U.S. Oil & Gas Industry Chartbook BBVA Research USA Houston, TX August 2015 DISCLAIMER This document was prepared by Banco Bilbao Vizcaya (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 In August, the price of crude oil dropped to its lowest level since March 2009 as the oil supply glut continues Market sentiment is on the downside as indicated by the decline in futures prices. Last month, the total active rig count fell to its lowest level since January 2003; we expect a steady decline in crude oil production by early 2016 (see: The Dynamics of Crude Oil Production) In July, Texas employment in mining and logging experienced its biggest YoY decline since March 2010 The Obama administration approved limited crude oil trading with Mexico, which could possibly lead to further loosening of the export ban and an improved trade balance, although the impact on domestic fuel prices is uncertain
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 China devalues its currency 40 20 0 EIA cuts its oil price forecasts Saudi Arabia refusal to cut production Rig count falls to lowest level since January 2003 WTI at $41.14 as of August 20, 2015 3
Spot Prices Crude Oil and Natural Gas Spot Prices 160 140 120 100 80 60 40 20 U.S. economy expands 2.9% between 2004-2007 Great Recession U.S. production of crude oil goes from 5.2 million B/D to 9.6 million B/D Cushing OK WTI Spot Price FOB (Dollars per Barrel), lhs Natural Gas Price, Henry Hub, LA {EIA} ($/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 ($/bbl) 110 100 90 80 1st expiring contract (nearby) 2-month 3-month 4-month 6-month 1-year 2-year 70 60 50 40 5
Forecasts EIA: Oil and Natural Gas Forecast 110 100 90 80 70 60 50 40 30 20 Spot Crude Price: West Texas Intermediate ($/bbl, WSJ), lhs Henry Hub Spot Price ($/mmbtu), rhs 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Projections are generated by simulation of the EIA Regional Short-Term Energy Model Source: Energy Information Administration/ Haver Analytics 6
Futures Prices Natural Gas Futures ($/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 -4 6-month MA -5 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) 12 10 8 North Dakota Texas U.S. 6 4 2 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) 700 600 500 400 300 Bakken Eagle Ford Haynesville Marcellus Niobara Permian Utica 200 100-2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Energy Information Administration 12
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 13
Private Fixed Investment Contributions to % Change by Type of Structure (SAAR, %) 1.00 0.80 0.60 0.40 0.20 0.00-0.20-0.40-0.60 Other structures Mining exploration, shafts & wells Power and communication Manufacturing Commercial/ Healthcare 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 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) abr-15 may-15 jun-15 jul-15 ago-15 sep-15 oct-15 nov-15 dic-15 ene-16 feb-16 mar-16 15
Inventories U.S. Stocks of Crude Oil Excl. SPR (EOP, thousand barrels) 500,000 480,000 460,000 440,000 420,000 400,000 380,000 360,000 340,000 320,000 300,000 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
Net Imports U.S. Production and Net Imports of Natural Gas (Bill. CF) 400 350 300 250 200 150 100 50 Net Imports Production 3000 2500 2000 1500 1000 500 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 19
Exchange Rate WTI ($/bbl) and U.S. Dollar Exchange Rate (Mar-73=100) 160 WTI 140 Real Broad Trade-Weighted 120 100 95 100 80 90 60 40 85 20 0 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Debt High Yield Bonds (option adjusted spreads relative to U.S. treasuries) 1200 1000 800 600 Energy Total 400 200 0 Source: Bloomberg 21
Debt Median Net Debt to EBITDA 2.5 Selected E&P companies 2.0 Dow Jones Industrial Average 1.5 1.0 0.5 0.0 Source: BBVA Research & Bloomberg 22
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Debt E&P Free Cash Flows (Bill.$) 20 10 - (10) (20) (30) (40) (50) (60) Source: BBVA Research & Bloomberg 23
Stock Markets S&P Daily Stock Market Capitalization (Bill.$) 20000 19000 18000 17000 550 500 450 400 350 16000 15000 S&P 500 (lhs) E&P Index (rhs) 300 250 14000 200 24
4.0 Gasoline Retail Gasoline Price ($/gallon) 3.5 3.0 2.5 2.0 1.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 25
Gasoline Gasoline Prime Supplier Sales Volume (Mil. Gallons/Day) 320 315 310 305 300 295 Regular Premium (rhs) 41 40 39 38 37 36 35 290 34 26
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 27
Texas Employment YoY Change in Employees 80 60 40 Texas (SA, Thous) Jul-13 Jul-14 Jul-15 20 0-20 -40 28
U.S. Oil & Gas Industry Chartbook BBVA Research USA Houston, TX August 2015 DISCLAIMER This document was prepared by Banco Bilbao Vizcaya (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.