Shale To Provide 50%+ of Revenue for More Than Half of Oilfield Services Companies & 40% of Upstream Firms in 2014: UHY LLP-PennWell Survey

Majority-Shale-Revenue Companies up 15% from 2013

HOUSTON--()--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.”

Shale’s Challenges

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

 
      Operators       Oilfield      
Operating Challenges       & partners       Services       Others
High drilling & completion costs 1 5 1
Shortage of qualified employees 2 2
Regulatory environment 4 3 3
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.

     

Play

% of Respondents Active in Play

Operators/ partners

     

Oilfield services

Eagle Ford 48% 69%
Permian Basin 40% 62%
Marcellus 32% 49%
Bakken 27% 44%
Barnett 24% 41%
Utica 23% 36%
Haynesville 22% 38%
Niobara 21% 31%
Woodford 19% 23%
Outside N. Amer 14% 23%
Other 13% 8%
Canadian plays 12% 23%
Fayetteville 10% 18%
Tuscaloosa Mar. 6% 10%
Monterey 3% 8%
 

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.

A copy of the survey news release is posted on the UHY LLP website at http://www.uhy-us.com/shaleoutlook, and a copy of the full survey report is available upon request via energy@uhy-us.com.

PennWell Corporation is a highly diversified, business-to-business media company providing authoritative print and online publications, conferences and exhibitions, research, databases, online exchanges and information products to strategic global markets. Since 1910, PennWell has embraced a mission of transforming diverse information into practical business intelligence for strategic markets worldwide. PennWell delivers key resources and audiences for your business success in today's global market with a broad portfolio of industry-leading publications, events, e-newsletters and more to provide unparalleled opportunities to grow your business.

Oil & Gas Financial Journal provides global financial decision makers with specific, easily accessible, and essential business intelligence regarding worldwide oil and gas markets, both in the form of content and informative advertising, in a manner that generates value for its readers, advertisers, and stakeholders.

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.

Contacts

For UHY LLP Certified Public Accountants
Tom Sommers, (713) 222-1600
tsommers@sommersassoc.com

Release Summary

Shale will provide 40%+ of revenues for oil and gas upstream and oilfield services companies in 2014, up about 15% from 2013, according to a survey by CPA firm UHY LLP and Oil & Gas Financial Journal.

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Contacts

For UHY LLP Certified Public Accountants
Tom Sommers, (713) 222-1600
tsommers@sommersassoc.com