Marcellus Shale and Rail: A Forecast
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Transcript of Marcellus Shale and Rail: A Forecast
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1Genesee & Wyoming Inc.
Marcellus Shale and Rail:A Forecast2013 Pennsylvania Rail Freight Seminar
Ryan Fischer, AVP Emerging MarketsGenesee & Wyoming Inc.
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2Genesee & Wyoming Inc.
Overview
• Listed on NYSE with market cap of ~$4 billion
• Own 111 railroads and employ ~4,500 people serving 2,000 customers
• Operate over 15,000 miles of track with ~1,000 locomotives
• Provide rail services in the United States, Canada, Australia, the Netherlands and Belgium
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3Genesee & Wyoming Inc.
Genesee & Wyoming Inc.Nine North American Regions
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4Genesee & Wyoming Inc.
NortheastRegion
• Buffalo & Pittsburgh RR serves numerous sand, pipe customers in western dry and wetMarcellus
• Wellsboro & Corning RR added with RailAmerica, serves heart of dry Marcellus
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“Got shale? You need rail.”
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6Genesee & Wyoming Inc.
U.S. shale geography
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7Genesee & Wyoming Inc.
Inputs ~ 30+ railcars per well:• 4-6 railcars of OCTG (pipe)• 15-30+ railcars of sand• 1 railcar of calcium chloride• 1 railcar of barite• ½ railcar of cement
Outputs ~ 10+ railcars per well:• 4-6 railcars of drill cuttings • Varying NGLs, brine and crude
Shale to rail – What does it mean?
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8Genesee & Wyoming Inc.
2009 2010 2011 2012Change2009-12
Stone, clay & aggregates (sand)
470,055 562,236 754,869 771,525 64.1%
Petroleum & coke 217,954 254,259 278,851 256,622 17.7%
Chemicals 753,850 812,808 1,114,270 1,147,241 52.2%
Shale-related shortline traffic
Based on RMI RailConnect Index of Shortline Traffic
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9Genesee & Wyoming Inc.
G&W shale traffic up across several regions
NY/PA and Ohio• Both major regions handling
200-300 shale-related cars/month (3-5% of traffic) even with Marcellus down
• Sand first, followed by pipe, stone, and NGLs• New fractionation plant (June) to add 5K+ cars/year
Wellsboro & Corning (acquired 1/13)• Vast majority of traffic is Marcellus-related
Traffic excludes some stone customers whose volumes cannot be specifically attributed to shale drilling
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10Genesee & Wyoming Inc.
M3/UEO fractionation plant (Scio, Ohio)
• 42,000’ of track • 4 loading tracks, load
55 cars/day
• On site storage for ~250 rail cars
• 16 loading racks
• Rail yard will have three locomotives
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11Genesee & Wyoming Inc.
Broader Marcellus trends to watch
• Supply: More takeaway, w/backlog of wells “turned on”– Dry gas projects in northeast of state
– Processing/fractionation plants, ethane and propane pipe in southwest
– Risks of oversupply?
• Demand: Where will it come from?– LNG export decision in coming months? Will they be seasonal?
– Will new power generation demand be enough?
• Western Pennsylvania growth north of Pittsburgh?
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12Genesee & Wyoming Inc.
Pennsylvania 2012 production
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13Genesee & Wyoming Inc.
Tough economics in western dry Marcellus
Source: Bentek
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14Genesee & Wyoming Inc.
Less drilling, but more production?
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15Genesee & Wyoming Inc.
Expanded processing, fractionation networks
Source: MarkWest Energy Partners
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16Genesee & Wyoming Inc.
More ethane, propane takeaway
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17Genesee & Wyoming Inc.
“Y-grade” pipeline to the Gulf?
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18Genesee & Wyoming Inc.
Challenges for Marcellus rail
• Defining the market– Pipelines vs. rail? Competition from other shale plays?
• Committing to long-term track investments
• Optimizing use of sites (unit trains?)– What’s the best use of limited properties for transloads, etc.?
• Maintaining service to existing (non-shale) customers
• Strong competition between railroads for projects
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19Genesee & Wyoming Inc.