A New Dawn? - sut.org · simmons & company international | energy specialists of piper jaffray 4 1 source: capital iq as at 22/01/2018

A New Dawn?Mike Beveridge - Managing Director

2SIMMONS & COMPANY INTERNATIONAL | ENERGY SPECIALISTS OF PIPER JAFFRAY

January 2017… Fit at 50?


January 2018… Life Begins At 70?


1 Source: Capital IQ as at 22/01/2018

What A Difference A Year Makes: From $55/bbl to $70/bbl

40

45

50

55

60

65

70

75

$USLTM Max:

$70

LTM Min:$44

LTM Avg:$55


Example Oil Price Macro Influences

Demand growth (EVs)? Saudi Arabia

OPEC cuts

Non-OPEC accord

Oil Price

Record L48 production

Non-OPEC production growth

Political tensions in IranGlobal inventories

Are we heading towards a more

balanced oil market in 2018?


From Peak Oil Supply….. To Peak Oil Demand

2005 2017


A Sign Of The Times

“Schlumberger plans to exit the marine and land seismic acquisition business”Jan-18

“Weatherford plans to divest assets to ease debt load”Nov-17

“Maersk Drilling in "extensive talks" about the future”Aug-17


1 Source: IEA Report as at 19/01/2018

75

80

85

90

95

100

105

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

mb/d

• CAGR: 1.88%

Global Oil Demand 2009 – 2018

Global Oil Demand: • 85.4 mb/d in 2009• Expected to grow to 99.1 mb/d by

2018


“A Tale Of Two Cities”

(0.50)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Y/Y

Dem

and

Cha

nge

(mb/

d)

Non-OECD Demand

Africa Middle East Latin America Other AsiaEurope China FSU

$0

$20

$40

$60

$80

$100

$120

(2.1)

(1.8)

(1.5)

(1.2)

(0.9)

(0.6)

(0.3)

0.0

0.3

0.6

0.9

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

E20

18E

2019

E20

20E

Bren

t Pric

e ($

/bbl

)

Y/Y

Dem

and

Cha

nge

(mb/

d)

OECD Demand

United States North America ex US Europe

Pacific Average Brent Price

Source: IEA, SCI


Demand Drivers Are Shifting

-4 -3 -2 -1 0 1 2 3 4 5

Petrochemicals

Aviation

Freight

Maritime

Passenger Cars

Buildings

Power Generation

Change In Demand By Sector, 2015 – 2040

Source: IEA

Million bbl/day


Electric Vehicles: Impact On Oil Demand?

Source: IEA, SCI

0

500

1000

1500

2000

2500

2010 2011 2012 2013 2014 2015 2016

China USA Rest of World

Electric car stocks

(000s)


Fuel Demand From Cars Continues To Rise

1923

23

0

5

10

15

20

25

30

35

40

45

2015 Growth indemand for

travel

Gains in fuelefficiency

Switching tonatural gas

vehicles

Switching toelectric vehicles

2035

Decomposing Changes In Liquids Demand From Cars: 2015 - 2035

(17)

Mb/d

Source: BP 2017 Energy Outlook

(0.2) (1.2)


1 Source: Simmons, IEA, EIA, BHI

Lower 48 Crude Oil Production¹

300

500

700

900

1,100

1,300

1,500

1,700

1,900

6,000

6,400

6,800

7,200

7,600

8,000

8,400

8,800Ja

n-15

Mar

-15

May

-15

Jul-1

5Se

p-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

l-16

Sep-

16N

ov-1

6Ja

n-17

Mar

-17

May

-17

Jul-1

7Se

p-17

Nov

-18E

Jan-

18E

Mar

-18E

May

-18E

Jul-1

8ESe

p-18

EN

ov-1

8E

L48 Production Forecasts (Black Oil)

Actual SCI IEA EIA Rig Count Actual Rig Count Forecast

Lower 48 Crude Production kb/d

BHI US Oil Rig Count / SCI

Forecast


International Non-OPEC Supply

(600)

(400)

(200)

0

200

400

600

800

2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E

Y/Y

Cha

nge

(KBD

)International Non-OPEC Y/Y Change

International Non-Opec Y/Y Change 2013-2015 Average

2015-2018 Average 2019-2022 Average

“Robust growth”

“Stagnation”

“Secular Decline”

Source: SCI


OPEC Resolve…. And Non-OPEC Accord

“Russia And Saudi Arabia: A New Oil Bromance?”“OPEC agrees to extend oil supply cuts into 2018”


OPEC Compliance: 9/10 Ain’t Bad

0 0.1 0.2 0.3 0.4 0.5 0.6

OPEC Crude Production Cuts

Actual Cut in Nov 17 Agreed Cut

(million barrels per day)

Source: IEA, SCI1 As at Nov 2017

2017 Average Compliance1

120%

44%

54%

100%

63%

119%

82%

133%

62%

27%

~ 90%

Saudi Arabia

Iraq

UAE

Kuwait

Venezuela

Angola

Algeria

Qatar

Ecuador

Gabon


Heightened Geopolitical Risk


Global Rig Count1

1 Baker Hughes2 Note: Excludes Russia and China

0

500

1000

1500

2000

2500

3000

3500

International Rig Count US Rig Count


1 Spears and Associates

Offshore Rig Count

391 400

355380 380

352377 389

324

248229 234

0

50

100

150

200

250

300

350

400

450

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E


Subsea Construction Backlog

32.7 32.1 32.033.7

35.0

38.940.3 40.1

39.1

46.5

41.2

37.2

34.5

31.029.8

26.524.6 25.3

23.7

19.4

22.5

19.718.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0$

McDermott TechnipFMC Saipem Subsea 7 Brent Crude Oil $/bbl

$115.06

$57.54

Source: Company Documents


Recent Major Project Sanctions

Source: SCI, Company Documents

ProjectPeak Oil

Production (kb/d)

Peak Total Production

(kboe/d)

Year of Sanction

Expected Start Up Country Oil/Gas Project Type Operator Development

Capex ($B)

ReoverableResources

(bboe)

Implied Development Costs ($/boe)

$k/boedof

Flowing Barrel

Johan Sverdup Phase 1 460 440 2014 2019 Norway Oil Deepwater STO $11.5 1.9 $6.1 $26.2

Tengiz Future Growth/ WPMP 260 260 2016 2022 Kazakhstan Oil EOR CVX $36.8 1.6 $23.0 $73.6

Johan Castberg 180 180 2017 2022 Norway Oil Deepwater STO $5.9 0.55 $10.7 $32.8

Appomattox 175 175 2015 2020 USA Oil Deepwater RDS N/A 0.65 N/A N/A

Mad Dog 2 140 140 2016 2021 USA Oil Deepwater BP $9.0 0.5 $18.0 $64.3

Liza Phase 1 120 120 2017 2020 Guyana Oil Deepwater XOM $4.4 0.45 $9.8 $36.7

Kg-DWN-98/2 78 175 2016 2020 India Oil/Gas Deepwater OTHER $5.1 1.05 $4.9 $29.1

West White Rose Expansion 75 75 2017 2022 Canada Oil Deepwater HSE.TO $5.2 0.21 $24.3 $69.3

Thunder Horse South Expansion 50 50 2015 2017 USA Oil Deepwater BP $0.9 N/A N/A $17.0

Offshore Cape Three Points 50 85 2015 2017 Ghana Oil/Gas Deepwater E $6.0 0.38 $16.0 $70.6

Peregrino South 45 45 2016 2020 Brazil Oil Deepwater CAELUS $3.5 0.25 $14.0 $77.8

Kaikias Phase 1 40 40 2017 2019 USA Oil Deepwater RDS N/A 0.1 N/A N/A

Trestakk 40 60 2016 2019 Norway Oil/Gas Deepwater STO $0.7 0.08 $8.7 $11.0

Greater Enfield 40 40 2016 2019 Australia Oil Shallow Water WINTERSHALL $1.9 0.07 $27.5 $47.5

Snorre 2040 39 39 2017E 2020 Norway Oil Deepwater STO $2.9 0.2 $14.5 $47.4

Njord Future 35 50 2017 2020 Norway Oil/Gas Deepwater STO $1.8 0.18 $10.3 $36.0

GMT-1 30 30 2015 2108 USA Oil Conventional COP $0.9 N/A N/A $30.0

Maria 30 32 2015 2017 Norway Oil/Gas Deepwater OTHER $1.5 0.18 $8.4 $47.5

Red Emperor 28 38 2015 2019 Vietnam Oil/Gas Deepwater REPSOL $1.1 0.67 $1.6 $29.3

Culzean 25 100 2015 2019 UK Oil/Gas Conventional MAERSK $4.0 0.27 $14.7 $40.0

Tyra Future 20 60 2017 2022 Denmark Oil/Gas Deepwater TOT $2.7 0.2 $13.5 $45.0

Oseberg Vestflanken 2 20 20 2016 2018 Norway Oil Shallow Water STO $0.8 0.11 $7.5 $41.0


Average Breakeven Oil Prices

Source: Rystad Energy UCube

Current

$50/bbl


Source: Capital IQ as at 22/01/2018

- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

FY14

FY15

FY16

FY17

E

FY18

E

$bn

- 2.0 4.0 6.0 8.0

10.0 12.0 14.0 16.0 18.0

FY14

FY15

FY16

FY17

E

FY18

E

$bn

Public Company Trading Performance

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

FY14

FY15

FY16

FY17

E

FY18

E

$bn

- 0.5 1.0 1.5 2.0 2.5 3.0 3.5

FY14

FY15

FY16

FY17

E

FY18

E

$bn

EV/EBITDA

FY17

FY18

4.3x

6.3x

EV/EBITDA

FY17

FY18

11.1x14.4x

EV/EBITDA

FY17

FY18

13.4x

9.2x

EV/EBITDA

FY17

FY18

6.6x

8.9x

20.0

25.0

30.0

35.0

40.0$

10.011.012.013.014.015.016.017.0

Jan-

17

Apr-1

7

Jul-1

7

Oct

-17

Jan-

18

$

10.0

15.0

20.0

25.0

30.0

35.0$

80.090.0

100.0110.0120.0130.0140.0150.0$


M&A Activity This Time Last Year!


Deal Activity In 2017

Consolidations

Logos for example only, not exhaustive

http://www.worleyparsons.com/


Deal Activity In 2017 (Continued)


* Denotes transactions where PJL advised

Mergers & Acquisitions

* * *

*

*

*

**

*

*


Deal Activity In 2017 (Continued)

New Entrants Balance Sheet Restructurings



Evolution Of The OFS Landscape

Market Cap - Select OFS Companies (Dec 2014 Vs. Dec 2017)

10488

37 3723

13 13 14 104 13

7 3 1 2 1

9

8

-

25

50

75

100

125

150

GE /BHI

SLB /CAM

HAL NOV FMC /TEC

WFT COSL SPN OIS

Combined Market Cap (Dec 2014): $232 billion2

Combined Market Cap (Dec 2017): $178 billion2

USDbn

BHI Dec’14 $27bn

BHGE Dec’17 $15bn1

1 Including Minority Interests2 Excludes Baker Hughes / GE

12

9


Changing Face Of The UKCS


Operators

Industry Bodies

“UK offshore licensing round attracts offers from 68 oil & gas companies”

OGA

“Shell’s redevelopment of Penguins will deliver a

‘significant boost’ to north-east communities”

Scottish Government


Plenty To Look Forward To

Decommissioning Offshore WindNew Project Investments

Global Centre Of Excellence

Role OfTechnology Tax Reforms


https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi90OLYi93YAhXM44MKHbuMDz0QjRwIBw&url=https://stv.tv/news/north/1384161-north-sea-oil-firm-reports-major-find-west-of-shetland/&psig=AOvVaw3Daf3nJzrTnVzowFiHRmVf&ust=1516212976906975