Wood Mackenzie: 2017 to be a year of 'stability and opportunity' for global oil and gas

In Wood Mackenzie's global corporate outlook for 2017, forecasts suggest that the oil and gas industry will turn cash flow positive for the first time since the downturn, if OPEC production cuts drive oil prices above US$55 per barrel. 

Senior vice president of corporate analysis research at Wood Mackenzie, Tom Ellacott, said "Most oil and gas companies will start 2017 on a firmer footing, having halved cash flow breakevens to survive the past two years. Further evidence of a cautious, U-shaped recovery in investment should emerge.” 

The corporate outlook looks at five themes across the industry for the majors, independents and national oil companies (NOC). These themes are; Strengthening finances will be a top priority, US Independents to lead the sector into a new investment cycle, Portfolios will adapt, down the cost curve into new energy, Modest growth in production despite past capex cuts, An improved value proposition for exploration and mergers and acquisitions. 

The analysis from Wood Mackenzie's suggests that the US Independents could increase investment by over 25 per cent if oil prices average above US$50 per barrel. However, total spend for the big players in the sector will continue to trend down, as total investment by the Majors will fall by around eight per cent as recent capital-intensive projects wind down. 

"More companies will strive to adapt by positioning portfolios lower down the cost curve. The hot oil plays are US tight oil, with the Permian Basin to the fore, and Brazil pre-salt. Both have materiality and development breakevens which are among the lowest globally. Renewables exposure will continue to build, though scarce capital and improving returns from upstream suggest small steps in 2017 rather than transformational moves," Ellacott added. 

The entire article can be purchased on Wood Mackenzie's website's here.