Oil, Gas Producers’ Success Brings a New Set of Issues

By Alex Mills   January 30, 2020 The exploration-and-production (E&P) sector of the U.S. oil and gas industry faces many financial hurdles this year as forecasts of stagnant demand with increasing supplies give the appearance that prices for crude oil and natural gas will be flat. The Energy Information Administration (EIA) at the Department of Energy reported last week it expects West Texas Intermediate (WTI) crude oil prices will average about $55 throughout 2020. Oil traded on the New York Mercantile Exchange on Wednesday closed at $53. EIA forecasts that Henry Hub natural gas spot prices will average $2.33 per million British thermal units (MMBtu) in 2020, down from $2.57 in 2019. The American Oil and Gas Reporter said in its January issue other analysts have similar opinions about oil and natural gas prices. The national trade publication reported these predictions by industry analysts:
  • Evercore - $60;
  • Raymond James - $65;
  • Petrie – mid-$50s to mid $60s;
  • Platts – break through $60 early 2020 and dropping to the high $50s; and
  • Goldman Sachs – averaging $58.50.
The AOGR conducted its own survey in November/December of independent producers and the average response was $55.59. With these prices the consensus is another declining year for capital expenditures, also called capex. Raymond James projects U.S. capex to decline 15 percent. Drilling budgets will decline 7.1 percent in 2020, and the drilling rig count will drop another 10 percent, according to Evercore, which conducts research about oil field activity.....  
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