Energy Lender Price Survey Q4/14 Overview Q4 2014

Energy Lender Price Survey
Q4 2014
Q4/14 Overview
We are pleased to present Macquarie Tristone’s Quarterly Energy Lender Price Survey, a commodity pricing
poll of energy reserve-based lenders. Our survey of energy lenders’ price forecasts covers a broad spectrum
of regional, U.S. national and international banks that engage in energy reserve-based lending (“Participating
Banks”). This quarter’s survey includes 39 Participating Banks.
Base Case Results
For 2014, the Q4/14 Survey indicates a mean Base Case West Texas Intermediate (“WTI”) oil price forecast of
$78.53/BBL and a mean Base Case Henry Hub (“HH”) gas price forecast of $3.62/MMBtu. Our survey of
Brent-based oil price forecasts shows a mean Base Case of $84.04/BBL. The five-year trend shows a
decreasing forward price deck for oil and increasing forward price deck for gas, with average 2018 oil and gas
price forecasts of $76.11/BBL, $77.62/BBL and $4.03/MMBtu, for WTI, Brent and HH, respectively.
70% of respondent’s do not escalate prices past 2018 and price are capped at means of $76.91BBL,
$78.68/BBL and $4.53/MMBtu, respectively. The average discount rate used by Participating Banks is 9% for
Base Case oil and for Base Case gas, unchanged from last quarter’s average. The average discount rate for
Brent is 9%. Operating costs on average are escalated 0.6% per year for WTI, for Brent, and for HH.
Participating Banks each consider proved reserve categories to different extents, but lenders who only
consider proved developed producing reserves average an advance rate of approximately 65%.
4th Quarter 2014 Price Survey: Mean of 39 Participating Banks – Base Case
Oil ($/BBL) - WTI
Oil ($/BBL) - Brent¹
Gas ($/MMBtu) - Henry Hub
2014
78.53
84.04
3.62
2015
77.21
82.00
3.69
2016
76.24
79.72
3.80
2017
76.01
78.36
3.91
2018
76.11
77.62
4.03
2019+ Esc.
0.7%
0.5%
1.5%
Cap
76.91
78.68
4.53
LOE Esc.
0.6%
0.6%
0.6%
9%
9%
9%
Discount Rate
1
Mean of 5 Participating Banks
MacquarieCapital ~ PAGE 1
Current WTI Oil Pricing – Base Case ($/BBL)
$60
2013
$80
$100
2014
$70.00
2015
$78.53
$70.00
2016
2018
High
Mean
$84.71
$77.21
$70.00
2017
$86.89
$76.24
$70.00
$76.01
$70.00
$76.11
$84.00
$85.75
$87.00
Low
Current Brent Oil Pricing – Base Case ($/BBL)
$60
2013
$80
$100
2014
$77.00
2015
$84.04
$76.00
2016
$74.00
2017
Mean
$91.00
$88.60
$78.36
$71.00
High
$82.00
$79.72
$73.00
2018
$94.20
$86.80
$77.62
$86.10
Low
Current HH Pricing – Base Case ($/MMBtu)
$2.00
2013
$3.00
$4.00
$5.00
2014
$3.25
2015
$3.45
2017
$3.50
2018
$3.50
High
Mean
PAGE 2 ~ MacquarieCapital
Low
$4.25
$3.69
$3.25
2016
$4.00
$3.62
$4.50
$3.80
$3.91
$4.03
$4.50
$4.50
$6.00
Base Case to NYMEX Trends
Base Case Q4/14 vs. NYMEX as of October 15, 2014
We compared the average Base Case against NYMEX futures pricing as of October 15, 2014, as shown
below. Base Case results for WTI average 103% of NYMEX WTI futures in 2014, and Base Case results for
Brent average 97% of NYMEX WTI futures in 2014; Base Case results for WTI and Brent average 92% and
96%, respectively, in 2018.
When compared with NYMEX futures pricing, the average Base Case results for gas were 94% of NYMEX HH
futures in 2014 and 95% in 2018.
MacquarieCapital ~ PAGE 3
Quarter-to-Quarter Trends
Quarter-over-Quarter Pricing Trends – Base Case
Compared to last quarter’s Survey, front-year pricing decreases by 3.0% for oil and 1.5% for gas. In the fifthyear, the forecast decreases by 0.8% for oil and by 1.2% for gas.
Oil ($/BBL) - WTI
Q3/14
1
Q4/14
Oil ($/BBL) - Brent¹
% Increase/
(Decrease)
Q3/14
Gas ($/MMBtu) - Henry Hub
% Increase/
Q4/14 (Decrease)
Q3/14
Q4/14
% Increase/
(Decrease)
Front-Year
81.00
78.53
-3.0%
82.60
84.04
1.7%
3.68
3.62
-1.5%
Second-Year
79.29
77.21
-2.6%
80.40
82.00
2.0%
3.74
3.69
-1.5%
-1.5%
Third-Year
77.65
76.24
-1.8%
78.00
79.72
2.2%
3.86
3.80
Fourth-Year
76.83
76.01
-1.1%
76.40
78.36
2.6%
3.96
3.91
-1.3%
Fifth-Year
76.75
76.11
-0.8%
75.60
77.62
2.7%
4.08
4.03
-1.2%
Sixth-Year and Beyond
0.7%
0.7%
N/A
0.0%
0.5%
N/A
1.5%
1.5%
N/A
Cap
76.75
76.91
0.2%
75.40
78.68
4.3%
4.55
4.53
-0.3%
Mean of 5 Participating Banks
Quarter-to-Quarter Base Case Oil (WTI) and Gas (HH) Pricing Trends
$82.00
$/BBL
$80.00
$78.00
$76.00
$74.00
2014
2015
Q1/14
Q2/14
2016
Q3/14
2017
Q4/14
2018
$/MMBtu
$4.50
$4.00
$3.50
$3.00
PAGE 4 ~ MacquarieCapital
2014
2015
Q1/14
2016
Q2/14
2017
Q3/14
2018
Q4/14
Sensitivity Case Results
The Q4/14 Survey also includes a Sensitivity Case, which represents the lenders’ low or conservative price
decks. Of the 39 Participating Banks, 35 banks provided a Sensitivity Case for WTI and HH, which averages a
21% discount to Base Case lending policies for oil and 20% discount to Base Case lending policies for gas
over the five-year strip. Four banks provided a Sensitivity Case for Brent, which averages an 17% discount to
the Base Case pricing over the five-year strip.
4th Quarter 2014 Price Survey: Mean of 35 Participating Banks – Sensitivity Case
Oil ($/BBL) - WTI
Oil ($/BBL) - Brent¹
Gas ($/MMBtu) - Henry Hub
2014
62.16
69.76
2.84
2015
2016
61.42
60.56
67.90
65.66
2.93
3.06
2017
2018
60.59
60.61
64.25
64.25
3.15
3.23
2019+ Esc.
Cap
LOE Esc.
0.7%
62.26
0.3%
0.7%
65.00
0.3%
1.2%
3.61
0.3%
9%
9%
9%
Discount Rate
1
Mean of 4 Participating Banks
Current Oil (WTI) Pricing – Sensitivity Case ($/BBL)
$40
2013
$60
$80
$100
2014
$53.50
2015
$52.00
2016
$48.75
2017
2018
High
Mean
$62.16
$61.42
$60.56
$72.10
$68.40
$68.91
$54.00
$60.59
$70.00
$54.00
$60.61
$70.00
Low
MacquarieCapital ~ PAGE 5
Current Oil (Brent) Pricing – Sensitivity Case ($/MMBtu)
$40
2013
$60
$80
$100
2014
$63.58
$56.00
High
Mean
$74.00
$64.25
$57.00
2018
$75.80
$65.66
$59.00
2017
$78.20
$67.90
$61.00
2016
$80.10
$69.76
$62.00
2015
$73.30
Low
Current Gas Pricing – Sensitivity Case ($/MMBtu)
$2.00
2013
$3.00
$4.00
2014
$2.48
2018
High
Mean
PAGE 6 ~ MacquarieCapital
$3.75
$3.06
$2.30
2017
$3.50
$2.93
$2.31
2016
$3.50
$2.84
$2.34
2015
$2.50
Low
$3.15
$3.23
$3.75
$3.83
$5.00
Participating Banks
Macquarie Tristone thanks the following banks for their participation in this quarter’s survey.
Amegy Bank of Texas
FirstCapital Bank of Texas, N.A.
BancFirst
Frost Bank
Bank of Texas
IBERIABANK
Bank SNB
Independent Bank
BB&T
ING Capital LLC
BBVA Compass
Mizuho Bank, Ltd.
BDC
Natixis
BMO Capital Markets
NBH Bank, N.A.
Cadence Bank
Platinum Bank
Canadian Western Bank
RBC Capital Markets
Capital One, N.A.
Regions Bank
CIT
Santander Bank
Citi
Société Générale
Citibank
TD Securities
Comerica Bank
Texas Capital Bank
Community National Bank
US Bank
Crédit Agricole
Wells Fargo
DNB Bank ASA
West Texas National Bank
First Interstate Bank
Whitney Bank
First Tennessee Bank
MacquarieCapital ~ PAGE 7
Macquarie Tristone Contacts – Houston
Rob Bilger
Vice Chairman
[email protected]
713-651-4222
Krishna Desai
Associate
[email protected]
713-651-4215
About Macquarie Tristone
Macquarie Tristone has completed more than 300 energy asset packages valued at over US$28 billion since 2001. As a leading A&D team, we provide advisory services in
energy asset transactions worldwide to a range of clients in the oil and gas energy industry.
With a sophisticated suite of asset divestiture processes, coupled with superior senior-level industry relationships, Macquarie Tristone brings together an unparalleled
combination of disciplines in engineering, geoscience and economics. Macquarie Tristone’s expertise extends across all phases of the divestiture process, including, deal
strategy, financial and value analysis, technical evaluations, buyer identification and qualification, and other deal-related logistics.
Combined with Macquarie's global resources activities, the result is a seamless, integrated offering, providing top-tier financial and execution experience with superior,
specialized technical expertise.
Disclaimer
"Macquarie Capital" refers to Macquarie Capital Group Limited, its worldwide subsidiaries and the funds or other investment vehicles that they manage. Macquarie Capital
Group Limited is an indirect, wholly-owned subsidiary of Macquarie Group Limited.
This document and its contents are confidential to the person(s) to whom it is delivered and should not be copied or distributed, in whole or in part, or its contents disclosed
by such person(s) to any other person. Notwithstanding the foregoing, the recipient (which includes each employee, representative, or other agent of the recipient) is hereby
expressly authorized to disclose to any and all persons, without limitation of any kind, the tax structure and US federal income tax treatment of the proposed transaction and
all materials of any kind (including opinions and other tax analysis) if any, that are provided to the recipient related to the tax structure and US federal income tax treatment.
This document does not constitute an offer to sell or a solicitation of an offer to buy any securities. You may not rely upon this document in evaluating the merits of
investing in any securities. This document does not constitute and should not be interpreted as either an investment recommendation or advice, including legal, tax or
accounting advice.
Future results are impossible to predict. Opinions and estimates offered in this presentation constitute our judgement and are subject to change without notice, as are
statements about market trends, which are based on current market conditions. This presentation may include forward-looking statements that represent opinions,
estimates and forecasts, which may not be realized, and such statements may be based on information not generated or sourced by Macquarie Capital. To the extent that
such statements are based on information generated or sourced by Macquarie Capital, we believe the information provided herein is reliable, as of the date hereof, but do
not warrant its accuracy or completeness. In preparing these materials, we have relied upon and assumed, without independent verification, the accuracy and
completeness of all information available from public sources.
Nothing in this document contains a commitment from any member of Macquarie Capital to subscribe for securities, to provide debt, to arrange any facility, to invest in any
way in any transaction described herein or otherwise imposes any obligation on Macquarie Capital. Macquarie Capital does not guarantee the performance or return of
capital from investments.
None of the entities noted in this document are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations
of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide
assurance in respect of the obligations of these entities.
CIRCULAR 230 DISCLOSURE
Macquarie Capital does not provide any tax advice. Any tax statement herein regarding any US federal income tax is not intended or written to be used, and cannot be
used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or
matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
© 2014 Macquarie Capital (USA) Inc.
www.macquarietristone.com
PAGE 8 ~ MacquarieCapital