WoodMacs View | Russell T. Rudy Energy LLC
In a recent report cited by “Rigzone”, consulting firm Wood Mackenzie (WoodMac) shared its outlook for independent domestic oil and gas operators. In the document, WoodMac lays out its ciriteria for short and long term success and how some individual companies measure up.
Oil prices and debt are the two most important considerations for WoodMac. They see $50 oil as essential for most companies to just maintain production and remain cash flow neutral (cash outlays equal to receipts). WoodMac’s Kris Nicol observed, “We think we’re starting to see the first signposts of a recovery. We believe the pace of growth of tight (shale) oil will really be the biggest wild card in 2017. The number one priority is to remain cash flow neutral.”
Nicol went on to say that the average domestic independent needs a price of $57 to support 5% growth and $63 to grow 10% and remian cash flow neutral. Since this exceeds WoodMac’s price forecast for 2017, he does not anticipate widespread double digit growth anytime soon. However, he thinks that Pioneer Natural Resources is well positioned to grow in spite of low prices. He contends that given the company’s low levels of debt, and hedged production at $70, the company is uniquely positioned to prosper in both the short and long term.
WoodMac also sees Marathon Oil and Hess Corp. well-positioned for success in 2017. For long term growth, asset quality is essential and Pioneer, EOG Resources, and Devon Energy all seem to have an advantage over many competitors.
Conversely, Chesapeake Energy and Southwestern Energy face a difficult 2017 according to WoodMac. Chesapeake appears to have avoided bankruptcy but is still weak, and Southwestern plans to lay off an additional 1,100 workers.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/147212/WoodMac .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
