CenterPoint Energy Services. Current Market Fundamentals June 27, 2013

Transcription

1 CenterPoint Energy Services Current Market Fundamentals June 27, 2013

2 CenterPoint Energy is one of the largest combined electric and natural gas delivery companies in the U.S. Asset portfolio CNP Footprint Electric transmission and distribution Natural gas distribution Pipeline and field services operations Competitive natural gas sales and services 5.4 million gas and electric customers Regulated operations in 6 states, natural gas sales and service in 20 states 8,720 employees $22.8 Billion assets, $7.4 Billion revenue (2012) Investment grade ratings Moody s, Fitch, S&P NYSE: CNP Dow Jones Utilities Index company Headquartered in Houston, TX Website: 2

3 CES is a competitive company operating in the deregulated energy market CES Regional Offices CenterPoint Energy Services provides customers with competitive gas supply with a customer retention rate of 95 percent. We work with a wide range of customers, from utilities and power generators to manufacturers and retail to small commercial and residential Choice programs. Our service offering extends across 20 states and serve customers within 53 unique utility territories. 3

4 Our Customers Note: Company logos are the trademarks of the respective companies.

5 2012: Year in Review Canadian exports to the U.S. fell as production declined. Foreign investment from national oil companies and LNG export projects imply this trend will continue in New Pipeline Projects In 2012, pipelines focused their activity on laterals and expansions rather than large, interstate projects. Several of the year s projects are highlighted in the map below. The U.S. experienced its warmest year on record. Kern River Mountain Pass Lateral Transco Bayonne Lateral Tennessee Line 300 Expansion Hurricane Sandy hit the East Cost, causing over $60 billion in damage and leaving 8 million households without electricity. Transco Mid-South Expansion Marcellus natural gas production grew by over 4 Bcf/d, helping offset production declines in other parts of the country. Nuclear plant outage prompts incremental gasfired electric generation. Producers continued to target oil in The number of rigs drilling natural gas wells declined by 47 percent. Meanwhile, the oil rig count increased by 11 percent. Energy Transfer Eagle Ford Mainline Expansion SONAR South System Expansion Hurricane Isaac shut in oil and gas production, but price response was muted. Low natural gas prices spurred record levels of coal-to-gas switching. In April, natural gas generated the same amount of electricity as coal for the first time ever. 5

6 Natural Gas SUPPLY

7 Abundance of Natural Gas Supply Natural Gas Production (Bcf/d) Natural Gas Rig Count Historical Natural Gas Production 1,800 1,600 1,400 1,200 1, Natural Gas Rig Count Source: EIA, Baker Hughes 7

8 Production Efficiency Gains Days to drill Wells Per Rig ,657 Lateral Length (in feet) 3,619 4,100 4,836 4,528 Wells in Production Production (in Bcfe) Well Costs ($ in millions) Source: Southwestern Energy, RBN Energy 8

9 Shale Geographic Overview Sabine Pass is the 1 st LNG import terminal to receive regulatory approval to export domestically sourced NG. Freeport becomes the 2 nd in May

10 Natural Gas WEATHER

11 Weather Review Feb 13 Mar 13 Apr 13 Feb 12 Mar 12 Apr 12 Source: HPRCC 11

12 Temperature Forecasts Jun 13 3-Month Source: NOAA 12

13 Natural Gas DEMAND

14 Natural Gas Demand Segments Bcf/d Residential and Commercial Electric Generation 10.0 Industrial 0.0 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Source: EIA 14

15 Yr/Yr Changes in Demand Bcf/d Res/Commercial Industrial EG ( 3.48 ) - (2) (4) (6) Jan Feb Mar April May Source: Wood Mackenzie Monthly Market Update May

16 Electric Generation Demand Bcf/d Forecast Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: EIA, PIRA Gas Flash Weekly 6/20/

17 Natural Gas STORAGE AND PRICES

18 Natural Gas Storage Levels Bcf 4,500 4,000 3,500 Last Year Current Year 5-yr Average 3,000 2,500 2,000 1,500 5-yr Range 1, Source: EIA 18

19 NYMEX Natural Gas Futures Curves $/MMBtu $6.50 Prompt Month $5.50 $4.50 $3.50 $ Year low $1.50 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Source: FutureSource, Clearport NYMEX 19

20 NYMEX Natural Gas Futures

21 NYMEX Prices $9.00 $8.00 Upper 95% confidence interval $7.00 $6.00 $/MMBtu $5.00 $4.00 NYMEX Futures $3.00 $2.00 $1.00 NYMEX Settlements Lower 95% confidence interval $0.00 Note: Confidence interval derived from options market information for the 5 trading days ending June 6, Intervals not calculated for months with sparse trading in near-the-money options contracts. 21

22 Long Term Demand Outlook

23 Growth Demand Segments Power Generation Industrial Revival Natural Gas Vehicles 23

24 POWER GENERATION DEMAND

25 Net Generation by Fuel 60% 50% Coal 40% 30% Natural Gas 20% Nuclear 10% 0% Source: EIA 25

26 Coal and Gas Compete on Price $20.00 $15.00 $10.00 Natural Gas $5.00 Coal $ Source: Clearport NYMEX and CAPP CES estimate 26

27 Coal s Regulatory Trainwreck Source: 27

28 Projected Coal Retirements Source: 28

29 Incremental Power Generation Demand Growth Projection Bcf/d 9 Current Demand of 21 Bcf/d + 8 Bcf/d = 29 Bcf/d in Incremental Power Generation Source: Wood Mackenzie North American Gas Service Spring

30 INDUSTRIAL REVIVAL

31 Industrial Demand is Rebounding Bcf/d Cold Winter + Low Storage Levels + Recession Price Shock Hurricanes Commodities Price Spike + Recession Source: EIA 31

32 US Prices Become More Attractive $/MMBtu Japan EU Union UK Henry Hub $16 $12 $8 $4 $ Note: Company logos are the trademarks of the respective companies Source: BP Statistical Review of World Energy June 2012, various company websites 32

33 Incremental Industrial Demand Growth Projection Bcf/d 6 Current Demand of 20 Bcf/d + 6 Bcf/d = 26 Bcf/d in Incremental Industrial Demand Source: Wood Mackenzie North American Gas Service Spring

34 NATURAL GAS VEHICLES

35 Which Comes First? Vehicles or Infrastructure? 35

36 Price Creates Incentive to Switch $/MMBtu $30 $25 $20 Crude Oil $15 $10 $5 shale Natural Gas $ Energy Policy Act of 92 set goals for alternative fueled vehicles LDC s attempt to pull NGV market demand Source: Clearport NYMEX 36

37 Global NGV Growth Millions of Vehicles Source: 37

38 Global Natural Gas Vehicle Growth by Region Millions of Vehicles 10 8 Asia-Pacific 38.7% 6 4 Latin America 14.8% 2 Europe 16.2% Africa 16.1% -1.2% North America Source: 38

39 Current Natural Gas Transportation Demand 2011 U.S. natural gas consumption totals 62 Bcf/d Residential Commercial Industrial Electric Power Transportation 19 Source: EIA Note: 2012 overall demand increased to 64 Bcf/d but Electric Power demand was at an all time high of 25 Bcf/d and it was 4 th warmest winter on record represents a more normal distribution. 39

40 Potential Vehicle Demand is Significant Light Duty Residential 40 Bcf/d Heavy Duty On-Road Logistics and Long Haul 10 Bcf/d Medium to Heavy Duty Public Transit, Refuse 5 Bcf/d Source: Bank of America Merrill Lynch 40

41 Current NGV Infrastructure Source: 41

42 Clean Energy Corridor Infrastructure (2011) Source: Clean Energy Fuels Corporation 42

43 Clean Energy Planned Completions by End of 2012 Source: Clean Energy Fuels Corporation 43

44 Why Natural Gas Vehicles Abundant Affordable American Clean Proven Estimated natural gas reserves provide over 100 more years of supply The more you drive the more you save with average savings of $1.50 per gallon, payback in 2-4 years US Imports about 50% of oil consumption, while 98% of natural gas consumption is produced domestically Converting one refuse truck from diesel to natural gas = removing 300 vehicles off the road Millions of vehicles worldwide use this technology It just makes cents!! 44

45 Incremental NVG Demand Growth Projection Bcf/d 10 Current Demand of 0.1 Bcf/d Bcf/d = Bcf/d in PIRA High Adoption 2 PIRA Reference 0 Wood Mackenzie Source: Wood Mackenzie North American Gas Service Spring 2013, PIRA Special Report Natural Gas Vehicles Gaining Traction Aug

46 Incremental Demand Growth Summary Bcf/d 30 Current End User Demand of 62 Bcf/d Bcf/d = Bcf/d in NGV's Wide Range Industrial 0 Power Generation Source: Wood Mackenzie North American Gas Service Spring 2013, PIRA Special Report Natural Gas Vehicles Gaining Traction Aug

47 Thank You Reliable Service. People You Trust. CenterPointEnergy.com/ces Jesse Blair Pricing and Product Development Phone: (713) Vickie Farina Phone: (630) Marguerita Shay Phone: (630)

48 Working Together 48