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Intrepid Private Capital Group

Will Shale, Deepwater Projects Be Cancelled In 2015?


More than $150 billion in oil and gas projects worldwide are expected to be canceled next year as oil prices continue to fall. Norwegian consulting firm Rystad Energy is expecting companies to make final investment decisions on a total of 800 projects valued at $500 billion and totaling nearly 60 billion barrels of oil equivalent, according to Reuters. But one-third of the spending won’t get approved.
The analysts estimate that half of overall volumes are at risk of being shut down if oil stays at $70 per barrel.
An oil rig using horizontal drilling is seen near Kennedy, Texas. AP
An oil rig using horizontal drilling is seen near Kennedy, Texas. AP View Enlarged Image
Brent oil fell 1.2% to 68.80 on Friday.
As oil prices plunge, more expensive fields are going offline because production is no longer profitable. Unconventional oil fields like the Bakken and Eagle Ford are more expensive to drill using new methods than traditional wells due to expensive new technology.
Royal Dutch Shell (NYSE:RDSA) in October had already questioned projects in west Canada if prices fell below $80 a barrel.
Shell shares fell 0.5% to 67.07 in the stock market today
Offshore developments are also expensive. Renting rigs from companies like Transocean (NYSE:RIG) can cost up to $500,000 per day, according to the Wall Street Journal, five times the rate for a shallow water rig.
The future of Chevron’s (NYSE:CVX) project in the North Sea, which has been delayed several times already, is uncertain and analysts don’t expect a decision on the project until late next year, according to Reuters.
Chevron shares dipped 0.4% to 111.82.
In October BP (NYSE:BP) and Chevron were bullish about a “significant oil play” about 180 miles off the coast of Louisiana. But BP has shelved other Gulf projects like the Mad Dog Phase 2 deep water project last year after development costs skyrocketed to $20 billion. Another delay in the field is expected. Shares fell 0.9% to 40.03. By GILLIAN RICH, INVESTOR’S BUSINESS DAILY Posted 12/05/14

…… and the fallout from the continuing drop in oil prices persists!


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Intrepid Private Capital Group • December 22, 2014

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