Fortress America A Resource Rich Island of Stability in a Sea of Turmoil Presented by Jason Willan Director, Risk Management & Research
Disclaimer The data and information contained in this presentation are gathered and provided to Fellon-McCord & Associates through proprietary and public sources and are published with the intention of being accurate. Fellon- McCord & Associates, and any affiliates cannot, however, insure against or be held responsible for inaccuracies and further assumes no liability whatsoever arising from use of such data or any information contained in this presentation. The material in this presentation does not, in any way, represent a recommendation of any kind that you or your company purchase or sell any commodity. Discussions or representations of past market performance do not predict future market results. Any forecast of potential future energy prices or market trends are for discussion purposes only and are expressly not intended to induce the purchase of any commodity of any kind. September 13, 2011 Proprietary and Confidential 2
Fellon-McCord Introduction Key Statistics What We Do 1992 Founded in Louisville $14 Billion Annual client energy spend in North America and UK/Europe Energy Consulting & Management Data Management & Utility Bill Payment Energy Scheduling & Dispatching 400 Supported by more than 400 energy professionals worldwide 24/7 Round the clock power dispatch desk Markets Served Include Aerospace Automotive Chemicals Commercial real estate Consumer products Cooperative and municipal utilities Healthcare Manufacturing Steel and steel processing Universities and colleges September 13, 2011 Proprietary and Confidential 3
Energy Misconceptions The U.S. is entirely dependent on foreign countries for energy All of the primary global sources for energy are in the Middle East The U.S. is rapidly running out of energy resources September 13, 2011 Proprietary and Confidential 4
1,073 611 440 332 327 273 204 148 112 Millions of Short Tons 3,362 U.S. Energy Truths Global Coal Production 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - September 13, 2011 Proprietary and Confidential 5
15 173 126 45 37 37 33 Billions of Short Tons 67 84 261 U.S. Energy Truths Global Coal Reserves 300 250 200 150 100 50 - September 13, 2011 Proprietary and Confidential 6
4.2 3.8 3.2 3.0 2.6 2.5 2.5 2.4 2.3 2.1 2.0 7.2 Millions of bbl per day 10.0 9.7 U.S. Energy Truths Global Oil Production 12 10 Oil Production by Country 8 6 4 2 0 September 13, 2011 Proprietary and Confidential 7
Percent of Total World Reserves 17.8% 11.9% 9.1% 8.4% 7.7% 7.0% 6.6% 6.5% 4.0% 2.9% 2.4% 2.0% Global Oil Reserves U.S. Energy Truths Potential Crude Oil Reserves by Country 20% 15% 10% Including the Outer Continental Shelf, Arctic National Wildlife Refuge, and the National Petroleum Reserve - Alaska 5% 0% September 13, 2011 Proprietary and Confidential 8
Billion cubic feet per day 9 8 8 8 7 13 10 16 59 51 U.S. Energy Truths Global Natural Gas Production 70 60 50 40 30 20 10 - September 13, 2011 Proprietary and Confidential 9
Trillion Cubic Feet 1,567 1,048 1,046 896 286 280 227 200 185 159 U.S. Energy Truths Global Natural Gas Reserves Potential Natural Gas Reserves by Country 1,800 1,600 1,400 Including the Outer Continental Shelf, Arctic National Wildlife Refuge, Onshore Federal Lands, and the National Petroleum Reserve - Alaska 1,200 1,000 800 600 400 200 0 September 13, 2011 Proprietary and Confidential 10
THE U.S. NATURAL GAS STORY September 13, 2011 Proprietary and Confidential 11
Peak Gas Theory (2001-2006) Commonly Held Belief that U.S. was Running Out of Gas September 13, 2011 Proprietary and Confidential 12
Conventional Wisdom (2006) Natural Gas Production in a Terminal Decline 55 54 53.7 53 52 51 52.1 51.6 52.6 51.9 52.3 50.9 50.7 50 49.5 49 48 47 September 13, 2011 Proprietary and Confidential 13
Conventional Wisdom (2006) Natural Gas Production in a Terminal Decline 1550 U.S. Natural Gas Rig Count 1350 1150 950 750 550 350 150-50 -250 U.S. Gas Production 720 560 496 52.6 Bcfd 52.1 Bcfd 51.6 Bcfd 939 53.7 Bcfd 691 51.9 Bcfd 872 52.3 Bcfd 1025 50.9 Bcfd 1186 49.5 Bcfd 1372 50.7 Bcfd 61 59 57 55 53 51 49 47 September 13, 2011 Proprietary and Confidential 14
Bcf per day Conventional Wisdom (2006) Natural Gas Prices on the Rise 54 $10 53 52 51 50 49 48 $2.11 $2.27 $3.89 $4.27 $3.22 $5.39 $6.14 $8.62 $7.23 $8 $6 $4 $2 $0 $ per MMBtu Avg. NYMEX Natural Gas Price $ per MMBtu U.S. Gas Production September 13, 2011 Proprietary and Confidential 15
Bcf per Day Conventional Wisdom (2006) LNG Imports will Need to Fill the Gap 70 65 60 US Gas Consumption LNG? 55 50 45 U.S. Production and and Imports Pipeline Imports Forecast 40 September 13, 2011 Proprietary and Confidential 16
The Shale Revolution A Funny Thing Happened on the Way to Peak Gas September 13, 2011 Proprietary and Confidential 17
Bcf per Day The Shale Revolution Record Domestic Production in 2008, 2009, 2010 60 50 40 30 Conventional and Other Shale September 13, 2011 Proprietary and Confidential 18
$ per MMBtu The Shale Revolution Downward Pressure on Natural Gas Prices 15 12 9 6 3 0 September 13, 2011 Proprietary and Confidential 19
EMERGING CONSIDERATIONS FOR U.S. INDUSTRY September 13, 2011 Proprietary and Confidential 20
Emerging Considerations U.S. Generation Mix Dominated by Low-Cost Fuels 2009 1% 7% 4% 20% Nuke Coal 45% Gas 23% Coal Natural Gas Nuclear Petroleum Hydro Renewables September 13, 2011 Proprietary and Confidential 21
15.4 14.6 12.6 12.0 11.6 10.3 8.0 7.0 6.0 5.0 $U.S. cents per kwh 29.0 Emerging Considerations Industrial Power Pricing is a U.S. Competitive Advantage 35 30 Industrial Power Prices 2009 25 20 15 10 5 0 September 13, 2011 Proprietary and Confidential 22
Emerging Considerations Potential Risks to U.S. Power Prices Coal and nuclear generation subject to regulation and/or forced retirement Carbon legislation and renewable standards that increase dependence on higher-priced fuels Rebalancing of natural gas supply and demand Replacement fuel for coal and nuclear Regulation of hydraulic fracturing LNG Exports September 13, 2011 Proprietary and Confidential 23
Questions Jason Willan Director, Risk Management & Research 502-214-9347 jwillan@fellonmccord.com September 13, 2011 Proprietary and Confidential 24