“The FUTURE Starts TODAY” - SNEAK PEEK Into the Future of Energy & the Workforce, Jenny Philip, Director Research, Greater Houston Partnership

An exciting, thought provoking and fast-paced presentation by leading Energy Economist, Jenny Philip, Director Research, Greater Houston Partnership, discussing the upcoming major trends in technology & how they will soon impact both energy markets & the workforce.

Transcript

1. Houston Economy Update Jenny Philip
2. 2 www.houston.org
3. How has Houston weathered the energy downturn? 3
4. Houston Employment, Net Change 0 20 40 60 80 100 120 140 '14 Mar May Jul Sep Nov '15 Mar May Jul Sep Nov '16 Mar May Jul Jobs, 000s Source: Texas Workforce Commission 12-Month Running Totals
5. Winners Gains Hotels, Restaurants, Bars +32,800 Health Care +22,200 Services to Buildings +7,900 Arts, Entertainment, Rec +7,500 Food Stores +4,900 Construction +3,100 5 Houston Job Gains And Losses Since Dec ’14 Biggest Winners and Losers Source: Texas Workforce Commission Losers Losses Manufacturing -32,500 Mining and Logging -24,700 Engineering Services -10,200 Employment Services -4,300 Wholesale Trade -4,200 Transport, Warehousing, Utilities -4,100
6. Winners $ Wages Hotels, Restaurants, Bars $19,760 Health Care 52,936 Services to Buildings 27,612 Arts, Entertainment, Rec 36,192 Food Stores 26,468 Construction 68,744 6 Houston Job Gains And Losses Since Dec ’14 Biggest Winners and Losers – Average Annual Wage Source: Texas Workforce Commission Losers $ Wages Manufacturing $75,816 Mining and Logging 151,840 Engineering Services 126,256 Employment Services 48,516 Wholesale Trade 78,520 Transport, Warehousing, Utilities 69,940
7. $41.1 $44.3 $45.5 $48.2 $51.6 $48.2 Q1/11 Q1/12 Q1/13 Q1/14 Q1/15 Q1/16 $ Billions Source: Texas Workforce Commission * ’16 Constant Dollars 7 Houston Total Wages Paid – Q1 ’11-’16
8. Where are we in the cycle? 8
9. 0 20 40 60 80 100 120 Jun '14 Dec '14 Jun '15 Dec '15 Jun '16 $ Per Barrel Source: Baker Hughes & U.S. Energy Information Administration 9 NYMEX WTI Spot Price
10. $ Per Barrel Raymond James $80 Piper Jaffray $60 Ryan Sitton (TRC) $60 Wells Fargo $55 U.S. Energy Information Administration $52 Morgan Stanley $51 10 West Texas Intermediate Sample Oil Price Forecasts – ’17 Average
11. 0 20 40 60 80 100 120 140 160 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 $ Per Barrel Source: Greater Houston Partnership calculations based on U.S. Energy Information Administration data West Texas Intermediate, Monthly Average Price 11 Real Crude Prices
12. 0 20 40 60 80 100 120 140 160 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 $ Per Barrel Source: Greater Houston Partnership calculations based on U.S. Energy Information Administration data West Texas Intermediate, Monthly Average Price 12 Real Crude Prices Long Term Average = $54/barrel
15. Source: Laura and John Arnold Foundation 15
16. 0 500 1000 1500 2000 2500 Jun '14 Dec '14 Jun '15 Dec '15 Jun '16 Dec '16 Working Rigs Source: Baker Hughes 539 rigs Up 135 from bottom 16 U.S. Rig Count
17. 5 6 7 8 9 10 '10 '11 '12 '13 '14 '15 '16 '17 Source: U.S. Energy Information Administration Millions of Barrels Per Day 9.6 million barrels/day to 8.7 million barrels/day 17 U.S. Crude Production
18. 30.4 30.1 30.2 30.2 30.0 30.8 30.9 31.1 31.4 31.5 31.5 31.6 32.1 32.4 32.2 32.4 32.2 32.3 32.6 32.6 32.9 33.3 33.2 Oct '14 Jan '15 Apr '15 Jul '15 Oct '15 Jan '16 Apr '16 Jul '16 Source: U.S. Energy Information Administration Millions of Barrels Per Day 18 OPEC Crude Production
19. 2.66 2.69 2.73 2.67 2.67 2.66 2.70 2.57 2.60 2.67 2.73 2.72 2.80 2.89 2.96 3.00 3.03 3.07 3.09 3.08 3.07 3.09 3.07 3.03 Source: U.S. Energy Information Administration 19 Billion Barrels OECD Commercial Crude Inventories
20. 1.4 0.5 -0.8 -0.9 -0.5 0.2 -0.4 -0.9 0.5 0.7 0.4 1.9 1.7 2.0 1.4 2.4 1.2 0.9 0.5 0.6 0.1 0.3 -0.6 -0.3 Source: U.S. Energy Information Administration 20 Million Barrels Per Day Global Crude Surplus & Deficit
21. 16.1% 32.1% 41.9% Q1/16 Q2/16 Q3/16 Source: Federal Reserve Bank of Dallas Energy Survey % Responding Outlook Has Improved 21 Compared to the prior quarter, has your firm’s outlook improved, not changed, or worsened Texas Energy Industry Survey
22. 51.7% 25.6% 22.3% Q1/16 Q2/16 Q3/16 Source: Federal Reserve Bank of Dallas Energy Survey % Responding Outlook Has Worsened 22 Compared to the prior quarter, has your firm’s outlook improved, not changed, or worsened Texas Energy Industry Survey
23. 23 But the industry faces a big challenge.
26.  Pay shareholder dividends  Drill more wells X Hiring binge  Pay down debt X Leasing spree As the industry recovers
27. Assuming oil prices bottomed out in Q1 27 Q1/16 Oil Prices Bottomed Out
28. Assuming oil prices bottomed out in Q1 28 Q3/16 or Q4/16 Drilling picks up Q1/16 Oil Prices Bottomed Out
29. Assuming oil prices bottomed out in Q1 29 Q1/17 or Q2/17 Energy industry hiring picks up Q3/16 or Q4/16 Drilling picks up Q1/16 Oil Prices Bottomed Out
30. “Best” Case Scenario 30 Q1/17 or Q2/17 Energy industry hiring picks up Q3/16 or Q4/16 Drilling picks up Q1/16 Oil Prices Bottomed Out What is 2016’s “Iran Nuclear Deal”? Huge inventory build up Debt paid down first Technological advances What is OPEC (Saudi Arabia) going to do? Will demand growth be strong enough?
32. Houston’s Outlook 32
33. -15% -10% -5% 0% 5% 10% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 % Change in Jobs Source: Greater Houston Partnership calculations based on Texas Workforce Commission data Base Jobs Non-Base Jobs 33 12-Month Employment Change
34. -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% -15% -10% -5% 0% 5% 10% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Change in Non-Base Change in Base Source: Greater Houston Partnership calculations based on Texas Workforce Commission data Base Jobs Non-Base Jobs 34 12-Month Employment Change
35. Rank Metro Residents 1. New York 20,182,305 2. Los Angeles 13,340,068 3. Chicago 9,551,031 4. Dallas-Fort Worth 7,102,796 5. Houston 6,656,947 6. Washington 6,097,684 7. Philadelphia 6,069,875 8. Miami 6,012,331 9. Atlanta 5,710,795 10. Boston 4,774,321 Source: U.S. Bureau of Economic Analysis 35 Most Populous U.S. Metros – ’15
36. Rank Metro $ Billions 1. New York 1,602.7 2. Los Angeles 930.8 3. Chicago 640.6 4. Houston 503.3 5. Washington 491.0 6. Dallas-Fort Worth 485.7 7. San Francisco 431.7 8. Philadelphia 411.2 9. Boston 396.6 10. Atlanta 339.2 Source: U.S. Bureau of Economic Analysis 36 Largest U.S. Metro Economies – ’15
37. 98.4 -8.1 18.7 44.3 53.4 54.4 53 10.6 92.8 17.8 59.7 1.3 -1.7 -11.6 39.3 91.1 107 90.7 21.6 -110.6 49.7 82.9 118.5 89.9 104.7 15.2 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 December to December, (000s) Source: Texas Workforce Commission Historic Job Growth
38. 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 0 20 40 60 80 100 120 140 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Jobs, Millions WTI ($/bbl) Source: Texas Workforce Commission, U.S. Energy Information Administration Monthly Oil Prices Oil Prices & Houston Employment
39. 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 0 20 40 60 80 100 120 140 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Jobs, Millions WTI ($/bbl) Source: Texas Workforce Commission, U.S. Energy Information Administration Monthly Oil Prices Employment Oil Prices & Houston Employment
40. Houston Economy Update Jenny Philip