A majority of oil and gas executives expect the price of West Texas Intermediate crude to remain in the $40-50/bbl range in 2017, according to a recently released survey conducted by Deloitte. In its 2017 Oil & Gas Executive survey, released Oct. 11, 64% of executives held this view.
In contrast, executives last year were markedly more optimistic about a rapid price recovery, Deloitte said. "With lower expectations of a rapid price recovery, the need by many [executives] to find new efficiency gains and reduce costs could push the digital revolution to its tipping point," it said.
"The slow road back has gotten longer," said John England, vice-chairman, Deloitte LLP, and US energy and resources leader. "The protracted holding pattern we've been in for the last 2 years seems to have shaken executives' confidence in every sector-upstream, midstream, and downstream.
The main findings of the survey include:
• The pessimism was more pronounced in oil prices, with the outlook for natural gas slightly more stable. Nearly half of those surveyed expect Henry Hub gas to be $2.50-3/MMbtu in 2017, with price increases expected for 2018, and into 2020.
• Half of upstream oil and gas executives expect as much as a 10% decline in capital expenditures in 2018 vs. 2016. About 58% of executives expect a net decrease in rig deployment in 2018 vs. 2016.
• Oil field services is seen as the sector with the greatest potential for increased mergers and acquisition activity, followed closely by upstream exploration and production, integrated oil, and midstream.
• About half of respondents see service and supply cost changes as the biggest factors impacting cost structures in 2017 and 2018, followed by increased well productivity (42%) and digital technology (31%).
• About 41% of respondents anticipate a decline in headcount reductions in 2018 vs. remaining the same. Also, fewer expect direct headcount changes to have as much of an impact on costs in 2018 vs. 2017.
• More than half, 56%, of midstream executives expect a decrease in capex in 2018 vs. 2016.
• Pipelines are seen as the best opportunity for growth in 2018, with the majority continuing to view the Gulf Coast as the most productive (49%), followed by US Midwest and Appalachia (42%).
• Downstream executives are slightly less likely to expect reductions in capex (45%) compared with those in upstream and midstream.
• Expectations for refinery margins by yearend 2018 are largely in line with current margins, with 52% expecting margins between $15-25/bbl.
"The new reality seems to have set in-waiting for a significant price recovery may be a long haul," said Andrew Slaughter, executive director, Deloitte Center for Energy Solutions, Deloitte Services LP.
