LONDON – Wood Mackenzie has canvassed the views of its oil and gas industry clients on prospects ahead, with uncertainty over whether oil prices will recover from around $50/bbl.
Across theupstream sector, companies are considering their next investments, the analyst points out, while at the same time determining how to remain profitable in the current climate.
Wood Mackenzie asked its clients for their thoughts on issues such as their expectations around the oil price; whethermerger and acquisition (M&A) and capital spending will rise; the industry’s priority over the remainder of the year; and the best long-term growth option.
Martin Kelly, WoodMac’s head of Corporate Analysis, said: “The industry is very cautious right now and risk appetite is low. The upstream sector’s key priorities for 2017 include protecting the dividend and strengthening balance sheets.
“There is a clear consensus that oil prices will be in the $50-60/bbl range this year [according to 80% of respondents], while 75% think it will be in the $60-80/bbl range in 2020, which, if correct, will generate significant free cash flow for the industry.”
The survey also found that, on balance, respondents expect investment in M&A, exploration and capital spending to rise this year. Only 25%, however, sawfrontier exploration or corporate M&A as delivering the best returns this year.
Uncertainty continues with regard to service costs, with respondents split almost equally over whether or not these will rise again during 2017.