American Oil and Gas Reporter - January 2019 - 43

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Industry Outlook
America and a ramp internationally-yet pushed back by a quarter
or two-and a true offshore recovery that is happening now."
Regarding that last point, Evercore adds, "The offshore rig
market remains encouraging. Financial investment decisions
are ripping to the upside and the need to replace reserves is becoming a major concern. Underpinning our bullish thesis for
the offshore market is the fact that the necessary supply of
global oil cannot come solely from the Permian Basin."
Other generally positive outlooks for oil field activity come
from the Federal Reserve Banks of Dallas' and Kansas City's
third quarter energy surveys. In the Kansas City Fed's survey,
which was conducted between Sept. 14 and 25, 54 percent of
respondents were anticipating an increase in drilling/business
activity six months out while 43 percent expected no change.
Half of the Kansas City Fed's respondents expected increased
capital expenditures six months out while 43 percent saw no
change.
The Dallas Fed, which conducted its survey between Sept.
12 and 20, found 65.4 percent of its respondents expected
increased levels of capital spending in 2019, while 25.2 percent
anticipated no change.
The Dallas Fed surveys companies in Texas, northern
Louisiana and southern New Mexico, while the Kansas City
Fed surveys companies operating in Colorado, Kansas, Nebraska,
Oklahoma, Wyoming, and portions of western Missouri and
northern New Mexico.
Oil Price Predictions
Of course, all oil field activity is driven by price expectations,
and the predictions for 2019 crude prices generally range from
$50 to $70 a barrel.

Complicating this year's outlook was November's crude oil
nose dive, but at least some analysts say they see that as a
relatively short-term phenomenon. In its Energy Stat of the
Week released Nov. 26, Raymond James says, "The extreme oil
price meltdown over the past two weeks has been more of a
technical breakdown that has evolved into a full-blown 'algorithm-fueled' selling stampede. Despite the meltdown . . . we
think (industry) fundamentals continue to look very bullish
over the next few years. Most available data suggest that global
oil demand growth remains exceptionally robust in the face of
higher oil prices this year."
In a webinar announcing Evercore's 2019 outlook, fundamental
research analyst James West noted that a decline in oil prices
similar to the late-year swoon that occurred while the firm was
conducting its 2019 survey had happened 13 other times over
the past 40 years, and "oil prices were higher six months later
in almost all occurrences."
"We expect oil prices to recover in the coming months, supported by Saudi Arabian and Russian cohesiveness, bottlenecks
to North American shale production growth, and demand
growth," West said.
He added that the operators Evercore surveyed quoted a
West Texas Intermediate average price of $59.19 for 2019, well
below Evercore's own projection of $66.00 a barrel.
Moody's Investors Service puts both WTI and Brent prices
in a range of $50-$70 a barrel for 2019 in a sector comment released Oct. 3, then repeated that forecast in its 2019 Global Oil
and Gas Outlook, released Dec. 10, commenting, "The announced
production cuts by OPEC and Russia will contribute to more
balanced global supply and demand, and will help to stabilize
oil prices."

FIGURE 2
Operators' 2019 Drilling Plans Compared with 2018
16.1

10.7

73.2

Category 1

16.7

11.1
72.2

Category 2

25

50

25

Category 3

Will Drill More

16.7
19.4

63.9

0

Oil

77.3

14.6

67.7

Gas

Will Drill Less

Will Drill Same

17.7

22.7

All

FIGURE 3
0

10.7
33.9

55.4

Category 1

50

Operators' 2019 Spending Plans Compared with 2018
5

50

Category 2

40

11.1
55

Category 3

Will Spend More

44.4

Will Spend Same

Oil

44.4

Will Spend Less

4.3

17.4

9.3
78.3

Gas

52.6

38.1
All

JANUARY 2019 43



American Oil and Gas Reporter - January 2019

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2019

Contents
American Oil and Gas Reporter - January 2019 - Intro
American Oil and Gas Reporter - January 2019 - 1
American Oil and Gas Reporter - January 2019 - 2
American Oil and Gas Reporter - January 2019 - 3
American Oil and Gas Reporter - January 2019 - 4
American Oil and Gas Reporter - January 2019 - Contents
American Oil and Gas Reporter - January 2019 - 6
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