OPEC Cuts, Permian Investments Create Optimism for Oil, Gas Industry
The tone of cautious optimism for the oil and gas industry will likely continue as we enter into 2017. After oil prices bottomed out in 1Q 2016 and OPEC finally agreed to cut production, sentiments among the industry seem to be on the rise.
Oil and gas labor market conditions were positive in 4Q 2016, the first time this year, according to a quarterly energy survey released Dec. 29 by the Federal Reserve Bank of Dallas.
The survey of 147 E&P (exploration and production) firms and oilfield services firms in the Eleventh District (Texas, northern Louisiana and southern New Mexico) revealed:
- Although the majority of respondents reported no change in headcounts, 18 percent of firms reported net hiring, while 15 percent reported net layoffs
- Oil and gas production stopped declining this quarter, according to E&P firms
- 58 percent of respondents revised up their 2017 oil price forecasts and company outlooks in response to announced production cuts
- 71 percent of respondents expect higher oil prices a year from now, while 50 percent expect higher gas prices
OPEC and Production Cuts
The energy survey also included questions about OPEC and some non-OPEC countries agreeing to curb production in 2017.
Responses were split, with most expressing doubt that OPEC and other non-OPEC countries would be able to enforce agreements to limit crude oil production. Forty-two percent of respondents expect production agreements to be enforced, while 58 percent believe they will not be enforced.
Based upon recent meetings regarding cuts to crude production, 44 percent of respondents believe it’s most likely the oil market will come into balance in 3Q 2017. Skepticism surrounding OPEC’s agreement affected these responses. Almost all respondents who believe markets will balance in 2018 or later also doubt producer agreements will be enforced.
Positivity in the Permian
A bright spot for the upstream industry in the second half of 2016 was the increased interest in the Permian. Operators began to jump at the chance to acquire acreage – referred to as “Permian Panic.” Diamondback Energy Inc. said Dec. 14 it would pay $2.43 billion for acreage in the Permian, making it one of the latest companies to show interest.
While some survey respondents said they believe Permian acreage was overvalued, the increased Permian activity does stand to create employment opportunities – something oil and gas professionals have been waiting on for years.
Oilfield services company Halliburton is looking to hire 200 workers in the Permian, spokesperson Emily Mir said in an email to Rigzone. The company is hiring in all of its product service lines and support functions in the Permian.
“The Permian Basin is an important area for Halliburton and we’ll continue to make adjustments to our workforce based on business demand as needed,” Mir said.
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