Differences in Differentials Evaluating Natural Gas and Crude Oil Prices in Wyoming Wyoming Gas Fair September 18, 2014 Jackson, WY Brian Jeffries (307) 237-5009 brian@wyopipeline.com www.wyopipeline.com
1.00 Price difference between natural gas in Wyoming and natural gas in Louisiana 0.00 (1.00) (2.00) (3.00) (4.00) (5.00) (6.00) (7.00) Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 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 Jan-13 Jan-14 Jan-15 Wyoming price difference in $ per MMBtu
Principal Interstate Natural Gas Pipeline Capacity Serving Wyoming WBI 140 WBI 111 Bison 407 Powder River Basin KMIGT 77 CIG 103 KMIGT 130 WIC 1479 CIG 50 WIC 50 KMIGT 31 KMIGT 123 Ruby 1460 Opal Hub CIG 609 WIC 808 Cheyenne Hub Trailblazer 846 Rockies Exp. 2000 Rockies Exp. 1800 Cheyenne Plains 137 Questar 300 Northwest PL South 467 Southern Star 198 Kern 1998 CIG 750 XCEL 225 CIG 523
12,000,000 2013 Gas Fair PresentaEon 10,000,000 MMBtu per day 8,000,000 6,000,000 4,000,000 2,000,000 0 Oct- 12 Export Need Apr- 13 Forecasted future differenyals based on long run marginal cost to transport gas out of the Rockies $0.30 - $0.60 Oct- 13 Apr- 14 Oct- 14 Apr- 15 Oct- 15 Apr- 16 Oct- 16 Apr- 17 Oct- 17 Apr- 18 Increasing marginal transportayon cost Oct- 18 Apr- 19 Oct- 19 Apr- 20 Oct- 20 Apr- 21 Oct- 21 Apr- 22 Oct- 22
12,000,000 2013 Gas Fair PresentaEon 10,000,000 MMBtu per day 8,000,000 6,000,000 4,000,000 2,000,000 0 Sep- 08 Export Need Mar- 09 Sep- 09 Mar- 10 How about doing the same thing for crude Forecasted future differenyals based on long run marginal cost to transport gas out of the Rockies $0.30 - $0.60 Sep- 10 Mar- 11 Sep- 11 oil for 2014? Mar- 12 Sep- 12 Mar- 13 Sep- 13 Mar- 14 Increasing marginal transportayon cost Sep- 14 Mar- 15 Sep- 15 Mar- 16 Sep- 16 Mar- 17 Sep- 17 Mar- 18 Sep- 18
$ per barrel 110 105 100 95 90 85 80 75 70 65 60 PercepEon of Crude DifferenEal depends on what proxy price used Jan- 12 Apr- 12 Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14
20 Spread between highest and lowest 18 16 14 12 10 8 6 4 2 0 Jan- 12 Apr- 12 Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14 $ per Barrel
$ per barrel 110 105 100 95 90 85 80 75 70 65 60 PercepEon of Crude DifferenEal depends on what proxy price used Jan- 12 Apr- 12 EIA First Purchaser Price Wyoming Sweet Jul- 12 Oct- 12 Jan- 13 Apr- 13 Jul- 13 Oct- 13 Jan- 14 Apr- 14
130 120 CuMng through the cluner Louisiana Light Sweet $ per barrel 110 100 90 80 70 Wyoming Sweet WTI 60 Jan- 12 Mar- 12 May- 12 Jul- 12 Sep- 12 Nov- 12 Jan- 13 Mar- 13 May- 13 Jul- 13 Sep- 13 Nov- 13 Jan- 14 Mar- 14 May- 14 Jul- 14 Source: EIA First Purchaser Data
Some differences between gas and oil ANribute Natural Gas Crude Oil Price Transparency Hub prices in WY and elsewhere WTI and a few other places Capacity data 4X per day nope Shipper data 4X per year nope Rates data All Some Rates large factor in delivered cost Yes No Choice of pipe or? No Yes (rail) FERC response Strong Not so strong
Building a model for crude in Wyoming Hiland PRB Bridger and Belle Fourche Plade Guernsey rnsey Cheyenne Plade PXP Denver
Building a model for crude in Wyoming Big Horn Basin Express Casper Hiland PRB Bridger and Belle Fourche Casper/ Rawlins Plade Guernsey rnsey Cheyenne Plade PXP Denver
Building a model for crude in Wyoming Big Horn Basin Express Casper Hiland PRB Bridger and Belle Fourche Casper/ Rawlins Plade Guernsey rnsey Cheyenne Plade PXP Denver DJ
Building a model for crude in Wyoming Big Horn Basin Express Casper Hiland PRB Bridger and Belle Fourche Casper/ Rawlins Plade Guernsey rnsey Cheyenne Plade PXP Denver DJ
Building a model for crude in Wyoming Big Horn Basin Express Casper Hiland PRB Bridger and Belle Fourche Casper/ Rawlins Plade Solving this model is difficult and wouldn t fully answer the quesyon of the differenyal Guernsey rnsey Denver Cheyenne DJ Plade PXP
Approximate costs to your final desynayon Pipeline Rate Components Range of rates Comment Geing off lease $1 - $3 Gathering/trucking Pipeline tariff Guernsey to Cushing Range for Pipeline $4 - $6 Age and distance affect rates $5 - $9 Using $7 in examples to follow
Approximate costs to your final desynayon Rail Rate Components Range of rates Comment Geing off lease $1 - $3 Gathering/trucking Rail car lease costs Rail terminal loading Rail transportayon $2 - $4 Lease rates vary with market and turn around Yme on cars $1 - $2 Spot/term $5 - $8 Unit v. Manifest/ Distance Range for Rail $9 - $17 Using $11 - $13 in examples to follow
Preferred desynayon depends on market and costs PacNW North Dakota East Coast Utah Wyoming Pipeline path Rail path California Denver Cushing Louisiana
Preferred desynayon depends on market and costs PacNW North Dakota East Coast Wyoming $13 Utah California Denver $7 $11 Cushing Louisiana
Preferred desynayon depends on market and costs PacNW North Dakota East Coast Utah California Wyoming $97 Denver $7 $11 Cushing $90 $13 $110 $100 Louisiana
Preferred desynayon depends on market and costs PacNW North Dakota East Coast Utah California Wyoming $89 Denver $7 $11 Cushing $90 $13 $100 $100 Louisiana
Preferred desynayon depends on market and costs PacNW North Dakota East Coast Utah California Wyoming $83 Denver $7 $11 Cushing $90 $13 $95 $92 Louisiana
So where does that leave Wyoming? Fortunate that: rail is an opyon have both BNSF and UP pipeline addiyons do happen Expect that: Prices at market hubs and refining will influence delivery mode and netback Rail and pipeline built will cycle back and forth as explanayon for price at any point in Yme WTI via pipe is the long run floor on price
20% 0% DifferenEals Expressed as Percent of Benchmark -20% -40% Crude -60% -80% Natural Gas -100% Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15