World Oil's editorial advisors analyze upstream results for 2006, forecast activity and issues for 2007 ///

“Flush with cash” is how one E&P analyst described the condition of oil and gas companies this year, and high prices have certainly helped revenues. Although futures oil prices have cooled down to between $55 and $58/bbl for West Texas Intermediate (as of mid-November), the average futures price from January through September was $68.22/bbl. Furthermore, average first purchase price for US domestic crude was $61.92/bbl through August. Thus, operators have enjoyed very good revenues for most of 2006. Even at recent prices, earnings off oil production are quite attractive. On the natural gas side, there is concern about a short-term oversupply, at least in North America. Last winter was a mild season, and natural gas storage levels piled up, accordingly. As of Nov. 10, 2006, working gas in storage in the US was 3.45 Tcf, up 7.4% from the five-year average inventory level. Prices have responded negatively to the situation.

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