Offshore Deepwater Data & Intelligence Consultants - KPMG’s … · 2017. 5. 18. · Deepwater Sector Review Current State LNG Bright Spot Analysis of Project Costs ... Move towards

CLARITY • INSIGHT • VISION

KPMG’s M&A Oil & Gas Symposium

Wednesday, January 20, 2016Windsor Court Hotel • New Orleans, LA

Paul H. HillegeistPresident & COO

Quest Offshore Resources



Forward-Looking StatementsStatements in this presentation regarding Quest Offshore Resources or its management'sintentions, beliefs or expectations, or that otherwise speak to future events, are "forward-lookingstatements.” Future results and developments discussed in these statements August be affectedby numerous factors and risks, such as the accuracy of the assumptions that underlie thestatements, the success of the oil and gas exploration and production industry, drilling results,uncertainties in interpreting market data, changes in laws and regulations, the ability to respondto challenges in international markets, including changes in currency exchange rates, political oreconomic conditions, trade and regulatory matters, general economic conditions, and other factorsand risks. Actual results and developments August differ materially from those expressed orimplied in this presentation.

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Table of Contents Degenerating Landscape

Threats & Challenges

Industry Response

Deepwater Sector Review

Current State

LNG Bright Spot

Analysis of Project Costs

Industry Reset

Market Forecast

Mexico Opportunity

Regional Opportunities 4


Threats & Challenges Sustained lower commodity prices

Surging crude inventories

Lackluster global demand growth

“Double-Dip” declines in E&P Capex

Lead to…Opaque near-term visibility

Market Overview

Source: Wall Street Journal Christophe Vorlet


Industry ResponseM&A and consolidation across segments

250,000 & growing industry job losses

Continue to leverage technology

Move towards integrated delivery of services & equipment

Standardization efforts to drive lower costs through: Scale Efficiencies & Optimization Operational Excellence

Shifting contracting model

Market Overview

Source: Helix Energy Solutions


Global E&P Spending OutlookAverage of E&P Spending Forecasts, Brent Mean Case & History, Brent Low Case & High Case

Source: Quest Offshore, Evercore ISI, Cowen & Co., Barclays

$-

$20

$40

$60

$80

$100

$120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Bren

t Cru

de O

il Sp

ot P

rice

($Re

al)

Tota

l CAP

EX ($

mill

ions

)

AVERAGE of E&P Spending Forecasts Brent Mean Case and History

Brent Low Case Brent Mean Case and History

7


Global Subsea Trees by DecadeAverage Water Depth

0

500

1000

1500

2000

2500

3000

3500

0

1000

2000

3000

4000

5000

6000

7000

8000

1960's 1970's 1980's 1990's 2000's 2010's

Aver

age

Wat

er D

epth

(Fee

t)

# Su

bsea

Tre

es (M

ean

Case

)

Startup Decade

Number of New Subsea Wells Average Water Depth (Feet)

Proxy for Deepwater Drilling & Development Activity

Subsea & Related Hardware Components

Production Umbilicals

ROV Services & MarCon (URF Install)

Subsea Workover & Intervention Opportunities

Source: Quest Offshore Resources8


0

2

4

6

8

10

12

14

Tota

l Dee

pwat

er P

rodu

ctio

n (M

MBO

E/D)

Deepwater Oil Productionby Year

Source: Kosmos Energy

Source: ExxonMobil Energy Outlook to 20409


Regional Deepwater Oil Production by Decade

0

1

2

3

4

5

NAM SAM AFR NSEA Russ/Casp ASP

MM

BOE/

D

2010s 2020s 2030s 2040s

Source: ExxonMobil Energy Outlook to 2040

Source: Royal Dutch Shell Management Day Investor Handout November 2015

10


Global Natural Gas Demand & Supply

11


Source: BP Energy Outlook 2035

Fossil Fuels Will Continue to be the World’s Primary Energy Source

12


LNG Supply is Poised for a Growth SpurtAs an analog we can look at the newly combined Shell & BG future project landscape!!

Source: BP Energy Outlook 203513


Overview of Floating LNG Projects

19

46

1413

5

8

.5 1

5

6.3

XNumber of Proposed FLNG Projects

Planned Capacity (MTPA)X Under Construction

Capacity (MTPA)XSource: Quest Offshore Resources

14


Image courtesy of: Total

Project Cost Challenges


The Economics of Global Oil MarketsStylized Oil Production Cost Curve

Shale has become shock absorber

Source: BP Spencer Dale “New Economics of Oil”, Oct. 2015


Source: Y Charts, Quest Offshore Resources Inc.

Oil Price vs IOC Return on Capital EmployedInflation Adjusted Average Brent Oil Price In Sanction Year

0%

5%

10%

15%

20%

25%

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015

Pric

e pe

r Bar

rel

YearAvg. Inflation Adjust Brent Price IOC Avg. Return on Capital Employed


Major Project Awards by Oil PriceInflation Adjusted (2014) Average Brent Oil Price In Sanction Year

<$20 <$30 <$40 <$50 <$60 <$70

Total Girassol -98

Statoil Snorre B -98

PB Marlim - 99

XOM Hoover Diana -97

CVX Petronious -97

BP Na Kika – 00

BP Atlantis – 01

XOM Kizomba A-C– 01-03

PB Marlim Leste- 2003

CVX Agbami – 04

BP Greater Plutonio - 04

Anadarko Constitution – 04

Murphy Kikeh -04

Maersk Culzean– 15

Shell Appomatox -15

Statoil Johann Sverdrup – 15

ENI OCTP -15

GDF Gjoa– 05

ENI Goliat -09

Total Akpo – 05

CVX Tahiti – 09

BHP Neptune

PB Roncador 3&4, 05&09

Long-term Opportunities:• Increased/stable oil & natural gas price• More efficient development executions

• Growing natural gas demand • Phased projects & shorter cycle times

• IOC’s operating in Brazil

Long-term Challenges:• Larger scale projects

• More complicated projects• Most of the “easy” reserves are found

• Less capacity/people to execute higher project volumes• Low 2013-2016 exploration leading to

reduced inventories of discoveries

Source: Quest Offshore Resources


Deepwater Drilling Market

Deepwater Drilling Market

19


Current Contracted Units (44) U.S. Gulf of Mexico Floating Rigs

0

2

4

6

8

10

12

14

16

18

2016 2017 2018 2019+

Rig

Coun

t

Year Available

<$350,000 $350,000-$500,000 >$500,000

Leading Edge contracts on DW-UDW rigs in U.S. Gulf

Noble Danny Adkins Semi: $208 for 90 days firm

Ensco 8506 Semi: $210 for 120 days firm

Ensco 8505 Semi: $180 for two years firm

Noble Paul Romano Semi: $302 for one year firm

Deepwater Champion Drillship: $395 for 90 day ext.

Nearly half rigs currently working at rates above $500,000/day are nearing

the end of their firm contracts



Cumulative Floating Rigs Stacked/Scrapped2009-2015

54

27

44 Warm Stacked

Cold Stacked

Scrapped

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014 2015

Cum

ulat

ive

Coun

t

Stacked Year

Over 75% of inactive floating rigs have been taken out of service in the past nine months



Changing Deepwater Project EconomicsDrivers for Step-Change

Capex Allocation

0%

100%

SPS & SURF35%

FAB & FAC25%

DRLG40%

Current Cost Structure

8%

12%24%

The New Net

Potential Net Savings

Step-Change to Reduced Cost, Risk & Inefficiency

35%

30%

60%

Deflation, Replication, Efficiency, Standardization

44%



Deepwater Value Creation

Source: Royal Dutch Shell Management Day Investor Handout – November 201523


Market Trends & Forecast

24


Global Deepwater Exploration ActivityOpening up new reserves for long-term development

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

% F

ront

ier

Spud

s

All

Expl

orat

ion

Spud

s

Spud Year

<5000fsw >5000fsw Frontier



0

10

20

30

40

50

60

70

80

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Gre

enfie

ld P

roje

ct C

t

Execution Year

Africa/Medit. (Mean Case) Asia Pacific/Middle East (Mean Case)North America (Mean Case) North Sea (Mean Case)South America (Mean Case) Global (High Case)Global (Base Case)

Global Deepwater Project Executions - Greenfield

2016-2020 vs 2011-15+3%

2021-2025 vs 2016-20 +49%


CLARITY • INSIGHT • VISION Global Activity TrendsFacilities & SURF Market

27


Offshore Construction Vessel Day Rate Trends2013 – 2018

0.75

0.80

0.85

0.90

0.95

1.00

1.05

2013 2014 2015 2016 2017 2018

Day

Rate

Inde

x

Contracting Year

Deepwater Pipelay Derrick Pipelay Heavy LiftMSV ROV DSV

Source: Quest Offshore Resources Inc.


0 500 1,000 1,500 2,000 2,500 3,000 3,500

Africa/Medit.

Asia Pacific/Middle East

N. America

N. Sea

S. America

Vessel Demand Days

2017e 2016e 2015e 2014

Global Marine Construction Total DemandWorldwide Pipeline & Umbilical (Days) 2014-2017



North AmericaIndicators for Onshore & Shallow Water

30


0

500

1000

1500

2000

2500

0

10

20

30

40

50

60

70

2008 2009 2010 2011 2012 2013 2014 2015 2016

BHI U

S La

nd R

ig C

ount

GoM

Jack

-Ups

Con

trac

ted

Contracted Year

U.S. Gulf of Mexico Jack-Up RigsCurrent Contracted Units (6)



0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Num

ber o

f Str

uctu

res

Installation Year

Fixed PF 0-100ft Fixed PF 101-400ft Fixed PF 401-650ft

Fixed PF 651-1000ft Cais/WP 0-100ft Cais/WP 101-400ft

U.S. Gulf of Mexico Fixed Platform InstallationsNumber of Structures by Install Year, Type, and Water Depth

Source: Bureau of Ocean Energy Mgmt (BOEM), Quest Offshore Resources32


0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Num

ber o

f Str

uctu

res

Removal Year

Fixed PF 0-100ft Fixed PF 101-400ft Fixed PF 401-650ft

Fixed PF 651-1000ft Cais/WP 0-100ft Cais/WP 101-400ft

U.S. Gulf of Mexico Fixed Platform DecommissioningNumber of Structures by Removal Year, Type, and Water Depth

Source: Bureau of Ocean Energy Mgmt (BOEM), Quest Offshore Resources33


Regional ForecastDeepwater Opportunities in North

America

34



Central GoM Lease Sale ComparisonHigh Bids in Millions USD

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

$3,000.0

$3,500.0

0-300 ft.

301-1,500 ft.

1,501-3000 ft.

> 3,000 ft.

35


Western GoM Lease Sale ComparisonSum of High Bids

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

8/1998HighBids

8/1999HighBids

8/2000HighBids

8/2001HighBids

08/2002HighBids

08/2003HighBids

08/2004HighBids

8/2005HighBids

8/2006HighBids

8/2007HighBids

8/2008HighBids

8/2009HighBids

12/2011HighBids

11/2012HighBids

8/2013HighBids

8/2014HighBids

8/2015HighBids

0-300 ft.301-1,500 ft.1,501-3000 ft.> 3,000 ft.



North America Deepwater Exploration Activity

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Spud

Cou

nt

Spud Year

0-1000 FSW 1001-5000 FSW >5000 FSW

175 E&A wells spud 2010-2014 216 E&A wells forecast to spud 2015-2019

The U.S. Gulf of Mexico accounts for 75% of North America deep water exploration drilling. Increased activity outside of U.S. Gulf will be led by results of current Newfoundland and Nova Scotia programs and future IOC activity in upcoming Mexico deepwater licensing.



Contracted Supply (44 units)U.S. Gulf Operators with Floating Rig Contracts

0 1 2 3 4 5 6 7 8

BHP-IND

Cobalt-IND

ConocoPhillips-IND

Eni-MAJ

Marubeni-IND

Noble Energy-IND

Repsol-IND

Statoil-NOC

Stone Energy-IND

Talos Energy-IND

ExxonMobil-MAJ

LLOG-IND

Murphy-IND

Freeport McMoRan-IND

Hess-IND

Anadarko-IND

BP-MAJ

Chevron-MAJ

Shell-MAJ

Rigs contracted past 2016 Rigs ending contract in 2016

13 rigs roll off current contract in 2016


CLARITY • INSIGHT • VISIONN. America Forecast Opportunities – Stand Alone DevelopmentsBy Country and Startup Year

5 Projects

Projects in engineering or procurement bidding stages

Stage Concept, FEED or Bidding

0-1000 fsw20%

1001-5000 fsw80%

0

1

2

3

2017 2018 2019 2020 2021

Canada NE GOM-US



Regional ForecastMexico Opportunities

40


• 10 total blocks in Perdido Fold Belt (4) & Salina del Itsmo Basin (6)

• Est. 10.8bn bbl reserves

• Final Presentation Q3 ‘16 Q4 ‘16 / Q1 ’17 Bid Round

• Requires Deepwater Experience

• License Model instead of Prod. Sharing Contract

Mexico Deepwater Bid Round 1.4



Paul H. Hillegeist President and COO

[email protected]

Caitlin ShawSr. Director Market Data & Research

[email protected]

Sean Shafer Manager of Consulting

[email protected]

Quest Offshore Resources, Inc. 77 Sugar Creek Center Blvd. Suite 500

Sugar Land Texas, 77478 USA

Tel: 281-491-5900Fax: 281-491-5902

www.questoffshore.com

Josh DouglasSales Manager

[email protected]

Contact Us

Inquiries:[email protected]

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http://www.questoffshore.com/





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Offshore Deepwater Data & Intelligence Consultants - KPMG’s … · 2017. 5. 18. · Deepwater Sector Review Current State LNG Bright Spot Analysis of Project Costs ... Move towards