In the past two weeks, EnergyFundz attended two separate luncheons where US shale markets and global oil prices were discussed. The first featured OilPro Managing Director, Joseph Triepke, and the second was with energy consulting firm, Rystad Energy. While there were common themes, it was interesting to hear their differing outlooks on next year’s oil prices. Joseph saw 2016 oil prices dipping further, whereas, Rystad saw prices increasing.
What they did agree on though was 2015 prices would be largely flat and the primary victim – small onshore NA independents. So, assuming Joseph’s scenario of sub-$60 oil prices in 2016, small E&P’s will be hurting even more.
If we went with Rystad’s view of $80+ oil prices, the expectation is a wave of projects would come online. However, well startup costs for new drilling and completions programs, especially in Tier 3-4 plays are not overnight endeavors. They require CAPEX and OPEX spending, in the ball-park of $4 million, which might not be readily available to a new/small E&P.
Whether we choose to consider $50 or $90 oil prices in 2016, it is clear there are connections to be made by investment organizations and small E&P’s. While the terms, rates and deal structure may defer from either scenario, either side stands to gain by finding one another in an overly crowded market. We want to help.
We’re interested to hear your views on oil prices in 2016. Or are you an operator and what is your biggest financial concern at the moment? Feel free to comment below.