Even with a double-digit percentage decline in crude oil prices since their initial capital spending budgets for 2017 were set, the 13 diversified U.S. exploration and production companies (E&Ps) we’ve been tracking are trimming their spending plans for the year by only $300 million, largely keeping in place $19 billion in drilling and completion investment. The Diversified Peer Group’s apparent confidence flies in the face of eroding investor sentiment as the median enterprise value per barrel of oil equivalent (boe) of reserves has declined 23% since year-end 2016 to $13.72/boe. Today, we review the changes in the outlook for the Diversified Peer Group’s upstream capital spending plans and update their expectations for 2017 oil and natural gas production.
How We Got Here
One way we keep a finger on the pulse of the U.S. energy sector as a whole is to closely track 43 top U.S.-based E&Ps. In Piranha!, our market study of these companies, we examined the strategies that E&Ps are adopting to thrive in a $50/bbl world. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. Then, in several blogs over the past few months, we examined details for each of these groups of companies and tallied the increases in capex the firms had planned for 2017.
Now that our 43 companies have wrapped up their second-quarter/first-half earnings announcements and conference calls, we’ve been providing updates of their 2017 capital spending plans. We started the update in Rock Steady with a big-picture look at all the companies we track. There, we noted that 2017 capital spending estimates for the E&Ps were lowered from initial plans by only $800 million to $54.7 billion — a level still 40% higher than their 2016 capex. In Sail On, we analyzed the individual investment and production guidance for the Oil-Weighted Peer Group. Today, we provide the same analysis for our baker’s dozen of Diversified E&Ps.
Where We’re Going