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ITG Investment Research: U.S. Energy Reserves More Than Double Official Estimates

CALGARY AND NEW YORK, Oct. 8, 2012 /PRNewswire/ -- ITG (NYSE: ITG), a leading independent execution and research broker, today announced the release of a comprehensive report analyzing recoverable onshore oil and gas resource in the lower 48 United States (L48).  The 64-page report, No More Guessing: Hardcore IV estimates total remaining recoverable resource at 1.1 quadrillion cubic feet equivalent (Qcfe) across 450,000 drilling locations.  The new ITG report also noted estimated recoverable resource of 900 trillion cubic feet equivalent (Tcfe) in 10 overlapping plays compared to 426 Tcfe for those same plays noted in a study by the US Energy Information Agency. 

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The new ITG study is based on a county-by-county dispatch curve for 37 major onshore plays.  According to the study, of the 1.1 Qcfe in resource, over 680 Tcfe comes from gas-prone counties, 210 Tcfe from liquids-rich counties and over 30 billion barrels of oil equivalent (Bboe) from oil-prone counties. The Marcellus shale holds the largest remaining recoverable resource at 330 Tcfe, followed by the Eagle Ford and Bakken shales at 152 Tcfe (25 Bboe) and 72 Tcfe (12 Bboe), respectively.

Other key findings:

  • Base decline rate (i.e., the amount that production would fall one year out if no new wells were completed) for L48 natural gas and oil is 25% and 20%, respectively, based on production data from more than one million wells.
  • At year-end 2011, Marcellus, Haynesville, Barnett and Fayetteville accounted for ~60% of new monthly gas production additions in the L48. Bakken, Eagle Ford and Permian accounted for ~60% of all new oil production additions.
  • ITG Investment Research calculated break-even NYMEX prices for over 24,000 individual wells in the L48 using over 140 different type curves. ITG estimates the Marcellus is the lowest-cost gas play with a weighted average break-even price of $3.81/Million cubic feet (Mcf).
  • The current horizontal rig-weighted supply cost for gas plays averages $4.35/Mcf, while the figure for oil and liquids-rich plays averages ~$2.94/Mcf, or $74 per barrel (bbl).
  • Based on rig assumptions, ITG's model shows L48 natural gas production will fall slightly through 2013 and then grow again, but at a much slower rate than that of the last few years. ITG estimates the average break-even production cost of incremental new gas was ~$4.30/Mcf in 2011 and calculates this figure has now declined to ~$3.70/Mcf. The drop reflects a greater percentage of rigs in liquids-rich plays plus a greater percentage of dry gas coming from the low-cost Marcellus.
  • ITG forecasts total L48 onshore oil production will reach 10 million bbl per day by 2025, up from the current rate of about six million bbl per day. Bakken, Eagle Ford and Permian are the three main growth drivers, each expected to contribute over 1.5MM bbl per day in 2025 and each having current weighted average break-evens of ~$65 per bbl for West Texas Intermediate crude. We expect L48 monthly oil production additions to increase to over 300,000 bbl per day each month by 2015, up from current addition levels of over 200,000 bbl per day each month and the 2009 rate of 100,000 bbl per day each month.
  • If the additional processing capacity build-out continues in the L48 and liquids-rich plays are processed to full capacity, ITG estimates natural gas liquids production (excluding C5+ products) could grow to 3.2MM bbl per day by 2020 and ~3.5MM bbl per day by 2025.

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