Brian A. Habacivch Constellation, Commodities Management Group October 20, 2018

Transcription

1 North American Energy Outlook The Transformative Role of Shale in the Global Hydrocarbons Market Why It Matters to Commercial, Institutional, and Industrial End Users Brian A. Habacivch Constellation, Commodities Management Group October 20, 2018

2 Constellation: Who We Are Approximately 2.2 million customers served #1 C&I Power provider in the US Continually investing in emerging energy technologies Headquarters: Baltimore, MD Constellation is among the top 10 commercial solar developers *2016 data Delivering RECs for customers enabling them to avoid 1.2 million metric tons of GHG in 2015 Dedicated team of Regulatory, Market & Wholesale Experts Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC or Constellation Energy Services, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

3 Exelon s family of companies represents every stage of the energy value chain. 3 Generation Energy Sales & Services Transmission & Delivery Exelon Generation Generation Capacity: Constellation * Competitive C&I Load Served: Atlantic City Electric, BGE, ComEd, 32,720 MW 150 Annualized TWH (power) Delmarva Power, 688 Annualized BCF (natural gas) PECO and Pepco *Q data Competitive Energy Sales: Over 213k business & public sector customers Over 2 million residential customers Wholesale sales, dispatch, and delivery from Exelon s ~33 GW power generation portfolio Service: 10 million electric and natural gas customers 2017 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC or Constellation Energy Services, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

4 Natural Gas Prices and Electricity Prices are tied at the HIP 84% Correlated ERCOT IS CURRENTLY AN EXCEPTION TO HIGHLY CORRELATED GAS AND POWER PRICES 4 Presentation Title

5 THE BIG PICTURE

6 Shale Revolution Transformation: Has Made the U.S. Largest Natural Gas Producer in World Source: EIA, 6

7 Shale Revolution Transformation -- U.S. Crude Oil Production Growth Story Data sources: EIA 7

8 U.S. Crude Oil Production Global Rank in 2018 Data sources: EIA, Trading Economics.com/OPEC (Jan 2018) NOTE Crude Oil figures do not include OPEC condensate, OPEC NGL, Russian Condensate, Russian, NGL, or U.S. NGL, or bio fuels) 8

9 Shale Revolution has made the U.S. the largest NGL producer in the world. US NGL Production 9 Presentation Title

10 The U.S. The Emergent Hydrocarbon Superpower Hydrocarbon Superpowers -- Export 10 Presentation Title

11 EXPORTS The Shale Revolution -- U.S. Is Rising Star in Crude Oil Exports U.S. Current Crude Oil Exports million barrels per day Current estimated rank order of crude oil exporting countries: 1. Saudi Arabia 7.3 million bbls per day (CIA Factbook 2014 Crude Oil Exports) 2. Russia 5.1 million bbls per day (CIA Factbook 2016 Crude Oil Exports) 3. Iraq 2.8 million bbls per day (CIA Factbook 2014 Crude Oil Exports) 4. Canada 2.7 million bbls per day (CIA Factbook 2016 Crude Oil Exports) 5. Nigeria 2.3 million bbls per day (CIA Factbook 2014 Crude Oil Exports) 6. Angola 1.7 million bbls per day (CIA Factbook 2014 Crude Oil Exports) 7. Kuwait 1.7 million bbls per day (CIA Factbook 2014 Crude Oil Exports) Source: Source: EIA Weekly U.S. Exports of Crude Oil 2/16/

12 EXPORTS -- The Shale Revolution: U.S. Is Largest Exporter of Refined Petroleum Products in the World Data source: EIA 12

13 EXPORTS -- The Shale Revolution: NGL Exports Come of Age U.S. World s Largest Exporter of Propane March 2016: First U.S. ethane export terminal at Marcus Hook, PA begins exporting to Europe. September 2016: Second U.S. ethane export terminal begins exporting from Houston Ship Channel. In the past five years, U.S. exports of propane have grown ten fold. The Asian petrochemical sector is now the largest customer for U.S. exports. Data source: EIA 13

14 EXPORTS U.S. Rising Star in Global LNG Market U.S. LNG Export Capacity 10 Bcf/d by 2020 from projects currently under construction Source: Bentek The first cargo left Sabine Pass on February 24, 2016 bound for Brazil. Cove Point, MD; second U.S. LNG export terminal commenced deliveries March of 2018 Source: Constellation, FERC, Bentek, EIA 14

15 EXPORTS -- Cove Point Sends Its First LNG Delivery Cove Point is the second ever US LNG export facility to come on line since DOE approval was granted in 2017 Sabine Pass currently liquifying ~3 Bcf/d in Louisiana was the first Dominion has long-term contracts for the projects capacity secured with Gail India and Japan s Sumitomo. The first cargo left Sabine Pass on February 24, 2016 bound for Brazil. Owner and operator for the Cove Point LNG export facility, Dominion, announced on March 2 that the first vessel carrying US LNG has departed their new facility. The terminal was originally expected to come online late in The terminal consists of one train with nameplate capacity of turning 0.75 Bcf/d of dry gas to liquid (0.66 Bcf/d after operations, losses, etc.) with 7 tanks on-site to provide storage totaling 14.6 Bcf. Data sources: EIA, Dominion, Platts, NPR 15

16 EXPORTS --- China Signs 20 Year Deal For U.S. LNG Millions Tones Asia is a key market for incremental LNG demand, where prices have historically been linked to oil prices. Cheniere Energy signed its first long term contract (thru 2043) with China National Petroleum Corp (CPNC) for off take from its Corpus Christi train #3 facility (0.6 Bcf/day) The U.S. will see Cove Point, Cameron 1, Elba Island and Freeport 1 come online by end of 2018 for ~ Bcf/day. U.S. capacity will rise to 9 Bcf/day by 2019 but additional projects will require offtake agreements. Source: Cheniere Energy, EIA 16

17 EXPORTS -- New Pipeline Capacity Supporting U.S. NG Export Growth to Mexico Source: EIA, 17

18 NYMEX Natural Gas Forward Curve vs. Third Party Forecasts Source: NYMEX, EIA 18

19 $/MMBtu NYMEX Winter Strip Prices Natural Gas $4.50 $4.25 $4.00 $3.75 $3.50 $3.25 $3.00 $2.75 $2.50 NYMEX Winter Strips - 3 Year History $/MMBtu W18/19 W19/20 W20/21 W21/22 Current $3.17 $2.90 $2.76 $2.74 Y-o-Y -1% -4% -8% -10% vs. 3-yr Avg 0% -9% -15% -18% vs. All-time Max -75% -78% -79% -80% vs. All-time Low 17% 4% 2% 2% Winter 18/19 Winter 19/20 Winter 20/21 Winter 21/22 Note: Winter defined as November through March. Prices as of COB 10/25/ Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. Source: NYMEX 19

20 Summary The U.S. is undergoing a fundamental energy transformation. The U.S. is the emergent hydrocarbon superpower and global swing producer. The U.S. is the emergent energy exporting power. Natural Gas and Electric power prices are tied at the hip. The U.S. natural gas market is changing and new risks are presenting because of exports -- subject to global pricing forces very similar to crude oil. The potential for rising energy price volatility is back on the table. Energy prices in the forward markets are very low in nominal and real terms. Energy consumers should be very interested in forward energy prices and thinking more strategically. You cant be 100% Right Don t be 100% wrong 20 Presentation Title

21 Thank you. Brian A. Habacivch Principal, Constellation Energy, Commodities Management Group Connect on Linkedin Cell Phone

22 Disclaimer The information contained herein has been obtained from sources which Constellation NewEnergy, Inc. and/or Constellation NewEnergy-Gas Division, LLC (collectively, Constellation ) believes to be reliable. Constellation does not represent or warrant as to its accuracy or completeness. All representations and estimates included herein constitute Constellation s judgment as of the date of the presentation and may be subject to change without notice. This material has been prepared solely for informational purposes relating to our business as a physical energy provider. We are not providing advice regarding the value or advisability of trading in commodity interests as defined in the Commodity Exchange Act, 7 U.S.C. 1-25, et seq., as amended (the CEA ), including futures contracts, swaps or any other activity which would cause us or any of our affiliates to be considered a commodity trading advisor under the CEA. Constellation does not make and expressly disclaims, any express or implied guaranty, representation or warranty regarding any opinions or statements set forth herein. Constellation shall not be responsible for any reliance upon any information, opinions, or statements contained herein or for any omission or error of fact. All prices referenced herein are indicative and informational and do not connote the prices at which Constellation may be willing to transact, and the possible performance results of any product discussed herein are not necessarily indicative of future results. This material shall not be reproduced (in whole or in part) to any other person without the prior written approval of Constellation Constellation Energy Resources, LLC. The offerings described herein are those of Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted. 22