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Title : E&Ps' CAPEX To Exceed Cash Flow in 2018 -- RBN Energy -- October 24, 2017
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E&Ps' CAPEX To Exceed Cash Flow in 2018 -- RBN Energy -- October 24, 2017

Futures: all major indices GREEN. Dow 30 up 60 points.

WTI: $52.31

Active rigs:

$52.31↑	10/24/2017	10/24/2016	10/24/2015	10/24/2014	10/24/2013
Active Rigs	53	35	68	194	180

RBN Energy: many E&Ps defy soft prices and expect 2017 capex to exceed cash flow (again).

Despite some hints that U.S. exploration and production companies are slowing some of their drilling in high profile shale basins — including last week’s decline of 15 operating rigs in the Baker Hughes count, our analysis of 43 representative E&Ps suggests that more than half expect their upstream capital spending in 2017 to exceed cash flow — a definite sign of optimism — and one fifth of the E&Ps will outspend cash flow by more than 50%.

Is this a case of rose-colored glasses? Blind faith? Or have E&Ps’ post-price-crash efforts to high-grade their portfolios and improve their operational efficiency given them well-deserved confidence that if they don’t “back down” on capex things will turn out well?  Today, we analyze the cash flow versus the capex of 43 U.S. E&Ps and discuss what it all means.

After weathering the oil price decline in 2014-16, U.S. E&Ps have been repositioning themselves to survive and even thrive in a $50/bbl world by (among other things) focusing on the sweetest of production sweet spots and wringing more oil, gas and natural gas liquids out of each well by drilling longer laterals, using more frac sand and fine-tuning their completion techniques. In late 2016, the 43 E&Ps we’ve been tracking announced a 42% increase in 2017 capital spending, and despite oil prices dipping below $50/bbl in the second quarter of 2017, our universe of producers remained committed to their accelerated investment plans.

But as noted above, there have been indications that E&Ps have started to pull back.

somewhat, with a 5% decline in the rig count since the end of July cited as evidence.

http://ift.tt/2dZyQXu

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