North American drilling: Price volatility is breathtaking ///

This midyear course correction gives us a chance to hedge the predictions we made at the beginning of the year. There have been times when we wished we would have stayed with the earlier forecast. To say that prices have been volatile is an extreme understatement. Five percent price swings in a day are now common, and 10% in a week has happened too. Since the data from this midyear correction was gathered during the extreme highs in oil and gas prices during June and early July ($145 and $13, respectively), we tend to think that the large percentage increases that are predicted for the second half by independents and majors (33% and 17%, see tables) are enthusiasm-based. So, we’ve tempered their zeal. Although there is more revenue being generated by oil for the first time in many years, Baker Hughes still puts drilling at 4-to-1, gas-to-oil.

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