Report: Shale Vulnerable to Short-Term Investment Cuts Versus Deepwater

“Exploration in 2015 is the 2018-2020 investment project, and halting exploration prematurely may mean not having the next project to take advantage of a stronger price environment at a later time,” said GCA in the report.

Actual spending cuts will be determined by a large number of individual company factors, and the cash flow squeeze will undoubtedly cause cuts to be felt everywhere. While onshore shale companies include a range of players from small independents to majors, deepwater companies include large independents and majors, for whom it is more an issue of capital allocation versus financing.

“Thus, to preserve value for the future suggests that companies with both types of assets in their portfolio, onshore unconventional projects will deferentially be deferred, where other factors do not prevail.”

Earlier this year, GCA reported that shale “sweet spots” would still be viable at lower oil prices, but companies operating outside these areas could be pinched if oil prices continued to decline.

Deepwater Gulf of Mexico production is expected to set a new record in 2016 thanks to new developments and the expansion of older oil fields, Wood Mackenzie reported last month. But production beyond the 2016 peak is expected to decline as legacy fields are depleted and a limited number of new projects are expected to come onstream.


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