Benposium Volatility, Supply and Demand May 15, 2013 Tony Chovanec www.enterpriseproducts.com Vice President, Fundamentals All rights reserved. Enterprise Products Partners L.P.
Enterprise Company Overview Largest publicly traded energy partnership with an enterprise value of approximately 70 billion 64th on Fortune 500; 226th on Fortune Global 500 Integrated midstream energy system serving producers and…
EPD Portfolio of Integrated Assets Major Asset Overview 50,000 miles of natural gas, NGL, crude oil, refined 21 NGL & Propylene fractionators products and petrochemical pipelines 6 offshore hub platforms 200 MMBbls of NGL, refined…
Existing Wells and Shale Plays Shales: Source Rock of Conventional Oil & Gas Its No Coincidence EPD Pipelines Gas Crude Oil Liquids (NGL & Products) Shale Plays Existing North American Production 0 250 500 Miles Oil Gas…
Agenda Dissecting the Formula for Calculating Volatility Source: Wikipedia All rights reserved. Enterprise Products Partners L.P. 6
Volatility: Warm up Is This a Volatile Market All rights reserved. Enterprise Products Partners L.P. 7
Volatility: Warm up Is This a Volatile Market All rights reserved. Enterprise Products Partners L.P. 8
Volatility: Warm up Which price scenario is more volatile If so, by what factor do you think 2 times, 4 times, 10 times If you only look at the market on days 1 and 100, do you really care All rights reserved. Enterprise Products…
Answer Using 20-day volatility, prices are at least 4 times more volatile under Scenario 2 than Scenario 1 If you only look at the market on days 1 and 100, do really care All rights reserved. Enterprise Products Partners L.P. 10
Econ 101: Cost of Incremental Supply and Volatility Unconstrained supply yields less volatile prices Storable vs. un-storable commodities Diversified supply vs. single point supply failure Diversified demand such as substitution of…
NYMEX WTI 30-day Volatility Implied volatility is now 25%, down from historical levels of 4050%, or more Despite recent ups and downs, volatility is still subdued Source: NYMEX All rights reserved. Enterprise Products…
NYMEX Natural Gas 30-day Volatility Implied volatility historically was 5070%, now it is trading about 35% in the options market Despite recent price recent ups and downs, volatility is still subdued Source: NYMEX All…
NG Cash vs. Prompt Futures Spread Another Gauge of Volatility Ample supply Increased storage & deliverability Diversification of demand (coal switching, industrial, etc.) Henry Hub Cash vs. NYMEX Prompt Sources: NYMEX & Gas…
NWPL Cash Prices and 30-day Volatility Access to ample supply REX and Bison pipelines provided better integration into the national grid (Midwest and Eastern markets) Not at the mercy of Western markets only, such as California and…
Crude Oil and Natural Gas Prices Moving in Very Different Directions 160 16 140 Historical Forecast 14 120 12 Natural Nat Gas 100 10 /Bbl - /Bbl Gas - /MMBtu 80 8 WTI /MMBtu WTI 60 6 40 4 20 2…
Supply Fundamentals All rights reserved. Enterprise Products Partners L.P. 17
Huge Shift from Gas to Oil Drilling Baker Hughes Rig Counts Gas rigs down 561 (60%) and Oil rigs up 277 (26%) in last 18 months Total U.S. Gas Total U.S. Oil Sources: Baker Hughes and EPD Fundamentals All rights reserved.…
Both Lean Gas and Rich Gas Rigs have Declined Precipitously Baker Hughes Rig Counts Rich Gas rigs down 273 (57%) & Lean Hz Gas rigs down 163 (65%) & Other Gas rigs down 125 (62%) in last 18 months Sources: Baker Hughes and EPD…
Plentiful Supply Available Below 5 Gas Price Required for 20% Before Income Tax (BFIT) Returns Potential GasIncludes Additions 25 to 50 Bcf/d by 2025 NGL Upgrade (if any) 1 to 4 Potential gas 2 to 3 Bcf/d additions 2012 1 to 2…
Natural Gas Oriented Producers Equities Suffering with Low Prices (2010Today) S&P 500 Gas-Oriented Producers Sources: NYSE and EPD Fundamentals All rights reserved. Enterprise Products Partners L.P. 21
Understanding Profitability and Producer Incentives Comparison of NG Values /Mcf of Gas 7.0 6.5 6.29/Mcf 5% Ethane 0.31 6.0 Nat. Gasoline 0.43 5.5 4.98/Mcf Iso Butane 0.55 5.0 0.8% Ethane 0.04 Nat. Gasoline 0.31 35% Normal…
Rich Gas Will Continue to Dominate Source: EPD Fundamentals All rights reserved. Enterprise Products Partners L.P. 23
EPD View of U.S. Supply Potential Assuming Sufficient Markets Gas NGLs Ethane Propane Butanes C5+ (Bcf/d) (MBPD) (MBPD) (MBPD) (MBPD) (MBPD) Current (Feb-13) 69.7 2,453 949 765 428 312 2015 70.0 70.8 3,645 3,790 1,670 1,740 1,000…
Demand Fundamentals All rights reserved. Enterprise Products Partners L.P. 25
NG Demand Growth Next 57 Years Power Generation, Industrial and Exports Oil Sands (Demand) 1.01.5 RC NE 0.71.5 EG West 1.0 MW EG EG 1.0 2.0 SE Gulf EG EG 1.0 Power Generation* 4.07.0 1.0 Industrial / Chems 2.04.0…
The Importance of Exports What If we had a No Export Scenario for Propane Propane Inventory Forecast MMB (excludes Propylene) 140 Without exports, inventory overhang 2012 Inventories without likely Devastating to Entire Value Chain…
U.S. PetChems: Retooling and Expanding Announced Incremental C2 Demand Ranges from 600750 MBPD CP Chemical Dow Chemical ExxonMobil CEO announced permits Filed permits to expand 4 billion investment to filed for 1.5 MM mt/yr build 1.5…
U.S. Ethylene Crackers: Significant Global Cost Advantage Using an average ethylene plant (1.5 billion lbs. per year), 70 a 40 cent per lb. margin advantage is Oct-2005 Current 600MM per year incremental margin for a single plant 60…
Its Not Just Gas / NGLs 8 MMBPD Crude Oil Increase (2008 to 2020) Canada +2.35 Williston +1.25 CA / AK Rockies NE U.S. 0.36 +0.22 +0.43 Mid-Cont. +0.41 North of Cushing / 4.3 MMBPD Permian South of Cushing / Gulf Coast…
U.S. Petroleum Imports A Very Different Balance in Just 5 Years U.S. oil imports from outside of North America have fallen by 2.0 MMBPD while the U.S. has moved Includes oxygenates and blend stocks from a net refined product…
Historical Crude Price Projections Do We Have a New Normal 160 Jul 2008 140 120 Actual Jan 2008 2009 to Current New Normal 100 80 Jan 2006 60 Jan 2009 40 2000 to 2004 End of Cheap Crude 20 0 Jun02…
Enterprise Connectivity to USGC EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header Source: EPD Fundamentals All rights reserved. Enterprise Products Partners L.P. 33
Enterprise Connectivity to USGC Ethylene Plants (96% of U.S. Capacity) USGC is home to 1.1MMBPD of Petchem demand for Ethane EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header EPD Petrochemical Customers…
Enterprise Connectivity to USGC Ethylene Plants (96% of U.S. Capacity) Petchems planning 250 MBPD of ethane demand through expansion and conversions EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header EPD…
Energy Intensive Industries Adding Significant USGC Capacity Numerous other industries (Ammonia, Steel and Methanol) are also adding USGC capacity EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header EPD…
Then, Add World Scale Petrochemical Additions Last, but not least, six world scale ethylene plants are also planned Announced World Scale Ethylene Plant EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header EPD…
Is This What An Energy Renaissance Looks Like Several LNG Export facilities are planned near EPD Assets Announced World Scale Ethylene Plant EPD Gas Pipelines EPD Liquid Pipelines Proposed Aegis Ethane Header EPD Petrochemical…
In Closing Science: shale rocks are the source of conventional reserves Volatility: with increased supplies of both oil and natural gas, price volatility has fallen considerably Natural Gas: resources have now moved to on the shelf…
Thank You All rights reserved. Enterprise Products Partners L.P.
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