Barclays: Global E&P spending drop revised to 27% for 2016

Barclays has revised down its global exploration and production spending outlook for 2016, now saying such spending could fall 27% this year, down from 15% back in January.

Spending in North America is now trending down 40% vs. 27% in January. International spending is down 21% year-over-year.

Since the Barclays Upstream Spending Survey published in January, operators representing 71% of total spending have revised budgets to reflect reduced 2016 spending plans amid a sustained lower oil-price outlook.

“Following a 23% decline in 2015, global spend in 2016 is shaping up to be down a staggering 44% from 2014 levels after the first back-to-back decline since 1986-87. Despite oil prices 48% off the $27/bbl bottom, we believe there is further downside risk to our upstream estimates as Independent E&Ps and [international oil companies] seek to live within cash flow (prior surveyed budgets assumed $50/$45 Brent/WTI) and delay long-term projects,” Barclays said.

More than 90% of companies have revised North America E&P spending since January. The expected 40% decline in spending is led by large capitalization E&Ps (-52%) and small to midsized capitalization E&Ps (-44%), offset by a more muted 29% decline for US IOCs, which make up 35-40% of the total spending.

Nearly 70% of companies have revised international E&P spending since January and Barclays is now tracking 2016 international upstream spending to decline 21%, driven by IOCs and several national oil companies such as Petroleos Mexicanos (Pemex) -31%, Petroleo Brasileiro SA (Petrobras) -22%, and PetroChina -20%.

Saudi Aramco estimates have also been lowered to -5% from +5% in January.

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