RJ turing bearish on drillers
Posted: Mon Jun 25, 2012 9:50 am
Raymond James thinks rapidly growing domestic oil production from the Bakken, Eagle Ford and Permian Basin will drive down WTI price and cause many E&P companies to make significant cuts in their 2013 drilling budgets. This is from today's Energy Stat:
"In today's Stat, we take a deeper look into our new rig count assumptions that drive our proprietary bottom-up production-by-play model. Recall, on April 16, we lowered our 2013 U.S. rig count forecast to a 3% average annual DECLINE (or a 10% beginning-to- end-of-year decline in 2013). Following the further reduction in our oil price outlook last week, we now expect average annual onshore rig growth of only 4% in 2012 and a 13% DECLINE in 2013. In fact, we think the looming oil supply problem potentially could be so severe that WTI oil prices must fall far enough to drive the total U.S. onshore rig count down roughly 25% from now until exit 2013. Keep in mind that consensus expectations for 2013 still assume increasing drilling activity y/y. To put this into perspective, last week the total rig count reached 1,966 rigs, and we anticipate by the end of 2013 there will be roughly 1,470 active rigs."
A couple things to watch:
> Will OPEC defend oil prices? I think they will
> Will natural gas prices continue to drift higher? Hot summer in the South + hurricane related shut-ins + normal winter could take a major bite out of the U.S. natural gas surplus.
NOTE: All of our gas fired peaking power plants are now on-line as Texas tries to avoid rolling blackouts.
"In today's Stat, we take a deeper look into our new rig count assumptions that drive our proprietary bottom-up production-by-play model. Recall, on April 16, we lowered our 2013 U.S. rig count forecast to a 3% average annual DECLINE (or a 10% beginning-to- end-of-year decline in 2013). Following the further reduction in our oil price outlook last week, we now expect average annual onshore rig growth of only 4% in 2012 and a 13% DECLINE in 2013. In fact, we think the looming oil supply problem potentially could be so severe that WTI oil prices must fall far enough to drive the total U.S. onshore rig count down roughly 25% from now until exit 2013. Keep in mind that consensus expectations for 2013 still assume increasing drilling activity y/y. To put this into perspective, last week the total rig count reached 1,966 rigs, and we anticipate by the end of 2013 there will be roughly 1,470 active rigs."
A couple things to watch:
> Will OPEC defend oil prices? I think they will
> Will natural gas prices continue to drift higher? Hot summer in the South + hurricane related shut-ins + normal winter could take a major bite out of the U.S. natural gas surplus.
NOTE: All of our gas fired peaking power plants are now on-line as Texas tries to avoid rolling blackouts.