Shale’s Potential: The Next Phase - Toledo Metropolitan
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Shale’s Potential: The Next Phase September 12, 2013
Transcript of Shale’s Potential: The Next Phase - Toledo Metropolitan
Shale’s Potential: The Next PhaseToday’s Panelists Ryan Fischer
Assistant Vice President, Emerging Markets Genesee & Wyoming
Railroad Services, Inc.
Genesee & Wyoming Inc. Nine North American Regions
Ohio Valley Region
Business opportunity:
• Support Utica East Ohio Midstream LLC in developing the largest integrated natural gas “midstream” service complex in the Utica Shale, served by a shortline railroad with multiple Class-1 rail connections..
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Key Industrial Development actions: (summary)
• Helped identify key parcel in Harrison County, Ohio, to satisfy UEO’s acreage, logistics and utility requirements.
• Defined capital and infrastructure requirements for a rail-loading terminal.
• Constructed new one-mile siding and rehabilitated a three-mile storage track to handle rail traffic to/from the plant.
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Key Industrial Development actions: (summary)
• Invested $2 million through a public- private partnership to expand CUOH’s yard in Newark, Ohio, to further support UEO and other Utica Shale traffic.
• Designed rate / logistics package with our Class-1 rail partners.
• Total CUOH investment was ~ $2.1 million (excluding state rail funds).
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
• Midstream complex was constructed and began rail shipments in July 2013.
Project impact: (estimated) • Private investment of ~$1 billion (includes
connected gas processing plant). • A projected 10,000 annual outbound
carloads of natural gas liquids. • Close to 100 long-term, full-time jobs in
the local community of Scio, Ohio, in addition to ~1,700 short-term construction positions.
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Crosstex Today: Delivering Diversified Midstream Solutions
10
The Midstream Value Chain A critical part of energy infrastructure responsible for moving product from well-head to consumption
Presenter
Presentation Notes
Provide full range of services for 3.2 billion cubic feet of natural gas per day. Provide services for on-system producers, off-system producers, and interstate pipelines. Services move gas from where it’s produced to point of consumption. We can operate well; have systems that can support bigger operations with little investment; and we have internal engineering and commercial expertise to develop opportunities and execute on them. Integrated midstream natural gas solutions provider. We have rail, truck, pipeline and barge facilities that allow our producer customers to capitalize on current strong NGL and oil prices.
11
Presenter
Presentation Notes
Asset Overview 750 employees 3,500 miles of gathering/transmission pipelines 10 gas processing plants 4 Fractionators (Eunice, Riverside, Plaquemine, Mesquite) 440 miles of NGL pipelines 200 miles of oil/condensate pipelines 3.2 MM barrels of NGL storage in Louisiana Brine logistics
Ohio River Valley Assets: A Great Platform for Growth
12
Presentation Notes
The Company- Clearfield Energy, Inc: - 125 years of history in Ohio; formerly (prior to 1983) Buckeye Pipeline’s Mackburg Division, created in 1886 - Fee-based crude and condensate services in Ohio, West Virginia, and Kentucky Pipeline, rail, barge, and trucks - Fee-based brine collection and disposal services in Ohio and West Virginia Four wholly owned and two joint venture disposal wells - Handles ~30% of all oil production in Ohio and Kentucky; ~55% in West Virginia Majority of new Utica Shale oil production - Current Volumes ~10,000 Bbl/d of crude/condensate and ~5,700 Bbl/d of brine Revenue mix: ~75% crude/condensate and ~25% brine WHY CLEARFIELD ENERGY? Geographic diversification: - Entry into the prolific production areas of Ohio, West Virginia, and Kentucky, with a footprint in the rapidly developing Utica Shale and opportunities for growth in the Marcellus Shale Service diversification: - Business includes crude oil pipelines, a barge loading terminal on the Ohio River, a rail loading terminal on the Ohio Central Railroad network, a trucking fleet, and brine water disposal wells - Expanded logistics capabilities to be leveraged for use in other operating areas Platform for additional growth: - Known and established business and customer relationships in Ohio with first mover advantage in the area - Provides local presence, existing workforce - Competitive advantage providing trucking for “first barrels” and salt water disposal, followed by pipeline gathering, gas gathering, and other services - Ability to provide producers with market optionality - Opportunity to capitalize on existing capacity: - Truck fleet has ~20,000 Bbl/d of available capacity Existing pipeline system capacity can be quickly expanded to ~27,000 Bbl/d with minimal capital investment The Transaction: - Agreement to acquire privately held Clearfield Energy, Inc. for $210 MM - 9X EBITDA multiple, expected to move to a 5X EBITDA multiple within three years; $50 MM additional capital investment - Closed early July 2012 - Financing through a combination of debt and equity Closed on privately held Clearfield Energy, Inc. on July 2, 2012 The acquisition provides an entry into the Ohio River Valley region with exposure to both the Utica and Marcellus Current services include oil and condensate purchasing and salt water collection and disposal Assets include a fleet of trucks and liquid trailers, over 200 miles of pipeline, 7 salt water disposal wells (5 - 100% owned, 2 - joint venture wells), rail loading terminal, barge terminal, liquid storage facilities, and over 2,500 miles of unused ROW Rig count in the area is consistent with acquisition projections New wells have been taking a little longer than originally expected due to shut-in time post-frac Overall, oil and condensate volumes being purchased are consistent with initial plans Brine disposal volumes are above initial projections due to new well being placed into service West Virginia Marcellus activity is providing new opportunities beyond acquisition model expectations Assets include: 4,500 Bbl/hr barge terminal on the Ohio River 20 car-28,000 Bbl/d (expanding to 40 car-56,000 Bbl/d by end of 2012) rail loading terminal on the Ohio Central Railroad ~120 miles of 8” pipeline in Ohio (Current capacity 10,000Bbl/d) ~80 miles of 6” pipeline in West Virginia (Current capacity 7,000Bbl/d) Over 2,500 miles of unused ROW Over 500,000 Bbls of above ground storage 4 wholly owned brine disposal wells, 2 joint venture disposal wells, 1 additional well currently being completed and 1 being permitted Extensive fleet of trucks (Current capacity 35,000 Bbl/d)
Today’s Panelists Penny Seipel Vice President of Public Affairs The Ohio Oil and Gas Association
The Ohio Oil and Gas Association The Ohio Oil & Gas Association (OOGA) is a trade association with over 3,300 members involved in all aspects of the exploration, production and development of crude oil and natural gas resources within the State of Ohio.
The Ohio Oil and Gas Association OOGA represents the people and companies directly responsible for the production of crude oil, natural gas, and associated products in Ohio.
The Ohio Oil and Gas Association The Ohio oil and natural gas industry: Provides more than 4,490 indirect jobs Provides 12,950 jobs due to the leasing, royalties, exploration, drilling, production, and pipeline construction activities
The Ohio Oil and Gas Association The Ohio oil and natural gas industry: Was responsible for $793 million in annual salaries and personal income during 2010 Kept $718 million in Ohio by buying locally- produced natural gas and crude oil
The Ohio Oil and Gas Association Additionally, the Utica Shale play is projected to: Help create and support over 204,500 jobs due to the leasing, royalties, exploration, drilling, production, and pipeline construction activities
Create $12 billion in annual salaries and income to Ohioans by 2015
The Ohio Oil and Gas Association Additionally, the Utica Shale play is projected to: Lead to $14 billion in reinvestment on new exploration and development in 2015
Generate $12.3 billion in gross state product in 2015
Production Concerns The Production Itself - As more wells have access to infrastructure it will give a clearer picture of Shale’s potential
Producers continue to “crack the code” on completion and production techniques which will result in improvement of volumes produced
Production Concerns Lack of timely production data from State of Ohio does not give a clear picture of the Utica’s potential, slows reaction time and limits resources
Producers have the data, OH needs to require it and publish
Production Concerns Local refining market can only absorb about 55,000 bpd of Utica condensate production along with the condensate being produced from the western Marcellus Anything produced in the region beyond that has to be moved outside of these local markets Long-term consumptive market for purity NGL’s is in the Gulf Coast region
Production Concerns Pipeline exports via Mariner East and West (NW Europe and Sarnia)
However, over the next 6-12 months a significant amount processing and takeaway capacity will come online from new projects
Production Concerns Further development of northeast of Utica play (Youngstown, OH/PA border area) Eventual role of pipelines in Utica/Marcellus What will be long-term demand for condensate? … driven in part by pipelines and other developments in western Canada
Logistics Concerns Lack of long-term transportation solutions Railways and trucking companies will be in huge demand: Transport inputs necessary for production and Haul away initial Utica volumes long-term infrastructure solutions such as pipelines are needed to move product to market
Logistics Concerns Railways and trucking companies will be in huge demand: The average shale well requires millions of pounds of sand, thousands of barrels of water and thousands of truck trips to bring inputs and move product out Workforce needs - The trucking industry is short drivers, and the existing pool of drivers is aging
Logistics Concerns Evolution of rail frac-sand logistics … will unit trains play larger role?
Rail site selection … many of the “easy” sites have been taken, requiring companies to get creative, and perhaps make larger initial investments
Logistics Concerns Impacts to local roadway system – many State and local routes not built to carry the repeated loadings resulting from Fracking-related trucking
Regulatory/Policy Concerns Water usage in production and wastewater disposal
Injection well regulation – impact on permitting new wells Timely permitting process improves infrastructure and production schedules Slow process forces alternatives outside the State, lost opportunity, jobs, revenue
Regulatory/Policy Concerns Tax Legislation – impact on investments in the region – lack of clear signals stymies investment
Permitting challenges through wetlands and environmentally sensitive areas
Regulatory/Policy Concerns Tougher air permits for transload sites?
Further implications of Quebec crude- train derailment?
Panelist Contact Information Ryan Fischer Assistant Vice President, Emerging Markets Genesee & Wyoming Railroad Services, Inc. (412) 310-6322 (Mobile) [email protected]
Today’s Panelists
Ohio Valley Region
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Today’s Panelists
The Right Platform:Diverse Base of Assets
Ohio River Valley Assets: A Great Platform for Growth
Today’s Panelists
Slide Number 20
Genesee & Wyoming Inc. Nine North American Regions
Ohio Valley Region
Business opportunity:
• Support Utica East Ohio Midstream LLC in developing the largest integrated natural gas “midstream” service complex in the Utica Shale, served by a shortline railroad with multiple Class-1 rail connections..
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Key Industrial Development actions: (summary)
• Helped identify key parcel in Harrison County, Ohio, to satisfy UEO’s acreage, logistics and utility requirements.
• Defined capital and infrastructure requirements for a rail-loading terminal.
• Constructed new one-mile siding and rehabilitated a three-mile storage track to handle rail traffic to/from the plant.
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Key Industrial Development actions: (summary)
• Invested $2 million through a public- private partnership to expand CUOH’s yard in Newark, Ohio, to further support UEO and other Utica Shale traffic.
• Designed rate / logistics package with our Class-1 rail partners.
• Total CUOH investment was ~ $2.1 million (excluding state rail funds).
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
• Midstream complex was constructed and began rail shipments in July 2013.
Project impact: (estimated) • Private investment of ~$1 billion (includes
connected gas processing plant). • A projected 10,000 annual outbound
carloads of natural gas liquids. • Close to 100 long-term, full-time jobs in
the local community of Scio, Ohio, in addition to ~1,700 short-term construction positions.
Genesee & Wyoming Industrial Development: UEO Midstream LLC
Press Release: UEO Midstream to build natural gas fractionation hub in Utica Shale - $900-million plant will be located on a 600-acre tract in Harrison County, Ohio New facility to be served by the Columbus & Ohio River Railroad (CUOH)
Case Study Exhibit
Crosstex Today: Delivering Diversified Midstream Solutions
10
The Midstream Value Chain A critical part of energy infrastructure responsible for moving product from well-head to consumption
Presenter
Presentation Notes
Provide full range of services for 3.2 billion cubic feet of natural gas per day. Provide services for on-system producers, off-system producers, and interstate pipelines. Services move gas from where it’s produced to point of consumption. We can operate well; have systems that can support bigger operations with little investment; and we have internal engineering and commercial expertise to develop opportunities and execute on them. Integrated midstream natural gas solutions provider. We have rail, truck, pipeline and barge facilities that allow our producer customers to capitalize on current strong NGL and oil prices.
11
Presenter
Presentation Notes
Asset Overview 750 employees 3,500 miles of gathering/transmission pipelines 10 gas processing plants 4 Fractionators (Eunice, Riverside, Plaquemine, Mesquite) 440 miles of NGL pipelines 200 miles of oil/condensate pipelines 3.2 MM barrels of NGL storage in Louisiana Brine logistics
Ohio River Valley Assets: A Great Platform for Growth
12
Presentation Notes
The Company- Clearfield Energy, Inc: - 125 years of history in Ohio; formerly (prior to 1983) Buckeye Pipeline’s Mackburg Division, created in 1886 - Fee-based crude and condensate services in Ohio, West Virginia, and Kentucky Pipeline, rail, barge, and trucks - Fee-based brine collection and disposal services in Ohio and West Virginia Four wholly owned and two joint venture disposal wells - Handles ~30% of all oil production in Ohio and Kentucky; ~55% in West Virginia Majority of new Utica Shale oil production - Current Volumes ~10,000 Bbl/d of crude/condensate and ~5,700 Bbl/d of brine Revenue mix: ~75% crude/condensate and ~25% brine WHY CLEARFIELD ENERGY? Geographic diversification: - Entry into the prolific production areas of Ohio, West Virginia, and Kentucky, with a footprint in the rapidly developing Utica Shale and opportunities for growth in the Marcellus Shale Service diversification: - Business includes crude oil pipelines, a barge loading terminal on the Ohio River, a rail loading terminal on the Ohio Central Railroad network, a trucking fleet, and brine water disposal wells - Expanded logistics capabilities to be leveraged for use in other operating areas Platform for additional growth: - Known and established business and customer relationships in Ohio with first mover advantage in the area - Provides local presence, existing workforce - Competitive advantage providing trucking for “first barrels” and salt water disposal, followed by pipeline gathering, gas gathering, and other services - Ability to provide producers with market optionality - Opportunity to capitalize on existing capacity: - Truck fleet has ~20,000 Bbl/d of available capacity Existing pipeline system capacity can be quickly expanded to ~27,000 Bbl/d with minimal capital investment The Transaction: - Agreement to acquire privately held Clearfield Energy, Inc. for $210 MM - 9X EBITDA multiple, expected to move to a 5X EBITDA multiple within three years; $50 MM additional capital investment - Closed early July 2012 - Financing through a combination of debt and equity Closed on privately held Clearfield Energy, Inc. on July 2, 2012 The acquisition provides an entry into the Ohio River Valley region with exposure to both the Utica and Marcellus Current services include oil and condensate purchasing and salt water collection and disposal Assets include a fleet of trucks and liquid trailers, over 200 miles of pipeline, 7 salt water disposal wells (5 - 100% owned, 2 - joint venture wells), rail loading terminal, barge terminal, liquid storage facilities, and over 2,500 miles of unused ROW Rig count in the area is consistent with acquisition projections New wells have been taking a little longer than originally expected due to shut-in time post-frac Overall, oil and condensate volumes being purchased are consistent with initial plans Brine disposal volumes are above initial projections due to new well being placed into service West Virginia Marcellus activity is providing new opportunities beyond acquisition model expectations Assets include: 4,500 Bbl/hr barge terminal on the Ohio River 20 car-28,000 Bbl/d (expanding to 40 car-56,000 Bbl/d by end of 2012) rail loading terminal on the Ohio Central Railroad ~120 miles of 8” pipeline in Ohio (Current capacity 10,000Bbl/d) ~80 miles of 6” pipeline in West Virginia (Current capacity 7,000Bbl/d) Over 2,500 miles of unused ROW Over 500,000 Bbls of above ground storage 4 wholly owned brine disposal wells, 2 joint venture disposal wells, 1 additional well currently being completed and 1 being permitted Extensive fleet of trucks (Current capacity 35,000 Bbl/d)
Today’s Panelists Penny Seipel Vice President of Public Affairs The Ohio Oil and Gas Association
The Ohio Oil and Gas Association The Ohio Oil & Gas Association (OOGA) is a trade association with over 3,300 members involved in all aspects of the exploration, production and development of crude oil and natural gas resources within the State of Ohio.
The Ohio Oil and Gas Association OOGA represents the people and companies directly responsible for the production of crude oil, natural gas, and associated products in Ohio.
The Ohio Oil and Gas Association The Ohio oil and natural gas industry: Provides more than 4,490 indirect jobs Provides 12,950 jobs due to the leasing, royalties, exploration, drilling, production, and pipeline construction activities
The Ohio Oil and Gas Association The Ohio oil and natural gas industry: Was responsible for $793 million in annual salaries and personal income during 2010 Kept $718 million in Ohio by buying locally- produced natural gas and crude oil
The Ohio Oil and Gas Association Additionally, the Utica Shale play is projected to: Help create and support over 204,500 jobs due to the leasing, royalties, exploration, drilling, production, and pipeline construction activities
Create $12 billion in annual salaries and income to Ohioans by 2015
The Ohio Oil and Gas Association Additionally, the Utica Shale play is projected to: Lead to $14 billion in reinvestment on new exploration and development in 2015
Generate $12.3 billion in gross state product in 2015
Production Concerns The Production Itself - As more wells have access to infrastructure it will give a clearer picture of Shale’s potential
Producers continue to “crack the code” on completion and production techniques which will result in improvement of volumes produced
Production Concerns Lack of timely production data from State of Ohio does not give a clear picture of the Utica’s potential, slows reaction time and limits resources
Producers have the data, OH needs to require it and publish
Production Concerns Local refining market can only absorb about 55,000 bpd of Utica condensate production along with the condensate being produced from the western Marcellus Anything produced in the region beyond that has to be moved outside of these local markets Long-term consumptive market for purity NGL’s is in the Gulf Coast region
Production Concerns Pipeline exports via Mariner East and West (NW Europe and Sarnia)
However, over the next 6-12 months a significant amount processing and takeaway capacity will come online from new projects
Production Concerns Further development of northeast of Utica play (Youngstown, OH/PA border area) Eventual role of pipelines in Utica/Marcellus What will be long-term demand for condensate? … driven in part by pipelines and other developments in western Canada
Logistics Concerns Lack of long-term transportation solutions Railways and trucking companies will be in huge demand: Transport inputs necessary for production and Haul away initial Utica volumes long-term infrastructure solutions such as pipelines are needed to move product to market
Logistics Concerns Railways and trucking companies will be in huge demand: The average shale well requires millions of pounds of sand, thousands of barrels of water and thousands of truck trips to bring inputs and move product out Workforce needs - The trucking industry is short drivers, and the existing pool of drivers is aging
Logistics Concerns Evolution of rail frac-sand logistics … will unit trains play larger role?
Rail site selection … many of the “easy” sites have been taken, requiring companies to get creative, and perhaps make larger initial investments
Logistics Concerns Impacts to local roadway system – many State and local routes not built to carry the repeated loadings resulting from Fracking-related trucking
Regulatory/Policy Concerns Water usage in production and wastewater disposal
Injection well regulation – impact on permitting new wells Timely permitting process improves infrastructure and production schedules Slow process forces alternatives outside the State, lost opportunity, jobs, revenue
Regulatory/Policy Concerns Tax Legislation – impact on investments in the region – lack of clear signals stymies investment
Permitting challenges through wetlands and environmentally sensitive areas
Regulatory/Policy Concerns Tougher air permits for transload sites?
Further implications of Quebec crude- train derailment?
Panelist Contact Information Ryan Fischer Assistant Vice President, Emerging Markets Genesee & Wyoming Railroad Services, Inc. (412) 310-6322 (Mobile) [email protected]
Today’s Panelists
Ohio Valley Region
Slide Number 5
Slide Number 6
Slide Number 7
Slide Number 8
Today’s Panelists
The Right Platform:Diverse Base of Assets
Ohio River Valley Assets: A Great Platform for Growth
Today’s Panelists
Slide Number 20
