Wood Mac: Mixed bag for oil and gas exploration next year

Consultant group expects spending to be about flat, but that should at least keep payrolls in order.

By Daniel J. Graeber

LONDON, Dec. 9 (UPI) -- Oil and gas explorers are expected to get a little leaner next year, but for those with good financials, potentially a bit meaner, Wood Mackenzie reports.

The consultant group reported the exploration and production side of the energy industry is expected to get smaller next year, but more efficient. Companies that service that side of the energy sector like Schlumberger and Baker Hughes made corporate adjustments during the height of the downturn, but said the market likely hit bottom in the latter half of 2016.


Andrew Latham, a vice president of exploration at Wood Mackenzie, said in a report that 2017 may show gains for those in the industry making low-cost, but smarter, portfolio choices. Choices made by the supermajors like Marathon already show signs of a payout.

"The rest of the industry is heading in the same direction," he said. "Fewer, better wells promise a brighter future for explorers."

In terms of investments, the consultant group said it expects about $40 billion will go toward exploration next year, about the same as this year. Despite the stand-still, Wood Mackenzie said costs are moving lower and that should keep budgets in check enough to prevent further industry layoffs.


Several companies servicing the exploration side of the industry cut staff or in some cases closed down offices altogether this year.

Geographically, the consultant group said some bright spots next year could emerge in natural gas pipeline opportunities in the former Soviet sphere in Europe, North Africa and Latin America. High-cost areas, like offshore Alaska and other Arctic waters, may be sidelined with oil priced at around $50 per barrel.

Latham said that more than half of the new volumes next year could come from deepwater basins, where the bottom line shows potential at less than $50 per barrel for oil.

In two years, Wood Mackenzie says it expects the price of oil to be in the upper $70 range.

"If this happens, then recovery in exploration spend will follow a year or two later," the report read.

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