Engineering news
Energy consultancy Wood Mackenzie believes the oil and gas sector will begin to recover next year after several years of low oil prices.
According to the firm, if OPEC production cuts drive oil prices above $55 per barrel, the oil and gas industry will turn cash flow positive for the first time since the downturn started in 2014.
Tom Ellacott, senior vice president of corporate analysis research at Wood Mackenzie, said: "Most oil and gas companies will start 2017 on a firmer footing, having halved cash flow break evens to survive the past two years. Further evidence of a cautious, U-shaped recovery in investment should emerge.
"Overall 2017 will be a year of stability and opportunity for oil and gas companies in positions of financial strength. More players will look at opportunities to adapt and grow their portfolios," said Ellacott.
The company’s annual analysis of the year-ahead identifies a number of themes that it thinks will be important in 2017 for major national and independent oil companies around the world. These include a strengthening of finances, new investment by US firms, further cost reductions and efficiency improvements and an “improved value proposition for exploration and mergers and acquisitions”.
The report predicts that independent US oil companies will be emboldened by a Trump administration committed to exploiting domestic oil and gas resources and could increase investment by a quarter if oil prices average above $50 per barrel. However, it finds investment by major firms will fall by around 8% as recent capital-intensive projects wind down.
Wood Mackenzie forecasts production from the 60 companies covered in its corporate service to grow by an average of 2%, and the trend of improving exploration success rates and full-cycle returns to continue in 2017, with major and national oil companies stepping up new ventures activity.
"Mergers and acquisitions will also offer an attractive value proposition for the financially strong prepared to take a bullish view on long-term prices," said Ellacott. "Low-cost, low-risk discovered resource opportunities will look attractive again. And the larger players will need these to ensure long-term portfolio renewal as part of a more balanced growth strategy."