After spending most of the last three years in a dark, depressed condition, the E&P industry appears headed for better times. Our forecast in next month’s issue will define the situation far better, but in the meantime, consider several leading indicators pointing in that direction.
The numbers. Some basic statistics give hope for 2018. For instance, while U.S. and global oil production (as of late 2017) had edged up 4.9% and 1.0%, respectively, over 12 months, despite output reduction deals, crude prices nevertheless improved. Indeed, WTI broke through $50/bbl in September and surpassed $60/bbl in very late December. While this pace is a little fast, the upward trend is welcome.
On the drilling front, good cheer can be taken from the Baker Hughes U.S. rig count, which in December 2017 stood 47% higher than a year earlier. And while the 930 U.S. rigs working were off slightly from the 953 peak in July, the count appears to be headed upward in 2018. Notable gains include Texas (+47%), New Mexico (+128%), North Dakota (+47%), northern Louisiana (+70%), and California (+133)%. International rig activity in the November count was 5% greater, with activity noticeably higher in Australia, Indonesia, Colombia, Brazil and Iraq.
This optimism is supported further by the latest global E&P spending survey from Evercore ISI. It projects that worldwide capital spending will be up 7% in 2018, to $360.7 billion in the survey group of about 300 operators. Leading the way will be U.S. spending (+15%), followed by Canada (+9%). Outside North America, Evercore projects international spending to be up 4%. We will have more on this in our February forecast issue.
Improved U.S. regulatory picture. The U.S. market in 2018 also benefits from a vastly improved regulatory front in Washington, D.C. Most of that improvement comes from the Trump administration. The Interior Department and EPA have led the way in postponing, reviewing and/or rescinding Obama-era regulations, but other agencies, such as FERC, have gotten into the spirit. Recent actions by Interior include rescinding the Obama rule regulating fracing on federal lands; revisions to the offshore Production Safety Systems Rule; and the Jan. 4 release of its draft National OCS Program for 2019–2024, which makes 90% of all OCS acreage available for leasing. If the E&P industry had a “person of the year” award for 2017, it would go to Interior Secretary Ryan Zinke.
We lost a really good one. It is with heavy heart that we announce the passing of Paul L. Kelly, retired senior vice president at Rowan Companies. While Paul’s “official” obit is on page 67, some additional things need to be said about this fine man. First, he was an extremely effective and tenacious advocate for the U.S. E&P industry in dealings with federal officials. As his fellow, retired Rowan executive, Bill Provine, told us, “There was no one better at asking questions of government bureaucrats in a way that made it impossible for them to dodge the question.”
Accordingly, Paul served on the U.S. Commission on Ocean Policy, as well as on Interior’s OCS Policy Committee under four presidential administrations (a feat unmatched since), serving as its chairman from 1994 to 1996. Having managed Rowan’s North Sea operations in London for two years, Paul also served two years as president of the British American Business Council of the Southwest. He also was part of a team that assembled a landmark study of U.S. natural gas supply and demand for the National Petroleum Council in 2000. His accomplishments go far beyond these, too numerous to list here.
Paul also was an editorial advisor to World Oil for 17 years, from 1988 into 2005, and was listed as “senior editorial advisor” for the last several of those years. This editor frequently sought out and valued his counsel, and his assistance and contributions to World Oil were invaluable over the years. More than anything else, Paul was a gracious, classy professional. He will be missed by many of us. 
- Executive viewpoint: TRRC opinion: Special interest groups are killing jobs to save their own (February 2024)
- Management issues: New U.S. House Speaker is strong supporter of oil and gas industry (December 2023)
- Oil and gas in the Capitals (October 2023)
- Embracing the opportunity of ESG to deliver a sustainable future (September 2023)
- The C-Suite series: Chevron’s Hearne optimistic about firm’s growth in a future of low-carbon operations (July 2023)
- Industry at a glance (June 2023)
