EY Predicts What's to Come in Oil and Gas in 2019
On the heels of a year when the oil and gas industry saw oil hit a four-year high, recruiters said they planned to recruit more and Qatar surprised everybody by leaving OPEC, many are optimistic about the future.
Leaders from Ernst & Young LLP (EY) weighed in on their expectations for the industry in 2019. Here’s what Deborah Byers, U.S. energy leader for EY, and Pat Jelinek, oil and gas partner for EY, shared with Rigzone.
Byers on Capital Strategy
“This era of oil and gas abundance coupled with the nimbleness of North American producers has created a ceiling for how high oil prices can rise before supply catches up to temper them,” Byers said. “While the volatility of oil prices is always a consideration, companies are being cautious in their capital allocation strategies and are maintaining very conservative price outlooks that should insulate planning from recent pricing shifts.”
“The investment community has seen behind the curtain, and now believes that global balancing can’t bolster low oil prices as quickly as previously thought,” Byers added. ““While oil and gas companies were historically rewarded for getting the resource to market, now they are judged on cash flow. This is coloring capital spending decisions across the sector and increasing the necessity for all investments to prove their value in a short time horizon. Ultimately, E&Ps face the challenge of showing investors they can operate with positive cash flow and can continue to do so even if prices fall.”
Jelinek on the Majors
“The majors will always look for ways to optimize and integrate their portfolios where possible and generally already know the projects they want to prioritize,” Jelinek explained. “In 2019, big oil companies will continue focusing on developing their operations as efficiently as possible while also lining up the right customers and logistics for their product as well as maintaining their license to operate.”
Jelinke added that digital adoption is integral to increased operational efficiency, specifically among the majors.
“As more and more successful pilot efforts demystify digital and demonstrate proven success in the industry, we expect companies will increasingly lean on these tools to decrease costs, increase safety, optimize assets and minimize downtime,” he said.
“In the U.S., the majors are focused on ensuring they capture every ounce of value they can out of the hydrocarbons they’re producing,” Jelinek said. “Globally, capital efficiency, license to operate and hydrocarbon demand are paramount. Specifically, with the rise in global supply and the variability of contract durations, there is noted focus on market creation and product and market selection, including a recognized focus on sustainability and portfolio implications.”
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