Business Outlook Report 2017

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Myles Nicholson
6 years ago
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1 Business Outlook Report 217 Adam Davey Market Intelligence Manager Sponsored By:

2 Agenda 1 Oil and Gas Markets 2 Supply Chain Outlook - Revenues - Share Price 3 Upstream Outlook - Capex - Opex - Production - Drilling - Decommissioning 4 Progress and Challenges

3 Nominal Price ($/boe) There has been a gentle price recovery over last few months but outlook remains uncertain 14 Dated Brent NBP Month Ahead Source: Argus Media, ICIS Heren Business Outlook Report 217 3

4 Turnover ( Billion Money) The supply chain needs activity to drive revenues, efficiency is a vital part of the solution 45 Facilities Marine & Subsea Wells Services Support & Services Reservoirs Source: EY Business Outlook Report 217 4

5 Index On average, oil and gas sector company share prices grew last year after 214/15 sell-off Support & Services Facilities Marine & Subsea Wells Services Reservoirs Sector Average Jan 214 Jan 215 Jan 216 Jan 217 Source: Yahoo Finance Business Outlook Report 217 5

6 UKCS Expenditure ( Billion Money) Upstream expenditure has fallen by almost 4% since this year is likely to be more stable Operating Costs Development Costs E&A Costs Decommissioning Costs Source: Oil & Gas UK, OGA Business Outlook Report 217 6

7 Capital Expenditure ( Billion Money) Capital Investment fell by 3% last year as major projects finish development phase Committed Investment Potential Upside from Projects yet to be Sanctioned Source: Oil & Gas UK Business Outlook Report 217 7

8 Total Capital Investment by New Field Approvals ( Billion Money) A flow of new project development opportunities is critical to the future of the UKCS Source: OGA, Oil & Gas UK Business Outlook Report 217 8

9 Operating Costs ( Billion Money) Operational expenditure is now back to a more sustainable pre-boom level 12 Operating Cost Upper Range Source: Oil & Gas UK Business Outlook Report 217 9

10 Production (Million boepd) Production has grown by 1% and 5% in last two years respectively next decade more uncertain Source: Oil & Gas UK Business Outlook Report 217 1

11 Net Production Change (Million boe) New capacity and efficiency improvements in existing assets have been at the heart of growth to % Restart New Start Existing Asset Ceased to % Source: OGA Business Outlook Report

12 Number of Development Wells (including geological sidetracks) Development well spuds fell by one-third last year, a major concern for production outlook Source: OGA Business Outlook Report

13 Unit Operating Costs ( and $/boe Money) Opex and production improvements have resulted in UOC s halving in two years 3 25 Unit Operating Costs ( per boe) Unit Operating Costs ($ per boe) Source: Oil & Gas UK, OGA Business Outlook Report

14 Annual Decommissioning Expenditure ( Billion Money) Decomm growth driven by a few major projects expected COP date pushed back for many fields Source: Oil & Gas UK Business Outlook Report

15 Number of Exploration Wells (including geological sidetracks) Volumes Discovered (Million boe) Exploration remains a challenge but some positive signs are emerging Exploration Wells Potential Upside on Forecast Volumes Discovered Source: Oil & Gas UK, OGA, Wood Mackenzie Business Outlook Report

16 Cash-Flow ( Billion Money) Free cash-flow returning to UKCS but will take time to filter down through supply chain 6 5 Gross Revenue Post-Tax Expenditure Post-Tax Cash-Flow Source: OGA, Oil & Gas UK Business Outlook Report

17 Progress Challenges The average unit operating cost has fallen by almost 5% in two years? To sustain and build-on recent efficient gains Total UKCS production has increased by around 16% in the last two years? To avoid a return to rapid production decline in the early 22s The supply chain has shown impressive resilience through the downturn? To retain world class supply chain capabilities in the UK that can be exported overseas Over 36mn boe was discovered through exploration activity last year? To reinvigorate E & A drilling on the UKCS and find more commercial discoveries Upstream has returned to free cash flow of around 5 billion for the first time since 213? To ensure that the UKCS is internationally competitive so it can attract capital back into the basin Business Outlook Report

Learning from other Geographies North Sea

AOG Conference Learning from other Geographies North Sea Adam Davey & Stephen Marcos Jones 24 th February 2017 Who are Oil & Gas UK? Raise profile Deliver industry initiatives Promote dialogue Engage with