Transportation of Oil & Gas SPE Roughneck Camp 2014 Amethyst Cavallaro, Market Intelligence Williams

Transcription

1 Transportation of Oil & Gas SPE Roughneck Camp 2014 Amethyst Cavallaro, Market Intelligence Williams

2 Forward-looking statements The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) and Williams Partners L.P. (WPZ) may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We make these forward looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of You typically can identify forward-looking statements by various forms of words such as anticipates, believes, seeks, could, may, should, continues, estimates, expects, assumes, forecasts, intends, might, goals, objectives, targets, planned, potential, projects, scheduled, will, guidance, outlook, in service date or other similar expressions. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management and include, among others, statements regarding: > Amounts and nature of future capital expenditures; > Expansion and growth of our business and operations; > Financial condition and liquidity; > Business strategy; > Cash flow from operations or results of operations; > The levels of dividends to Williams stockholders and of cash distributions to WPZ unitholders; > Seasonality of certain business components; > Natural gas, natural gas liquids, and olefins prices, supply, and demand; and > Demand for our services Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this presentation. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following: > Whether Williams has sufficient cash to enable it to pay current and expected levels of dividends; > Whether WPZ has sufficient cash from operations to enable it to pay current and expected levels of cash distributions, if any, following establishment of cash reserves and payment of fees and expenses, including payments to WPZ s general partner; > Availability of supplies, market demand, and volatility of prices; > Inflation, interest rates, and, in the case of Williams, fluctuation in foreign exchange and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers); > The strength and financial resources of our competitors and the effects of competition; 2 Barclays CEO Energy-Power Conference / September 12, 2013

3 Forward-looking statements continued > Ability to acquire new businesses and assets and integrate those operations and assets into our existing businesses, as well as successfully expand our facilities; > Development of alternative energy sources; > The impact of operational and development hazards and unforeseen interruptions; > Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation, and rate proceedings; > Williams costs and funding obligations for defined benefit pension plans and other postretirement benefit plans sponsored by its affiliates; > WPZ s allocated costs for defined benefit pension plans and other post retirement benefit plans sponsored by its affiliates; > Changes in maintenance and construction costs; > Changes in the current geopolitical situation; > Our exposure to the credit risk of our customers and counterparties; > Risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of capital; > The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate. > Risks associated with weather and natural phenomena, including climate conditions; > Acts of terrorism, including cybersecurity threats and related disruptions; and > Additional risks described in our filings with the Securities and Exchange Commission (SEC). Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this announcement. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. With respect to WPZ, limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. Investors are urged to closely consider the disclosures and risk factors in Williams and WPZ s annual reports on Form 10-K filed with the SEC on Feb. 27, 2013, and each of our quarterly reports on Form 10-Q available from our offices or from our websites at and 3 Barclays CEO Energy-Power Conference / September 12, 2013

4 Williams Footprint with Assets in Major Supply Basins Across the U.S. 4 Transportation of Oil & Gas 7/16/14

5 Midstream Value Chain (Williams Example) Market Hub 20% U.S. Dry-Gas Volumes Touch Our Systems Transmission Pipelines and Storage Natural Gas End User Ethylene Propylene Wellhead (onshore and offshore) Gathering Gas Treating Plants Gas Processing Plants Mixed Natural Gas Liquids Fractionation Facilities Multiple Products Storage Transmission Pipelines Olefins Plant Market Hub End User 11 Bcf/d 7 Bcf/d inlet Mbbl/d Mbbl/d 370 Mbbl/d 22 MMbbl 386 (lbs/year) Mbbl/d 1,900 MM ethylene Figures represent 100% capacity for operated assets, including those in which Williams has a share of ownership; NGL and derivatives storage includes capacity owned and that under long-term lease; olefins-plant volumes are inclusive of Geismar, La., facility at full operation and expansion. 815 MM propylene 395MM lbs ethylene storage 24 storage customers 7 exchange partners 5 Transportation of Oil & Gas 7/16/14

6 Connecting Different Parties in the Value Chain Producers want: Options to maximize the value of their product Reliability that enables investment in their E&P activities Transparency providing trust and long-term customer relationships Producers Gathering & Processing Transportation, Fractionation & Storage Olefins, Exports Power gen, Industrial, LDCs, Plastics & Chemicals Williams Scope of Operations Downstream customers want: Access to low cost shale economics to fuel profitability and growth Market knowledge for international customers seeking domestic market expertise and export options Experience to build and operate assets 6 Transportation of Oil & Gas 7/16/14

7 How Do Midstream Providers Make Money? Summary of typical midstream & gas pipelines contracts Business Unit: Gathering & Processing Pipeline Revenue from: Liquid Commodity Fee Contract type: % of Proceeds Keep Whole Process Gather Transport Fee based on: Fuel & Shrink paid by: Natural gas price impact on Williams: Liquids sold by: Liquid price impact on Williams: N/A N/A or Volume processed Volume processed Volume gathered Capacity + small fee for Volume transported Producer Midstream Producer Producer End User None None None None Producer and Midstream Midstream Producer N/A N/A None None None 7 Transportation of Oil & Gas 7/16/14

8 Gas Supply Growing Rapidly NATURAL GAS U.S. SUPPLY GROWTH (Bcf/d) CAGR 3% % +9.5 Bcf/d CAGR 3% % Bcf/d Northeast Rockies San Juan 60 Gulf of Mexico Fort Worth 40 Mid-Continent Gulf Coast 20 Permian West Coast Alaska Source: Wood Mackenzie North America Gas Service. Note: Excludes Canadian import volumes of approximately 4.5 Bcf/d (at 2014 levels). 8 Transportation of Oil & Gas 7/16/14

9 Market Dynamics Drive Sustained Opportunity Supply INFRASTRUCTURE RENEWS ECONOMIC VIABILITY, NEW SUPPLIES Short Term Expect continued cross currents as new demand and new infrastructure drive volatility in commodity prices Long Term Expect improving natural gas prices to drive healthy, more sustainable supply and demand growth Demand EXPORTS NEEDED MARKET DYNAMICS CREATING DEMAND FOR NATURAL GAS AND NGLS 9 Transportation of Oil & Gas 7/16/14

10 Upstream Shale Innovation Changes Everything Supply Development THEN > The few, the integrated the super-majors > Muted sensitivity to price signals NOW > Many, relatively smaller upstream-focus > Greater sensitivity to price signals Infrastructure Development > Efficient, supply-sponsored build-out of large-scale infrastructure > Fully integrated systems > Large-scale infrastructure requires sponsorship beyond supply side > Open-access systems Market Structure > Benefits concentrated to a few > Go-it-alone > Broad benefits to many across the value chain > Structured transactions share risk across value chain 10 Transportation of Oil & Gas 7/16/14

11 Discontinuity in Value Chain as Infrastructure Gaps Yield Market Barriers > U.S. SHALE NGLs PRICE SIGNAL TO PRODUCERS IN PERIL RIGS MOVE TO OIL PROSPECTS RAIL TRANSPORT SCALABILITY Supply Shows Up Market Access Lags Demand Builds > 4+ MMbbl/day by 2020 > Low-cost gas drilling, high NGL margins Infrastructure investment : > $313 billion natural gas > $56 billion NGLs > $125 billion in petchem investments > 148 factories and plant expansions 11 Transportation of Oil & Gas 7/16/14

12 $/mmbtu Marcellus supply surge needs infrastructure to retain, sustain market premium Price $6.00 $6 MMBtu 5 $ $ $ $2.00 Marcellus 2013 and Forward Marcellus production Transco Leidy Henry Hub Dominion South Pt. Volume 14 Bcf/d 20, ,000 16, , ,000 10, , ,000 New York City vs. Marcellus gas prices $120 $100 $80 $60 $40 Regional price spikes Transco Z6 all-time high $ /22/2014 Infrastructure bottleneck 1 $ $0.00 1/2/2013 1/2/13 1/23/ ,000 2, $20 $0 Sources: Bloomberg, historical prices and forward strip as of 1/23/14; production, EIA and Williams analysis. Marcellus gas (Dom South) Source: LCI Energy New York City gas 12 Transportation of Oil & Gas 7/16/14

13 MBPD $/bbl How Storage Affects Pricing 60 WTI price vs.cushing inventory levels $ $140 $ $ $80 20 $60 $40 10 $20 0 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 $0 Source: EIA Cushing inventory WTI prices 13 Transportation of Oil & Gas 7/16/14

14 Transport Cost Contributes to Price Differentials Source: EnVantage 14 Transportation of Oil & Gas 7/16/14

15 Bakken Rail to the Rescue 15 Transportation of Oil & Gas 7/16/14

16 Barge Plays an Important Role Too Cargo Capacity ONE BARGE 1,500 TON 52,500 BUSHELS 453,600 GALLONS ONE 15 BARGE TOW 22,500 TON 787,500 BUSHELS 6,804,000 GALLONS ONE JUMBO HOPPER CAR 112 TON 4,000 BUSHELS 33,870 GALLONS ONE 100 CAR TRAIN 11,200 TON 400,000 BUSHELS 3,387,000 GALLONS ONE LARGE SEMI 26 TON 910 BUSHELS 7,865 GALLONS Equivalent Units ONE BARGE 13.4 JUMBO HOPPER CARS 58 LARGE SEMIS ONE 15 BARGE TOW TWO 100 CAR TRAINS 870 LARGE SEMIS Equivalent Lengths ONE 15 BARGE TOW.25 MILE Source: Iowa Department of Transportation 16 Transportation of Oil & Gas 7/16/14 TWO 100 CAR TRAINS 2.4 MILES 870 LARGE SEMIS 11.5 MILES (BUMPER TO BUMPER) PM

17 Constitution Pipeline: New Market Access for Marcellus Production > A 124-mile, 30-inch pipeline connecting Williams Partners Gathering System in Susquehanna County, PA to Iroquois Gas Transmission and Tennessee Gas Pipeline in Schoharie County, NY > Capacity: 650 MDth/d > Project capex: $300 million (41%) > New FERC-regulated interstate pipeline > Owned (41%) and operated by Williams; Cabot Oil and Gas owns 25%, Piedmont Constitution Pipeline Company owns 24%, and Capital Energy Ventures owns 10% > Target in-service date: Late 2015 to Transportation of Oil & Gas 7/16/14

18 Atlantic Sunrise: Major Transco Expansion Underpinned by Long-term Commitments > 15-year binding firm-transportation agreements > Bolsters connection to growing, emerging supplies > 1.7 MMDth/d fully committed > Expecting WPZ net investment of $2.1 billion > Producers, LDCs investing in project > Target in-service: second half of 2017 LNG Cove Point 18 Transportation of Oil & Gas 7/16/14

19 Gas Pipeline Assets: Unprecedented Growth with Fully Contracted Projects CAPITAL INVESTMENT PLACED INTO SERVICE ($MM) $4,000 $3,500 MMdt/Day $3,000 $2,500 $2, $1,500 $1,000 $ $ Transco Gulfstream* Constitution* Capacity* * Represents Williams ownership percentage. The estimated project in-service dates assume timely receipt of all regulatory approvals. Constitution expected in service late 2015/early Transportation of Oil & Gas 7/16/14

20 Quick Quiz Question: Which can you build for less dollars per mile of pipeline? Constitution Pipeline 122 miles, large-diameter, interstate pipeline Northeast Pennsylvania to Upstate New York Steel cost of $660k/mile Hilly terrain Keathley Canyon Connector 200 miles, large-diameter, high-pressure Gulf of Mexico, >215 miles SW of New Orleans; 7,000 of water Steel cost of $920k/mile Hostile terrain 20 Transportation of Oil & Gas 7/16/14

21 Answer Less than Intuitive Constitution Pipeline 122 miles, large-diameter, interstate pipeline Northeast Pennsylvania to Upstate New York Steel cost of $660k/mile Hilly terrain $4.8 million per mile Regulators: dozens overlapping $1.7 million per mile Regulators: 1 strict but clear Keathley Canyon Connector 200 miles, large-diameter, high-pressure Gulf of Mexico, >215 miles SW of New Orleans; 7,000 of water Steel cost of $920k/mile Hostile terrain 21 Transportation of Oil & Gas 7/16/14

22 POWER GENERATION 22 Transportation of Oil & Gas 7/16/14

23 Power Generation Demand Drives Strong Transco Growth Dth/d 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , /1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/ Transportation of Oil & Gas 7/16/14

24 EPA Rules Lead to Higher Gas Demand Up to 8 Bcfd ~50 GW of potential incremental natural gas power generation within 50 miles of Transco Zone 5 Zone 6 G G G G Zone 4 G G Zone 3 Zone 2 Zone 1 G Power Plants Opportunities Currently Serve Source: U.S. Environmental Protection Agency. 24 Transportation of Oil & Gas 7/16/14

25 INDUSTRIAL DEMAND Williams Geismar ethylene plant 25 Transportation of Oil & Gas 7/16/14

26 mmcfd Industrial projects piling up to take advantage of low-cost US natural gas 3,000 2,500 2,000 1,500 1, Methanol Fertilizer Petrochemicals DRI GTL Other Source: Wood Mackenzie 26 Transportation of Oil & Gas 7/16/14

27 LNG EXPORTS Photo courtesy of the Center for Liquefied Natural Gas. 27 Transportation of Oil & Gas 7/16/14

28 LNG Service Opportunities Increase Along Transco System Path UNDER CONSTRUCTION FILED CERTIFICATE APPLICATION PRE-FILED Atlantic Sunrise Cameron* Lake Charles* Golden Pass LNG Cove Point* Sabine Pass* Freeport* Corpus Christi Excelerate Gulf Trace LNG Elba LNG LNG LNG * FTA/non-FTA approved by U.S. Department of Energy. Source: U.S. Department of Energy; FERC 28 Transportation of Oil & Gas 7/16/14

29 The Market Needs INDISPENSABLE INFRASTRUCTURE 29 Transportation of Oil & Gas 7/16/14

30 Midstream Services Provide a Critical Link in the Value Chain INFRASTRUCTURE Supply Clear, Efficient Price Signals Open, Transparent Markets Demand Connect & Help Grow BEST SUPPLIES & BEST MARKETS Critical Role to Ensure Supply Infrastructure Investment 30 Transportation of Oil & Gas 7/16/14

31 Questions? 31 Transportation of Oil & Gas 7/16/14