US E&P Budgets Rebound, Grow For First Time Since 2014 Downturn

US E&P Budgets Rebound, Grow For First Time Since 2014 Downturn
US CAPEX and rig counts to drive production growth of 5% this year; drilling and completion spending to increase by 58% this year, according to Fitch Ratings' modeling.

Exploration and production (E&P) spending in the United States will increase this year for the first time since the 2014 downturn, which roiled the industry for two years rife with lay-offs and bankruptcy filings.

Increasing capital expenditures (CAPEX) is expected to drive production up this year by 5 percent, according to Fitch Ratings’ measurement across 40 U.S. E&Ps. Total drilling and completion spending is on the rise, too, increasing by roughly 58 percent.

Most of the CAPEX is dedicated toward highest-return shale plays, especially the Permian Basin, Eagle Ford, STACK, Haynesville and Marcellus basins, the ratings group said in a statement April 21.

What’s more, the Fitch sample forecasts that land rig counts in the lower 48 will increase up to 65 percent, year-over-year. The pace is likely to slow during the second half of 2017, but still culminate in up to 875 land rigs by year-end.

The disparity between CAPEX and production growth for the year indicates growth will continue next year. Spending more money on the production side – rather than testing and delineation – as well as efficient gains, will further boost 2018 growth, Fitch said.

In August 2016, analysts at RBN Energy, LLC, said E&P CAPEX had likely hit bottom when 46 U.S. E&Ps revealed spending that year at $41 billion – down 51 percent and 70 percent from investment made in 2015 and 2014, respectively.

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