Bernie Thomas - Navigator Energy Services

Bernie Thomas
Co-Founder and
Vice President, Commercial
Permian Congress
Houston, Texas
Charting Your Course for Midstream Solutions
July 29 & 30, 2015
AGENDA
• Who is Navigator?
• Why the Permian Basin?
• Where are the opportunities?
• What is the role of trucking?
• How does the current price
environment affect project
economics?
• What are the affects of low
vs. high oil prices on
gathering capacity?
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UNLOCKING
THE SECRET
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WHO IS
NAVIGATOR?
Independent midstream infrastructure company
headquartered in Dallas
Backed by $250M equity commitment from First
Reserve Infrastructure Fund II
Approximately 60 full-time employees and
consultants
Owner of the Big Spring Gateway (BSG) Crude Oil
pipeline project
North Midland Basin Crude Oil Gathering Transport
System
~250,000,000 BO in volume commitments
~145,000 acres dedicated
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WHAT NAVIGATOR
IS ALL ABOUT
• It’s a customer service
business, we just happen
to lay pipe and build tanks.
• We identify value gaps where
midstream infrastructure
can act as a bridge.
• We are currently building in
the Permian, but are
geographically nimble.
• It is about our people.
We work to hire the best talent
in the industry, to continue
setting ourselves apart from
the rest.
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NAVIGATOR TEAM
JOHN O’SHEA
MATT VINING
RANDY MARGO
BERNIE THOMAS
Chief Executive Officer
Chief Commercial Officer,
Co-Founder
SVP Business Engineering
& Operations
Co-Founder and
Vice President, Commercial
Experience:
30 years
Experience:
12 years
Experience:
22 years
Experience:
33 years
Recent Experience:
Tenaska Capital Management,
Denham Capital,
Tradition Midstream
Dynegy
Recent Experience:
TPF Gas Services,
Tenaska Capital Management
Recent Experience:
PVR Midstream,
Lonestar Midstream,
Crosstex Energy
Recent Experience:
TPF Gas Services,
Crosstex Energy,
Dynegy,
Hunt Oil
Education:
B.S in Petroleum Engineering,
Louisiana Tech University
MBA, Finance and Entrepreneurship,
University of Texas
Education:
B.S. of Business Administration
and Finance,
University of Arizona
Education:
B.S. in Mechanical Engineering,
Texas A&M University
M.S., Mechanical Engineering,
Texas A&M University
Education:
B.A. in Economics, DePauw
University
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WHY THE
PERMIAN?
Known Resource
The Permian Basin has been producing crude oil
since the 1920s.
Top Tier Production Economics
Advancements in drilling techniques combined
with multiple pay zones have enhanced producer
drilling economics.
Limited Gathering Infrastructure
Over 700,000 bopd is transported by truck from
the production lease to bulk markets.
Broad Geographic Footprint
Covering an area approximately 250 miles wide
and 300 miles long - greater in size than the
Eagle Ford and Bakken combined.
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WHY THE
PERMIAN?
Source: Pioneer Resources
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WHY THE
PERMIAN?
Source: Pioneer Resources
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PERMIAN BASIN
WHAT A MONSTER!
Source: Tudor, Pickering and Holt
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PERMIAN BASIN OPPORTUNITIES
SO MANY WAYS TO PLAY
Source: Tudor, Pickering and Holt
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PERMIAN BASIN
HORIZONTAL DRILLING GROWTH
50% oil growth
in three years
Source: ITG IR
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ITG PERMIAN OIL
GROWTH FORECAST
Source: ITG IR
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PERMIAN BASIN
COUNTY INDEX / 242 Rigs Running / 259 Permits
Source: PLS Permian Scout
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WHERE NAVIGATOR FOUND OPPORTUNITY
BIG SPRING GATEWAY SYSTEM
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BIG SPRING
GATEWAY SYSTEM
Crude oil gathering and
transmission line located in
Midland Basin
Serving Martin, Glasscock, Howard
and Midland counties
~160,000 bopd throughput capacity
~200 miles of high pressure
common-carrier mainline
~250 miles of low pressure
dedicated gathering
450,000 BO of operational
and third-party leased
crude oil storage
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BIG SPRING GATEWAY
DISTRIBUTION OVERVIEW
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THE ROLE OF TRUCKING
BSG SYSTEM MAP
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PROJECT DEVELOPMENT
WHAT TO CONSIDER
• Isolated lease vs. large,
consolidated acreage position
• Future drilling plans
• Proximity to existing infrastructure
• Options for moving crude
•
•
•
Truck
Pipeline
Rail
• Options for moving gas
•
Pipeline
• Options for moving NGL’s
•
•
•
Truck
Pipeline
Rail
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MANAGING PERMIAN
CRUDE OIL LOGISTICS
• Step change in
well productivity
• More production than
trucks and drivers
• Non-uniform quality
• 90% of storage and
pipeline capacity owned by
fewer than six (6)
companies
• Inter-basin supply/demand
dynamics impact on
Permian infrastructure
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WHY BSG PIPELINE
MAKES SENSE
Need For Regional Takeaway Capacity
160,000 bopd of new takeaway for a market
prominently served by truck; the large scale
also reduces costs
Creating Multi-Market Access
Only local pipeline gathering system with connection
into Alon Refinery
Only direct path to Colorado City within Howard and
Martin Counties
Eliminates Regional Truck Reliance
Eliminates 30-100 mile roundtrip, reduced logistical
oversight, improved field inventory management
Well Productivity Requires Pipeline
Horizontal well production profiles and
multi-well pad development are not
efficiently moved by truck
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NAVIGATOR’S
COST ADVANTAGE
Crude Marketer
Purchaser
#1
Purchaser
#2
$/bbl
Fixed Cost Adder
$0.90
Flat Variable (per mile)
$0.06
Transport Cost
Example
Destination
Miles (1 - 15)
$0.11
$/bbl
Miles (16 - 30)
$0.09
Truck Haul Rate
Miles (31 - 50)
$0.05
Pipeline Gathering Rate
Miles 50+
$0.03
Hand Gauge Measurement
Fee
$0.25
Martin
County
(Option 1)
Martin
County
(Option 2)
Midland
Midland
Martin
Martin
Martin
County
County
County
(NES
(NES
(NES
Injection) Injection) Gathered)
Colorado
City
Alon
Colorado
City
$2.95
$2.95
$2.95
$2.95
--
--
--
--
--
$1.00
Tariff (Delivered to
Market)
$0.73
$1.25
$0.73
$0.60
$0.73
$0.15
Pipeline Loss Allowance
$0.18
$0.18
$0.18
$0.09
$0.18
Truck Injection,
Mainline, and Pumping
Fees
$0.24
$0.06
$0.14
$0.06
$0.14
Gross Delivered Cost to
‘WTI’ Market
$4.10
$4.44
$4.00
$3.70
$2.05
30 mile round trip example
$2.95
$3.15
100 mile round trip example
$6.90
$5.65
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SCALABILITY OF
INFRASTRUCTURE
• Scale
• Scale
• Scale
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Bernie Thomas
Co-Founder & Vice President, Commercial
[email protected]
2626 Cole Ave. Suite 850
Dallas, TX 75204
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