Even if E&P clients are able to negotiate more favorable terms for their debt, the industry’s overextended balance sheets will put a cap on activity — even if oil prices rise. On the producer side, companies will most likely de-lever before they drill should some extra cash come in the door. For OFS, building all the new equipment such as walking rigs and big frac spreads to meet strong client demand has some players in this sector significantly over-levered.
Light, sweet crude prices for February delivery settled Jan. 7 below $34/bbl on the New York market, which was the lowest settlement for the front-month contract since February 2004. Brent crude oil for February also settled below $34/bbl on the London market Jan. 7.
More than $60 billion in unsolicited corporate takeover bids during 2015 were rejected, causing deal value to drop to a 10-year low. Aside from the Shell-BG deal, there were no corporate takeovers exceeding $5 billion. Fewer than 10 asset deals valued at greater than $1 billion occurred, following more than 30 annually during each of the previous 2 years.
Dow e-minis were down 380 points, or 2.26 percent, with 99,258 contracts changing hands at 8:13 a.m. ET (1313 GMT). S&P 500 e-minis were down 45 points, or 2.27 percent, with 578,860 contracts traded. Nasdaq 100 e-minis were down 130.25 points, or 2.93 percent, on volume of 108,831 contracts.
Crude oil prices ended 2015 below $40 per barrel (b), the lowest level since early 2009. Spot prices for the international crude oil benchmark Brent averaged $52/b in 2015, 53% below the level in 2014 and 49% below the average price over 2010-14. Spot prices for West Texas Intermediate (WTI) crude oil were also down 53% in 2015 compared with 2014, averaging $49/b for the year.
"We will be more subtle in our approach and may gradually increase output," Qamsari said. "I have to say that there is no room to push prices down any further, given the level where they are."
While Iran enjoys the world's fourth-largest proven crude oil reserves and the world's second-largest natural gas reserves, its production and export potential has remained largely unutilized as a result of the nuclear related sanctions. The sanctions have had a major impact on Iran's energy industry and have caused a number of cancellations or delays in its oil and gas upstream projects.
Underground sites are slated to hold about 130 million barrels, which would account for nearly a quarter of the 550 million-barrel SPR target set by Beijing for 2020, according to local media and analysts.
“Given the volumes of gas shipped to Europe, the marginal cost of additional Russian gas is low and they should be able to compete with US LNG supplies,” said Malcolm Johnson, a Guildford, England-based faculty member of The Oxford Princeton Programme, an energy training provider. “However, it is clear that in certain countries there is a desire to diversify supplies for supply security.”
West Texas Intermediate crude for February delivery declined to $36.58 a barrel on the New York Mercantile Exchange, after falling 0.8 percent Monday. U.S. crude inventories are forecast to keep supplies more than 130 million barrels above the five-year seasonal average, according to a Bloomberg survey before government data Wednesday.