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Survey finds cautious optimism about the oil, natural gas industry

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Written by Andrew Wilmoth

Click HERE to Read the Article by the Publisher.


Twenty-seven months after oil prices began to fall, oil and natural gas industry professionals are feeling a cautious optimism that the downturn is ending, according to a Deloitte survey released this week.

The survey found that 59 percent of respondents think the industry is in recovery or that recovery will begin next year. Most also said they expect to see an increase in capital spending in 2017.

“This recovery in many ways mimics the pattern of the recovery from the Great Recession,” said John England, vice chairman of Deloitte LLP. “If last year was the year of hard decisions, 2017 will be the slow road back. Companies are generally optimistic that prices will rise to a more sustainable level next year; however, they understand that even if we see an uptick in price, the industry likely won’t fully recover until 2018 or beyond.”

About 43 percent of respondents said they expect more layoffs this year, but 36 percent said they expect hiring will restart in 2017.

Industry leaders have spent much of the past two years cutting costs and improving operations in a move that has lowered the needed oil price for profitability. The price of oil in February hit a 15-year low of $27.05 a barrel, but then recovered to more than $50 by June.

Since then, the price has hovered between $40 and $50, providing stability to the industry, but at a level still lower than most Deloitte survey respondents are comfortable with. Domestic benchmark West Texas Intermediate gained 98 cents Thursday to close at $46.32 a barrel.

$60 threshold

“Most executives believe that $60 per barrel is an important threshold for a revival in U.S. oil and gas exploration and production activity,” the survey found.

About 44 percent of the respondents said they expect prices to continue to rise, reaching $60 to $80 by 2017, and 28 percent said prices would reach $80 to $100 by 2020.

Global oil supplies have dropped steadily since the first of the year. Demand has continued to increase, but prices have fluctuated on various reports that have shown the global economy to be slowing or that it might slow in the near future.

Oil overproduction over the past two years also has created a record storage glut, both in the United States and worldwide.

The survey results match anecdotal evidence we’ve seen locally in recent weeks that the oil industry is stabilizing. Just this week, Oklahoma City-based Harding Shelton Exploration changed its name to Antioch Energy and said it will double its staff after receiving a financial investment from Houston.

Oklahoma City-based Templar Energy this week avoided bankruptcy with a $1.45 billion financing deal with its lenders, and SandRidge Energy Inc. is expected to soon emerge from bankruptcy after shedding nearly $4 billion in debt.

Despite the optimism, however, few locally or in the Deloitte survey would say the risks are over. The oil storage glut remains. The future of the global economy is far from certain. And countries like Iran and Russia have continued to pledge to increase oil production.


Tags: oil, gas, natural gas, energy, West Texas Intermediate


Written by Andrew Wilmoth

Click HERE to Read the Article by the Publisher.

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