E&P WILL UP BY 5%
OGJ wrote, oil and gas companies are poised to increase spending on exploration and production globally by 5% in 2017, while offshore spending may continue to fall next year, based on Barclays' midyear global spending survey of more than 200 companies.
This survey has been conducted over the last 5 weeks throughout the month of August with most oil companies basing full-year 2016 upstream spending on $50/bbl Brent and $45/bbl West Texas Intermediate.
This midyear update to the Barclay's Upstream Spending Survey shows global upstream spending declining 22% in 2016, an upward revision from their March estimate of a 27% decline. Spending for 2015 has been revised down slightly to a 26% decrease from 23% previously in January, now reflecting actual reported figures.
North America spending is forecast to decline 37% in 2016, slightly better than a drop of 40% estimated in March but could decline further if oil prices drop back down to $40/bbl. Based on Barclays' preliminary estimates, North America spending set to increase 17-23% in 2017. This assumes oil prices stabilize in the $55-60/bbl (WTI) range on average next year and E&P spending in line with cash flows.
More than 77% of survey respondents said they expect onshore well costs in North America to trend down during the next 12 months, despite more than 51% expecting pressure pumping pricing to increase over the same period.
International spending will decline 17% in 2016, the survey said. This compares with Barclays' 2016 estimated decline of 21% in March and 11% decline in January, as national oil companies are now budgeting a 13% decline, European international oil companies down 20%, US-based IOCs down 26%, and international exploration and production firms down 15%. Middle East is the only area of growth in 2016, while Latin America will fall 33% this year.
"International spending in 2017 to be flat to up single-digits based on our preliminary estimates as the IOCs' continued focus on dividends, capital preservation and balance sheet strength will outweigh any opportunities to increase spending. Our 2017 estimate assumes a 5-10% increase in spending from NOCs, offset by declines for all other customer types which are expected to see declines for a 3rd straight year," said Barclays.
After a 34% estimated decline in offshore spending in 2016, Barclays expects a further decline of 25% in 2017, driven by day rate reductions, contract cancellations and delayed deliveries for rigs.
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