WASHINGTON, April 26, 2016 /PRNewswire/ -- Suzanne Minter, Manager, Oil and Gas Consulting for Platts Analytics, the forecasting and analytics unit of Platts, a division of McGraw Hill Financial, today testified before the U.S. Senate Energy and Natural Resources Committee. The hearing examined challenges and opportunities for oil and gas development in different price environments.
Suzanne Minter said: "After 14 months of persistently low prices, U.S. producers have entered 2016 with estimated capital expenditures cuts of 40%, more than 6,500 drilled but uncompleted wells in inventory, and find themselves operating at or near cash costs.
Drilled but uncompleted wells hold reserves that can be brought on line in a short period of time, thereby defining the concept of spare capacity. It is plausible to believe that U.S. spare capacity may be close to rivaling OPEC's current spare capacity. However, we believe that the prices needed to incentivize the U.S. producer to complete their drilled but uncompleted wells may be much lower than global competitors believe or would like it to be.
The near term oil recovery will be more than likely be tenuous and ebb and flow, rather than occur in a linear fashion, as all parties involved figure out how to balance supply growth that has the ability to hit the market in a short period of time relative to demand growth with appears to be occurring at a slower rate."
IMPACT OF OIL PRICES ON INDUSTRY
- U.S. energy producers continue to navigate through a volatile and overall low price environment. This price environment has dramatically affected spending and producing behavior.
AN OVERSUPPLIED ENERGY MARKET
- The "Shale Revolution" that drove natural gas production between 2010 and 2015, found its way into the oil field, showing a 57% increase in U.S. crude production in just three years between 2012 and 2015.
WHEN WILL SUPPLY AND DEMAND BALANCE AGAIN
- The current price environment is sending a signal to producers that production must slow and allow demand to catch up. U.S. producers may be in the best position to lead the recovery, given the technical prowess they've developed in response to the unique economic environment, by raising production rates and decreasing drill times.
Access the prepared testimony by clicking on this link.
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Senior Director, Communications
McGraw Hill Financial
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