HOUSTON--(BUSINESS WIRE)--More than half of oilfield services companies and 40% of upstream companies expect shale oil and gas plays to provide the majority of their revenues in 2014, according to a global industry survey by UHY LLP Certified Public Accountants and PennWell Publishing’s Oil & Gas Financial Journal. This is an increase of about 15% from 2013 levels in the number of oilfield services and upstream companies for which shale is the source of a majority of revenues.
Other companies in the midstream, downstream and integrated segments predict shale-related income will account for slightly less than one-fourth of their 2014 revenue, according to survey respondents.
Companies are supporting expanded shale-related operations with a majority of planned capital spending in 43% of upstream firms and 42% of oilfield services companies, compared with just 21% in other industry segments.
“These growth projections and investment levels recognize that shale oil and gas development is the future of the global oil and gas industry, and that it is being driven primarily by small and mid-size E&P and services companies,” said UHY LLP Principal Bill Penczak. “Their plans for continuing investment, moderate price expectations and realistic appraisals of the challenges facing shale development reflected in this survey bode well for shale’s future in the U.S.”
Survey respondents shared a general consensus on the largest challenges facing their shale operations, with costs, lack of transportation and infrastructure, the regulatory environment and lack of capital or credit the most often cited. Oilfield services companies targeted a shortage of qualified employees and commodity prices as top problems, but project operators and partners ranked it lower.
Top-Ranked Operational Challenges, by Segment
|Operating Challenges||& partners||Services||Others|
|High drilling & completion costs||1||5||1|
|Shortage of qualified employees||2||2|
|Lack of transportation/infrastructure||2||4|
|Low commodity prices||5||1||5|
|Lack of capital/credit||3||3|
Extent of Shale Operations
Oilfield services companies reported involvement in an average of 4.8 shale plays (with a high of 14), and project operators/non-operating partners averaged 2.3 (with a high of 7).
The three highest-activity plays for operators and non-operating partners are Eagle Ford, Permian Basin and Marcellus. Beyond those areas, more than one-third of oilfield service company respondents also report working in the Bakken, Barnett, Utica, and Haynesville plays.
% of Respondents Active in Play
|Outside N. Amer||14%||23%|
Other Study Highlights
- Large majorities of respondents in all segments expect crude oil prices (WTI NYMEX) to remain between $90 and $110/bbl, although 15% of upstream respondents expect oil to reach $110 to $130/bbl in 2015;
- The consensus across all segments is that natural gas prices will stay in a $4 to $6 range during 2014 and 2015, although about one-in-five anticipate a move to the $6 to $8 level in 2015;
- Only one-in-six survey respondents believe their companies would feel a positive effect from an increase in LNG or crude oil exports from the U.S.;
- A 75% majority of producers use pipelines to move their product to market, and half utilize tanker trucks, while 19% use rail cars.
The survey’s 178 respondent companies accounted for about $700 billion in 2013 revenues. Three-quarters are headquartered in the U.S.; about half describe themselves as primarily upstream companies, with one-fifth in the oilfield services sector and 10% in the midstream. The survey was conducted online between March 11 and March 24, 2014.
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UHY LLP, a licensed independent CPA firm in Texas, performs attest services through an alternative practice structure with UHY Advisors TX, LLC. UHY Advisors TX, LLC conducts operations in Texas as a subsidiary of UHY Advisors, Inc. The firm also has an office in Dallas. UHY Advisors, Inc. and its subsidiary entities have nearly 1,000 professionals providing services from offices throughout the United States. UHY Advisors is ranked as one of the Top 20 professional services firms providing tax and business consulting services in the country by Accounting Today.
UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. For additional information, please visit their website at www.uhy-us.com/.
UHY LLP is a licensed independent CPA firm that performs attest services. UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms.