There has always been an aura of excitement, adventure and risk surrounding the quest to unlock natural resources, from the California Gold Rush to the early days of Texas oil wildcatting. Today’s exploration and production leaders may be just as passionate as their predecessors, but the “riverboat gambler”-type days of reckless spending in pursuit of growth now seem like a distant memory. In the brutal aftermath of the oil price crash in late 2014, producers have been forced to follow their heads instead of their hearts, adopting a far more careful approach to investment that prioritizes portfolio rationalization over expansion, and cash flow above growth. E&P companies in 2019 slashed capital investment, and, according to early guidance, they will again in 2020. Underscoring this more conservative attitude is the release of the 2019 Securities and Exchange Commission price deck, which impacts the economics of booking oil and gas reserves. It showed the WTI oil price for SEC reporting purposes declined about $10/bbl, or 15%, to $55.69/bbl in 2019, while the Henry Hub SEC price declined by 17%, to $2.58/MMBtu. Today, we examine a representative group of U.S. E&Ps’ spending plans for 2020, which reflect the impacts of a lower-price environment.
Can’t Afford to Love You – 2020 E&P Capex Set to Plunge As Producers Prioritize Cash Flow
