How will the oil industry adapt to IEAs Oil Market Outlook 23 March - - PowerPoint PPT Presentation
How will the oil industry adapt to IEAs Oil Market Outlook 23 March 2017 Oddvar Bjrgan +47 22 48 76 71 / +47 91 71 94 60 oddvar.bjorgan@nordea.com Emil Johannessen +47 22 48 79 28 / +47 48 23 21 74 emil.norum.johannessen@nordea.com IEA:
23 March 2017 Oddvar Bjørgan +47 22 48 76 71 / +47 91 71 94 60
Emil Johannessen +47 22 48 79 28 / +47 48 23 21 74 emil.norum.johannessen@nordea.com
2 • Source: IEA and Nordea Markets
Supply / demand balance
94 95 96 97 98 99 100 101 102 103 104 16 D 16S 17 D 17S 18 D 18S 19 D 19S 20 D 20S 21 D 21S 22 D 22S
Global oil demand and supply (IEA) m bpd
Comment IEA’s latest global oil supply and demand estimates suggest a meaningful undersupply of oil beyond 2020 unless significant investment decisions will be made now. 1) Is it correct? 2) Do the oil companies BELIEVE it is correct? 1) Big Oils: Sceptical 2) US E&Ps: Don’t care (because we are lower on the cost curve), and OPEC issued a price guarantee.
The graph is based on IEA’s estimates from the “Oil 2017” report (including IEA’s US shale estimates of course). In addition we have assumed that OPEC crude oil production will stay flat from the February 2017 level of 32.0m bpd in this graph. OPEC could therefore at any time increase production by 1.0m bpd. In addition, the IEA estimates that OPEC’s sustainable production capacity will increase by 1.5m bpd in 2018-2020. OPEC could therefore add some 2.5m bpd to the supply side by 2020 (balancing the market).
3 • Source: Nordea Markets, company reports and Bloomberg consensus
10 Integrated Oils’ capex US E&P’s capex
25 000 50 000 75 000 100 000 125 000 150 000 175 000 200 000 225 000 250 000 275 000 300 000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E USDm
Down 62% from Q4 13 to Q4 16 Expects a slow recovery Down 75% from Q1 14 to Q3 16 Expects a quicker recovery
4 • Source: Company data, Bloomberg and Nordea Markets
10 20 30 40 50 60 70 80 90 100 110 120 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000 220 000 240 000 260 000 280 000 300 000 320 000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E USD/bbl USDm
Integrated Oils' CFFO and Capex (USDm)
CFFO (USDm) Capex (USDm) Brent (RHS)
5 • Source: Bloomberg and Nordea Markets
114 89 57 47 29 30 136 118 77 66 49 50 10 20 30 40 50 60 70 80 90 100 110 120 130 140 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E USD/bbl
Integrated Oils' break-even oil price
Brent oil price Break-even after CAPEX (USD/bbl) Break-even after CAPEX and div. (USD/bbl)
That means they CAN increase investments from 2018 if they WANT
6 • Source: Bloomberg and Nordea Markets Q4 16 Brent: 49 BP Shell Total ENI Statoil Chevron Conoco Exxon Repsol Cash-flow from operations before WC changes 2 035 9 818 5 105 1 933 3 800 3 147 1 753 9 800 1 519 38 909 Organic capex
FCF organic
4 104
1 231
754 6 000 565 8 039 WC changes 393
1 913 1 568
716
258
FCF organic after WC changes
3 456 1 276 1 076
444 3 600 822 7 755 Acquisitions/sale of assets 212 2 285 814 691
1 086 1 052 2 100 466 8 340 FCF
5 741 2 090 1 767
940 1 496 5 700 1 288 16 095 Dividends
Buy-backs 60
24
FCF after dividends and buy-backs
3 346 1 600 1 731
1 046 2 600 1 306 6 098 Change in net debt (+ is increase) 1 339
2 360 811
2016 Brent: 44 BP Shell Total ENI Statoil Chevron Conoco Exxon Repsol Cash-flow from operations before WC changes 13 889 26 904 17 640 6 223 10 655 13 396 4 759 30 342 4 865 128 673 Organic capex
FCF organic
4 788
14 266 1 722 8 449
WC changes
2 223
FCF organic after WC changes
6 010 1 134
Acquisitions/sale of assets 1 948
453
496 1 257 1 312 3 644 3 603 3 262 FCF
846 9 654 4 737
Dividends
Buy-backs 100
FCF after dividends and buy-backs
4 168
Change in net debt (+ is increase) 8 037 46 719
4 521 11 475 2 805 4 113
71 611
7 • Source: Bloomberg consensus and Nordea Markets
900 1 100 1 300 1 500 1 700 1 900 2 100 2 300 2 500 2 700 2 500 5 000 7 500 10 000 12 500 15 000 17 500 20 000 22 500 25 000 27 500 30 000 32 500 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Q3 15 Q1 16 Q3 16 Q1 17E Q3 17E Q1 18E Q3 18E
33 US shale oil players
Capex (LHS) Oil production (RHS)
100 200 300 400 500 600 700 800 900 1 000 1 100 1 200 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
US horizontal onshore oil rigs
8 • Source: Company data, Bloomberg and Nordea Markets 1 000 1 200 1 400 1 600 1 800 2 000 2 200 2 400 2 600 2 800 3 000 3 200 3 400 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017E Q2 2017E Q3 2017E Q4 2017E k bpd USDm
58 Shale players' cash flow
Cash flow (LHS) CAPEX (LHS) Oil production (RHS)
9 • Source: Company data, Bloomberg and Nordea Markets
30 40 50 60 70 80 90 100 110 2 000 4 000 6 000 8 000 10 000 12 000 14 000 Oct 2013 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 Dec 2014 Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015 Jul 2015 Aug 2015 Sep 2015 Oct 2015 Nov 2015 Dec 2015 Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 USD/bbl
US E&P companies' funding (USDm)
Equity raised (USDm) Debt raised (USDm) WTI (RHS)
10 • Source: Company data and Nordea Markets
0 % 20 % 40 % 60 % 80 % 100 % 120 % 140 % 160 % 180 % 200 % 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
RRR Oil ex. acquisitions: 8 largest Integrated Oils
RRR Oil ex. Acquisitions (annual):
0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
RRR Oil New discoveries
5 000 6 000 7 000 8 000 9 000 10 000 11 000 12 000 13 000 14 000 15 000 k bpd
Integrated Oils' liquids production
0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
RRR (Revision of previous estimates)
11 • Source: IEA, EIA, Company data and Nordea Markets
Capex 17 US onshore FID 17 Scrip CF b-e 17 XOM + + Lisa RDS
Yes BP + Busy Yes CVX
Total
Yes 50 ENI
Statoil + Yes 50 COP + 50 Repsol + Yes CVX Capital discipline, lower capex Shell Capex down in 2017, but then up. Increasd focus on shale Conoco Focusing more on shale Statoil Eager to start increasing capex again BP Raised 2017 capex guidance, eager to FID Total Capex down also over the medium term, 10 projects ready for FID Repsol Raising capex in 2017 ENI Capex down Exxon Capex up, but a big turn to shale
Capex (USDm) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E ExxonMobil 9 989 11 437 12 859 11 986 13 839 15 462 15 387 19 318 22 491 26 871 30 975 34 271 33 669 32 952 26 490 16 163 19 016 20 778 22 083 RD Shell 6 594 12 102 12 252 12 734 15 904 22 922 24 576 35 065 26 516 26 940 26 301 32 576 40 145 31 854 26 131 22 116 23 155 24 280 24 816 BP 12 142 12 049 12 368 12 286 12 281 15 125 17 830 22 658 20 650 18 421 17 845 23 222 24 520 22 546 18 648 16 255 16 210 16 109 16 489 Chevron 9 713 7 597 5 625 6 310 8 701 13 813 16 678 19 666 19 843 19 612 26 500 30 938 37 985 35 407 29 504 18 109 16 527 16 569 17 693 Total 6 736 6 568 7 209 9 212 11 011 12 453 14 462 17 450 16 528 18 324 24 997 25 598 29 757 26 365 25 154 18 117 15 794 16 303 16 542 Eni 4 725 6 474 8 883 8 443 8 161 7 713 11 696 18 113 16 783 16 328 16 235 14 431 14 497 14 196 11 789 10 036 8 642 9 057 9 305 ConocoPhillips 3 016 4 388 6 169 9 496 11 620 15 596 11 791 19 099 10 861 9 761 11 214 14 172 15 537 17 085 10 050 4 869 5 103 5 881 6 453 Repsol 3 000 3 000 2 538 2 976 3 949 6 807 6 070 7 246 6 065 6 445 4 946 4 384 2 646 3 462 3 321 2 217 3 713 4 109 4 461 Statoil 1 938 2 259 3 169 4 727 4 873 7 054 10 917 10 508 10 735 11 335 15 196 16 302 19 562 19 506 15 485 12 191 11 064 11 991 12 917 BG Group 1 118 1 275 1 045 1 283 1 936 2 422 3 437 5 178 6 777 8 397 10 300 9 974 10 605 8 510 5 596 Petrobras 4 151 4 120 4 229 4 201 5 046 6 952 9 172 12 264 10 405 10 477 10 632 11 864 45 311 34 778 21 361 16 318 17 008 15 358 13 488 Sum 63 122 71 268 76 346 83 654 97 320 126 319 142 017 186 564 167 653 172 911 195 141 217 732 274 235 246 660 193 528 136 392 136 233 140 435 144 247 Annual change 11 540 8 146 5 077 7 308 13 666 28 999 15 698 44 548
5 258 22 230 22 591 56 503
4 202 3 812
22 % 13 % 7 % 10 % 16 % 30 % 12 % 31 %
3 % 13 % 12 % 26 %
0 % 3 % 3 %
12 • Source: Company data, Bloomberg and Nordea Markets US Liquids production (1.000 bpd) Company 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2017 2018 2019 2017 2018 2019 Conoco 526 497 625 590 430 427 425 434 454 370 395 419 482 25 24 64 7 % 6 % 15 % Occidental 385 394 439 385 383 400 326 326 354 330 347 372 395 17 25 23 5 % 7 % 6 % EOG 31 46 55 75 113 158 220 289 284 283 333 397 470 51 63 73 18 % 19 % 18 % Apache 249 254 279 323 340 352 347 300 284 275 263 280 283
17 2
7 % 1 % Devon 151 107 115 111 123 146 168 214 275 259 254 275 297
20 23
8 % 8 % Anadarko 151 151 131 141 152 163 174 204 222 221 257 292 314 35 35 22 16 % 14 % 8 % Hess 260 252 279 289 249 284 225 220 238 191 178 191 197
13 6
7 % 3 % Pioneer 25 30 32 34 42 63 75 87 105 134 171 212 260 37 41 48 28 % 24 % 23 % Continental 24 25 27 32 45 68 96 122 147 128 133 164 190 5 30 26 4 % 23 % 16 % Noble Energy 85 71 64 66 58 88 101 105 114 126 136 163 186 10 27 23 8 % 20 % 14 % Marathon 138 148 174 188 180 218 165 166 174 158 138 167 182
29 16
21 % 9 % Murphy Oil 92 118 132 127 103 113 135 142 126 103 94 99 102
5 3
5 % 3 % Chesapeake 27 31 32 50 87 85 113 115 115 90 92 103 107 2 12 4 2 % 13 % 4 % Whiting 26 34 42 52 56 63 74 92 129 93 87 102 114
15 12
17 % 12 % Concho 8 13 19 26 37 46 58 72 94 92 116 143 177 23 28 33 25 % 24 % 23 % Newfield 24 29 36 40 54 33 39 52 73 71 67 77 92
10 16
15 % 21 % Denbury 28 31 37 60 61 67 66 71 69 61 58 59 59
1
1 % 0 % QEP 8 9 10 8 10 17 28 47 54 56 60 70 82 4 10 12 8 % 17 % 17 % Linn 3 9 9 13 22 29 34 73 63 49 49 49 49 0 % 0 % 0 % Cimarex 20 23 23 27 27 31 37 43 51 45 56 68 87 11 12 19 24 % 21 % 28 % SM 19 18 17 17 22 28 38 46 53 45 37 50 71
13 21
35 % 42 % Enerplus 35 35 33 31 30 37 38 40 42 43 40 49 51
9 3
22 % 5 % Oasis 1 1 2 5 10 21 31 41 44 41 54 64 72 12 10 8 30 % 18 % 13 % WPX 7 8 8 8 13 18 22 25 34 41 56 83 103 14 28 20 35 % 50 % 24 % Diamondback Energy 1 1 1 2 6 15 25 31 54 76 97 23 22 21 74 % 40 % 28 % Halcon 2 3 3 3 2 7 28 35 33 28 30 34 45 2 4 11 6 % 13 % 33 % PDC 2 3 3 3 5 5 8 12 19 24 37 52 68 13 15 16 53 % 40 % 32 % Laredo 1 1 9 13 15 19 21 23 28 33 40 5 5 7 21 % 20 % 20 % RSP Permian 2 3 3 8 16 21 40 54 65 19 14 11 88 % 35 % 20 % W&T Offshore 23 19 20 19 17 16 19 20 21 20 19 20 18
1
4 %
20 others 57 55 51 50 59 78 88 120 136 113 132 157 145 18 25
16 % 19 %
Total 2 409 2 413 2 698 2 777 2 741 3 080 3 200 3 554 3 870 3 567 3 811 4 371 4 902 244 560 531 7 % 15 % 12 % Change k bpd 4 285 79
339 121 354 316
244 560 531 Change % 0 % 12 % 3 %
12 % 4 % 11 % 9 %
7 % 15 % 12 % Source: Bloomberg consensus
13 • Source: EIA and Nordea Markets
US liquids 2013 2014 2015 2016 2017 2018 US growth (m bpd) 2014 2015 2016 2017 2018 Crude oil 7,47 8,76 9,42 8,88 9,20 9,73 Crude oil 1,29 0,66
0,33 0,52 Onshore 6,21 7,36 7,90 7,27 7,53 7,90 Onshore 1,15 0,54
0,26 0,37 Offshore 1,26 1,40 1,51 1,61 1,67 1,83 Offshore 0,14 0,12 0,09 0,07 0,15 NGL 2,61 3,01 3,34 3,48 3,75 4,20 NGL 0,41 0,33 0,14 0,27 0,45 Fuel ethanol 0,87 0,93 0,97 1,00 1,03 1,03 Fuel ethanol 0,07 0,03 0,03 0,03 0,00 Total liquids: 10,94 12,71 13,72 13,35 13,98 14,95 Total liquids: 1,77 1,02
0,62 0,98 Source: EIA Short Term Enery Outlook 7 Mar 17 Source: EIA Short Term Enery Outlook 7 Mar 17
7,7 7,9 8,1 8,3 8,5 8,7 8,9 9,1 9,3 9,5 9,7 9,9 10,1 10,3 10,5 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18
Total US crude oil production (m bpd)
Jan 15 Mar 15 Nov 15 Sep 15 Apr 16 Dec 16 Feb 17 Mar 17
5,5 5,6 5,7 5,8 5,9 6,0 6,1 6,2 6,3 6,4 6,5 6,6 6,7 6,8 6,9 7,0 7,1 7,2 7,3 7,4 7,5 7,6 7,7 7,8 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18
US onshore crude oil production (m bpd). EIA estimates
Apr 16 Dec 16 Feb 17 Mar 17
1,3 1,4 1,5 1,6 1,7 1,8 1,9 2,0 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18
US offshore crude oil production (m bpd)
Dec 15 Apr 16 Dec 16 Mar 17
14 • Source: IEA, EIA, Company data and Nordea Markets
0,00 0,50 1,00 1,50 2,00 2016 2017 2018 2019 2020 2021 2022
IEA EIA Companies
2017 2018 2019 2020 2021 2022 IEA 0,39 0,58 0,42 0,18 0,12
EIA 0,62 0,98 Companies 0,70 1,61 1,48
Companies are based on 7% growth of a base around 10m bpd in 2017, then 15% and 12% in 18-19
15 • Source: Bloomberg
45 46 47 48 49 50 51 52 53 54 55 56 57 58 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
WTI futures curve (USD/bbl)
29.11.2016 30.11.2016 01.12.2016 05.12.2016 01.03.2017 17.03.2017 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59
Brent futures curve (USD/bbl)
29.11.2016 30.11.2016 01.12.2016 02.12.2016 27.02.2017 17.03.2017
EIA: Brent USD 55/bbl in 2017 and USD 57/bbl in 2018. WTI USD 1/bbl lower. IEA: Futures curve
16 • Source: Nordea Markets
1) I believe US shale could grow more than the IEA assumes 2) Big Oils will see few FIDs in 2017, probably more in 2018, but it depends on the price signal in 2017 Big Oils: 1) Most of them still in no hurry to invest offshore 2) US players transfer capex to US onshore 3) But tempting low cost offshore environment also now and some matured prospects 4) Uncertain about oil price, wants to see how US shale behaves in early part of this cycle first 5) USD 50/bbl will see limited investments, but if they believe in USD 60/bbl it will come US E&Ps: 1) Activity really took off after the 30 Nov OPEC meeting 2) Perfect storm now with rising oil prices, rock bottom costs and an inventory of super wells 3) Many players guiding 20% annual multi-year production growth 4) Capital discipline lost again? 5) Permian leading the way 6) 120 shale players bankrupt so far in 2015-2017 7) Cost inflation has already re-started 8) Activity looks set to increase throughout 2017 and give strong production growth in 2018 9) In 2018 we will see if new wells are profitable with higher costs, less super wells and the actual
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