30 slides from Teck Resources Limited Class A's investor presentation, Sep 8, 2015
Slide 1: Energy Marketing & Strategy
Energy Marketing & Strategy September 8, 2015 Ray Reipas, Senior Vice President, Energy
Slide 2: Forward Looking Information
Forward Looking Information Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario)
Slide 3: Building a Valuable Energy Business
Building a Valuable Energy Business Oil market rebalance expected post-2016, corresponding with first oil at Fort Hills Strategy for diversified market access Market access improving due to falling industry production levels Significant free cash flow over 50 year project life at expected long term
Slide 4: Agenda
Agenda Oil Pricing & Quality Market Strategy Market Access Fort Hills Introduction Summary 4
Slide 5: Global Oil Market to Rebalance
Global Oil Market to Rebalance West Texas Intermediate (WTI) Price $140 2014-2015: Price drop due market imbalance $120 • Supply growing $100 − OPEC: highest ever production at 31.7 MMbpd; more $80 US$/bbl supply from Iran & Iraq $60 − Non-OPEC: production growing faster than global $40 $20 demand;
Slide 6: Oil Price Forecasts: Near term & Long Term
Oil Price Forecasts: Near term & Long Term Near Term: Limited upside for North American prices North American Weekly Oil Rig Counts • Growing US production despite rig decline 2,000 12000 − US shale continues to play a significant role 1,800 10000 − No firm decision on US export capability 1,600 800
Slide 7: Narrower Heavy Oil Price Differential
Narrower Heavy Oil Price Differential Average Monthly WTI-WCS Differential • Western Canadian Select (WCS) is the benchmark $45 price for Canadian heavy oil $40 $23.12 $35 • WCS differential to West Texas Intermediate (WTI) $30 $15.69 − Based on supply/demand, alternate feedstock $16.65 accessibilit
Slide 8: Agenda
Agenda Oil Pricing & Quality Market Strategy Market Access Fort Hills Introduction Summary 8
Slide 9: Strategy for Diversified Market Access
Strategy for Diversified Market Access Teck Marketing Plan for 50 kbpd Diluted Bitumen Blend Sufficient export capacity in place, including pipeline and rail capacity Kitimat • 3rd parties seeking to reduce committed pipeline Edmonton capacity, due to production cuts Hardisty Asia Vancouver Saint Jo
Slide 10: Agenda
Agenda Oil Pricing & Quality Market Strategy Market Access Fort Hills Introduction Summary 10
Slide 11: The US is a Prime Market
The US is a Prime Market Existing North American Pipelines to US/Canadian Markets Enbridge Mainline Kitimat • In service Edmonton • US Midwest,Eastern Canada markets Hardisty Enbridge Flanagan South Superior • Phases 1 & 2 operational Q4 2014 Saint John Vancouver Montreal • 600 k bbls/day capability
Slide 12: Additional US Pipeline Capacity Proposed
Additional US Pipeline Capacity Proposed New/Proposed North American Pipelines to US Markets Enbridge Line 9B Reversal Kitimat • Construction competed, operational 2nd half 2015 Edmonton • Ontario, Quebec markets Hardisty Keystone XL1 Superior Saint John • Cushing-US Gulf Coast Market Link: In servi
Slide 13: Asia is a Growing Market
Asia is a Growing Market Proposed North American Pipelines to Tidewater Ports Trans Canada Energy East Kitimat • Under regulatory review Edmonton • Eastern Canada, offshore markets Hardisty Enbridge Northern Gateway Superior • Conditionally approved, pending sanction Saint John Vancouver Montreal •
Slide 14: Growing Rail Capacity in Western Canada
Growing Rail Capacity in Western Canada Western Canadian Rail Capacity Estimated Rail Costs & Cycle Times 1.5 Oil Sands Million barrels / day 1.0 Vancouver Canada West Coast 0.5 8-11 days $9-$16/bbl East Coast 13-17 days US East $15-22/bbl Coast 0.0 Port Arthur Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 201
Slide 15: Sufficient Transportation Capacity in Western Canada
Sufficient Transportation Capacity in Western Canada Western Canadian Transport Supply & Demand 8,000 2 New Pipelines Assumptions 7,000 Fort Hills’ First Oil • Fort Hills first oil late 2017 6,000 Enbridge Expansions • Enbridge mainline capacity expansions Million bbls/day 5,000 move forward 4,000 •
Slide 16: Committed Logistics Solutions in Alberta
Committed Logistics Solutions in Alberta Pipeline Teck Pipeline/Terminal Operator Capacity Capacity Status (kbpd) (kbpd) Northern Courier Hot TransCanada 202 40.4 Construction- ROW cleared, 30km complete Bitumen Construction- Civil construction and tank East Tank Farm - Blending Suncor 292 58.4 foun
Slide 17: Northern Courier Hot Bitumen Pipeline Progress
Northern Courier Hot Bitumen Pipeline Progress 17 Source: TransCanada PipeLines
Slide 18: Northern Courier Pipeline Progress at Fort Hills
Northern Courier Pipeline Progress at Fort Hills 18 Source: TransCanada PipeLines
Slide 19: East Tank Farm Progress
East Tank Farm Progress 19 Source: Suncor Energy
Slide 20: Hardisty Blend Tankage Progress
Hardisty Blend Tankage Progress 20 Source: Gibson Energy
Slide 21: Agenda
Agenda Oil Pricing & Quality Market Strategy Market Access Fort Hills Introduction Summary 21
Slide 22: Simplified Process Flowsheet
Fort Hills Simplified Process Flowsheet Mining Ore Ore Preparation Reject Truck and Shovel Feeder/Crusher Feed Surge Ore Preparation Hydrotransport Paraffinic Primary Extraction Froth Treatment Solvent Recovery Bitumen Froth (PFT) Unit Primary Product Flotation Separation Cells Hydrocyclones Froth U
Slide 23: Project Status and Progress
Project Status and Progress Safety and Environment 13 million construction hours without a reportable environmental or continued positive performance regulatory non-compliance 0.35-0.45 recordable injury frequency per 200,000 exposure hours Project Progress continues to track positively within 90% e
Slide 24: Construction Productivity
Construction Productivity Fort Hills construction productivity has improved over previous regionally executed projects since the launch of a formal productivity improvement program Improved productivity level has been reflected in the sanction estimate and schedule Improved construction productivity
Slide 25: Bitumen Netback Calculation Model
Fort Hills Bitumen Netback Calculation Model Typical Diluted Bitumen Cash Margin1 Calculation Example (Dilbit) Blend Western Canadian Select $80 (WCS) at Hardisty $70 $60 $60 $60 ~25% $50 $43 Diluent $40 ~75% $30 $16 Bitumen $20 $10 $0 Example Scenarios Exchange Bitumen Cash WTI (US$/C$) Netback Mar
Slide 26: Project Economics Are Robust
Fort Hills Project Economics Are Robust1 US$60 WTI US$80 WTI Potential Contribution Fort Hills Free Cash Flow Yield4 & $0.80 & $0.90 from Fort Hills CAD/USD CAD/USD Sensitivity to WTI Price Teck’s share of annual production 25% 13 Mbpa 13 Mbpa (36,000 bpd) Estimated netback2 ~$43/bbl ~$55/bbl 20% Fr
Slide 27: Summary
Fort Hills Summary Proven bitumen process and no upgrading required ~50% completion at year end expected Significant productivity improvements achieved Attractive Free Cash Flow yield at conservative long term prices 27
Slide 28: Agenda
Agenda Oil Pricing & Quality Market Strategy Market Access Fort Hills Introduction Summary 28
Slide 29: Building a Valuable Energy Business
Building a Valuable Energy Business Oil market rebalance expected post-2016, corresponding with first oil at Fort Hills Strategy for diversified market access Market access improving due to falling industry production levels Significant free cash flow over 50 year project life at expected long term
Slide 30: Energy Marketing & Strategy
Energy Marketing & Strategy September 8, 2015 Ray Reipas, Senior Vice President, Energy