North American Natural Gas Markets

1
North American Natural Gas Markets

• September 2nd 2009
• J. Cameron Bailey CFA
• President and Chief Executive Officer

2
Historical Decline Rates
US Production Declining by 30 - 35 per annum
3
Natural Gas Directed Rig Count
Source Baker Hughes
4
US Natural Gas Production - Declining
US Production
Source Bentek
5
Canadian Gas Drilling Rig Count
Lowest levels witnessed in 10 years
Source Baker Hughes
6
Canadian Gas Production - Declining
Canadian gas production is declining leaving less
for exports to the US
Source NEB
7
Canadian Gas Export to the United States
Source Bentek
8
US Wellhead Prices vs US Natural Gas Rig Count
Source EIA
9
The Growing US Supply Deficit - Revised
US Average Demand
10
Forecast Gas Storage Levels Revised 700 Rigs
3.0 TCF Storage
Not enough gas production to fill storage
11
Natural Gas - Investment Cycle

• Concept
• Land Acquisition
• Permits
• Rig Count Baker Hughes Rig Count
• Completions
• Pipeline Construction Tie-in
• Production Daily Estimates

Six Month Delay?
12
Delayed Production Response Natural Gas
Drilling Activity in Texas
New well permits are down 73 but there still
remained an inventory of Barnett Shale wells to
complete
Source Railroad Commission of Texas
13
Delayed Production Response Natural Gas
Drilling Activity in Barnett Shales
Source Railroad Commission of Texas
14
Shale Gas Plays Texas Barnett Shale

• 10,539 Wells on Production since 2004
• 21 of Texas production
• 2008 Drilling Permits issued were 4,145
  representing 75 of all drilling activity in
  Texas
• Well permits have decreased 73 YOY
• Texas Production represents 33 of US total
  production.

15
Texas - Natural Gas Production
Source Railroad Commission of Texas
16
Total US Demand Recession?
More affected by weather than recession
Source Bentek 2009
17
Recession and Demand? Industrial Demand
Industrial demand is off 1.3 bcf/d Y/Y but
recovering
Source Bentek 2009
18
Recession and Demand? Power Demand
The loss of Industrial demand has been partially
made up by the increase in Power demand
Source Bentek 2009
19
LNG Imports - Excess Capacity
Source Bentek 2009