BHP Billiton Petroleum/media/bhp/documents/investors/... · 2015-01-15 · Hydraulic fracturing. Rig count 2000-2012 J. Michael Yeager, ... Nigeria Australia China Saudi Arabia United

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BHP Billiton PetroleumOnshore US Shale Media Tour

J. Michael YeagerChief Executive, BHP Billiton Petroleum8 November 2012

Disclaimer

Slide 2

Reliance on Third Party InformationThe views expressed here contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This presentation should not be relied upon as a recommendation or forecast by BHP Billiton.

Forward Looking StatementsThis presentation includes forward-looking statements within the meaning of the US Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of BHP Billiton. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation.

Non-IFRS Financial InformationBHP Billiton results are reported under International Financial Reporting Standards (IFRS) including Underlying EBIT and Underlying EBITDA which are used to measure segment performance. This presentation also includes certain non-IFRS measures including Attributable profit excluding exceptional items, Underlying EBITDA interest coverage, Underlying effective tax rate, Underlying EBIT margin and Underlying return on capital. These measures are used internally by management to assess the performance of our business, make decisions on the allocation of our resources and assess operational management. Non-IFRS measures have not been subject to audit or review.

No Offer of SecuritiesNothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP Billiton securities in any jurisdiction.

Stakeholder feedbackPlease note, the Commonwealth Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2006 requires Operators to perform consultation relating to environment plans and oil spill contingency plans. The latest revision of the Regulations includes a requirement for correspondence from stakeholders relating to these plans to be passed on to NOPSEMA and therefore should not be considered to be confidential between the author and BHP Billiton. It is recommended that confidential matters not relating to the environment should be in separate communications.

J. Michael Yeager, Chief Executive, BHP Billiton Petroleum, 8 November 2012

Agenda

J. Michael Yeager, Chief Executive, BHP Billiton Petroleum, 8 November 2012 Slide 3

BHP Billiton Petroleum overview

The US shale revolution

BHP Billiton’s shale position

Business plan highlights

Iron Ore

One of BHP Billiton’s four largest businesses


Petroleum

Base Metals Metallurgical Coal

23%

% of FY12 Underlying EBIT

Iron OrePetroleumBase MetalsMetallurgical CoalEnergy CoalManganeseDSPSSMAluminium

A world class, global Petroleum portfolio


Shenzi Neptune

Atlantis Mad Dog

Pyrenees Stybarrow

UK

Trinidad and Tobago

Minerva

Algeria Pakistan

North West Shelf Bass Strait

Eagle Ford

Fayetteville Haynesville

Permian

Australia ~215 Mboe/d

Gulf of Mexico~90 Mboe/d

Onshore US Shale~270 Mboe/d

International ~75 Mboe/d

Production based on approximate FY13 expected net production rates.

A continuously growing business


Source: BHP Billiton analysis as at 30 June 2012.

0 600 1,200 1,800

WoodsideMurphy Oil

NexenCenovus

HuskyTalisman

HessMarathon

Inpex CorporationEOG

BHP Billiton (2011)CNRL

ChesapeakeSuncor Energy

EncanaBG

DevonBHP Billiton (Q1 FY13)

AnadarkoOccidental

ApacheRepsol

ConocoPhillips

2011 production rates – large caps(thousands of barrels of oil equivalent per day)

Source: Wood Mackenzie.

0

100

200

300

400

500

600

700

FY07 FY08 FY09 FY10 FY11 FY12 FY13e

BHP Billiton Petroleum net volumes(thousands of barrels of oil equivalent per day)

A leader in safety performance


Conventional business safety performance(Total Recordable Incident Frequency) • Best ever TRIF in the

conventional business during FY12

• New Onshore US business significantly lagging in performance

• Goal is to be become safest in industry, offshore and onshore

1. International Association of Drilling Contractors.Source: BHP Billiton analysis.

A proven track record of outstanding operational performance


0

5

10

15

20

FY09 FY10 FY11 FY12

Unit cash operating costs(BHP Billiton net share, US$/boe)

Peer group1 BHP Billiton

Average drill time per 1,000 ft(Deepwater Gulf of Mexico, subsalt, days)

0

2

4

6

8

Others BHP Billiton

Source: Rushmore Associates’ The Rushmore Reviews, Scout Tickets and BHP Billiton analysis as of 16 April 2012.

1. Unit operating costs peer group consists of Apache, Marathon, Hess, BG, Anadarko, Noble and Talisman. Source: BHP Billiton analysis.

Outstanding project execution


ShenziGulf of Mexico

PyreneesWestern Australia

ZamzamaPakistan

MacedonWestern Australia

Agenda






An abundance of opportunity


Source: US Energy Information Administration.

A unique combination of favourable characteristics working together


Rig and services

availability

World’s largest gas market

Landowners as royalty owners

Supportive regulators

Attractive fiscal terms

Low population density in

development areas

Extensive pipeline network

Attractive geology

Two technologies in combination


Horizontal drilling

Hydraulic fracturing

Rig count 2000-2012


Source: Wood Mackenzie, Smith Bits.

US shale rig counts in selected plays

0

50

100

150

200

250

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Eagle Ford

Barnett Bakken

Marcellus

Haynesville

Natural gas resources in the US are the largest in the world, driven by shale


0

200

400

600

800

1,000

1,200

1,400

1,600

US

A

Rus

sia

Iran

Qat

ar

Can

ada

Turk

men

ista

n

Nig

eria

Aus

tralia

Chi

na

Sau

di A

rabi

a

Uni

ted

Ara

bE

mira

tes

Ven

ezue

la

Alg

eria

Kaz

akhs

tan

Nor

way

Indo

nesi

a

Iraq

Om

an

Azer

baija

n

Arg

entin

a

Unconventional Conventional

Natural gas resource estimate (Tcf)

Source: Wood Mackenzie, October 2012.

Shale gas is a critical source of supply to meet growing US demand for natural gas


US natural gas supply(Bcfd)

US natural gas demand(Bcfd)

0

20

40

60

80

100

2005 2010 2015 2020 2025 2030

Net imports ConventionalAssociated Tight gas, CBMShale

0

20

40

60

80

100

2005 2010 2015 2020 2025 2030

Power Non power

Shale gas


A major ramp-up in industry activity over the last three years, now focused on liquids


0

500

1,000

1,500

2,000

2,500

Nov

09

Feb

10

May

10

Aug

10

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Oil rigs

Gas rigs

Source: Baker Hughes.

Total US onshore rig counts

0

1,000

2,000

3,000

4,000

5,000

2009 2010 2011 2012e

Source: Railroad Commission of Texas.

Drilling permits issued in the Eagle Ford shale

US unconventional liquids production now forecast to surpass Brazil, Canada, and Iraq


0

1

2

3

4

5

6

7

8

2010 2012 2014 2016 2018 2020


Liquids production forecast(millions of barrels per day)

• Onshore US unconventional production is expected to grow rapidly and contribute significantly to total US liquids production

• In 2013 total US liquid production forecast to average 11.4 million barrels per day1

• Saudi Arabia averages approximately 11.6 million barrels per day1

1. Petroleum Marketers Association of America.

Total liquids

Decades of declining US oil production reversed with growth in shale liquids


Source: US Energy Information Administration.

US crude oil production(millions of barrels per day)

0

1

2

3

4

5

6

7

8

9

10

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Onshore

Offshore

Alaska

History

Crude oil only

Shale energy development brings major benefits to the US economy


Shale Gas

Employment

• 1.75 million jobs created in the past few years and expected to account for 3 million jobs in 2020

• Wages 50% higher than the national average

Investment and Tax Revenue

• US$5.1 trillion investment and US$2.5 trillion in government revenues between now and 2035

• Nearly 2% of US GDP over the next 3 years

Energy Security

• 25% increase in domestic oil production in the last 4 years, driven primarily by shale oil

• Net oil imports expected to decrease 60% by 2020

Source: US Chamber of Commerce.

Agenda






Shale business model


• Offshore oil and gas offers strong returns on a full development basis but expansion capability is limited post investment

• Shale developments offer strong returns on an individual well basis and are highly expandable in both the short and long term

• Current shale drilling and completion technologies recover very low amounts of the hydrocarbons in place

• Shale is ripe for a long term technology approach which few companies can execute

Offshore Feature ShaleYes Geologic risk No

5+ years 1st production Months

Years Payback Months

Limited Flexibility Significant

Limited Expandability SubstantialShenzi Eagle Ford well

Strong positions in four large shale plays


Fayetteville

Eagle Ford

Permian

Haynesville(and Lower Bossier)

We have significant positions in two of the largest oil field developments in the world


0 500 1,000 1,500

Kearl Oil Sands

Niobrara Shale

ACG

West Qurna 1

Upper Zakum

Rumaila N&S

Christina Lake

Lula Phase 1, Brazil

Kashagan

West Qurna 2

Bakken Shale

Permian Shale

Manifa, Saudi Arabia

Eagle Ford Shale

Major field production growth 2012-2017(thousands of barrels of oil per day)

Source: Morgan Stanley.

• Eagle Ford and Permian are forecast to be the two largest drivers of US oil production growth through 2017

• BHP Billiton’s position in these two fields is large

• Fields with very long lives such as these will have several tranches of technologies applied over decades

• There are very few in the world

Our position in the Eagle Ford is among the largest and most valuable of all operators


0.0

0.5

1.0

1.5

2.0

2.5

0.0 0.5 1.0 1.5

BHP Billiton

NPV and acreage of Eagle Ford operators(relative terms, BHP Billiton indexed to 1.0)

Source: WoodMackenzie, BHP Billiton indexed to 1.0 (October 2012).

Rel

ativ

e ac

reag

e

Relative net present value

Other operators

The scale of our Eagle Ford opportunity is unprecedented for BHP Billiton Petroleum


0

50

100

150

200

250

300

350

FY08 FY10 FY12 FY14e FY16e

Actual and estimated production(BHP Billiton net share, Mboe/d)

BHP Billiton Petroleum Eagle Ford

BHP Billiton Petroleum Australia

BHP Billiton Petroleum Gulf of Mexico

Source: BHP Billiton analysis.

Permian offers a second shale liquids opportunity


0 100 200 300 400 500

Arkoma Woodford

Ardmore Woodford

Fayetteville

Utica

Cana Woodford

Haynesville

Barnett

DJ-Niobrara

Granite Wash

Mississippian

Marcellus

Williston

Eagle Ford

Permian

Horizontal Directional Vertical

US rig count by field and type(week ending October 12, 2012)

Source: Baker Hughes.

• Industry operating almost 500 rigs in the Permian

• Decades of conventional drilling and production history

• Shale oil development in early stages – years behind Eagle Ford

• BHP Billiton holds over 400,000 acres in the Permian and is actively appraising for potential development

Our total dry gas resources exceed current annual US consumption


0

5

10

15

20

25

30

35

BHP Billiton net resources 2011 US natural gasconsumption

Source: Wood Mackenzie, BHP Billiton analysis.

BHP Billiton resources by field(trillions of cubic feet)

Haynesville

Fayetteville

• Total dry gas resources in excess of 30 tcf

• Sufficient to supply US demand for natural gas for more than a year

• Drilling will continue for decades in both fields

The quality of our acreage in the Haynesville is among the best in industry


BHP Billiton acreage

Haynesville core area

• Largest acreage position in the core of field, where single well recoveries exceed 8 Bcf

• Many wells within our core acreage deliver recoveries in excess of 10 Bcf and some significantly higher

• Strong rates of return for single well investments, even at current prices

Haynesville and Fayetteville are among the lowest cost dry gas properties in the US


Lanc

e P

ined

ale

Frui

tland

Gra

nite

Was

hN

iobr

ara

Cod

ell

Eag

le F

ord

- Wet

Olm

osLa

nce

Jona

hM

ontn

eyD

uver

nay

Sha

leM

esav

erde

Coa

lsM

arce

llus

Sou

thw

est

Faye

ttevi

lleA

rkom

a W

oodf

ord

Hor

n R

iver

Sel

ma

Cha

lkM

arce

llus

Nor

thea

stA

nada

rko

Woo

dfor

dH

ayne

svill

e - T

ier O

neB

arne

ttB

ossi

er S

hale

Mes

aver

de W

asat

chP

enns

ylva

nian

Coa

lsH

orse

shoe

Can

yon

Rat

on V

erm

ejo

Hon

aker

Tra

ilM

esav

erde

Pic

eanc

eA

lmon

d W

amsu

tter

Jam

es L

ime

Pow

der R

iver

CB

MC

hero

kee

Dee

p H

aley

Man

cos

Utic

a - A

ppal

achi

aB

arne

tt S

outh

wes

tB

lack

War

rior C

oals

Dee

p B

ossi

erW

ilcox

Lob

oN

ew A

lban

yH

uron

Trav

is P

eak

Hay

nesv

ille

- Tie

r Tw

oC

hatta

noog

aA

ustin

Cha

lkC

ody

Utic

a - Q

uebe

cA

ntrim

Man

nvill

eLo

wer

Vic

ksbu

rgC

otto

n V

alle

yB

axte

rE

agle

For

d - D

ry G

asP

ierr

eG

othi

cC

olum

bia

Sub

-bas

alt

Pal

o D

uro

Bar

nett

Woo

dfor

dC

onas

auga

Source: Wood Mackenzie, 2012.

Comparative ranking of break even wellhead cost for US unconventional gas plays, 2012(gas focused unconventional plays only)

Haynesville

Fayetteville

We are making significant progress towards further reducing development cost


Average Fayetteville rig release time(days)

0

5

10

15

20

25

30

35

40

45

Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12


Agenda






Near-term activity focused on liquids


0

10

20

30

Fayetteville dry gas

Haynesville dry gas

Permian liquids

Eagle Ford liquids

January 2012

June 2012

Gross operated rigs(average rig count)


US$6.5 billion capital program this fiscal year, focused on shale liquids


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13e

ConventionalShale

Development capital(BHP Billiton net share, US$ millions)


Targeting combined 15% liquids growth in FY13, both shale and conventional


0

50

100

150

200

250

FY11 FY12 FY13e

Gas

Liquids

Volumes(BHP Billiton net share, MMboe)

15% liquids growth

Gas roughly

flat


Onshore US shale in summary


• An industry phenomenon that is transforming the US energy outlook

• BHP Billiton’s position is both large and valuable

• Leverages our strengths in project management, technical capability and operational excellence

• Matches BHP Billiton’s strategy and strong financial capability

• Major development program and production growth ahead


Looking forward

J. Michael YeagerChief Executive, BHP Billiton Petroleum8 November 2012

Many examples of shale beginning to transform the US economy


0%

20%

40%

60%

01 03 05 07 09 11

Share of total US electric generationPercentage of monthly MWh

Electric power: gas displacing coal at an unprecedented rate

290393

615690 706

9121020

Mid E. N. Am S Am. SE Asia N. Am. NE Asia W Eu.

Global ethylene cash cost, 2011$/Mt

180

7

Coke only Partial gas injection

Blast furnace fuel costs1

$/Mt of hot metal

Steelmaking: energy costs dropping rapidly

Petrochemicals: US becoming a global low-cost powerhouse

With ethane at 45 c/gal

With ethane at 77 c/gal

Source: CMAI, BHP Billiton analysis.Source: EIA.

1. For a non-integrated steel mill using merchant cokeSource: US Steel.

203

187

• In April, gas surpassed coal in power generation

• During 2006-2011, the US had the largest reduction in GHG emissions of any country1

• US ethylene production is now among the lowest cost in the world

• Low gas prices are reviving other industries such as steelmaking

• Lower gas prices brought on by shale amounts to a ~$100 billion annual savings to the US economy2

1. Source: IEA.2. Based on 65 bcfd average gas use and $4/MMBTU difference in gas prices

relative to Western European levels.

CokeNatural gas

Coal

Natural gas

Significant domestic gas demand upside


Source: AEMO, Wood Mackenzie, BHP Billiton analysis.

2.8

13.1

31.0

52.1

65.9

AustraliaDomestic

China GlobalLNG

Europe US

The US gas market is the largest in the world…

40

2

5

8

All light-duty vehicles toCNG

Gas to Liquids

Highway transport toNatural Gas Vehicles

Fleet transport to CNG

Replacement of half ofremaining coal-fired

power

…but substantial untapped incremental domestic demand remains

1. Part of this replacement to be driven by projected environmental regulations.Source: McKinsey, BHP Billiton analysis.Notes: CNG stands for Compressed Natural Gas vehicles.

151

Gas demand, 2011(Bcf/d)

Examples of potential incremental US gas usage(Bcf/d)

LNG exports are opening new markets to US shale production


Source: EIA; BHP Billiton analysis.

0

10

20

30

40

50

60

70

80

2012 2014 2016 2018 2020 2022 2024

Multiple LNG export terminals proposed in the US Lower 48…

…which would give US gas access to a growing global market

2.2

4.1

13.1 19.4

Underconstruction

With supplycontracts

Othersproposed

Total


US lower 48 LNG proposed export capacity(Bcf/d)

Global LNG demand(Bcf/d)

As technology improves, recoveries from shale fields will likely grow, extending their lives


0%

20%

40%

60%

1975 1980 1985 1990 1995 2000 2005

In conventional, technology has helped secure large increases in recoveries over time…

0

50

100

150

200

1965 1970 1975 1980 1985 1990 1995 2000

…and early indications are that a similar dynamic is likely to be present in shaleUS lower 48 initial shale gas production rates, by vintage year(Mcf/day)

Source: Hermansen, H, ConocoPhillips Norway, in “The Ekofisk Field: Achieving three times the original value”. Paper presented at the 19th World petroleum congress, 2008.

Source: Beliveau, D. et al. in “Reserves growth: enigma, expectation or fact?”, SPE paper 84144, 2003.

Source: IHS CERA.

Norway: Ekofisk recovery factor predictions(percent of OOIP (100%=6,900 MMBO))

Canada: Turner Valley Rundle recoverable reserves(MMBO)

BHP Billiton is well positioned in this transformative opportunity


• Enormous, potentially transformative opportunity for the oil and gas industry

• Requires large capital resources, deep technical skills, and operational discipline

• Fits squarely within our strategic focus

• Positioned for success with a proven track record of operational excellence, strong financial footing, and our long term approach


Documents

BHP Billiton Petroleum/media/bhp/documents/investors/... · 2015-01-15 · Hydraulic fracturing. Rig count 2000-2012 J. Michael Yeager, ... Nigeria Australia China Saudi Arabia United