WellPoint Systems' Blog

WellPoint Systems hosted an executive breakfast in Houston on Friday Jan 22nd. Vikas Dwivedi, partner, BTU Capitol presented an Energy Outlook for 2010. Some takeaways from that presentation were the following:

Conclusions for the Crude market:
► Normalized price estimated at $90 per barrel
► Refined products will continue as primary global energy source
► Better economics than alternatives
► Product demand is GDP driven; does not need to return to trend for high prices
► Supply growth will be difficult without accelerating costs

Summary for the Natural Gas Market:
► The US natural gas market has a bearish outlook for at least the next 12 to 24 months.
► High productive capacity and limited demand are highly visible drivers. In contrast, the impact of bullish drivers like carbon legislation, CNG, and low rig counts are less visible and less certain.
► Demand
► R&C demand growth anemic over the short, medium, and long-term.
► Industrial demand decline started before recession and will continue for the next three to four years.
► Power sector is still the key driver. May be soft for 2 years and then pickup.
► Carbon, CNG initiatives, weaker dollar, and ethanol demand are positives.
► The U.S. can become one of the largest exporters of natural gas over time. (A point that is seemingly reiterated when you hear any industry expert speak)

Conclusions and observations on Cap and Trade
► Very little carbon savings will be achieved without significant technology development
► Carbon charges will increase energy prices and U.S. industry will be less competitive
► China is building the equivalent of the entire U.S. coal fleet between 2007 and 2012
► Approximately 38 TCF /Yr of carbon from U.S. power plants.
► Nobody, regardless of approach knows for sure – nothing but highly informed views
► Bill is dead for now

From Oil and Gas Journal

Nov 25, 2009
Curtis Williams
OGJ Correspondent

PORT OF SPAIN, Nov. 25 — BP PLC Chief Executive Officer Tony Hayward says more money needs to be spent on exploration and development if the world is to meet increasing demand for energy.

Speaking at a news conference in Trinidad, Hayward said BP was projecting that by 2030 the world will need at least 45% more energy than it consumes now.

Hayward said this increase demand will be driven mainly by the world’s emerging economies.

“Hundreds of millions of people, driven mainly by India’s and China’s development, are making the journey from a rural to an urban way of life, and that journey brings with it an explosion in demand for energy,” Hayward said.

To meet this increase in demand, BP projects it will require an investment of $25-30 trillion, or and average of “more than $1 trillion/year for the next 20 years.”

Hayward said is not happening at the moment because the world economic crisis has led to a reduction in companies’ ability to invest in exploration.

Hayward said to face the challenges of energy security and climate change there will also be a need for a more diverse energy mix.

“What has become very clear is that there are no magic bullets, nor is there going to be a ‘one-size fits all’ solution: each country will have to define its own pathway, based on its natural competitive advantage,” he said.

Focus on gas
Hayward said natural gas is becoming increasingly important in dealing with the energy and environmental challenges facing the world and as the developing economies continue to expand, demand for power is set to grow exponentially.

“We believe the best way of meeting this demand growth, while lowering carbon emissions, is through a switch from coal to gas.”

Renewable energy will eventually be important but it will take several decades to become a significant part of the power generation mix. Very long lead times apply to nuclear power as well.

“In the short term, the main choice for expanding generation capacity is between coal and gas. And until clean coal technology has been developed for use at scale—which is still some ways off—gas should be the clear choice,” he said.

Hayward added, “[Gas] generates half the carbon emissions of coal. It is abundantly available—even more so than we thought just a few years ago thanks to the unlocking of significant reserves of unconventional gas in North America. And as LNG it is traded in increasingly open markets around the world.”

A fundamental part of the world’s energy future, Hayward argued, must be gas. After all, he said, it is the fuel that offers the greatest potential to provide the largest carbon reductions—at the lowest cost—and all that by using technology that’s available today.

Hayward admitted though that clean coal technology will have to be improved and coal will return as part of the sustainable energy mix.

Last week was the WellPoint Systems Regional User Conference in Calgary. Over 45 attendees were at the event and shared their WellPoint experiences with each other as well as WellPoint staff. It was a very positive atmosphere, with customers stating their appreciation of the event. The sessions were productive, with great conversation and interaction between the participants. Some of the feedback was:

“It was good to hear about WellPoint’s strategies for the future”
“I learned some things that I can go back to the office and take advantage of immediately”
“The pricing module in Energy Broker in absolutely the most robust I’ve seen – bar none”
“WellPoint listened to (and has already implemented) the suggestions I made at the Houston conference. I’m back to make more suggestions”
“Thank you for putting on a conference for USERS”
“The small classes offered a setting conducive to good conversations”
“Your new website looks great! The things you are doing to market WellPoint look really good”

Mike Weiss, SVP Products and Technology for WellPoint, recently wrote an article regarding the value of data quality. Below is an excerpt, for the full article, click on the article.

WellPoint President and CEO recently wrote an opinion piece for Oil and Gas Financial Journal on better alternatives to proposed cap-and-trade legislation. Below is an excerpt of the article, to view the entire article, click on the article below.

Oil and Gas Financial Journal recently sat down with Debra Bryson – Product Manager for Energy Broker for a Q&A on ETRM.

Below is an excerpt, for the full article, click here. http://www.wellpointsystems.com/pdf/press/2009/OGFJENB.pdf

Q. Is it true that more energy trading is taking place than ever before? Is there a difference in the type of risk management systems required for each type of trading activity?

A. More trading is occurring today because there are a larger number of participants and despite continued liquidity issues in most energy commodity markets, the increased number of participants have resulted in more individual transactions. The ratio of physical to financial trades varies by several distinct variables: geo-political boundaries, North American geographies, seasonal production, facility capacity and storage options, storage capacity and the corporate or trading firm business models. The type of risk will vary by the type of trading activity. Firms trading product they own will have a lower risk profile while firms trading product as a commodity for hedging or swaps will have a higher risk profile.

CFOs Plan to Invest in Technology
“When the economy reboots, chief financial officers are planning to improve their information technology systems, according to a survey by Robert Half Management Resources. When asked where they are most likely to spend when a recovery occurs, 40 percent of CFOs said IT, according to the survey of 1,400 CFOs from U.S. companies with 20 or more employees. The next most popular answers for areas of investment were new products or service lines (18 percent) and new locations or real estate (14 percent).“As companies emerge from the recession and become more profitable, they will begin to focus on shoring up critical business applications and technology infrastructure,” said Paul McDonald, executive director of Menlo Park. Calif.-based Robert Half.”

The term “Big Oil” is thrown around routinely in the media and generally draws a visceral reaction from the public, invoking images of an all-powerful cabal secretly pulling the levers that control the flow of oil. But in reality, America’s independent natural gas and oil producers develop 90% of US wells, produce 82% of US natural gas, and produce 68% of US oil.

Although “Dallas” has been off the air for many years, J.R. Ewing remains for many the symbol of America’s oil and gas industry. In reality, however, the workforce comprising the oil and gas industry is quite diverse. In June of this year, women working for America’s oil and natural gas companies in 11 states were on Capitol Hill to meet with policymakers to discuss their concerns with major issues affecting the industry. Geologists, petrophysicists, land professionals, refinery workers and others from Louisiana, Illinois, Texas, Arkansas, Alaska, and beyond — all active, contributing members of their communities and their states, are using the opportunity to talk about how legislation under consideration would affect them, their communities and all American consumers.

Louisiana native Aisha Ragas, a senior geologist with Anadarko Petroleum, said she believed it was important to let members of Congress see the oil and natural gas industry for what it is. “The oil and gas industry is many faces. It’s not just middle-aged men. It’s women too. We are from all different ethnic backgrounds, different socio-economic backgrounds. We have different career paths — some are scientists, others are managers, some are field or rig workers. But all of our jobs are valuable, and we all care about what everyone else cares about: doing our jobs well, taking care of our families, and giving back to the community.”

Environmental record
The public perception of the oil industry’s environmental record is that the oil and gas industry has done a dismal job of protecting the oceans, the land and wildlife from oil spills. That spills are routine occurrences rather than rare accidents. The truth is that the oil industry lives with a focus on safety for the environment, wildlife, and people. For starters, as with health of humans where an ounce of prevention is worth a pound of cure, cleaning up pollution is far more expensive than preventing it. Avoiding a catastrophic disaster, such as the Exxon Valdez accident or the blowout and spill at Union Oil’s platform off in the Santa Barbara Channel off Los Angeles in 1969, is a major factor in oil companies’ dedication to operating in safe and environmentally sound manners. Failure to prevent such an accident would cost the company billions. In fact, according to API, only 14% of the oil in the sea is directly attributable to the world’s oil industry, with two% occurring from exploration and production spills and the remaining 12% attributable to accidents involving oil tankers. In contrast, 46% of oil found in our oceans is from natural oil seepage according to the National Research Council of the US Naval Academy of Sciences.

There is also the perception that the industry is somehow in favor of increased greenhouse gases in the Earth’s atmosphere. In reality, the US oil and natural gas industry is spending billions of dollars developing new advanced energy technologies to reduce greenhouse gas emissions while still meeting future energy needs.

Between 2000 and 2008, the industry invested more than US $58 billion in new low- and zero-emissions technologies. This represents 44% of the $133 billion spent by all US industries and the federal government combined. These large investments are critical to provide the low-carbon energy we will need in the years ahead. And to help meet future US energy demand growth and to diversify the US energy portfolio, US oil and gas companies invested an estimated $121.3 billion from 2000 through 2007 on emerging energy technologies in the North American market. This investment represents 65% of the estimated total of $188 billion spent by US companies and the Federal government.

We are still seeing a nice spike in website hits, as well as inbound inquiries for BOLO, Energy Broker (in some cases we are seeing companies looking at both), and others looking to learn about the variety of solutions under the WellPoint Systems umbrella. The pipeline will continue to grow as we further qualify and penetrate these interested companies.

The BOLO sales team made it down to Dallas this week for a couple of days at the A & D Strategies and Opportunities Conference. BOLO was the only software vendor who had a booth at this show, and it was vital for name recognition. This conference was different than others in that the attendees are generally at a very high level in their organization. Lots of CEO’s, CFO’s, and VP’s looking to make a play for their next lease acquisition, and others looking to sell off interests.

There was a very wide range of opinion regarding the outlook of oil and gas for 2010. Some feel that Natural Gas Prices will settle in at less than $3 per MMBtu, due to the abundance of Natural Gas here in the US – One quote that I do recall offhand is that “The US is to Natural Gas, what Saudi Arabia is to Oil”. Others felt that this was a down year, and have projections of Gas increasing all the way to $7.50 for MMBtu. I tend to be a glass half full kind of guy, and one line that really resonated with me was that “Oil prices dropped 76% in a 3 month period” earlier this year. My first thought was, if this happened in any other industry, the word “bailout” would be thrown around. But this industry was able to adapt, and now sustain. As we have seen recently, oil prices have settled into the $60-$80 per barrel range, proving that consistency and stability may have returned, even already.

While attendance was down in comparison to previous years, we were still able to have high level conversations with executives at target companies, and of course, have a chance to chat up with our existing clients in a relatively relaxed setting.

For example, I had a chance to chat with Tom Bandy (That is Bandy, not Brady – some of you must really have football on the brain, jeesh) of Blue Tip Energy, a friend of Chris Dinkler’s back at their Production Access days. Tom came up to me at the BOLO booth and mentioned that the Blue Tip team are huge fans of BOLO. Tom works in a variety of roles at Blue Tip – investor, IT guy, advisor and more, and he said that even though he is not using the system on a regular basis, he knows that it must be a great system for them, because, well, he never hears any complaints about it – and if they did not like it – he certainly would be hearing it. Steve Miller, the controller there, as well as Troy Hatler, who both use the software on a daily basis confirmed that it is a great system for them, emphasizing the ease of use, ability to quickly generate reports, and the willingness of Customer Care to assist them…even when the reason for the call into CC might be due to a user error.