Natural Gas: An Energy Game Changer Ron Muhlenkamp 2013. All rights reserved. Natural Gas: An Energy Game Changer Consumer Environmentalist Landowner Investor Natural Gas: An Energy Game Changer Consumer
Source: Bloomberg; Oil; Generic 1st 'CO' Future, Natural Gas; Generic 1st 'NG' Future delivery to Henry Hub Natural Gas Crude Oil 19953/17/2014 (Daily) How Shale Gas Benefits the Homeowner Source: Muhlenkamp & Company, Inc.
Percent of Total U.S. Electricity Net Generation by Energy Source 2012 Source: U.S. Energy Information Administration; Electric Power Monthly, Tables 7.2b and 8.2b 50% 25% 25% Home Heating Industry Utilities Historical Natural Gas Consumption in the U.S. Source: Muhlenkamp & Company, Inc. Working Gas in Underground Storage Compared with 5-year Range Week ending March 7, 2014 Note: The shaded area indicates the 5-year range between the minimum and maximum values for the weekly series. Between 2009-2014.
Source: U.S. Energy Information Administration; Form EIA-912, Weekly Underground Natural Gas Storage Report. Last 24 Months 5-year average Energy Source
Source: Bloomberg Other U.S. Consumers of Natural Gas Utilities Over-the-Road Trucking Industry Feedstock Manufacturers Natural Gas: An Energy Game Changer Consumer Environmentalist
Chemical Composition of Selected Fuel Sources Source: Muhlenkamp & Company, Inc. Acres of land needed to produce the fuel to generate enough electricity to serve 1,000 households for one year Land Usage: Favors Natural Gas for Power Generation Source: U.S. Energy Information Administration, Carbon Dioxide Emissions Coefficients Report 0 50 100 150 200 250 N u c l e a r S o l a r W a t e r W i n d O t h e r P u r c h a s e d
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C o k e Energy Source 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Carbon dioxide emission factors for electric power generation by fuel type in the United States P o u n d s
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B t u Percent of largest carbon emitter (Right Axis) Source: U.S. Energy Information Administration, Monthly Energy Review. Note: Reflects total carbon dioxide emissions in metric tons by month. U.S. Carbon Dioxide Emissions from Coal 1972-Nov2013 (Monthly) 0 50 100 150 200 250 1 9 7 2 1 9 7 4 1 9 7 6 1 9 7 8 1 9 8 0 1 9 8 2 1 9 8 4 1 9 8 6 1 9 8 8 1 9 9 0 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 3 2 0 1 4 Year M i l l i o n
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T o n s U.S. Total Carbon Dioxide Emissions from Energy Demand 1973-Nov2013 (Monthly) 250 300 350 400 450 500 550 600 1 9 7 3 1 9 7 5 1 9 7 7 1 9 7 9 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 3 Year M i l l i o n
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T o n s Ron Muhlenkamp & Company U.S. energy-related CO2 emissions in early 2012 lowest since 1992
Source: U.S. Energy Information Administration, Monthly Energy Review. Note: Reflects total carbon dioxide emissions in metric tons by quarter. What about the Water? 1) Into well 2) Flow back 3) Water table 4) Burn Methane (CH 4 ) 5) Ethanol (C 2 H 6 O)
Water into the Well It takes 5 million gallons to frac 1 well which drains 80 acres
ft 3
7.5 Gals. Acre 43,560 ft 2 1 80 Acres 12 Inches ft 2.3 Inches of Rain X = X Source: Muhlenkamp & Company, Inc. Flow Back Center for Sustainable Shale Development (CSSD) Into subsequent wells Water Table Burn Methane, CH 4 CH 4 + 2O 2 CO 2 + 2H 2 O 1 Billion ft 3 11 Million Gallons of H 2 O
Source: Muhlenkamp & Company, Inc. Fracturing: What about the Water?
$5 Million + 5 million gallons H 2 O = 88 Million Gallons of H 2 O 83 Million Gallons of H 2 O @ 6/Gallon = Free Energy Source: Muhlenkamp & Company, Inc. Ethanol: What about the Water? 30% of U.S. corn crop is used for ethanol production 25-30 of rainfall are required to grow corn Average corn yield of 1 acre of farmland 147 bushels 1 bushel of corn 2.77 gallons of ethanol 677,724 gallons of water 450 gallons of ethanol
Source: Muhlenkamp & Company, Inc. Fracturing vs. Ethanol: What about the Water? Marcellus gas well uses 0.16 gallons of water to generate the energy equivalent of 1 gallon of gasoline. Ethanol requires 2,259 gallons of water to produce the energy equivalent of 1 gallon of gasoline. Shale gas is 14,000 times more water-efficient in the production of energy than corn ethanol. Source: Muhlenkamp & Company, Inc. Source: MarcellusGas.org Examples of Typical Shale Fracturing Mixture Makeup Source: AXPC Natural Gas: An Energy Game Changer Consumer Environmentalist Landowner
Natural Gas in Pennsylvania Round I Source: sjvgeology.org Source: Oil and Gas Field Atlas of The Butler Quadrangle Source: Oil and Gas Field Atlas of The Butler Quadrangle Natural Gas in Pennsylvania Round II 6 Laterals (wells) seen here
Range Resources (Dry Gas): 1) Average distance of lateral in 2013: 5,000 feet 2) Currently drill with 25 fracture stages
Source: Oil and Gas Field Atlas of The Butler Quadrangle Source: Range Resources; Pennsylvanias Marcellus Gas Play Its History, Potential, and Challenges, 8/31/11 Total Disturbance during drilling, including access road, drilling pad and required pipeline infrastructure: Horizontal (yellow) develops 1,000 acres per pad with 1% surface disturbance Vertical (purple boxes) on 1,000 foot spacing develop 23 acres per well with 19% total surface disturbance (old industry method)
10 Laterals (wells) seen here
Range Resources (Dry Gas): 1) Average distance of lateral in 2013: 5,000 feet 2) Currently drill with 25 frac stages Source: Muhlenkamp & Company Source: National Geographic Source: Range Resources Source: Range Resources: October 29, 2013; Company Presentation
U.S. Natural Gas Pipeline Network October 29, 2013; Company Presentation Source: Range Resources October 29, 2013; Company Presentation Muhlenkamp & Company, Inc. 2013 * Typical Marcellus Shale dry gas well pad as of 8/1/13: assumes 58 year well life, 80 acre spacing, 6 Bcfe EUR (Estimated Ultimate Recovery) per well, 8 wells total, $4/MMBtu Dry Gas Price. Per Acre Estimate of Pre-Tax Cumulative Dollars Received by the Landowner Over the Life of a Typical Marcellus Shale Dry Gas Well in Southwestern Pennsylvania* Muhlenkamp & Company, Inc. 2013 * Typical Marcellus Shale dry gas well pad in SW Pennsylvania as of 8/1/13 ** EUR = Estimated Ultimate Recovery Estimate of Pre-Tax Cash Flows to the Landowner from a Typical Marcellus Shale Dry Gas Well in Southwestern Pennsylvania* Natural Gas: An Energy Game Changer Consumer Environmentalist Landowner Investor
Source: Bloomberg; Oil; Generic 1st 'CO' Future, Natural Gas; Generic 1st 'NG' Future delivery to Henry Hub Natural Gas Crude Oil 19953/17/2014 (Daily) Source: Examiner.com; 12/6/12 Source: Bloomberg Americas Natural Gas Highway The Clean Energy Solution
Natural Gas: Diesel Replacement for Americas Trucking Corridors Source: Clean Energy Fuels; http://www.cleanenergyfuels.com/buildingamerica.html Whats Next Changing Supply/Demand Dynamics Natural Gas Liquids (NGLs) Emphasis on products downstream of ethylene. Liquefied Petroleum Gas (LPG) exports continue to increase with U.S. playing a key role. Crude Oil North American production continues to grow mostly from unconventional resources. U.S. refined product exports continue to grow, enabled by increasing crude oil supplies. Natural Gas Markets will grow substantially, including power generation, and Liquefied Natural Gas (LNG) exports. Shut-in wells ready to respond to increases in prices, likely assuring low prices for years to come. Natural Gas Exploration & Production Cabot Oil & Gas Chesapeake Energy Range Resources Rex Energy Southwestern Energy
Oil & Gas Services Halliburton Company Schlumberger LTD Baker Hughes
Distribution Clean Energy
Engine Conversion Westport Innovations Fuel Systems American Power Group
LNG Plant Construction Chicago Bridge Fluor Corp. KBR Inc.
Feedstock U.S. chemical companies Muhlenkamp & Company, Inc. Intelligent Investment Management Questions and Responses Muhlenkamp & Company, Inc. Intelligent Investment Management The comments made by Muhlenkamp & Company are opinions and are not intended to be investment advice or a forecast of future events. Muhlenkamp & Company, Inc. Intelligent Investment Management 2013. All rights reserved.