BARCLAYS | Despite the recent firming in oil prices, crude remains firmly below the level that we would consider being conducive to additional investment. As such spending continues to come under pressure, with our recently published upstream spending survey showing that companies have revised down budgets by a further 15% since January. After three months of sub $40 oil, some ~70% of the companies in the survey have changed or introduced new budgets with global E&P spend to be down 27% y/y, the first time since 1986/87 upstream investment has fallen for two years in a row. It also takes absolute spend down 44% from 2014 levels.
North America spend now trending down 40% (vs. -27% in January): Over 90% of companies have revised NAM E&P spending since January and we’re now tracking 2016 NAM upstream spending to decline ~40% (vs. 27% decline in January) led by Large Cap E&Ps (-52%) and SMID-Cap E&Ps (-44%), offset by a more muted 29% decline for US IOCs, which make up ~35-40% of NAM spend.
International spend now trending down 21% (vs. -11% in January): Almost 70% of companies have revised Int’l E&P spending since January and we’re now tracking 2016 Int’l upstream spending to decline ~21% driven by driven by IOCs (down ~21% vs. – 12% in Jan) and several NOCs such as Pemex (-31%), Petrobras (-22%) and PetroChina (-20%). Our Saudi Aramco estimates have also been lowered to -5% (from +5% in Jan) based more on lower pricing than activity declines.