Shale Economics And Opportunities

Walden Associates

Technical, Regulatory and Public Policy Issues

Hydrofracking Shale for New Energy

Economics and Opportunities

Walden Associates

*Henry Hub trading price set by NY Mercantile Exchange (NYMEX)

Global gas market still many years away

Game Changer

Source: YCHARTS.com

Walden Associates

Price comparison normalized to power output will lead to conversion to NGVs and fueling station construction.

Diesel Price Compared to Natural Gas

Diesel Spread over Natural Gas

(dollars per gallon equivalent)

Walden Associates

Figure indicates the change in the way we generate electricity in the United States where this graph will only accelerate in the future with the conversion – this spells Opportunities.

Source: EIA

Power Generation

Walden Associates

Natural Gas leads the way into the future Source: EIA

Projected New Power Projects

Walden Associates

Current production trends for natural gas indicate the United States will become a new exporter of gas by 2020, if not sooner.

Source: EIA

Shale Gas Makes Us Net Energy Export in 10 Years

U.S. Dry Natural Gas Production by source, 1990-2050 *trillion cubic feet

Walden Associates

2010 2015 2035

Jobs 600,000 870,000 1,600,000

GDP Contribution 1 $76 billion $118 billion $231 billion

% of GDP 0.5% 0.7% 0.8%

CapEx/year 1 $33 billion $49 billion $127 billion

Production (Qcf) 5.8 9.9 18.9

% of natural gas production

27% 43% 60%

Notes: 1 – constant 2010 dollars Source: HIS, EIA and EP estimates

Sector poised to grow well into the future

Massive Positive Economic Impact

Walden Associates

2010 2015 2035

Drilling $ 9,937 $ 15,875 $ 46,722

Completion 12,421 19,844 58,402

Facilities 2,484 3,969 11,680

Infrastruction 8,419 9,019 9,786

TOTAL $ 33,260 $ 48,706 $ 126,591

Annual Capital Expenditures by Type (Millions of 2010 Dollars)

Note: Shell announced on March 13, 2013 building a $2 billion ethane

cracker in Beaver County, PA. Total investment $4 - $6 billion. Source: HIS, EIA and EP estimates

1.9 Trillion in Cumulative Investments from 2010 - 2035

Walden Associates

• Upstream – Exploration and Production

• Midstream – Transportation, Pipelines, Compressor Stations and Storage

• Downstream – Processing and purifying of raw gas, petrochemical plants – marketing and distribution

Where is the Money Spent?

Walden Associates

• Drilling play mapping – plot streams/surface waters

• Locate wells – potable, irrigation, oil/gas

• Pre-drilling groundwater assessment

• Ecological and wetlands assessment

• Site planning and access road layout

• GIS mapping to aid in well layout/spacing and royalty allocation

Pre-Drilling Work Consideration

Walden Associates

• Development of SWPPP and SPDES permit

• Development of SPCC plan for drilling pad

• Prepare water management and flowback handling plan

• Prepare BUD if applicable for cutting handling

• Erosion control and anti-sedimentation plans

• Site restoration plan

• File the drilling permit and supporting drawing set

• Wetlands mitigation plans

Pre-Drilling Permitting Activities

Walden Associates

• Construction design bidding and bid award

• Project management and construction oversight

• Monitor effectiveness of stormwater BMPs – install and update

• Development of site restoration plans and monitoring

Pad Development and Monitoring