webinar: the insider's guide to etrm software solutions in volatile energy markets

The Insider’s Guide to ETRM Solutions in Volatile Energy Markets

Patrick ReamesFounder and Managing Partner, Commodity Technology Advisory

Michael SchwartzEVP & Chief Marketing Officer,

Eka Software

Mitch LawEnergy Consultant,

Eka Software

USA | India | United Kingdom | Australia | Canada | Singapore

Agenda

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Featured Speaker – Patrick Reames• Perfect Storm in Commodity Markets• North American Gas & Power• Impacts on CTRM Technology

Eka Background – Michael Schwartz• About Eka, Customers, Global Presence• Next-Generation Smart CM

Eka Energy Solution – Mitch Law• InSight CM Platform

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Featured Speaker

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Patrick ReamesFounder and Managing Partner, Commodity Technology Advisory• Over the last 15 years focused primarily on

information technology serving energy and commodity trading, marketing, and risk management

• Prior to founding Commodity Technology Advisory, held senior executive positions with several technology companies including UtiliPointInternational, TransEnergy Management, AltraEnergy, and TradeWell Systems, servicing the energy and commodity markets

• Acknowledged expert in market analysis and advisory, frequent speaker at industry conferences and events, numerous published articles in industry publications, and co-author of 2 books on ETRM

9/8/2015

Confidential – Commodity Technology Advisory llc

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Energy Market Review

February 5, 2015

Confidential – Commodity Technology Advisory llc

Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM markets. We are dedicated to providing

insights into the issues and trends affecting the users and providers of the technologies that are crucial for success in the constantly evolving global

commodities markets.

Our global team, with a combined 60-plus years in the energy and commodities markets, provides depth of understanding of the market and

its issues that is unmatched and unrivaled by any analyst group. http://www.comtechadvisory.com

ComTech Advisory hosts the CTRMCenter, the online portal for CTRM, with news and views about commodity markets and technology as well as a

comprehensive online directory of software and services providers. http://www.ctrmcenter.com

Commodity Technology Advisory

9/8/2015Confidential – Commodity Technology Advisory llc 5

http://www.comtechadvisory.com/

http://www.ctrmcenter.com/

• A Perfect Storm in Oil and Commodity Markets• North American Gas and Power Markets • Impacts on CTRM Technology

Looking at the Energy Markets


• The perfect storm in commodities:• Strong Dollar – since Dec. 2014, the dollar has been

trading above a 5 year high• Continuing weak economic growth outside of the US

• China’s economy is slowing - factory output down in January 2015, growth forecast to struggle to meet 7% in 2015

• Europe must address debt issues, continuing recession is real concern (Greece, Spain, France, etc.)

• Increasing US oil production has previously been offset by losses in Middle East and Africa (Libya, Iraq, Iran, Angola)

• Though Libya output is still low, increased production in Iraq, Iran and Angola is increasing oil stocks and forcing down prices.

• Saudi Arabia has declared a price war on US shale producers.

The Perfect Storm


• US dollar and commodities are generally inversely related, i.e. strong dollar = weak commodity prices.

• US Dollar at 5 year high…Bloomberg index (CRB) is at 5 year low.

• Dollar priced oil contracts makes oil prices particularly sensitive to changes.

US Dollar and Commodities


• Slowing growth in China and Europe, combined with Russia troubles, point to lower energy demands in coming year.

Global Economic Outlook is Trending Down


• US (WTI) prices continue to push lower.

• Drilling is slowing, but continuing production increases from drilled but not yet completed wells will sustain production.

• How long can OPEC continue to live with $45 oil?

WTI Price – Is there a bottom?


• EIA believes demand will pick up in first quarter 2016, however excess stocks remain a problem.

• Current US Crude stocks at highest level since 1931.

• Global crude stocks have increased, including ship borne storage.

Improvement will take a while


• After a slowing during the winter 2014, gas production has been climbing again.

• Utica Shale is now coming on line; 7x increase in one year…almost 2bcf/d at end of 2014.

• New shale volumes continue to come on stream in other established fields (Eagle Ford, Marcellus).

US Natural Gas Markets


• With 2014 gas prices above $4 on average, production continued to increase in major shale basins.

• However, with prices expected to be below $4 in 2015, production growth is uncertain as capital budgets are cut.

• Nonetheless, drilled but yet to be completed wells will continue to come on line.

US Natural Gas


• Growth in NE volumes continues to reshape gas market/basis differentials.

• Though infrastructure development has started to address some bottlenecks and inefficiencies, regional imbalances continue.

• New takeaway capacity to the west and south may help Marcellus producers, however the outlook for 2015 is mixed.

North American Energy Markets


• Higher gas prices in 2014 drove full year wholesale power prices higher, though much of that was early in the year.

• With lower gas prices forecast in 2015, power will also trend lower.

• US power trading has been disappointing - little growth and increasing correlation with natural gas.

US Power Markets


• Though Chenier will begin export at Sabine Pass late this year, low crude prices do not bode well for rapid growth in US LNG exports.

• Factors to consider when forecasting US LNG growth:

• Oil Prices (index contracts)• Global Economic Growth• US Gas Production• Exports to Mexico via pipe

• Its unlikely that US LNG exports will exceed 5 bcf/d within 5 years.

• US gas exports to Mexico may be best bet for price support.

LNG Outlook?


• Fed policy is impacting commodity markets, particularly oil • With shifting of production, regional price imbalances have

occurred• Natural gas prices in 2015 will average below $4 for the rest of

the year, and gas trading volumes continue to be low • Power is increasingly linked to natural gas - Mild weather outlook

will kept prices low, though growing renewables may introduce short term volatility

• Signals to watch for in the market:• Fed policy – Delay rate increase?• The Saudis – How long can OPEC members endure? Are they blinking

already?• China – Will growth improve? Small signals have oversized impacts.• Japan – Some believe Nukes will come back – What impact on LNG?• Russia – What happens if economy keeps sinking?

North American Summary


• Technology cost containment should focus on optimization – improve utilization and eliminate the un-necessary and any redundancies

• Focus back on Risk Management – Price, Credit and Operational Risks

• More interest in keeping CTRM project costs down and potentially extending the life of such investments - Total cost of ownership increasingly an important metric

• However, position your company to successfully take advantage of a market recovery…if your systems were outdated prior to oil price crash, they will certainly continue to be so in an up market

• Know your technology providers – partner with them to ensure your technology infrastructure address your businesses needs in this rapidly changing market

Focus on Technology Spending


• As the fundamentals of trading change and regulatory oversight becomes more intense and invasive, visibility across all aspects of your business must improve:

• Market visibility – market awareness driven by data and a vigilant eye on macro trends. Strategies must be formulated around macro trends and managed on market data and real-time or near real-time analysis.

• Internal visibility – profit is made or lost on daily decisions. Accurate and timely position management, risk management and business intelligence support is key to ensure opportunities are exploited and risks addressed.

• Regulatory visibility – regulators will be quick to move and once on their radar, you will be a target of scrutiny for a very long time. Developing a culture of compliance and visibility for regulators is key to avoiding punitive attention and actions.

• Your chances of succeeding in this market will be dependent upon your trading technologies – ETRM/CTRM, data (Big Data?) aggregation and analysis, trading surveillance, BI and reporting.

The Big Picture


Eka Smart Commodity Management


Eka Software Solutions: Company Profile

Position: Global leader in on premise & cloud served Smart Commodity Management solutions

Founded: 2004

Employees: 315

Global Offices: 7 offices. 3 development & support centers• Americas: Stamford CT HQ, Calgary AB

• Asia Pacific: Bangalore India, Singapore, Adelaide & Perth AU

• Europe: London UK

Investors: Silver Lake Partners - GP Group - Nexus Venture Partners

Customer Base: >50 leading global enterprises on 4 continents• Cargill, Rio Tinto, Mitsui, Bunge, BMA, EDF Trading, Graincorp, Viterra, Louis Dreyfus, Noble,

CBH, Mitsubishi, Pinnacle Foods, Twin Eagle, Boliden, Tata Steel

Solution: InSight Commodity Management (CM) Platform• End to end financial and physical transaction management• Cross asset trading and position management – Ags, Energy, Metals, and Bulk• State of the art enterprise risk management

Commodity Analytics Cloud• Analytics specific to commodities• Multiple data sources internal and external to Eka• Prebuilt and custom apps

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Andy Bout | Vice President, EnergyAndy is a subject matter expert in the energy industry and provides leadership to the energy product team. Based in Calgary, Canada.

Stewart Brightman | Vice President, Energy Consulting ServicesStewart manages all software implementations and account management. Based in Calgary, Canada.

Dean Stiles | Vice President, Energy MarketsDean leads all business development and product solutions in the North American energy market. Based in Stamford, CT HQ.

Mitch Law| Energy Sales ConsultantMitch is the lead product and solutions consultant for the North American energy market. Based in Stamford, CT HQ.

Experienced, Professional Energy Team


Perth

Global Market – Global Customers – Global Engineering & Support

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Singapore

London

New York (CT)

Adelaide

Development & Support Centers

Bangalore

Eka Offices

Calgary


Customers

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Agriculture Metals & MiningEnergy


Trading, Risk, Accounting, & RegulatoryInSight CM – AgricultureInSight CM – BiofuelsInSight CM – Chemicals & FertilizersInSight CM – MetalsInSight CM – ConcentratesInSight CM – CoalInSight CM – Natural Gas, North AmericaInSight CM – Power, North AmericaInSight CM – Oil- Dodd Frank- Hedge Accounting- CME Integrator- ICE Integrator- VaR- Risk Advanced- Mobile Deal Entry- Mobile Dashboard

Commodity ProcurementInSight CM – Commodity Planning & Procurement

Supply ChainInSight CM – Gas Scheduling, North AmericaInsight CM – Power Scheduling, North AmericaInSight CM – OriginationInSight CM – Supplier Collaboration Portal

Bulk HandlingInSight CM – Site Automation ControlInSight CM – Commodity Site ManagerInSight CM - 3D Stockpile Manager InSight CM – 3D Anti CollisionInSight CM – Quality Manager InSight CM – Smart Scales

InSight CM Platform

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1990 2014+Mid-2000s CTRM Smart CM

FIRST- AND SECOND-GENERATION SYSTEMS NEXT-GENERATION SYSTEMS

ETRM

Transaction system necessary but not sufficient for today’s market

First- And Second- Generation Systems Not Built to Cross the Chasm

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• Transaction based• 10-15 year old technology• Cannot cross chasm to next generation

without rearchitecting (5-7 yr. process)

• Analytics + Transaction• Next-Gen architecture• Built for now and future


Industry Expert

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Mitch LawEnergy Consultant, Eka• Subject matter expert on Eka’s

InSight CM solution and oil, gas, and power markets

• Over 10 years experience with Energy Trading and Risk Management software systems for European and North American energy markets

InSight CM Platform for Natural Gas, Oil, & Power


InSight CM – Complete ETRM Solution

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• Fully integrated end-to-end commodity management

• Open design• Audit controls• Regulatory compliance• Architected for “speed to

benefit” – fast implementations


Transaction Capture

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• Physical and financial transactions

• Complex pricing structures• Secondary fees• Blotters & templates• API & spreadsheet import• ICE & CME Exchange module


Position & Risk Reporting

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• Physical & financial position & exposure

• Mark-to-market P&L and greeks

• Multi commodity & currency

• Configurable views• Trade drill-down• Historical reporting


Advanced Risk & Credit

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• VaR• Historical (HVaR)• Parametric (PVaR)• Backtesting

• Scenario analysis• P&L attribution• Credit


Natural Gas Solution

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• Transactions • Physical, transport, financial

• Tariff-based netback pricing• Volume and energy units & conversion• Storage• Scheduling

• Balancing and actualization of volumes


Oil Solution

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• Transactions • Physical, transport, storage• Event based pricing• Commodity specs

• Quality & quantity adjustments• Grade management• Location based taxes / fees• Scheduling


Power Solution

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• Transactions• Physical, financial,

transmission, renewables• Standard & shaped profiles• Quantity/price shape deals

• Scheduling• Counterparty checkout• Bookouts• Path management• Tag creation and

management


Smart Cubes - Introduction

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• Flexible and configurable analysis tool using a set of pre-modeled cubes covering trade, supply chain, finance, position and P&L, pools and reference data

• Create reports and dashboards using a simple drag and drop interface

• Create calculated fields • Configurable filters and color

schemes• Publish reports and dashboards

USATwo Harbor Point Square100 Washington Boulevard,Stamford, Connecticut 06902United States of AmericaT: +1.203.810.4250

EUROPE2 Sheen RoadRichmond , TW9 1AEUnited KingdomT: +44.208.973.2683

AUSTRALIALevel 5 185 Victoria SquareAdelaide 5000 SA AustraliaT: +61.0.4479.77831

SINGAPORE17 Phillip StreetGrand Building 05-01Singapore 048695Tel No: +65.8363.2635

INDIAEmbassy Tech Village, Phase IIAster Building 2A, East TowerDevarabeesanahalli, Outer Ring RoadBangalore 560 103 IndiaT: +91.80.40819200

CANADASuite 730, 734 - 7th Avenue SWCalgary, AB , T2P 3P8T: +1.403.237.7740

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