The global crude oil prices have increased and to the misery of the consumers, that’s the first thing the oil and gas exploration and production companies pray for. The OPEC and non-OPEC production cuts and the rising demand have been in play, which has lifted the crude oil prices to over $60 a barrel.
This increase in crude oil prices will be celebrated by the oil and gas E&P companies around the world that have been investing in the low price – and hence low cost – era. Though prices are expected to rise in 2018, they are likely to set in a range of $50-60 per barrel. That’s because even though the growth factors like supply restrictions, and geopolitical tensions in Middle East are not going away anytime soon, the US Shale oil production is likely to keep the price reigns in control.
Moody’s latest briefing on global oil industry highlights that while 2017 was a year of strong capital investments for the E&P companies, 2018 is when these firms will focus on boosting their returns. It further adds, “E&P companies will be aiming for profitable growth within existing oil acreage and cash flow, with improvement favouring companies with the greatest exposure to the best acreage…”
The situation in the domestic E&P sector will also not be very different. During the low oil price period, E&P companies invested in some key drilling and exploration. The local giants invested in carrying geological survey, acquiring seismic data along with fast-track exploration plans due to lower costs. PPL and OGDCL ramped up their efforts in Balochistan and KPK fields as well that were previously untouched due to security threats. With prices up, it’s time to reap the benefits, which would come in shape of greater profitability and higher hydrocarbon production. Though the present government’s interest in the E&P sector has been meagre, they are now also looking to auction new blocks that include some of the untapped areas.
Brokerage houses have started to revise their estimates for the oil and gas E&P companies’ earnings upwards. And while better oil price scenario has worked in the interest of these firms, the industry has also received another boost from PKR depreciation.
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