AUSTIN, Texas, Jan. 9, 2018 /PRNewswire/ -- Drillinginfo, the leading energy SaaS and data analytics company, has released After the Storm, a forward-looking report on the company's current view of the oil, natural gas, and NGL markets over the next five years. This update follows the market intelligence team's recent overview confirming crude oil prices have hit their peak price for the foreseeable future.
The 50+ page report includes a depth of market insight including how speculative factors drove the price of oil up to $75/Bbl in 2018. Though much of the industry's focus remains on the Permian Basin and its economics and vast stacked play potential lately, it is worth noting that the core of all major shale basins remain economic at prices below $55/Bbl. Also included in the report are OPEC quotas and impacts to OECD inventories, and how over a longer time frame, a $55/Bbl and $2.85/MMBtu long-term price scenario would drive oversupply for several years before starting to succumb to an undersupplied market in 2023 due to lack of longer-term projects, continued demand growth, and plateauing U.S. production.
Natural gas is predicted to continue to grow, especially in the Appalachian and Permian Basins, as will liquified natural gas (LNG) exports. The report also highlights the importance of Mexico as an export destination. During the next five years, U.S. exports are expected to reach 5 Bcf/d, representing more than 60 percent of the supply stack in Mexico.
Natural Gas Liquid (NGL) production is still hitting record highs, despite fractionation and infrastructure constraints. Drillinginfo projects that NGL production will grow ~five percent over the next year and ~20 percent over the next five years, with the highest growth out of the Permian (nine percent and 33 percent growth over one and five years, respectively).
After the Storm addresses a number of renewable energy projects that are slated to come online by 2023. From 2019 to 2020, if all wind and solar projects come online as expected, natural gas demand for power burn will decrease 1.24 Bcf/d.
Key Takeaways from the 50+ Page Report:
- Global economic growth drives demand for petroleum products. However, fears of a global economic slowdown suggest demand could suffer a blow. At the current forward curve, supply should outpace demand for 2019. In 2020+ a large supply deficit is possible offering an opportunity for higher prices. Prices will remain low throughout 2019. Volatility will be present as the speculators react to news, but any extensions higher will be subject to fundamental realities.
- Following the strength in prices at the end of 2018, natural gas prices are expected to range $2.60- 2.75/Mmbtu over the next five years. These prices will allow production growth at a pace to meet the expected demand growth in natural gas. LNG exports will lead the demand growth for the natural gas market while the power sector battles for market share with renewables sources.
- NGL production has hit a record high eight months in a row. Y-grade pipelines, railcars, and fractionators are all nearly full. Oversupply and constraints have yielded lower prices and lower netbacks. There is also increased volatility, which will likely remain at least over the next two to three years as incremental projects are completed and more constraints potentially unfold. Many greenfield projects have been announced to increase frac space and take advantage of some of the wide frac margins and optimization opportunities. Some midstream providers have been creative, recommissioning frac space through maintenance, building small pipelines to increase flow optionality, or optimizing volumes on their systems and through storage to create more space.
- M&A was the biggest story in Q3 for E&Ps, with activity surging 250 percent over Q2 to $32B, and 76 percent above the quarterly average since 2009. Consolidation within plays likely will increase in momentum as scale and efficiency reward larger players. Constraints exist across all commodities and vary by region but are another way consolidation can present strategic opportunities. As in prior quarters, investors are still favoring producers with more visibility to free cash flow. Costs will be flat to down in 2019 after seeing a five percent to 15 percent bump across the U.S. in late Q2 and early Q3, especially after the recent drop in crude and NGL prices.
Drillinginfo delivers business-critical insights to the energy, power, and commodities markets. Its state-of-the-art SaaS platform offers sophisticated technology, powerful analytics, and industry-leading data. Drillinginfo's solutions deliver value across upstream, midstream and downstream markets, empowering exploration and production (E&P), oilfield services, midstream, utilities, trading and risk, and capital markets companies to be more collaborative, efficient, and competitive. Drillinginfo delivers actionable intelligence over mobile, web, and desktop to analyze and reduce risk, conduct competitive benchmarking, and uncover market insights. Drillinginfo serves over 5,000 companies globally from its Austin, Texas, headquarters and has more than 1,000 employees. For more information visit drillinginfo.com.
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