U.S. Oil & Gas Industry Chartbook BBVA Research USA Houston, TX September 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 or dispose of an interest in securities.
Bottom Line Prices may rise upon expectations that the Fed could increase interest rates before year end. The total active rig count continues to plummet and is at its lowest level since January 2003. The resiliency of U.S. production is easing, although levels remain high. We expect a steady decline in production going forward. Pressures on profitability will continue to result in consolidation and further cuts in capital spending and jobs by producers. The House will consider a bill that lifts the four-decade old ban on crude oil exports, with the potential to improve the trade balance and impact domestic fuel prices. Uncertainty about China and other emerging markets may intensify downward risks to prices.
Spot Prices WTI Spot Price (avg, $/bbl) 120 100 80 60 EIA cuts its oil price forecasts Saudi Arabia refusal to cut production Nuclear deal between Iran and P5+1 OPEC stands ready to talk to all other producers 40 20 0 Libyan production increases by more than 300% from June 2014. Iraqi production increases by 24% from previous year. OPEC announces weaker demand & U.S. production reaches record high Concerns on Chinese economy WTI at $44.91 as of September 24, 2015 3
Spot Prices Crude Oil and Natural Gas Spot Prices 160 140 120 100 80 60 40 20 U.S. economy expands 2.9% between 2004-2007 Great Recession U.S. production of crude oil goes from 5.2 million B/D to 9.3 million B/D Cushing OK WTI Spot Price FOB (Dollars per Barrel), lhs Natural Gas Price, Henry Hub, LA {EIA} ($/mmbtu), rhs 18 16 14 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 4
Futures Prices WTI Futures ($/bbl) 100 90 80 70 1st expiring contract (nearby) 2-month 3-month 4-month 6-month 1-year 2-year 60 50 40 30 5
Futures Prices Natural Gas Futures ($/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 6
Forecasts EIA: Oil and Natural Gas Forecast 110 100 90 80 70 60 50 40 30 20 Spot Crude Price: West Texas Intermediate ($/bbl, WSJ), lhs Henry Hub Spot Price ($/mmbtu), rhs 6.5 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 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
Production Production for Top Crude Oil Producers (Thous. B/D) 12000 10000 8000 6000 4000 2000 USA Saudi Arabia Russia Iraq 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 9
Production U.S. Crude Oil Field Production (mmbbl/day) 10 9 8 North Dakota Texas 7 U.S. 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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) 900 800 Bakken Eagle Ford Haynesville Marcellus Niobara Permian Utica 700 600 500 400 300 200 100-2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Energy Information Administration 12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 Rig Count Rig Count Productivity (bbl/day) 900 800 700 600 500 400 300 200 100 0 Bakken Productivity Eagle Ford Productivity Bakken Filtered Trend Eagle Ford Filtered Trend Rig Productivity Cycle 145 125 105 85 65 45 25 5-15 -35-55 -75 Bakken Eagle Ford 13
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 14
Investment U.S. Real Private Fixed Investment: Contributions to % Change by Type of Structure (SAAR, %) 1.0 0.8 0.6 0.4 0.2 0.0-0.2-0.4-0.6 Other structures Mining exploration, shafts & wells Power and communication Manufacturing Commercial/ Healthcare 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 15
Inventories U.S. Stocks of Crude Oil Excl. SPR (EOP, million barrels) 500 480 460 440 420 400 380 360 340 320 300 2010 2011 2012 2013 2014 2015 16
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Inventories U.S. Stocks of Natural Gas (SA, End of WK, billion cubic feet) 4500 4000 3500 3000 2500 2000 1500 1000 17
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 18
Exchange Rate WTI ($/bbl) and U.S. Dollar Exchange Rate (Mar-73=100) 160 WTI 140 Real Broad Trade-Weighted 120 100 95 100 80 90 60 40 85 20 0 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 19
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Debt High Yield Bonds (option adjusted spreads relative to U.S. treasuries) 1400 1200 1000 800 Energy Total 600 400 200 0 Source: Bloomberg 20
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Stock Markets S&P Daily Stock Market Capitalization (Bill.$) 20000 19000 18000 17000 550 500 450 400 350 16000 15000 S&P 500 (lhs) E&P Index (rhs) 300 250 14000 200 21
Gasoline Retail Gasoline Price ($/gallon) 4.0 3.5 3.0 2.5 2.0 1.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 22
Gasoline Gasoline Prime Supplier Sales Volume (Mil. Gallons/Day) 330 325 320 315 310 305 300 295 290 Regular Premium (rhs) 42 41 40 39 38 37 36 35 34 23
Employment Change in Mining and Logging Employment (SA, Thous) 20 15 10 5 0-5 -10-15 -20-25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 24
Employment YoY Change in Employees Texas (SA, Thous) 80 60 40 Aug-13 Aug-14 Aug-15 20 0-20 -40 25
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