The Appalachian Basin Jason Hamil Director of U.S. Natural Gas Projects
Forward-Looking Information This presentation includes certain forward looking information to help current and potential investors understand management s assessment of our future plans and financial outlook, and our future prospects overall. Statements that are forward-looking are based on certain assumptions and on what we know and expect today and generally include words like anticipate, expect, believe, may, will, should, estimate or other similar words. Forward-looking statements do not guarantee future performance. Actual events and results could be significantly different because of assumptions, risks or uncertainties related to our business or events that happen after the date of this presentation. Our forward-looking information is based on the following key assumptions: planned monetization of our U.S. Northeast power assets and a minority interest in our Mexican natural gas pipeline business, inflation rates, commodity prices and capacity prices, timing of financings and hedging, regulatory decisions and outcomes, foreign exchange rates, interest rates, tax rates, planned and unplanned outages and the use of our pipeline and energy assets, integrity and reliability of our assets, access to capital markets, anticipated construction costs, schedules and completion dates, acquisitions and divestitures. Our forward looking information is subject to risks and uncertainties, including but not limited to: our ability to successfully implement our strategic initiatives and whether they will yield the expected benefits including the expected benefits of the acquisition of Columbia, timing and execution of our planned asset sales, the operating performance of our pipeline and energy assets, economic and competitive conditions in North America and globally, the availability and price of energy commodities and changes in market commodity prices, the amount of capacity sold and rates achieved in our pipeline businesses, the amount of capacity payments and revenues we receive from our energy business, regulatory decisions and outcomes, outcomes of legal proceedings, including arbitration and insurance claims, performance of our counterparties, changes in the political environment, changes in environmental and other laws and regulations, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and foreign exchange rates, weather, cyber security and technological developments. You can read more about these risks and others in our most recently filed Quarterly Report to shareholders and the 216 Annual Report filed with Canadian securities regulators and the U.S. Securities and Exchange Commission (SEC) and available at www.transcanada.com. As actual results could vary significantly from the forward-looking information, you should not put undue reliance on forward-looking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking statements due to new information or future events, unless we are required to by law.
TransCanada Corporation (TSX/NYSE: TRP) One of North America s Largest Natural Gas Pipeline Networks Operating 91,5 km (56,9 miles) of pipelines Transports 27 per cent of continental demand North America s Largest Natural Gas Storage Operator More than 653 Bcf of capacity Canada s Largest Private Sector Power Generator 17 power facilities, 1,7 MW Diversified portfolio, including wind, hydro, nuclear, solar and natural gas Premier Liquids Pipeline System Keystone Pipeline System: 4,3 km (2,7 miles), 545, bbl/d contracted capacity Safely delivered more than 1.4 billion barrels of Canadian oil to U.S. markets since 21
Agenda The Appalachian Basin Marcellus & Utica Producers U.S. Natural Gas Growth & Demand Removing Northeast/Appalachian Bottlenecks 4
Utica Wet Dry Belt Marcellus Dry The Appalachian Basin Upper Devonian Depth: 4,5 5, ft. EUR: 1.5 Bcfe/1, ft. Marcellus Depth: 5,5 6,5 ft. EUR: 2.1 Bcfe/1, ft. Utica/Point Pleasant Depth: 1,-11, ft. EUR: 3-3.5 Bcfe/1, ft. *EUR=Estimated Ultimate Recovery Source: EQT Analyst Presentation 2/9/17 5
The Appalachian Basin 21 215 22 Total U.S. Dry Gas 58.4 Bcf/D Total U.S. Dry Gas 74.4 Bcf/D Total U.S. Dry Gas 9.9 Bcf/D 22 CAGR = 2.5% 235 - Marcellus & Utica Production Total U.S. Dry Gas 125.1 Bcf/D Marcellus/Utica 54.7 Bcf/D Source: Forecasted ranges from: EIA, IHS, PIRA, Solomon, Woodmac 6
Oil Production Mbbl/D Gas Production MMcf/D The Appalachian Basin Production by Region (March 217) 19,15 25 2 15 1,762 5,559 6,171 4,548 7,829 4,161 1 5 25 2 2,25 15 1 5 976 1,77 43 39 447 41 Source: EIA 7
The Appalachian Basin Increasing Efficiency Lateral Length 214 Average Lateral Length: 5, to 7, ft. 216 Average Lateral Length: 7, to 1, ft. 216 Super Lateral drilled by Eclipse Resources: 18,544 ft. in Utica Formation Frac Technology More Proppant: 1,28 lbs./1, ft. to 1,312 lbs./1, ft. lateral per well (8 to 1 million lbs. average) Reduced Spacing and Increased number of Stages Managed Pressure Program Reduce Drawdown to Prevent loss of Proppant in Formation Increase EUR Source: Hart Energy: Marcellus-Utica Shales, 216 Playbook 8
The Appalachian Basin Increasing Efficiency (Cont d) Utilization of Existing Well Pads & Infrastructure No cost for constructing pad site Existing infrastructure in-place (access roads, utilities, pipeline, etc.) Reduction in Drilling & Completion (D&C) Cost Reduction in overall timeline from spud to completion Marcellus D&C: $12.3 Million to $8.1 Million (214 to 216) Utica D&C: $14. Million to $9.4 Million (214 to 216) Stacked Plays (Upper Devonian, Marcellus, Utica & Point Pleasant) Multiple pay zones to increase EUR located in Core Marcellus/Utica plays Source: Hart Energy: Marcellus-Utica Shales, 216 Playbook, Range Resources Investor Presentation 9
The Appalachian Basin Effects of Increased Efficiency Source: Hart Energy: Marcellus-Utica Shales, 216 Playbook, Range Resources Investor Presentation1
Marcellus Rig Count Utica Rig Count By Production and/or Net Acreage Marcellus & Utica Producers 67% Reduction 115 Top Utica Producers 22 34 43 26 14 1 85 7 55 4 25 1 Chesapeake Energy Gulfport Energy Antero Resources Eclipse Resources Ascent Resources 15 9 75 6 45 3 15 18 63% Reduction 85 81 58 3 212 213 214 215 216 Top Marcellus Producers Range Resources EQT Antero Resources Cabot Energy Southwestern Energy Source: Baker Hughes, Multiple Company Investor Presentations 11
Number of Wells 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Production (Bcf/D) Marcellus Producers 175 15 125 1 75 5 25 Marcellus Shale Region 213 214 215 216 N/A N/A Drilled 138 1324 567 Completed 1655 126 672 DUC 872 597 715 61 Drilled Completed DUC *DUC = Drilled but Uncompleted 19 18 17 16 15 14 13 4Q16 Plateau due to inactivity >675 wells per year must be placed online to maintain production 61 DUC @ YE216: ~17.3 Bcfe/well = 1.6 Tcfe Source: EIA Gas Production, Rice Energy Investor Presentations 12
Number of Wells 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Production (Bcf/D) Utica Producers 525 45 375 3 225 15 75 Utica Shale Region 213 214 215 216 N/A N/A Drilled 515 35 148 Completed 463 427 222 DUC 22 254 177 13 5 4 3 2 1 Producers refining D&C techniques 13 DUC @ YE216EUR ~21. Bcfe/well = 2.2 Tcfe Drilled Completed DUC Source: EIA Gas Production, Rice Energy Investor Presentations 13
U.S. Natural Gas Projected Demand Demand Growth By Region (Bcf/d) Regions 216 22 225 CAGR Northeast 12. 13.2 14.1 1.8% South Atlantic 1.8 12. 13.4 2.4% North Central 15.9 17.2 18.5 1.7% East South Central 4.9 5.1 5.5 1.3% West South Central 18.6 2.6 22.5 2.1% Mountain 5.4 5.3 5.6.3% Pacific 7.8 7.9 8.1.4% LNG.7 5.7 11. 36.4% Mexico Exports 3.8 4.9 6.3 6.% Source: EIA, Woodmac 14
U.S. Natural Gas Supply/Demand Balance BCF/D 11 1 The Importance of LNG & Mexico Exports 9 8 7 6 Domestic Production Imports US Net Demand LNG Exports Mexican Exports Source: EIA, Woodmac 15
U.S. Natural Gas Projected Demand by Sector 2 18 16 14 12 1 8 6 4 2 2 18 16 14 12 1 8 6 4 2 3 25 2 15 1 5-2 18 16 14 12 1 8 6 4 2 2 18 16 14 12 1 8 6 4 2 2 18 16 14 12 1 8 6 4 2 2 18 16 14 12 1 8 6 4 2 *All data in Bcf/d Source: EIA, Woodmac 16
U.S. Natural Gas Projected Demand Growth Bcf/D 3 3% 1% 4% 15% 25 13% 2 15% 15 1 4% 5 Residential Industrial Power LNG Exports Net Mexican Exports Transport Other Source: EIA, Woodmac 17
Northeast/Appalachian Takeaway Projects Base Gas is an estimate based on Market data. December 216: +1.35 Bcf Ohio-Louisiana, AIM, Gulf Market Exp. December 217: +9.45 Bcf Access South, Atlantic Sunrise, Broad Run, Gulf Market Exp. II, Marcellus to Market, Nexus, Northern Access, Northern Supply, Rayne Xpress, Rover December 218: +5.32 Bcf WB Xpress, PennEast, Mountain Valley, Gulf Xpress, Constitution 18
Jason Hamil Director of U.S. Natural Gas Projects C: 615-686-329 E: jason_hamil@transcanada.com