Haynesville Shale Revisited & Game Over for U.S. Oil SGS ... · 4/29/2020 · Labyrinth Consulting Services, Inc. artberman.com Slide 2 Observations Ø Haynesville Shale average

Slide 1Labyrinth Consulting Services, Inc. artberman.com

Haynesville Shale Revisited& Game Over for U.S. Oil

SGS/ETGS Continuing Education WebinarApril 29, 2020


Observations

Ø Haynesville Shale average well EUR since 2015 is 20 bcf; earlier wells averaged 7 bcf.

Ø A good example of why investors don’t trust shale companies.

Ø Also a good example of how producers learn and get better over time.

Ø Much of the U.S. oil industry will probably be nationalized.

Ø 2020 world liquids demand will be approximately 20 mmb/d less than in 2019.

Ø U.S. oil production will probably fall to 5.5 mmb/d in 2020.

Ø U.S. GDP will decrease about 20%.

Ø WTI price is unlikely to reach $40/barrel for several years.

Ø The world economic re-start will be slow, partial and intermittent.

Ø Very little will be like it was before Coronavirus.


Haynesville Shale methodology






1,000

10,000

100,000

1,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80

MonthlyRate,bblsorMscf

MonthsfromFirstProduction

Semi-LogPlotofRatevs.Time

Points=ActualDataLine=Forecast

Oil=Green,Gas=Red1

10

100

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1 10 100Rate,bblsorMscf/month

Timemonths

LogLogPlotRatevsTime

Points=ActualDataLine=ForecastOil=Green,Gas=Red

CHK 2015OIL GAS

Max NA 425,000b NA 0.40

Di NA 1.30EUR NA 11,990,646 CUM NA 5,685,029

Haynesville Shale representative decline-curve history match


17 bcf weighted-average EUR for top Haynesville producers


Haynesville Shale Economics


Haynesville Shale Economics


Haynesville Shale Methodology


Slide 12Labyrinth Consulting Services, Inc. artberman.comHaynesville Shale EUR map for wells drilled after 2014


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Frequency

Bin

Histogram

Frequency Cumulative%

Average2015-2019EURinHaynesvilleShaleis19bcfBreak-evenpriceis~$1.70at$10.5mmwelldrill&completecost

Source:Drilling Info&Labyrinth Consulting Services,Inc ShalePlays/HaynesvilleShale/Haynesville 2020/HaynesvilleALLEURAPR2020


Haynesville Shale EUR map for wells drilled before 2015


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AverageEURinHaynesvilleShaleis8bcfBreak-evenpriceis~$3.15at$8mmwelldrill&completecost

Source:Drilling Info&Labyrinth Consulting Services,Inc ShalePlays/HaynesvilleShale/Haynesville 2020/HaynesvilleALLEURAPR2020



$76.22

$42.68

$66.18

$51.08

$60.43

$52.31

$61.88

$52.31

$63.05$53.38

$31.50

-$37.63

$12.34

-$40

-$20

$0

$20

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$120

8/15/18

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1/1/20

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1/29/20

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2/26/20

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3/25/20

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4/22/20

WTI12-monthSpreadsChartTitle

CLMEAN 1SD -1SD WTIPRICE -5SD

Source:Quandl&LabyrinthConsulting Services,Inc. Oil &GasGeneral/Futures &FutureSpreads/CL1&CL7 Futures

mean$54

Fiveoilralliesfailedfrommid-2018toearly2020BiggestpricecollapseinhistorybeganinearlyJanuary

WTIPrice

SaudiRefineryAttackSep2019

IranWaiversOct 2018

AttacksonGulfshippingApril2019

Dec2018

OPEC+Cut Extension,China TradeDeal&

AssassinationJan2020+1SD

$66

-1SD$42

2589 CL1 WKLYCLOSE vs.MEAN WKLYAVG2594 4/28/20 $12.34 -$41.82 $40.492599 4/17/20 $18.27 -$35.89 $44.492601 CHANGE -$5.93 -$5.93 -$4.00

SinceJan6 -$50.93 97% -$21.47

OPEC+cutextensionJuly2019

OPEC+failureMar6

Mean &standarddeviation fromCL1Sept152018- present

-4SD$4.87



0.401.20

2.80

0.90 0.80

15.27

5.664.68

1.16

-0.10

-1.91-0.66

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Q12018 Q22018 Q32018 Q42018 Q12019 Q22019 Q32019 Q42019 Q12020 Q22020 Q32020 Q42020

WorldLiquidsSupplyandDe

mand(m

mb/d)

WorldLiquidsSupply-De

mandBalance(m

mb/d)

ChartTitle

BALANCEPOS BALANCENEG SUPPLY DEMAND

NegativeSD Balance

PositiveS-DBalance

Supply

4.03 1.60 0.80 -2.01 -1.56 -0.60 -15.54 -16.31 -19.28 -12.93Q42018 Year-over-Year Q22019 Q32019 Q42019 Q12020 Q22020 Q32020 Q42020 2020AVG

SUPPLYGROWTH 0.80 -2.01 -1.56 -0.60 -15.54 -16.31 -19.28 -12.93DEMANDGROWTH 0.40 1.10 1.90 -14.97 -20.40 -22.90 -21.10 -19.84SUPPLYBALANCE 0.80 -1.91 -0.66 15.27 5.66 4.68 1.16 6.69

Source:OPEC,IEA,EIA,Vitol,Trafigura, Goldman Sachs &LabyrinthConsulting Services EIAInternational/EIA Supply&DemandMaster


-2.9-3.0-2.6

-15.0

-20.4-21.1-22

-17

-12

-7

-2

3

81Q07

2Q07

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4Q07

1Q08

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3Q08

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WorldLiquidsDem

andGrowth(mmb/d)

ChartTitle

Series1 Series2 Series3Source:OPEC,IEA,EIA,Vitol,Trafigura, Rystad,IHSMarkit&LabyrinthConsulting Services EIAInternational/EIA Supply&DemandMaster

-20%contractioninglobalGDPislikelybasedonstrongcorrelationbetweenoilconsumptionandGDP

2008 FinancialCollapse

2020Covid-19&

OPEC+failure

AnnualGrowth PositiveDemandGrowth

-20

mmb/d Q1 Q2 Q3 Q4 Average2020 84.33 78.90 78.20 80.30 80.432019 99.30 99.30 101.10 101.40 100.28Change -14.97 -20.40 -22.90 -21.10 -19.84

PctChange -15% -21% -23% -21% -20%


0%

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120%

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CumulativePercent

Frequency

Bin

Histogramof2020GDPEstimates


U.S.GDPexpectedtocontract30-35%basedonestimatesby17investmentanalysts

Source: CharlesSchwab&LabyrinthConsulting Services,Inc. Oil&GasGeneral/GDP/2020 GDPEstimates

Frequency (LHS) CumulativePercent(RHS)

GDP%BloombergEconomics -9TSLombard -17.7WellsFargo 22.3ConrerstoneMacro -25JPMorgan -25UBS -25.5IHSEconomics -26.5BoAML -30OxfordEconomics -32DeutscheBank -33Strategas -33.3CreditSuisse -33.5

GoldmanSachs -34Barclays -35MorganStanley -37.9CapitalEconomics -40EvercoreISI -50


R²=0.93

$0

$1

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$1,000,000

0.0001 0.001 0.01 0.1 1 10 100

2017GDP($billion)

2017OilConsumption (mmb/d)

GDPUSD

GDPUSD Power (GDPUSD)

U.S.ChinaJapan

IndiaRussiaSaudiArabia

Source:EIA,WorldBank&LabyrinthConsulting Services,Inc. Oil&GasGeneral/GDP VSOILCONSUMPTION2017

GDPisproportionaltooilconsumption(Logarithmicscales)

Germany


Comparative Inventory (C.I.)

Supply Less Certain

Supply More Certain

Mid-Cycle PriceMarginal barrel or mmBtuprice at the 5-year averageneeded to maintain supply

Yield Curve

Higher Price Needed toMaintain Supply

Lower Price Needed toMaintain Supply

Source: Aperio Energy Research & Labyrinth Consulting Services, Inc.

- +


$0

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-150.00 -100.00 -50.00 0.00 50.00 100.00 150.00 200.00 250.00 300.00

NinePriceCyclesDefinedbyComparativeInventoryvsWTIPricefrom1995-2019

1995-2004

2005-NOV2006

DEC2006-2007

2008

2009

2010-2011

2012-2013

2014-2017

2018

Comparative Inventory (C.I.)Millionsof Barrels

WTIPrice($/barrel)

Source:EIA&La

byrinthConsultingServices,Inc.-A

perio

EnergyResearch

2017-2019

2014-17

1995-2004

2008

2014-17

2012-13

2006-2007

2010-2011

2005-2006



-100%

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-60%

-40%

-20%

0%

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100%

1/13/20

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4/12/20

ChangeinW

orldDrivingSincemid-Ja

nuary2020(Percent)

NEG POS Series3Source:Apple &LabyrinthConsultingServices,Inc. Oil&GasGeneral/AppleMoblityTrends

Globaldrivinghasdecreased-58%comparedtomid-Januarybaseline

-28%

-58%

+9%+6% Baseline


7.22

6.78

6.20

4.53

3.62

5.89

4.12

2.88

511

365

-50

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9.0Jan-16

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Jul-1

6

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7

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Jul-1

9

Sep-19

Nov-19

Jan-20

Mar-20

May-20

TightO

ilHorizo

ntalRigCount

12-M

onthLaggedTightO

ilProduction(m

mb/d)

ChartTitle

LAGGEDPROD SHUTINPROFILE RC

U.S.tightoilproductionwillprobablybe15-20%lowerinAprilvsMarchOutputwillfall~60%Junevs.Marchtolessthan3mmb/dbecauseofshut-inproduction

TotalU.S.outputwill fallto5.5mmb/d

Source: BakerHughes,EIADPR,Drilling Info&LabyrinthConsulting Services,Inc. RigCount/Rig CountCurrent/MONTHLY SHALEGAS-TIGHTOILRIG

LaggedTightOilProduction

(LHS)

Nov2019

TightOilRigCount(RHS) Mar

2020

May

Jun2020

Shut-inTrajectory

NormalTrajectory

bo/d&% Production ChangefromMarch PCTMar 7,055,728 0 0%Apr 5,887,064 -1,168,664 -17%May 4,120,945 -2,934,784 -42%June 2,884,661 -4,171,067 -59%

Apr

Mar2020

May2020

Jul2021


Low Risk High Risk

Tourism-Air Travel-CruisesBars, RestaurantsMovie Theaters

Sporting Events & Concert VenuesShopping Malls

Gyms & Recreation CentersSalons & SpasMuseums

Supermarkets & grocery storesHospitals, Medical Care

DaycareSchools

Food Supply & DistributionGoods Distribution

Work from HomeManufacturing & Construction

PharmaciesBig-box & Hardware Stores

Auto Repair ShopsLiquor stores

Banks

Home EntertainmentSocial Phone & Video Meetings

Convenience Stores & Gas Stations

Documents

Haynesville Shale Revisited & Game Over for U.S. Oil SGS ... · 4/29/2020 · Labyrinth Consulting Services, Inc. artberman.com Slide 2 Observations Ø Haynesville Shale average