Barclays sees likely downside to North American E&P budgets
This story was updated with additional information on Jan. 9.
Global exploration and production spending is expected to decline at least 8.8% in 2015 vs. 2014, according to 225 companies surveyed in the Barclays E&P Spending Outlook. North American budgets, meanwhile, are expected to fall at least 14.1% with significant downside potential, Barclays said.
Survey results estimated $679 billion worldwide E&P capital spending for 2014 compared with an estimated $619 billion for 2015. For North America, survey results estimated $196 billion for 2014 E&P spending compared with an estimated $166 billion for 2015.
The results provide only a “snapshot” of industry’s planning as of December, said David Anderson, a Barclays services and equipment analyst. At the time of the survey, participants assumed average 2015 oil prices of $70/bbl for Brent and $65/bbl for US light, sweet crude oil.
“We would expect spending to decline as much as 30% or more if 2015 West Texas Intermediate prices hold” in the vicinity of $50/bbl, Anderson told a conference call Jan. 9.
A competing spending survey, released earlier this week, indicated global capital expenditures for E&P projects are expected to drop 17% to $571 billion in 2015 (OGJ Online, Jan. 8, 2015).
The Barclays survey showed 40% of North American E&P companies expect drilling and completion costs to fall more than 10%, a complete reversal from 2014 when 35% of E&P firms indicated they expected cost increases of more than 10%.
Barclays, which has done an annual survey for 30 years, said the survey is intended to provide investors with guidance on trends in the worldwide oil and gas industry. The latest survey was conducted Dec. 1, 2014, through Jan. 5.
“We expect a downward revision to the survey results in the coming months, especially North American spending,” Anderson said.
US and Canadian E&P spending is almost entirely cash-flow driven so North America spending “could easily take another leg down in the coming months as companies report yearend results,” the survey indicated.
Anderson noted early signs of a slowdown including a dropping rig count. Many operators already have noted price discounts for rigs and pressure pumping coming from service companies.
“We expect the full magnitude of the slowdown to commence late first quarter 2015, then bottom out in the fourth quarter with operators dropping 500 rigs over the course of the year,” Anderson said. Service costs are forecast to fall as much as 20%.
Contact Paula Dittrick at [email protected].
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.
Paula Dittrick | Senior Staff Writer
Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.
Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.
