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INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC

Triple Double Advisors LLC · May 15, 2013 · 37 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 1
    Introduction & Energy Macro Review May 2013
  2. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 2
    Important Notice This notice is issued with and forms an integral part of information supplied in the form of either a printed document or in an audio visual presentation (in either case Information) and should be particularly noted in…
  3. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 3
    Introduction Triple Double Advisors' team of security analysts has dedicated their careers to the energy industry. We are fascinated by the industry's global scale and how the products of the energy sector make almost all other…
  4. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 4
    Our Team Arthur L. Smith, CFA Art founded Triple Double in August 2007 after he completed the sale of John S. Herold, Inc. to IHS. He serves as portfolio manager and oversees the firms energy research. From 1984 to 2007, Art was…
  5. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 5
    Energy Equities 5
  6. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 6
    Portfolios with Strong Yields and Prudent Risk Management 9.5% Estimated Call Premium Proceeds CPI Index = 2.0% 2 1) Current yields are calculated by annualizing the most recent dividend, distribution or interest…
  7. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 7
    Energy Portfolio Themes Energy Subsector Implications Exploration & Oil & Gas Service Integrated Pipelines Coal Refiners Production Prefer North Prefer Fee-Based Cautious of North American Refiners Surging North American Oil…
  8. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 8
    Energy Balanced Portfolio Diversified, Opportunistic Energy Exposure Invests in diverse energy equities, master limited partnerships and corporate bonds and is hedged using option strategies on a discretionary basis. The objective is to…
  9. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 9
    Energy Income Portfolio Quality Dividends with Downside Protection Selectively holds lower risk energy equities and master limited partnerships with above market yields and systematically utilizes collars to manage risk. It is well suited…
  10. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 10
    Energy Enhanced Income Portfolio Quality Dividends with Additional Income Selectively holds lower risk energy equities and master limited partnerships with robust yields and systematically sells out-of-the-money call options to enhance…
  11. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 11
    1Q 2013 Energy Sub-Sector Returns 1Q13 was a very strong quarter for energy equities. Refiners & Marketers continued their strong performance from 2012 and were once again the strongest performing energy sub-sector in 1Q2013.…
  12. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 12
    Crude Oil Fundamentals 12
  13. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 13
    Tracking U.S. Production Growth EIA U.S. Crude Oil Production 7,500 30% U.S. oil production continues to trend higher. In early 2013, U.S. oil 20% 7,000 production is up over 1.2 Mil. Bbl/Day (+19.8%) over 2012 levels. 10%…
  14. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 14
    Oil Supply and Demand Balance as of 1Q13 Current IEA Supply & Demand The IEA recently increased its estimate for non- Leading edge IEA estimates have reduced the 2013 call on OPEC 2013 supply growth to 1.1 Mil. Bbl/Day for a OPEC to…
  15. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 15
    U.S. Crude Inventories are High EIA U.S. Crude Inventory 390,000 15% 380,000 10% 370,000 5% 360,000 % Change from 2012 Thousand Bbls 350,000 0% 340,000 -5% U.S. oil inventory figures have 330,000 continued to…
  16. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 16
    But Other OECD Regional Inventories are Flat or Down IEA OECD Oil Inventory 1,020 20% 15% 1,000 10% % Change from 2012 980 5% Mil. Bbls 960 0% Although U.S. oil inventory figures are higher than 2012, -5% 940 OECD…
  17. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 17
    Natural Gas Fundamentals 17
  18. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 18
    Natural Gas Prices Rise Due to a Prolonged Winter NYMEX HH Natural Gas Forward Curves 5.0 4.8 4.6 4.4 4.2 /MMBtu 4.0 3.8 3.6 3.4 Approximate Starting Level of Gas to Coal 3.2 Electric Generation Switching at 3.35/…
  19. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 19
    Natural Gas Demand for Electric Generation is Very Price Sensitive Natural Gas v. Powder River Basin Switching Bands 5.00 Use Coal for Midwestern & Southeastern Electric Generation 4.50 4.00 /MMBtu 3.50 Fuel Mix Depends on…
  20. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 20
    Natural Gas Demand for Electric Generation Highlights Price Sensitivity EIA U.S. Electric Utility Natural Gas Consumption 40 50% 40% 35 30% 20% % Change from 2011 30 10% Bcf/Day 0% 25 -10% -20% Jan. 13 = 20.3…
  21. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 21
    2013 Natural Gas Inventory Levels are Much Improved EIA U.S Natural Gas Storage 4,000 40% 30% 3,500 20% % Change from 2012 10% 3,000 Bcf 0% 2,500 -10% -20% 2,000 Natural gas inventories are much improved from…
  22. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 22
    Natural Gas Rig Count Has Yet to Respond to Improved Prices Baker Hughes U.S. Gas Rig Count 1,000 0% 900 -10% 800 -20% % Drawdown Gas Rig Count 700 -30% 600 -40% Despite the improvement in short-term natural gas…
  23. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 23
    Natural Gas Rig Count Has Yet to Respond to Improved Prices EIA Form-914 Natural Gas Production 74 5% 4% 3% 72 2% % Change from 2012 1% Bcf/Day 70 0% -1% -2% 68 Despite the reduction in natural gas drilling rigs,…
  24. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 24
    U.S. Refining Fundamentals 24
  25. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 25
    Ingredients for Continued Strength in Refining Margins 1. Continuation of strong growth in U.S. oil production. Strong increases in U.S. oil production stresses exiting oil infrastructure and creates discounts for U.S. domestic crudes…
  26. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 26
    Product Exports Increase as U.S. Oil Product Demand Falls U.S. Total Oil Product Demand & Exports 23,000 22,000 21,000 000's Bbl/d 20,000 19,000 18,000 U.S. oil product exports of 3.6 Mil. have made up for the…
  27. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 27
    Few Crude Importers Still Buying at Brent Prices Source: EIA, Tudor Pickering Holt 27
  28. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 28
    April Challenges for Refiners The WTI-Brent spread that has contributed to strong margins for domestic refiners has shown some recent weakness. We believe that this compression of the spread has occurred for two reasons. First, 1Q13…
  29. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 29
    Brent WTI Spread Narrows Recently Brent - WTI Spread 120 25 115 20 110 105 Spread in /bbl 15 100 /bbl 95 10 90 85 5 80 75 0 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13…
  30. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 30
    Refiners Sourcing WTI Crude Experiencing Strong Margins NYMEX 3-2-1 Crack Spreads 45.0 100% 40.0 75% 35.0 50% 3-2-1 Crack Spread % Change from 2012 30.0 25% 25.0 0% 20.0 -25% 15.0 -50% 10.0 -75% 5.0 -100% J F M A M…
  31. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 31
    Crude Bottlenecks Migrating South Expected Date Pipeline Company Capacity Jan-13 Seaway Pipeline Enterprise/Enbridge 250 kb/d Mar-13 Longhorn Magellan 110 kb/d Apr-13 West Texas Gulf (WTG) Energy Transfer Partners 110 kb/d Apr-13…
  32. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 32
    Global LNG Review 32
  33. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 33
    LNG: LongTerm Supply 2011- 2020E LNG production (MMcf/d) 2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E CAGR Algeria 1,661 1,445 1,373 1,304 1,304 1,304 1,304 1,304 1,304 1,304 Egypt 846 686 617 555 555 555 555 555 555 555…
  34. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 34
    Demand Exceeds Supply Growth in Short-Term Year Over Year Change in LNG Supply & Demand 6 Supply Growth 5 Demand Growth Year Over Year Change in Bcf/Day 4 3 2 1 0 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E…
  35. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 35
    LNG: New Plants are Higher Cost Project complexity increasing: Newer LNG projects have tended to be more complex and thus higher cost for a variety of reasons: Coalbed methane projects require many more wells and infrastructure…
  36. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 36
    LNG: New Plants are Higher Cost Local content: Mandating of local content can create inefficiencies for projects. However, even in areas where local content is not mandated, project operators will tend to use a significant proportion…
  37. INTRODUCTION AND ENERGY MACRO REVIEW – Triple Double Advisors LLC – slide 37
    Future Projects Require High Breakeven-Prices Break-Even and Incremental Supply of LNG Projects 120 Evans Shoal Oil Price Required for Economic Break-Even 115 Pluto LNG 1 Abadi Arrow Brass 110 APLNG Greater Sunrise Angola…

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