Sweet 16 Update - some signs of inflation cooling

[dan_s]

Note from RBC Capital Markets

Global Oil & Gas: 2022 Budget & Production Tracker Published November 28 2022 15:24:44 EST
2023 Tracking 5-10% Higher; Some Signals that Inflation Cooling

Our view: 2022 spending was nudged yet again due to persistent inflation and some
activity pull-forward in preparation for 2023. While inflation remains a headwind,
there are some green shoots with some early signs that costs are leveling off a
bit. A very early read on 2023 spending points to a slight overall increase although
dependent on larger project activity and crude prices. There are increasing political
calls for more oil & gas activity to reduce global inflation, but we expect most
companies to maintain discipline and take cues from the commodities and investor
preferences. Our total updated 2022 global budget tracker is modestly higher from
the last update, and our estimated 2022 global oil production growth moved 1pp
lower to +4% (entry-to-exit) and is now down 3pp from initial expectations earlier
this year. Our budget tracker includes 2023 preliminary guidance which forecasts
global spending up another 5-10% next year.
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MY TAKE: Most of our Sweet 16 will keep their D&C budgets for 2023 at or +10% to what they spent in 2022. ESTE, NOG and SBOW should have the most year-over-year production growth in 2023 due to acquisitions in 2022. Thanks to much better hedge books, actual revenues should be much higher for most of them in 2023. All of the gassers (AR, CRK, EQT, RRC and SBOW) should report "stunning" Q1 operating cash flow. Callon Petroluem (CPE) is adding another operated drilling rig and completions crew, so I expect them to report steady production growth.