The Comeback: Competing in the Future of Energy

Yuan-Sheng Yu Analyst

Energy October 19, 2016 Agenda

Losing velocity and control of your

Changing up your approach for a successful comeback

Get ready – it’s comeback time

2 The arm is the most-prized commodity in baseball; teams invest to secure the future

Image Source: Amazon 3 Energy is your trillion dollar commodity… and it’s not doing so well right now

4 Three key strategies for a ’s comeback are the same three that will drive energy’s comeback

Efficiency Versatility New Model

Image Source: Wikipedia 5 Agenda

Losing velocity and control of your fastball

Changing up your approach for a successful comeback

Get ready – it’s comeback time

6 Efficiency: Improving operations is the first level of a successful comeback

Efficiency Pitch Effectiveness Darvish decreased Darvish throwing his pitches per game 5.0 120 more strikes per walk 4.5 Decrease operating 100 Increasing process yield cost 4.0 3.5 80 3.0 Game Game 2.5 60 per 2.0

Sabermetrics 40 1.5

1.0 Pitches 20 0.5 0.0 0 Darvish’s ERA 2012 2013 2014 2015 2016 Darvish’s effectiveness steadily declined Pitches/GS BABIP ERA unchanged K/BB WHIP PER Better results Linear (BABIP) Linear (ERA) Linear (K/BB) Overall efficiency Linear (WHIP) Linear (PER)

Data Source: PITCHf/x; Image Source: Wikipedia, FlatIcon 7 Sensing, connectivity, and analytics improve efficiencies in the intelligent oilfield

Efficiency

Image Source: Wikipedia 8 Canadian oil production company optimizes wax removal with Ambyint solution

Ambyint installs sensors Efficiency directly on crank arms, collecting, filtering, and compressing data for transmission.

Well performance data is sent, organized, and stored in Ambyint’s cloud platform. Proprietary pattern matching and machine Insights are pushed to learning uncover trends web- and mobile-based and recommend process UI and visualization changes. applications.

Measured performance Reduced chemical usage by Pattern matching to trends improvements and 50% translating to a in load and torque helps determined minimum savings of $15,000 per recommend when to inject chemical input for optimal month and an ROI in less wax removal chemicals performance than six weeks

Sense Collect Connect Store Analyze Act

Image Source: Wikipedia, Ambyint, Oasis Energy LLC 9 Versatility: When your core expertise loses its effectiveness you must quickly adapt

Adam Wainwright Pitch Type Percentage Versatility 70% Wainwright relied heavily on his early in his career. Post-injury Wainwright threw four different pitches equally 60% Single product offerings leave energy companies at risk Multiple products allow 50% companies to remain nimble

40%

30%

20% Percentage Percentage of Pitches Thrown 10%

0% 2011 2013 2015 2007 2012 2010 2014 2016 2008 2009 Fourseam Sinker Cutter

Data Source: PITCHf/x; Image Source: Wikipedia, FlatIcon 10 Emissions reduction goals cut straight into fossil fuels’ largest market – transportation

Versatility Global Road Transportation Emissions Fossil Fuel Displacement 10.0 100% 9.0 90% 80% 8.0 70% 7.0 60% 6.0 50% 5.0 40% 30% 4.0 20% 3.0 10% 0% Billion Tons Billion Tons of CO2 2.0 1.0 - 1980 1990 2000 2010 2020 2030 Low-adoption

Historical emissions High-adoption Business-as-usual

Business-as-usual emissions Medium-adoption 2015 INDC emissions target in 2030 First-generation biofuels Next-generation biofuels Low-adoption NGV PHEV Medium-adoption EV FCV High-adoption Fuel efficiency improvement Fossil fuel

Image Source: Wikipedia 11 Total adds four new pitches to fuel the future of transportation

Versatility Solar Storage

Distributed Generation Low-Carbon Fuels

Image Source: Wikipedia 12 New Business Model: Abandoning your core expertise for a better future

John Smoltz Pitch Effectiveness New Model 80 Smoltz was dominant 1 starter in the late 1990’s 70 0.9 0.8 60 0.7 50 Conventional energy has dominated for decades 0.6 40 0.5 30

0.4 Sabermetrics 20 0.3

Appearance Type (GS or GF) or (GS Type Appearance 10 0.2

0 0.1 1997 1991 1993 1995 2001 2003 1988 1992 1990 1989 1998 1994 1996 1999 2002 2000 2004 GS GF PER W or SV/GS or GF

Smoltz was more impactful Energy will need a new as a than a starter model as well for the future

Data Source: PITCHf/x; Image Source: Wikipedia, FlatIcon 13 Electricity is no longer a utility anymore, it’s a consumer product

“Utility of the Future” Progress Score New Model

E.ON Enel Engie SDG&E Exelon Duke Energy RWE Austin Energy Green Mountain Power SCE Iberdrola EDF Tepco Southern Company First Energy 0% 25% 50% 75% 100%

Utility size Location Renewables Corporate culture External venturing Internal innovation Partnerships

Image Source: Wikipedia 14 E.ON looks beyond renewables and its core competencies to become a utility of the future

New Model

Utility of the Future score:

Internal Innovation 85% Renewables

Wireless charging: In preparation Strategic pivot: Between late for the rise of plug-in vehicles and 2014 to 2016, E.ON has been their associated infrastructure External Venturing executing a strategic, company- challenges, E.ON has partnered level pivot away from with three other organizations to conventional generation, test the inductive charging of looking instead to renewables, E.ON invested into Greensmith’s plug-in vehicles. The first project distribution, and “customer $18.3 million Series C in late 2015: involves a Peugeot iOn delivery solutions” Software provider and system vehicle that was converted to this More than $10 billion invested: integrator for energy storage type of charging. Led by its E.ON Climate & systems Renewables arm, the utility has E.ON invested into Bidgely’s spent heavily on wind, hydro, $16.6 million Series B in late 2015: and solar power. Residential energy consumption disaggregation on the appliance level

Image Source: Wikipedia, Noun Project 15 Strategies span a wide spectrum, each offering its own unique advantages during a comeback

Efficiency Versatility New Model

Existing Core Competencies New Core Competencies

Image Source: Wikipedia 16 Agenda

Losing velocity and control of your fastball

Changing up your approach for a successful comeback

Get ready – it’s comeback time

17 Industrial IoT has an entire toolbox to address the unique challenges for the oil & gas industry

Problem: Extreme Environments Problem: Multitudes of Data Solution: Extreme Sensors Solution: IoT Platforms

Rugged – operating in extremely Unification – gets all the data in Device management, MEMS gas / chemical sensors application development, and harsh environments stable up to 600º C with parts one place analytics platform Wireless – locations that present per billion sensitivity Analytics – horsepower for challenges for wiring insights from the data Long-lasting – lifetime Applications – intuitive user requirements of industrial use interfaces and reporting tools cases Access – everyone can do it… Cheap – cost-effective for from anywhere widespread deployment

18 Transportation fuel in the future is multi-faceted and emerging markets are here in Asia-Pacific

19 The utility of the future might not even be a utility right now; new players are quickly making moves

Top Candidates to Displace Utilities as the Power Companies of the Future

20 Conclusion

The future of energy will require new core competencies

Solutions range from digital assets to physical infrastructure

Non-energy players play critical role in the energy evolution

21 Thank you

Yuan-Sheng Yu Analyst [email protected] +65 6592 6972

Image credits: Yu Darvish (Flickr – mjl816), Adam Wainwright (Flickr – Dirk Hansen), (U.S. Air Force – Don Peek), Ambyint, Oasis Energy LLC, Big Baseball (FlatIcon – Freepik), High Voltage (FlatIcon – Freepik), Noun Project

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