Delivering commercial insight to the global energy indu www.woodmac Wood Mackenzie Energy Rockies Development Activity and Trends IPAMS – May 2007
Jan 22, 2016
Delivering commercial insight to the global energy industrywww.woodmac.com
Wood Mackenzie Energy
Rockies Development Activity and Trends
IPAMS – May 2007
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Agenda
Rockies Overview
Reserves
Production
Basin Updates
Key Issues and Trends
Costs and Rig Count
Regulation
Price Differentials
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Rockies oil reserves on the rise
From 2003 to 2005, the Rocky Mountains region proved oil reserves profile has grown from 1.6 to over 2 billion barrels - an increase of over 26%
At the beginning of 2006, the Rockies proved oil reserves accounted for nearly 12% of total L48 reserves
Arguably one of the limiting factors to the potential of this resources continues to be local prices differentials and supply competition from out of region crudes
0.0
0.5
1.0
1.5
2.0
2.5
2000 2001 2002 2003 2004 2005
8%
9%
10%
11%
12%
Rockies (bn bbls) % of L48
Source: Data from U.S. EIA web-site
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Steady growth in Rockies gas reserves
The Rockies region proved gas reserves profile has grown from 46 tcf to 61 tcf in just 5 years – an increase of over 32%
Over the same period, the total Lower 48 proved reserves increased by 28 tcf – Rockies contributed 52% of those additional reserves
The Rockies profile continues to rise – at the end of 2005, the Rockies represented about 31% of total L48 proved reserves, up from 27% at the end of 2000
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005
26%
27%
28%
29%
30%
31%
32%
Rockies (tcf) % of L48
Source: Data from U.S. EIA web-site
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If these historical trends continue? A statistical forecast
0
15
30
45
60
75
1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Pro
ved
Gas R
eserv
es (
tcf)
.
Source: Historical Data from U.S. EIA, Forecast by Wood Mackenzie
Historical Reserves and Trend Model
Forecast
"Continuing the trend of 29 years of steady reserves growth"
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Oil production rising in the Rockies, as US continues to decline
Rockies annual oil production has increased by over 31 million barrels over the last three years
In contrast, US production has fallen by nearly 10% over the same period
Rockies now accounts for over 9% of total US production (on-shore + off-shore)
0
20
40
60
80
100
120
140
160
180
2000 2001 2002 2003 2004 2005 2006
mm
bbl
s
1.7
1.8
1.9
2.0
2.1
2.2
bn b
bls
Rockies US
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Rockies gas production compares favorably to other regions
CAGR = 4.6 %
The Rocky Mountains gas production has increase by nearly 31% from 10.4 bcfd in 2000 to 13.6 bcfd in 2006
Rockies region is a major contributor to US supply and now accounts for nearly 25% of total US onshore output
Growth driven by unconventional production:
Tight gas in the Greater Green River and Uinta-Piceance basins
CBM in the Powder River and Raton basins
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2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006
20%
21%
22%
23%
24%
25%
Rockies (bcfd) % of US onshore
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Unconventionals are fundamental to Rockies future production
Unconventional resources accounted for about 74% of Rockies gas production in 2000
Last year, that portion had risen to 82% and could be as much as 88% by 2011
Tight gas is increasing by 30% from 2007 through 2011
CBM shows growth of 6% through 2011
This profile is based on commercial unconstrained 2P production
0
2
4
6
8
10
12
14
16
18
2000 2002 2004 2006 2008 2010
bcfd
Tight Gas CBM Conventional Shale Gas
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Greater Green River becomes the largest producing basin in 2008
Steady growth of 0.9 bcfd projected between 2007 and 2011
Driven by giant tight gas projects: Pinedale, Jonah, Wamsutter
Production from these projects expected to provide 67% of basin production by 2011
Development of emerging plays could contribute to further production growth: Vermillion, Atlantic Rim
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2
4
6
8
10
12
14
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18
2000 2002 2004 2006 2008 2010
bcfd
Gtr. Green River Rockies
CAGR = 5.3%
CAGR = 5.1 %
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Uinta-Piceance is the fastest growing basin in the region
The Uinta-Piceance Basin shows the largest production growth in the Rockies – increasing by 1.4 bcfd through 2011
Growth primarily from the Mesaverde tight gas play in the Piceance Basin’s Valley and Highland regions.
In the Uinta Basin, production growth driven by ongoing expansion of Natural Buttes tight gas field
0
2
4
6
8
10
12
14
16
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2000 2002 2004 2006 2008 2010
bcfd
Uinta-Piceance Rockies
CAGR = 5.1 %
CAGR = 18%
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Powder River has strong growth on smaller volumes
Production from the Powder River Basin expected to grow by 260 mmcfd through 2011
Growth from the Powder River driven by ongoing development of the Big George coals
Current litigation surrounding disposal of CBM has potential to impact development
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2
4
6
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10
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14
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18
2000 2002 2004 2006 2008 2010
bcfd
Pow der River Rockies
CAGR = 5.1 %
CAGR = 9%
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Lots of activity in other basins
San Juan
Production in 2007 around 4.3 bcfd – largest producing basin
Overall gas production declines by 4% through 2011
Production from CBM relatively flat reflecting infill drilling of Fruitland coalbeds
Denver-Julesburg
2007 production of around 678 mmcfd – majority tight gas from Wattenberg
Marginal growth of 4% through 2011
Reflects large volume of development projects and workovers
Raton
CBM Production of around 360 mmcfd in 2007
Expected to grow by 16% through 2011
Reflects accelerated development of the Raton and Vermejo coals
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Key Issues and Trends
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Rig count cycles and costs
320
330
340
350
360
370
380
390
400
410
420
Jan-06 Apr-06 Jun-06 Sep-06 Dec-06 Mar-07
Source: www.bakerhughes.com
17 year peak at 406 rigs
"soft landing"
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50
100
150
200
250
300
350
400
450
1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: www.bakerhughes.com
"Foothills""Mountains"
"Peak?"
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Regulation still the largest obstacle to development
A number of ‘battles’ ongoing regarding disposal of CBM water in the Powder River
Development would be severely restricted if regulation passed
Economic Impact from stopping drilling could result in billions of lost revenue
Lengthy regulatory process continues to hinder development
Atlantic Rim CBM – Initial development proposal submitted in May 2001. Final ROD submitted to Washington in March 2007
Jonah Field – three years to issue ROD relating to the Jonah Infill Drilling Project
Extent of regional opposition to industry
State government: In Colorado, six energy bills pending or recently approved
The extent of opposition apparent when comparing with other onshore regions
Wide range of organizations opposed to oil and gas development: Opposition to proposed drilling in the Wyoming Range includes the United Steelworkers Union
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Rockies Oil Differentials – a trend with a complicated explanation
40%
50%
60%
70%
80%
90%
100%
110%
120%
1/7/2004 7/7/2004 1/7/2005 7/7/2005 1/7/2006 7/7/2006 1/7/2007
WTI Williston Sweet Williston Sour WY Sour WY Sweet W. Colorado
"Stable" Differentials
Downward Trending Differentials
Extreme Volatility
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Rockies Gas Differentials – Long-run view
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05
HH CIG OPAL Cheyenne Questar San Juan NW, WY Pool NW, S of GRV
Historical Minimums
Differentials > HH
San Juan Deviation
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Rockies Gas Differentials – Short-run view
2.00
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8.00
9.00
10.00
Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07
CIG Opal Questar Cheyenne Northwest, WY NW, Sth. of GRV El Paso, San Juan Henry Hub
"Consistent"
"Narrowing"
"Inconsistent"
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Rockies Differentials – Is it really all about Rockies Express?
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8.00
10.00
12.00
14.00
Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07
HH CIG Cheyenne San Juan
Minimum Spreads
Maximum Spreads
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