Oil and Gas Market Update VMA Market Outlook Workshop Chicago, IL Spears & Associates, Inc. Tulsa, OK August 2012
Macro-Economic Outlook 2
Oil Markets Worries about economic growth in the EU, US, and China pushed oil prices below 80 recently. Analysts expect oil Spot WTI Prices (/bbl) 110 demand to grow 1%/year in 2012 and 2013 as growth in emerging countries more than…
Gas Markets Warm weather last winter led to record gas inventories this past spring and a 50% drop in gas prices. Near-parity with US Spot Gas Prices (/mmbtu) 10 coal prices has in turn led to a large increase in gas use in the power…
NGL Markets Just as a glut of natural gas has decoupled US gas prices from oil prices, increased natural gas liquids (NGL) output has begun to depress NGL prices relative to oil. The price of an NGL barrel is now about 40%- 45% the…
Drilling Outlook 6
Impact of Volatile Oil and Gas Prices on US Drilling Activity Overall US rig activity has gradually slowed since peaking in late 2012 as the decline in gas drilling activity (Haynesville Shale, Barnett Shale, Marcellus Shale, etc.)…
Impact of the Slowdown in US Drilling Activity On Well Costs The decline in rig activity this year has left utilization of equipment and personnel slightly lower in most regions and in most segments. Well cost components: Rig: 25%…
Near-Term Exploration and Production Operating Environment Oil and Gas Operator Perspective Budget using conservative commodity price estimates (80/bbl oil, 3/mmbtu gas) Infrastructure constraints to keep NGL prices weak Strategy…
US Drilling Outlook Oil rig count price sensitivity: Oil prices below 70/bbl: down20 rigs/month Oil prices 80/bbl: no change Oil prices above 90/bbl: up 20 rigs/month Gas rig count is projected to fall 15% year-over-year in 2013.…
US Drilling Outlook New Wells Drilled Of the 49,500 new wells to be drilled in 50,000 2012, almost 17,000 will be horizontal, up 45,000 from 8,000 new horizontal wells in 2008. Vertical Horizontal 40,000 The forecast calls for…
Drilling and Completion Costs Versus Well Depth It is critical to differentiate new wells between vertical wells and horizontal wells because a horizontal well will consume 2.5x the equipment and services of a nearby vertical well drilled…
US Drilling Outlook Drilling and Completion Expenditures A small decrease in the cost to drill and complete new ( Bil) 160 wells is offsetting the 5% increase in drilling activity, leaving overall US drilling and completion…
Canada Drilling Outlook Canada Rig Count Canadian drilling activity is forecast to fall 5% in 2012, 450 to an average of 400 active rigs. Oil rig count is on track to grow 8% in 2012 while gas rig count is 400 projected to decline…
International Drilling Outlook International Rig Count International rig activity is expected to increase 5% in 1300 2012 to 1,200 active units, about 15,000 wells drilled and over 100 million feet of hole. 1250 1200 Drilling…
Related Markets 16
Oilfield Equipment Spending The existing stock of specialized equipment used for US Oilfield Equipment Expenditures 16 ( Bil) onshore drilling, completion, and production drilling rigs, pressure pumping equipment, well servicing…
Frac Horsepower Additions During the original frac HHP ramp up in 2004-2008, demand was driven by activity in just three basins: Barnett Shale, Fayetteville Shale, and, at the end, the Haynesville Shale. From 2009 onward, the ramp up…
Summary 19
Summary An expected combination of flat oil prices, weak NGL prices, and slowly recovering gas prices is likely to keep operators cautious about their near-term plans for capex and drilling activity through 2013. With growth and…
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