A recent Wood Mackenzie survey finds that 80% of oil and gas operators expect oil prices to reach the US$50-$60/bbl range this year. Despite optimism over oil prices, survey respondents remain very cautious right now, with little appetite for risk.
Seventy-five percent of the 170 survey respondents expect oil prices to recover to the $60-$80/bbl range by 2020, Wood Mackenzie reports. These higher oil prices would generate significant free cash flow.
Due to their cautious outlook, however, operators will focus this year on protecting their dividends and strengthening their balance sheets, says Wood Mackenzie.
On balance, survey respondents expect investments in merger and acquisition (M&A), exploration and capital spending to rise this year. But only 25% of respondents say they believe that frontier exploration or corporate M&A will deliver the best returns this year.
“Uncertainty remains about service costs, with respondents split almost equally over whether they will rise or not in 2017,” says Martin Kelly, head of corporate analysis at Wood Mackenzie.
Wood Mackenzie conducted the survey to gain a comprehensive view of how key industry players see the future.
Climate change is another key issue for major industry players. Seventy-five percent of respondents say that industry can best address this challenge by reducing its carbon footprint or boosting their exposure to renewable energy resources.