Shale participation on the rise
Majority shale revenue companies up 15% from 2013.
More than half of oilfield services companies and 40% of upstream companies expect shale oil and gas plays to provide the majority of their revenues in 2014, according to a global industry survey by UHY LLP Certified Public Accountants and Oil & Gas Financial Journal. This is an increase of about 15% from 2013 levels in the number of oilfield services and upstream companies for which shale is the source of a majority of revenues.
Other companies in the midstream, downstream, and integrated segments predict shale-related income will account for slightly less than one-fourth of their 2014 revenue, according to survey respondents.
Companies are supporting expanded shale-related operations with a majority of planned capital spending in 43% of upstream firms and 42% of oilfield services companies, compared with just 21% in other industry segments.
"These growth projections and investment levels recognize that shale oil and gas development is the future of the global oil and gas industry, and that it is being driven primarily by small and mid-size E&P and services companies," said UHY LLP Principal Bill Penczak. "Their plans for continuing investment, moderate price expectations, and realistic appraisals of the challenges facing shale development reflected in this survey bode well for shale's future in the US.
Shale's challenges
Survey respondents shared a general consensus on the largest challenges facing their shale operations, with costs, lack of transportation and infrastructure, the regulatory environment, and lack of capital or credit the most often cited. Oilfield services companies also targeted a shortage of qualified employees as a top problem, but project operators and partners ranked it lower.
Extent of shale operations
Oilfield services companies reported involvement in an average of 4.8 shale plays (with a high of 14), and project operators/non-operating partners averaged 2.3 (with a high of 7).
The three highest-activity plays for operators and non-operating partners are Eagle Ford, Permian Basin, and Marcellus. Beyond those areas, more than one-third of oilfield service company respondents also report working in the Bakken, Barnett, Utica, and Haynesville plays.
Other study highlights
- Large majorities of respondents in all segments expect crude oil prices (WTI NYMEX) to remain between $90 and $110/bbl, although 15% of upstream respondents expect oil to reach $110 to $130/bbl in 2015;
- The consensus across all segments is that natural gas prices will stay in a $4 to $6 range during 2014 and 2015, although about one-in-five anticipate a move to the $6 to $8 level in 2015;
- Only one in six survey respondents believe their companies would feel a positive effect from an increase in LNG or crude oil exports from the US;
- A 75% majority of producers use pipelines to move their product to market, and half utilize tanker trucks, while 19% use rail cars;
- The survey's 178 respondent companies accounted for about $700 billion in 2013 revenues. Three-quarters are headquartered in the US; about half describe themselves as primarily upstream companies, with one-fifth in the oilfield services sector and 10% in the midstream. The survey was conducted online between March 11 and March 24, 2014.
A copy of the full survey report is available upon request via [email protected].
About the Company
UHY LLP, a licensed independent CPA firm in Texas, performs attest services through an alternative practice structure with UHY Advisors TX, LLC. UHY Advisors TX, LLC conducts operations in Texas as a subsidiary of UHY Advisors, Inc. The firm also has an office in Dallas. UHY Advisors, Inc. and its subsidiary entities have nearly 1,000 professionals providing services from offices throughout the United States. For additional information, visit the UHY website at www.uhy-us.com.