U.S. Oil & Gas Industry Chartbook BBVA Research USA Houston, TX July 2015 DISCLAIMER This document was prepared by Banco Bilbao Vizcaya Argentaria s (BBVA) BBVA Research U.S. on behalf of itself and its affiliated companies (each BBVA Group Company) for distribution in the United States and the rest of the world and is provided for information purposes only. Within the US, BBVA operates primarily through its subsidiary Compass Bank. The information, opinions, estimates and forecasts contained herein refer to the specific date and are subject to changes without notice due to market fluctuations. The information, opinions, estimates and forecasts contained in this document have been gathered or obtained from public sources, believed to be correct by the Company concerning their accuracy, completeness, and/or correctness. This document is not an offer to sell or a solicitation to acquire ordisposeofan interest in securities.
Bottom Line After two months of relative stability, crude prices went down again due to over-supply concerns Both production and inventories continued to expand despite the downward trend in rig count and capital expenditures Iran s nuclear deal with the P5+1 could add further pressure on crude prices as Iran revitalizes production and boosts exports However, the impact will happen at a gradual pace and will be subjected to significant uncertainty (see: U.S. Negotiates Historical Deal with Iran) We expect U.S. crude oil production to decline by early next year, due to the combined effect of low prices and declining investments (see: The Dynamics of Crude Oil Production)
Spot Prices WTI Spot Price (avg, $/bbl) 120 100 Libyan production increases by more than 300% from June 2014. Iraqi production increases by 24% from previous year. 80 60 OPEC announces weaker demand & U.S. production reaches record high Nuclear deal between Iran and P5+1 40 20 0 EIA cuts its oil price forecasts Saudi Arabia refusal to cut production WTI at $50.10 as of June 22, 2015 Rig count falls to lowest level since June 2009 3
Spot Prices Crude Oil and Natural Gas Spot Prices 160 140 U.S. economy expands 2.9% between 2004-2007 Great Recession U.S. production of crude oil goes from 4.9 million B/D to 9 million B/D 18 16 120 14 100 80 60 40 Cushing OK WTI Spot Price FOB (Dollars per Barrel), lhs Natural Gas Price, Henry Hub, LA {EIA} ($/mmbtu), rhs 12 10 8 6 4 20 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 4
Prices EIA: Oil and Natural Gas Forecast 110 6.5 100 90 80 70 60 50 40 30 20 Spot Crude Price: West Texas Intermediate ($/bbl, WSJ), lhs Henry Hub Spot Price ($/mmbtu), rhs 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Projections are generated by simulation of the EIA Regional Short-Term Energy Model Source: Energy Information Administration/ Haver Analytics 5
Futures Prices WTI Futures ($/bbl) 110 100 90 80 1st expiring contract (nearby) 2-month 3-month 4-month 6-month 1-year 2-year 70 60 50 40 6
Futures Prices Natural Gas Futures ($/mmbtu) 5.0 4.5 4.0 3.5 3.0 2.5 1st expiring contract (nearby) 3 months ahead 6 months ahead 2.0 7
Supply and Demand Global Oil Supply and Demand Balance (mmbbl/day) 4 3 2 1 0-1 -2-3 6-month MA -4 2010 2011 2012 2013 2014 2015 8
Investment U.S. Real Private Fixed Investment: Mining Exploration/Shafts/Wells, % Change (SAAR) 100 80 60 40 20 0-20 -40-60 -80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 9
Private Fixed Investment Contributions to % Change by Type of Structure (SAAR, %) 1.00 0.80 0.60 0.40 0.20 0.00-0.20-0.40 Other structures Mining exploration, shafts & wells -0.60-0.80-1.00 Power and communication Manufacturing Commercial/ Healthcare 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 10
Rig Count U.S. Active Rig Count (units) 1400 1200 1000 800 Horizontal Vertical 600 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 11
Rig Count Rig Count Productivity (bbl/day) 700 Bakken 600 Eagle Ford Haynesville 500 Marcellus Niobara 400 Permian Utica 300 200 100-2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Energy Information Administration 12
Production U.S. Crude Oil Field Production (mmbbl/day) 12 10 Texas U.S. 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 13
Production OPEC Pledged Production (mmbbl/day) 30000 28000 26000 24000 22000 20000 14
Production Simulated Crude Oil Production (mmbbl/day) 10.6 10.4 10.2 10 9.8 9.6 9.4 9.2 9 8.8 Crude oil prod. forecast Crude oil prod. forecast (lower bound) Crude oil prod. forecast (upper bound) 15
Production Natural Gas Marketed Production Forecast (billion cubic feet/day) 85 80 75 70 65 60 55 50 16 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Source: Energy Information Administration
Inventories U.S. Stocks of Crude Oil Excl. SPR (eop, thousand barrels) 600000 500000 400000 300000 200000 100000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 17
Inventories U.S. Stocks of Natural Gas (SA, End of WK, billion cubic feet) 4500 4000 3500 3000 2500 2000 1500 1000 18 2012 2013 2014 2015 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net Imports U.S. Production and Net Imports of Crude Oil (mmbbl/month) 350 Net Imports Production 300 250 200 150 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 19
Exchange Rate WTI ($/bbl) and U.S. Dollar Exchange Rate (Mar-73=100) 160 100 140 120 95 100 80 90 60 40 WTI 20 Real Broad Trade-Weighted 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 85 80 20
Debt High Yield Bonds (option adjusted spreads relative to U.S. treasuries) 1200 1000 800 600 400 200 0 21 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Energy Total Source: Bloomberg
Debt Median Net Debt to EBITDA 2.5 Selected E&P companies 2.0 Dow Jones Industrial Average 1.5 1.0 0.5 0.0 Source: BBVA Research & Bloomberg 22
Debt E&P Free Cash Flows (Bill.$) 20 10 - (10) (20) (30) (40) (50) (60) Source: BBVA Research & Bloomberg 23 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Stock Markets S&P Daily Stock Market Capitalization (Bill.$) 20000 19000 18000 17000 16000 15000 14000 550 500 450 400 350 300 250 200 24 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 S&P 500 (lhs) E&P Index (rhs)
Iran Selected Indicators and World Ranking Value Ranking GDP (2014) $415.3 billion 28 th GDP per Capita (2014) $16,500 96 th Population Size (2014) 80.8 million 19 th Imports (2007) 20% of GDP 209 th Exports (2007) 29.9% of GDP 141 st Crude Oil Production (2014) 2.8 million BBL/day 7 th Oil Exports (2013) 2.2 million BBL/day 6 th Oil Reserves (2014) 157.3 billion BBL 4 th Natural Gas Reserves (2014) 1,194 cubic Ft 2 nd Source: BBVA Research, World Bank, CIA, EIA, Haver Analytics 25
Iran Oil production and GDP growth 7000 Oil (Thou. Bbl/day) GDP (%, rhs) 6000 5000 4000 3000 2000 1000 0 20 15 10 5 0-5 -10-15 26 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U.S. Oil & Gas Industry Chartbook BBVA Research USA Houston, TX July 2015 DISCLAIMER This document was prepared by Banco Bilbao Vizcaya Argentaria s (BBVA) BBVA Research U.S. on behalf of itself and its affiliated companies (each BBVA Group Company) for distribution in the United States and the rest of the world and is provided for information purposes only. Within the US, BBVA operates primarily through its subsidiary Compass Bank. The information, opinions, estimates and forecasts contained herein refer to the specific date and are subject to changes without notice due to market fluctuations. The information, opinions, estimates and forecasts contained in this document have been gathered or obtained from public sources, believed to be correct by the Company concerning their accuracy, completeness, and/or correctness. This document is not an offer to sell or a solicitation to acquire ordisposeofan interest in securities.