Energy executives are somewhat bullish on global oil and the futures markets, but they expect the natural gas market to get no love this year, according to an annual survey by Raymond James & Associates Inc.

The analyst team held its 18th annual dinner in Houston last week at NAPE, the North American Prospects Expo, and anonymously surveyed nearly 200 oil and gas executives about prices, production and drilling trends.

“The mood throughout the room appeared cautiously upbeat, but the coronavirus has many thinking they may need to wait until 2021 for the group to gain momentum,” said the analysts led by John Freeman. “In sum, the industry seems to be more bullish on oil than the futures markets, although not nearly as bullish as we are over the next year.

“On the other hand, the respondents (like us and the futures market) do not expect to see U.S. natural gas prices greater than $2.50/MMBtu this year.”

In the survey results, “the $1.50-2.00/MMBtu range received the most votes,” as to where gas prices may exit 2020, with the median near the upper end of range. “Interestingly, this is even lower than today's futures strip, which is averaging about $2.05/MMBtu for this year.”

For oil, about half of those surveyed expect crude to exit 2020 in a range of $50/bbl to $60, with the median forecast in the upper $50s. This would be above the current futures market at $50/bbl, but well below the Raymond James estimate of $73.

At the annual Raymond James dinner at NAPE last year, participants said they expected oil prices would exit 2019 around $62/bbl, which was “extremely close” to the actual $61.

NAPE draws exploration and production (E&P), oilfield services, midstream and alternative technology executives, as well as institutional investors, to network and make deals. Most of the Raymond James dinner guests were from E&Ps or E&P-related private equity firms.

“When it comes to E&P, our survey results suggest that sentiment among private E&Ps and private equity investors is shifting increasingly negative on well productivity gains after a tough 2019,” analysts said.

The emphasis today on returns and free cash flow has created a “pessimistic (or optimistic depending on your perspective) outlook for service costs, with activity unlikely to return absent a sustained rally in crude,” according to the survey.

Regarding prospects in the Lower 48, executives said there is an expectation that E&Ps could be forced to drill more child wells that extend beyond parent wells in core acreage as the industry matures.

Following a 15% surge during 2018 in initial production (IP) rates over 30 days (IP-30) most of those surveyed at NAPE last year expected 2019 to be “another banner year...with 70% of respondents expecting at least a 5% gain, including a third which expected over a 10% increase.”

Through 11 months of 2019, the data suggest that average new wells in 2019 produced 3% more oil on an IP-30 basis, but slightly less oil on an IP-90 basis, analysts noted.

“Chasing higher and higher IP-30s is meaningless if by the end of 90 days you've actually produced less oil...In fact, this actually implies that the decline curve is steepening relative to years past.”

E&Ps are responding to the IP-90 data, but the increasing interference in wells “is somewhat a foregone conclusion as the industry shifts into development mode with larger pads,” analysts said. Around half of all Permian Basin activity is now on pads with five wells or more.

More drilling in the same region is leading to more child infill wells “that are clearly seeing some type of interference with the parent or initial wells in the area.”

Also on the radar for E&Ps is the environmental, social and governance, or ESG, movement, which has become increasingly important to the industry, with 90% of respondents noting it has impacted their businesses.

Executives also were asked which investments are expected to outperform this year. Renewables, E&P equities and crude took the top three spots.

“Overall, despite all the near-term uncertainties, we continue to see a rapidly increasing number of energy participants shifting their business models toward sustainable free cash flow and creating businesses that can thrive even during periods of weaker commodity prices.”

Even with the growth in renewables, the survey participants said they believe peak global crude demand is still decades away.

“One of the most important concerns we hear from investors relates to the uncertainty regarding when global oil demand will peak,” the Raymond James team said. “Our view is that peak oil demand is still a ways off, and...most of the survey participants seem to agree.

Tends like electric vehicles (EV) are having an impact on oil demand, but consumer appetite remains limited, only accounting for 2.5% of global auto sales and less than 1% of vehicles now on the road.

“As we move further into the 2020s, those numbers are likely to grow, but even if we assume 35%-plus annual growth in EV sales until 2025 we still believe that demand can grow as much as 1 million b/d that year, driven by continuing economic growth in Asia and Africa.”