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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Saudi Arabia is considering delaying the international portion of the giant initial public offering of its state oil company until at least 2019, according to people familiar with the situation, who said a domestic share sale in Riyadh could still happen next year.
But we expect a rise in the sector's NPL ratio and muted credit demand in the second half of 2017 and 2018, reflecting the slowing economy. GDP growth slowed to 1.4% in 2016 from 3.4% in 2015 and we expect it to be below 1% in 2017 and 2018.
The Organization of Petroleum Exporting Countries and allies including Russia have been cutting oil production this year to bring fuel inventories in industrialized nations back in line with the five-year average.
The Japanese government will offer $10 billion to support firms bidding to build liquefied natural gas (LNG) infrastructure around Asia, the Nikkei business daily said on Monday.