Upstream Oil and Gas Industry Outlook Ben Brunnen November 3, 2015 Presentation to the Petroleum Services Association of Canada (PSAC)
2 Overview About Canada s Oil & gas industry Economic Context Competitiveness Pressures Market Opportunity Industry Priorities
3 About CAPP and Canada s Oil and Gas Industry Large and small producer companies and associate members Represent 90% of Canada s natural gas and crude production Largest private sector investor in Canada ($48 billion estimated in 2015) Annual government revenues average $17 billion Employ approx. 500,000 in Canada (direct & indirect) Canada is the 5 th largest producer of natural gas globally Canada is the 5 th largest producer of crude oil globally
4 Economic Context
00 01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 14 15 00 01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15 Crude Oil and Natural Gas prices have declined significantly since June 2014 140.00 Crude Oil Prices (WTI NYMEX) $US per barrel 14.00 Natural Gas Prices (AECO Daily Spot Price) $Cdn/mcf 120.00 12.00 100.00 10.00 80.00 8.00 60.00 6.00 40.00 20.00 4.00 2.00 0.00 0.00
Canadian Oil Sands (Bitumen & SCO) & Conventional Production
7 Alberta Unemployment Rates By Sector 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Source: Statistics Canada (CANSIM Table 282-0007) Total, all industries Goods-producing sector Mining, quarrying, and oil and gas extraction Services-producing sector
Regional Alberta Unemployment YoY Source: Statistics Canada CANSIM Table 282-0122 8
9 Industry Contribution
10 Industry Contribution
11 Employment and Supply Chain 2011-2014 Annual Growth in Mining, Quarrying and Oil and Gas Extraction Banff-Jasper-RMH and Ath.- GP-Peace River 6.7% Calgary 5.3% Camrose-Drum. -0.1% Edmonton 8.4% Leth.-Med. Hat -9.1% Red Deer 4.1% Wood Buff.-Cold Lake 10.4%
12 $ billions Share of Revenues Payments to Province Royalties, Land Bonuses and Share of Provincial Revenues $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Royalties Land Sales Other Share of Provincial Revenues
13 Economic Impact 2015 Economic Impacts of oil and gas Industry in Alberta $70.1 Estimated Expenditures (billions) GDP (millions)* $85,892 Federal Taxes (millions) $6,196 Provincial Taxes Paid in Alberta, not including royalties (millions)** $5,055 Employment (FTEs) 421,810 Includes direct, indirect, and induced impacts of estimated conventional and oil sands capital and operating expenditures in Alberta in 2015. *Represents 28% of provincial GDP. Down from 40% in 2014 **Add Royalties, total govt revenues = $9.9 billion, 20% forecast GoA revenues. Down from 36% in 2014
14 Competitiveness Pressures
15 Our Biggest Client is our Biggest Competitor
16 North American Crude Oil Production Source: BP Statistical Review. Includes NGL s.
17 North American Natural Gas Production Source: BP Statistical Review. Includes NGL s.
18 Tight Oil Breakeven Prices and Reserves
19 Historical Oil Sands Labour Demand No new mines forecast over the foreseeable future. Oil sands labour demand shifting to maintenance. Start of a longer period of more stable employment
20 Alberta Wage Growth
Real Wage Growth 21 Oil and gas raises real wages across the economy. Employs Albertans across the province.
22 Opportunities
2014 Canada and US Refinery Demand Source: CAPP, CA Energy Commission, EIA, Statistics Canada
24 US$/bbl 2010 A J O 2011 A J O 2012 A J O 2013 A J O 2014 A J O 2015 A J Oil Prices 140.00 120.00 100.00 80.00 60.00 40.00 Brent Spot WTI NYMEX Cdn Lt Swt WCS 20.00 -
25 Market Access Enbridge Mainline PADD IV Trans Mountain Express
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 $US/MM btu Natural Gas Prices 20.00 18.00 Japan 16.00 14.00 12.00 Europe 10.00 8.00 6.00 4.00 North America 2.00 0.00 26 Source: World Bank
27 New Market Opportunities for W. Canadian Gas Area of Oil Sands Deposit NGTL Westcoast PNG (Capacity approx: 110 MMcfd) Pacific Trail: Proposed (Kitimat LNG) Coastal GasLink: Proposed (LNG Canada) Prince Rupert Gas Trans: Proposed (Pacific Northwest LNG) Westcoast Connector: Proposed (Prince Rupert LNG) Potential LNG Export Demand Growing Oil Sands Demand Declining Traditional Market Demand
28 Canadian Production Status Quo Case and New Market Opportunity Case Status Quo Case New Market Opportunity Case *New Market Opportunity Case assumes favourable decisions on LNG projects in the near future with 3.5 Bcf/d of LNG exports by 2025.
Impact of declining commodity prices - Capital investment & Drilling Canadian capital investment down close to 50% over two years Drilling down close to 55% from 2014 Upstream still largest private sector investor in Canada 100 80 60 40 Capital Investment by Industry (2014) $ billions 2015 20 0 Upstream Oil & Gas Utilities Transportation & Warehouse Manufacturing Real Estate & Rental & Leasing Source:: Statistics Canada 29
30 $ billion $ billion Capital Investment in Canada % = Year/year change 70 60 50 Combined Capital Investment 90 80 70 60 Oil Sands Conventional 40 30 20-47% -16% -33% -10% 50 40 30 20-41% -12% 10 10 0 Conventional Oil Sands 2014 2015F 2016F 2014 2015F 2016F 0 2014 2015F 2016F
Industry Capital Spending Cdn $billions Northern Canada 2014 2015F 2016F $0.1 $0.5 $0.3 Oil & Gas Investment Spending: 2014: $81 billion 2015F: $48 billion 2016F: $42 billion Oil Sands 2014 2015F 2016F $34 $23 $21 Western Canada 2014 2015F 2016F $42 $21 $18 East Coast Offshore 2014 2015F 2016F $5.3 $3.3 $3.0 Note: Excludes spending on mergers & acquisitions 31
Total Wells Drilled in Western Canada 28 000 24 000 20 000 16 000 Dry/Susp. Gas Oil Yr/yr Reduction in Drilling: 2015 49% 2016-10% 12 000 8 000 4 000 2015F = 5,300 2016F = 4,800 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F Source CAPP. Based on Rig Release F=forecast
33 Discussion