RAILTRENDS CONFERENCE CRUDE BY RAIL OUTLOOK STUART E. NANCE VICE PRESIDENT - MARKETING

Transcription

1 RAILTRENDS CONFERENCE CRUDE BY RAIL OUTLOOK STUART E. NANCE VICE PRESIDENT - MARKETING New York City, NY November 22, 2013

2 What I will attempt to cover during this presentation What is the future for Crude by Rail ( CBR )? Are these production forecasts worth looking at? Where/how might the forecasts be wrong? What is the Oil & Gas producers perspective on CBR? 2

3 My First Exposure to Tank Cars ~ 1985 Deep East Texas Old Railroad Tank Cars Make Great Culverts FARM SHOW Magazine» Old Railroad Tank Cars Make Great Culverts If you need a large culvert to replace a small bridge or to make a crossing on a creek or other water way, you might want to consider using a railroad tank car. Terry Smith, Diversified Rail Car, Camden, Arkansas, has sold rail car culverts for several years, mostly in the Texas-Arkansas-Louisiana- Mississippi area. "An old tank car with the ends cut off makes an ideal culvert. They're made of high quality steel at least half an inch thick. Some have 7/8-in. thick walls. They're stronger than corrugated culverts of comparable size, so they don't have to be handled so carefully," he adds. Smith says tank car culverts are available in 7 to 10-ft. diameters and in lengths from 30 to 63 ft. The ends are removed along with any plumbing or valves attached to the tank. Cutting off the dome on top leaves about a 2-ft. hole that usually must be covered or welded shut by the buyer. "If you can put the culvert into place with the dome hole down, it doesn't need to be covered," Smith notes. "My main customers are county road maintenance departments, farmers and timber companies. I've seen counties use one, or even two or three to replace old bridges. Those old bridges must be inspected periodically and are in constant need of repair to keep them safe. Farmers use the tanks to make crossings in creeks and field ditches and to cross irrigation canals. Some actually put them together end to end and bury them to make underground irrigation canals or reservoirs. Some farmers have made runs as long as about 200 ft. with them. If they're going to do that, we leave one end on the tank that will be the end of the canal. "Timber companies like them because they can use them to get logging trucks and big machinery into areas where they're cutting. And if they don't want to leave them in place once a stand of timber has been harvested and replanted, they can dig them out and move them to other areas to reuse," he says. He says tank car culverts are priced comparably to corrugated culverts, but will last considerably longer because of the quality and volume of steel used in them. He says because the sides are smooth, a tank car culvert will allow as much as 25 percent more water flow than a comparably sized corrugated culvert. "They don't need reinforcement when you're handling them, or support while they're being installed, as corrugated culverts do. 3

4 Crude by Rail Early Days 2007 Central WY 4

5 Crude by Rail Early Days 2007 Central WY 5

6 CBR Today - Plains Tampa, CO Facility Nov

7 CBR Today - Plains Tampa, CO Facility Nov

8 CBR Today - Plains Tampa, CO Facility Nov

9 CBR Today Musket Corp - Windsor, CO

10 CBR Today Musket Corp - Windsor, CO

11 U.S. EIA Drilling Productivity Report October, 2013 Key tight oil & shale gas regions Six Regions account for ~ 90% of oil growth and virtually all gas growth

12 CAPP 2012 report Refining Capacity N America 12

13 PADD Districts and Refinery Locations Alternative View 13

14 Historical US Crude Oil Production US, TX & ND 14

15 EIA s Short Term Energy Outlook Regional Oil Forecasts 15

16 Forecast of Rockies Crude Oil Production BENTEK 16

17 Forecast of DJ Basin Production BENTEK Energy 17

18 Forecast of Powder River Basin Production - BENTEK Energy 18

19 Oil Production Forecasts What Could Go Wrong? Generally Risk is to the downside Forecasts are too optimistic Oil Price Absolute & Relative prices (spreads/arbs/vs. Nat Gas) Regulations uncertainty on potential new state/federal regs Limits on Capital Available to E&P s to support drilling Optimism Bias in forecasts based on oil producer s plans to grow 19

20 CBR is Here to Stay a Producer s Perspective CBR more flexible vs. PL w/out long-term commitments. Faster delivery to market vs. PL (days/weeks difference) Less uncertainty on regulation vs. PL (e.g. Keystone XL) CBR accesses diverse markets East, West & Gulf Coast Less credit intensity - PL line fill + Ship or Pay commits 20

21 CBR is Here to Stay a Producer s Perspective Real time surveillance of CBR will evolve quickly Shift from Truck à Rail to Pipe à Rail Niche Opportunities Wyoming Condensate 2007 Niche Opportunities Utah Waxy Crude High Pour Point Crude - Not PL Compatible Available supplies > local market demand - SLC 21

22 Additional Resources Crude by Rail Crude Oil Transloading Facility Report Lipow Oil Associates (monthly updates) Crude Oil Production Monitor - PADD IV - BENTEK Energy (monthly updates) Short Term Energy Outlook/Drilling Rig Productivity Report-EIA Genscape PetroRail Report 22