Raymond James Energy Group
U.S. Research Published by Raymond James & Associates
September 2014
Raymond James Energy Group The Condensate Conundrum The Condensate Conundrum
Raymond James Energy Group (800) 945-6275
[email protected]
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
Unknowns Have Dominated Conversation • Lease condensate isn’t a new addition to the energy dictionary, but the Eagle Ford has clearly catapulted it into the spotlight. condensate isn’t a new addition to the energy dictionary, but the Eagle Ford has clearly catapulted it into the spotlight.
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
2
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
2
Condensate: Not New, but Improved •
As an increasing piece of the overall resurgence in U.S. oil supply growth, we believe condensate production could reach 2 MM bpd by 2020. U.S. Condensate Production 2,250
RJ forecast
2,000 1,750
Mbpd
1,500 1,250 1,000 750 500 250 0 2000
2002
2004
2006
2008
Source: EIA, Raymond James research
2010
2012
2014 E
2016 E
2018 E
2020 E
Note: Actual EIA data only available through 2012
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
3
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
3
Unknowns Have Dominated Conversation •
We know its “ultra light”, but what is the specific API gravity classification of condensate? 45? 50?
•
Refiners aren’t adequately built to process condensate…but they are. Field-level blending is lightening up the barrel being delivered into the front-end of the refinery.
•
Can condensate find a home up in Canada?
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
4
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
4
Siiiiigh….Politics •
Questions still remain regarding the ultimate implications of the two private letter rulings – what is construed as “minimally processed”?
•
Most importantly, where do we go from here given the backpedalling out of the BIS (all new applications have been placed on hold)? Eagle Ford Condensate vs. WTI vs. LLS Prices $140 $130 $120
Condensate export private letter rulings hits newswire
$/Bbl
$110 $100 $90 $80 $70
EF Condensate WTI LLS
$60
Source: Bloomberg; RJ Research
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
5
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
5
To Export or Split? •
Eagle Ford condensate E&P netbacks could actually be higher under the economics of processing via a splitter Eagle Ford Condensate Exports WTI Selling Price
$ 94.52
Eagle Ford Condensate Price KMCC Fee (Field to Houston Ship Channel)
$ (85.50) $ (2.60)
Netback/bbl as of 9/04/14
$
6.42
Eagle Ford Condensate Splitter Production Low High Average $/Bbl Value LPG 3.0% 7.0% 5.0% $ 48.35 $ 2.42 Naphtha 25.0% 50.0% 37.5% $ 106.04 $ 39.76 Jet/Diesel Fuel 30.0% 40.0% 35.0% $ 120.02 $ 42.01 Gasoil 10.0% 35.0% 22.5% $ 112.54 $ 25.32 Total Value $ 109.51
Japanese Imports (Eagle Ford Condensate) WTI Selling Price $ 94.52 Shipping Fee (including Panama Canal toll) $ 4.50
Eagle Ford Condensate Price KMCC Fee (Field to Houston Ship Channel) Splitter Fee
$ (85.50) $ (2.60) $ (6.00)
Cost/bbl as of 9/04/14
Netback/bbl as of 9/04/14
$ 15.41
$ 99.02
Japanese Imports (Middle East Condensate) Middle East Condensate Blend $ 102.59 Shipping Fee $ 0.24 Cost/bbl as of 9/04/14
Source: RJ Research, Bloomberg, company websites
$ 102.82
Source: RJ Research, Bloomberg, Idemitsu, company websites
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
6
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
6
September 2014
Raymond James Energy Group The Condensate Conundrum The Condensate Conundrum
Raymond James Energy Group (800) 945-6275
[email protected]
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
Unknowns Have Dominated Conversation • Lease condensate isn’t a new addition to the energy dictionary, but the Eagle Ford has clearly catapulted it into the spotlight. condensate isn’t a new addition to the energy dictionary, but the Eagle Ford has clearly catapulted it into the spotlight.
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
2
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
2
Condensate: Not New, but Improved •
As an increasing piece of the overall resurgence in U.S. oil supply growth, we believe condensate production could reach 2 MM bpd by 2020. U.S. Condensate Production 2,250
RJ forecast
2,000 1,750
Mbpd
1,500 1,250 1,000 750 500 250 0 2000
2002
2004
2006
2008
Source: EIA, Raymond James research
2010
2012
2014 E
2016 E
2018 E
2020 E
Note: Actual EIA data only available through 2012
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
3
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
3
Unknowns Have Dominated Conversation •
We know its “ultra light”, but what is the specific API gravity classification of condensate? 45? 50?
•
Refiners aren’t adequately built to process condensate…but they are. Field-level blending is lightening up the barrel being delivered into the front-end of the refinery.
•
Can condensate find a home up in Canada?
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
4
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
4
Siiiiigh….Politics •
Questions still remain regarding the ultimate implications of the two private letter rulings – what is construed as “minimally processed”?
•
Most importantly, where do we go from here given the backpedalling out of the BIS (all new applications have been placed on hold)? Eagle Ford Condensate vs. WTI vs. LLS Prices $140 $130 $120
Condensate export private letter rulings hits newswire
$/Bbl
$110 $100 $90 $80 $70
EF Condensate WTI LLS
$60
Source: Bloomberg; RJ Research
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
5
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
5
To Export or Split? •
Eagle Ford condensate E&P netbacks could actually be higher under the economics of processing via a splitter Eagle Ford Condensate Exports WTI Selling Price
$ 94.52
Eagle Ford Condensate Price KMCC Fee (Field to Houston Ship Channel)
$ (85.50) $ (2.60)
Netback/bbl as of 9/04/14
$
6.42
Eagle Ford Condensate Splitter Production Low High Average $/Bbl Value LPG 3.0% 7.0% 5.0% $ 48.35 $ 2.42 Naphtha 25.0% 50.0% 37.5% $ 106.04 $ 39.76 Jet/Diesel Fuel 30.0% 40.0% 35.0% $ 120.02 $ 42.01 Gasoil 10.0% 35.0% 22.5% $ 112.54 $ 25.32 Total Value $ 109.51
Japanese Imports (Eagle Ford Condensate) WTI Selling Price $ 94.52 Shipping Fee (including Panama Canal toll) $ 4.50
Eagle Ford Condensate Price KMCC Fee (Field to Houston Ship Channel) Splitter Fee
$ (85.50) $ (2.60) $ (6.00)
Cost/bbl as of 9/04/14
Netback/bbl as of 9/04/14
$ 15.41
$ 99.02
Japanese Imports (Middle East Condensate) Middle East Condensate Blend $ 102.59 Shipping Fee $ 0.24 Cost/bbl as of 9/04/14
Source: RJ Research, Bloomberg, company websites
$ 102.82
Source: RJ Research, Bloomberg, Idemitsu, company websites
© 2014 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
6
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800 -248-8863
6
