Leading market analysts report that tumbling oil prices curtailed—and in some cases, wholly eliminated—industry investment capacity last fiscal year.
- Wood Mackenzie, “Deferred upstream projects tally reaches 68” (Jan. 14, 2016) “Wood Mackenzie has updated its analysis published in July 2015 on the impact of continued low oil prices on upstream oil and gas projects. It concludes in the last six months of 2015 an additional 22 major projects and seven billion barrels of oil equivalent (boe) of commercial reserves have been deferred, on top of the 46 developments and 20 billion boe of reserves identified previously…Mr Angus Rodger, Principal Analyst—Upstream Research for Wood Mackenzie, explains: ‘The impact of lower oil prices on company plans has been brutal. What began in late-2014 as a haircut to discretionary spend [sic] on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure. Tumbling prices and reduced budgets have forced companies to review and delay Final Investment Decisions (FID) on planned projects, to re-consider the most cost-effective path to commerciality and free-up the capital just to survive at low prices.’”
In their financial reports, oil and gas companies disclosed that low oil prices had reduced, and would continue to reduce, their capital expenditures.
- Newfield “Given the future uncertainty regarding the timing and magnitude of an eventual recovery of crude oil prices, our planned capital spending for 2015 was reduced from 2014 levels …” p. 32.
- Noble “In the current commodity price environment, we are assessing our future plans and may consider divestment opportunities.” p. 29. “Our 2015 capital program accommodates an investment level of less than $3 billion for our existing assets (including Rosetta), which represents an approximate 40% reduction from 2014.” p. 34.
- QEP Resources “In response to the current commodity price environment, we have reduced drilling
and completion activities, slowed production growth, and continue to preserve liquidity
and expect to continue these strategies in 2016…We have reduced our annual capital expenditure budget to 2015 to approximately $1.0 billion from $2.7 billion in 2014.” p. 25.
- SM Energy “2015 has been a year of transition as the broader oil and gas industry adjusts to lower oil prices. We scaled back activity during the first three quarters of 2015…” p. 26.
- Whiting Petroleum “As a result of the sustained decline in commodity prices during 2015, we have significantly reduced our level of capital spending to more closely align with our cash flows from operating activities…” p. 24.
- Halliburton “The industry experienced an unprecedented decline in North American stimulation activity during 2015. . . . During the first nine months of 2015, we had an operating loss of $251 million…primarily as a result of the downturn in the energy market…We took actions during the first nine months of 2015 by reducing our cost structure… to help mitigate the current market conditions that we are experiencing.” p. 16. “Activity in North America could drop substantially towards the end of 2015 as operators exhaust their 2015 budgets and possibly take extended holiday breaks which may impact our revenues and margins in the fourth quarter of 2015.” pp. 16-17.
- WPX “[T]he significant declines in forward commodity prices, especially oil, is challenging to the oil and gas industry as evidenced by the reduced 2015 capital plans among our peers and reductions in workforces across the industry…Our 2015 drilling activity has been greatly reduced in comparison to 2014 as we continue to either drill locations that generate the highest economic returns, preserve leases or optimize the drilling rigs already under contract in an effort to reduce the impact of rig release penalties.” p. 31.
- ConocoPhillips “We have further reduced our 2015 capital expenditures guidance to $10.2 billion compared with initial guidance of $11.5 billion. Approximately, half of these reductions are due to market factors, while the remainder are the result of discretionary actions.” p. 33.