Responses to a recent survey of oil and gas industry executives by Grant Thornton LLP show that 92% of respondents believe that prices of $8/MMBtu or more are needed to increase domestic drilling activity more than 20% over last year. However, the average 2009 price expectation for the group is $6.98/Mcf.
The average price expectation rises to $7.57/Mcf in 2010 and $8.21/Mcf in 2011, according to the firm's seventh "Annual Survey of Upstream U.S. Energy Companies."
"[T]he world's oil and gas complex has had a dramatic about-face from sky-high prices and results in first half '08. The picture for 2009 is neither clear nor rosy," wrote EnerVest Ltd. CEO John B. Walker in an introduction to the survey report.
"It appears that in the gas markets we are a victim of our own good works -- we broke the code using advanced technology to release the gas from the low-permeability shales. On top of dropping gas demand, particularly industrial and power demand, our supply of gas exceeds demand by 5-7 Bcfe/d."
A recent informal survey by Raymond James & Associates Inc. found industry executives to be more dour in their outlook for commodity prices than Wall Street (see related story).
The top three most important issues facing the industry are uncertain natural gas prices, uncertain oil prices and obtaining capital, the Grant Thornton survey found.
"Overall, as to be expected, respondents were generally not as optimistic as compared to the past two years," said Reed Wood, Grant Thornton partner-in-charge of the firm's energy practice. "Their responses, together with intelligence gathered from client and industry meetings, indicate that the entire energy industry will likely confront formidable challenges throughout 2009 as it continues to adjust to one of the most severe declines (absolute, percentage and period) for oil prices."
Walker wrote that he anticipates reserve writedowns, distressed asset sales and bankruptcies. "There is hope! The acquisitions of 2009 will be the best made in the past 10 years for those with the capital availability."
Other survey findings:
The survey results are available at www.GrantThornton.com/oilandgas.
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