AEE New England New England Energy Update 1/6/2016 Tim Bigler Senior Market Strategist
Agenda NYMEX NG/Oil Prices New England NG/Electric Prices Future Gas Produc:on Influences New England NG Pipeline Expansions New England Electricity Update 2
$60.00 NYMEX Forward Oil/Gas Prices Multi-Year Lows $/BBL $/MMBTU $3.90 $55.00 Break Even? $3.70 $3.50 Break Even? $50.00 $3.30 $45.00 $3.10 $2.90 NYMEX WTI NYMEX NG $40.00 $2.70 $2.50 $35.00 Feb- 16 Jun- 16 Oct- 16 Feb- 17 Jun- 17 Oct- 17 Feb- 18 Jun- 18 Oct- 18 Feb- 19 Jun- 19 Oct- 19 Feb- 20 Jun- 20 Oct- 20 Feb- 21 Jun- 21 Oct- 21 $2.30 3 Bloomberg Finance L.P.; CME/NYMEX; FOR INFORMATIONAL PURPOSES ONLY
New England Forward NG/MW Peak Prices Reflect RISK $70.00 $/MMBtu $8.00 $65.00 $7.00 $60.00 $55.00 $50.00 $45.00 $40.00 $6.00 $5.00 $4.00 NEPOOL ATC Algonquin Fixed NG $35.00 $30.00 $25.00 $/MWh Feb- 16 Jun- 16 Oct- 16 Feb- 17 Jun- 17 Oct- 17 Feb- 18 Jun- 18 Oct- 18 Feb- 19 Jun- 19 Oct- 19 Feb- 20 Jun- 20 Oct- 20 Feb- 21 Jun- 21 Oct- 21 $3.00 $2.00 4 Bloomberg Finance L.P.; CME/NYMEX; FOR INFORMATIONAL PURPOSES ONLY
Agenda NYMEX NG/Oil Prices New England NG/Electric Prices Future Gas Produc:on Influences New England NG Pipeline Expansions New England Electricity Update 5
U.S. Gas/Oil Shale Basins HENRY HUB EIA 6
Sub-$3.50 Could SLOW Marcellus Production? Bcf/M JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Range Resources 7
Declining Shale and Associated NG Will it continue? DEC 2015 DEC 2015 8 EIA
$70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Warm New England Dec 2015 Lower Gas/Electric Prices $/MWh $/MMBtu $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 NEMA PEAK AGT SPOT Bloomberg Finance L.P.; Genscape; FOR INFORMATIONAL PURPOSES ONLY 9
Northeast Pipeline Capacity Increases Production Sets Record 80 70 BCF/DAY 60 50 40 30 20 10 0 NORTHEAST PRODUCTION RECORD ~22.3 BCF/D 01/01/2016 U.S. DRY NG Northeast NG Bentek Energy LLC; FOR INFORMATIONAL PURPOSES ONLY 10
PA Shale - Large Well Backlog Supports Future Production? AT WHAT PRICE? 11 Bloomberg
El Nino = Warmer NE Winter High Storage 04/2016? Low Prices? 1,000 $6.50 800 $6.00 600 $5.50 400 $5.00 200 $4.50 0-200? $4.00 $3.50 Y- o- Y NG Storage NG WEEKLY SPOT - 400 $3.00-600 $2.50-800 $2.00-1,000 Bcf $/MMBtu $1.50 12 Bloomberg Finance L.P.; FOR INFORMATIONAL PURPOSES ONLY
Agenda NYMEX NG/Oil Prices New England NG/Electric Prices Future Gas Produc:on Influences New England NG Pipeline Expansions New England Electricity Update 13
New England Pipelines South to North Capacity Declines NG NG 14 Spectra Energy
New England Peak Day Deliveries 2014 vs 2015 HIGHER Y- o- Y 15 Bentek Energy LLC
New England Winter Peak Day LNG Required 16 ISO- NE; Genscape
U.S. NG Pipeline Projects Will they all get built? 11/2018 11/2016 11/2017 11/2018 Spectra Energy 17
New England Pipeline Projects Will they all get built? hsp://www.mass.gov/ago/doing- business- in- massachusess/energy- and- uyliyes/regional- electric- reliability- opyons- study.html 18
New England Pipeline Projects Will they all get built? Google 19
MMBtu $3.25 $2.75 $2.25 $1.75 $1.25 $0.75 $0.25 New England Pipeline Projects What Does The Market Think? Algonquin (AGT) Basis (Basis = AGT Henry Hub) Post 2017-18 Winter The market remains cau:ous - $0.25 APR 16- OCT 16 NOV 16- MAR 17 APR 17- OCT 17 NOV 17- MAR 18 APR 18- OCT 18 NOV 18- MAR 19 APR 19- OCT 19 NOV 19- MAR 20 APR 20- OCT 20 NOV 20- MAR 21 APR 21- OCT 21 NOV 21- MAR 22 20 Bloomberg Finance L.P.; FOR INFORMATIONAL PURPOSES ONLY
Agenda NYMEX NG/Oil Prices New England NG/Electric Prices Future Gas Produc:on Influences New England NG Pipeline Expansions New England Electricity Update 21
New England Natural Gas Fired Generation Dominates ISO- NE 22
New England Correlated Gas/Electric Pricing $80.00 $75.00 $70.00 $65.00 $/MWh $/MMBtu $10.00 $9.00 $8.00 $60.00 $55.00 $50.00 $7.00 $6.00 12M MA HUB ATC 12M AGT FIXED $45.00 $40.00 $35.00 $5.00 $4.00 $30.00 2/6/2013 2/6/2014 2/6/2015 $3.00 Bloomberg Finance L.P.; FOR INFORMATIONAL PURPOSES ONLY 23
New England Correlated Gas/Electric Pricing $45.00 $/MWh $40.00 $35.00 $30.00 $25.00 $20.00 MA Hub ATC AGT FIX $15.00 $10.00 $5.00 $0.00 $/MMBtu Cal 17 Cal 18 Cal 19 Cal 20 24 Bloomberg Finance L.P.; FOR INFORMATIONAL PURPOSES ONLY
New England Electric Pricing It s More Than ENERGY Costs $100.00 ISO- NE Market Perspec2ve Wholesale Cost of Load Increases in Capacity Markets, Market Risk Premiums, Ancillary Services Costs, & Growing Renewable Energy Requirements $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $12 $13 $15 $16 $26 $30 $38 $41 Capacity Load Following Ancillaries Risk Premiums Renewables $30.00 $20.00 $37 $56 $64 $53 $48 $46 $46 $46 $10.00 $- 2012 2013 2014 2015 2016 2017 2018 2019 Energy Non- Energy Price Components ILLUSTRATIVE PRICES FOR INFORMATIONAL PURPOSES ONLY 25
$80.00 $70.00 New England Winter Oil Anchors Gas Pricing? $/MMBtu $60.00 $50.00 $40.00 $30.00 #2 Oil Boston AGT Fixed Spot $20.00 $10.00 $0.00 26 Bloomberg Finance L.P.; FOR INFORMATIONAL PURPOSES ONLY
ISO-NE Winter Reliability Program Lower Oil Prices Y-o-Y 27 ISO- NE; FOR INFORMATIONAL PURPOSES ONLY
ISO-NE Winter Reliability Program ISO- New England Costs Declining Winter Reliability Program: The ISO has updated the program par:cipa:on numbers for generators and demand response providers as well as the maximum poten:al costs for this Winter s program. The following table provides the detailed informa:on, but the important thing to note is that the maximum poten:al cost for the program this year is about $41 million which is significantly less than the maximum exposure from the previous programs from the past two years. Total cost will be less if we have a harsh winter. Maximum exposure is calculated as if none of the oil or LNG is consumed and all of the inventory remains on March 1, 2016. 28 ISO- NE; FOR INFORMATIONAL PURPOSES ONLY
Agenda THE DEMAND WILDCARDS THAT CAN IMPACT NYMEX NG PRICES 29
U.S. Demand/Mexico/Canada/LNG/LPG Exports Support Future U.S. Production Henry Hub EIA; RBN Energy 30
U.S. LNG Exports Commence in 2016 Bcf/M JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC FERC; CPG Analy:cs; EIA; WoodMac 31
U.S. to Mexico Pipeline Capacity Significant Expansions Proposed Bcf/M JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 32 Bentek Energy LLC
Will U.S. NG Demand Catch Supply? If Yes, When? SUPPLY? DEMAND 2016 2017 2018 2019 33
Questions?