Friday, July 29 2016
In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.
Let’s take a look.
1. DUC list flattens out
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- The number of drilled but uncompleted wells (DUCs) flattened out in the first quarter of 2016, after a sharp build over much of 2015.
- As of April 1, according to Bloomberg Intelligence, there were 4,230 wells that had been drilled but not completed. That number was more or less the same from January levels.
- While some companies added DUCs to their portfolios in that time period, others began working through their backlog.
- Bloomberg Intelligence estimates that the DUC backlog could disappear in the Permian by the end of 2017 even if oil prices stand at $40 to $50. The Eagle Ford could see its fracklog 70 percent finished over that timeframe as well.
- Estimates vary on how much production the DUCs could add, from the low end of 250,000 barrels per day (Wood Mackenzie) to the most optimistic of around 1 million barrels per day (Citigroup).
2. BP cash flow not covering expenses
- BP reported another loss in the second quarter, the third consecutive quarter to do so. The oil major lost $2.25 billion, which is not quite as bad as a year earlier.
- When charges related to the Gulf of Mexico spill are stripped out, BP would have a $720 million profit. Nevertheless, BP is not generating enough cash flow to cover all of its expenses, including its hefty dividend.
- BP insists on not touching its dividend, but that means it will have to cut capex from $17 billion in 2016 to $15-$17 billion in 2017, grow its cash flow, and continue to divest itself of assets. It plans on $3-$5 billion in divestments this year plus $2-$3 billion next year. It is also taking on more debt.
- Net debt increased to $30.9 billion, the highest in four years. But the company doesn’t mind. “Money is so cheap right now,” BP’s CEO Bob Dudley said this week. “It’s a good time and we can actually manage a little bit more on the net debt.”
3. Refining margins falling
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- The oil majors are reporting bad figures for the second quarter, with many disappointing…