Intercontinental Exchange

22 Natural Gas Commodity & Basis Prices Upside Risks? U.S. Production: Severely lags demand gains U.S. Industrial/Power Gen Demand: Surges above market expectations U.S. Exports: Surges above market expectations The wildcards: Transportation demand, environmental, geology, U.S. interest rates

23 Gas Plant New NG Power Plant Efficiency Lowers Electric Energy Prices Heat Rate Btu/kWh 12,000 10,000 8,000 Assumption: $4/MMBtu Gas Input U.S. GAS RECORD $48 U.S. OIL 28Y HIGH $40 U.S. RECORD $ s XXXX

24 Gas Plant New NG Power Plant Efficiency Raises Coal to Gas Floor Heat Rate Btu/kWh 8,000 10,000 Assumption: Coal $32/MWh U.S. GAS RECORD U.S. OIL 28Y HIGH $3.20 $4.00 U.S. RECORD 12,000 $ s XXXX

25 $3.00 PJM Capacity Costs Surge/Stabilize Impacts - EPA Rules/Retirements/ Constraints Selected PJM Capacity Auction Results - /kwh $2.50 $2.00 $1.50 $ / / / /2018 $0.50 $0.00 PSEG JCPL BGE PEPCO PPL DUQ AEP ATSI DEOK DAYTON PJM; 50% Load Factor

26 PJM Peak Winter Futures Increase Y-o-Y Gas Basis Impacts FutureSource; CME/NYMEX

27 Natural Gas & Electric Key Points NG forward prices reflect a belief in future production gains What if supply does match demand gains? Natural gas demand increases are highly probable, how much is the? and the surprise may be to the upside U.S. gas exports may increase significantly above market expectations, i.e. 2 or 7 Bcf by 2019? Increasing power plant efficiency positively impacts U.S. electricity energy prices Power plant retirements and transmission constraints increase generation capacity costs Natural gas prices impact electric prices Regulatory Impacts on Electricity costs

28 28 Questions?

29 Strategies Lars Cleath, Technical Sales Manager 29

30 Q1 '15 Apr - Dec '15 Calendar 2016 Regional Outlook: New England $ $70.00 $ $65.00 $ $60.00 $ $ $ $90.00 $55.00 $50.00 $45.00 $80.00 $40.00 Strategic Guidance Short-Term 1 st Quarter Mid-Term Remainder 2015 Long-Term Calendar 2016 Jan2015 Hedge the winter months to high levels to protect against price volatility Forwards have significant premium but prices have shown capability to reach new highs March2015 Summer has been calm in the short term markets, look to take advantage of spot pricing and any major dips in forwards Jan2016 Good values here; tracking strips for a dip in the market, use the volatility to blend down winter premiums

31 Q1 '15 Apr - Dec '15 Calendar 2016 $ $ $95.00 $90.00 $85.00 Regional Outlook: New York $60.00 $58.00 $56.00 $54.00 $52.00 $80.00 $75.00 $70.00 $65.00 $60.00 $55.00 $50.00 $48.00 $46.00 $44.00 $42.00 $40.00 Jan2015 Strategic Guidance Short-Term 1 st Quarter Mid-Term Remainder 2015 Long-Term Calendar 2016 March2015 Jan2016 Forwards have significant premium due to last winter (90 th percentile) A conservative, high hedge would still be priced well below last year and the two year average day ahead price Good value in Apr15-Dec15. Q3 trading near the low (4 th percentile) Take advantage of low forward pricing in Q3 and start to layer in at least half of the desired hedge level Spot pricing has been low as well 2016 is cheaper than 2015 due to Q pricing near the high, however. Still premium in Q with a good chance of decreasing with a mild or normal winter

32 Q1 '15 Apr - Dec '15 Calendar 2016 $65.00 Regional Outlook: PJM $47.00 $60.00 $45.00 $55.00 $43.00 $50.00 $41.00 $45.00 $39.00 $40.00 $37.00 $35.00 $35.00 Jan2015 March2015 Strategic Guidance Short-Term 1 st Quarter Mid-Term Remainder 2015 Long-Term Calendar 2016 Hedge the winter months to moderate/high levels to protect against price volatility Forwards are averaging in line with 3 year day ahead average prices Upside price risk for spot market Forwards are near market lows, especially Summer Hedge Summer to moderate/high levels; minimal hedging in shoulder months to take advantage of likely lower spot pricing Jan2016 Great value; Calendar 2016 is cheaper than 2015 Take advantage of this by taking a moderate position; 25-50% or more depending on budget

33 Q1 '15 Apr - Dec '15 Calendar 2016 $44.00 $42.00 $40.00 $38.00 $36.00 $34.00 $32.00 $30.00 Regional Outlook: ERCOT $45.00 $44.00 $43.00 $42.00 $41.00 $40.00 $39.00 $38.00 $37.00 $36.00 $35.00 Jan2015 March2015 Strategic Guidance Short-Term 1 st Quarter Mid-Term Remainder 2015 Long-Term Calendar 2016 Consider moderate hedges for the winter months Potential for price spikes in late winter due to plant outages Summer 2015 are at/near all-time lows Hedge summer to moderate/high levels; Moderate hedges for shoulder months Jan2016 Great value, especially summer. High hedges for summer and winter Moderate hedges for shoulder months

34 34 Questions?

35 Thank you for attending today s Webinar! Today s slide presentation can be found at: 35