Friday, December 30, 2016

Let A Thousand Oil IPOs Bloom: Can U.S. Shale Add 1 Million Bpd In 2017?

It's all about the money.
First up, Bloomberg, Dec. 28:   

Oil IPOs Ready to Bloom Across the U.S.
  • Tudor Pickering CEO sees as many as 40 offerings through 2018
  • ‘It feels like we’ve entered a good window’ for deals: Holt
It may be time for a baby boom in U.S. oil.

Rising crude prices and a deregulatory push in Washington may spur as many as 40 companies to hold initial public offerings over the next two years, potentially tripling 2016’s activity, according to Maynard Holt, chief executive officer at Houston-based investment bank Tudor Pickering Holt & Co.
After a year in which explorers in the Permian shale basin straddling Texas and New Mexico dominated the business, interest in new oil-industry offerings is likely to spread wider. It could include pipeline operators and regions like the Bakken in North Dakota and Wyoming’s Powder River basin, Holt said in a telephone interview Wednesday. Mergers and acquisitions should pick up as well.

“The number of companies expressing interest in going into this window is really high, and the number of investors saying we’d like to see something different is really high," the CEO said.
After two years of crashing crude prices, the number of North American IPOs for oil and natural gas companies fell to 13 this year, worth a collective $2.23 billion, according to data compiled by Bloomberg. That was down from 44 announced offerings, worth $14.15 billion, in 2014, when oil topped $100 a barrel....MORE
And from Reuters, Dec. 29, can't do the equity? Have we got some debt for you: 

U.S. shale companies to boost spending as banks loosen purse strings
U.S. shale drillers are set to ramp up spending on exploration and production next year as recovering oil prices prompt banks to extend credit lines for the first time in two years.

The credit increase is small, but with major oil producers worldwide aiming to hold down production in 2017, U.S.-based shale drillers are looking to boost market share to take advantage of higher prices, and greater availability of capital will make that easier.
North America-focused oil and gas producers are expected to increase capital investments by 30 percent in 2017, according to analysts at Raymond James....MORE
Finally, from OilPrice, Dec. 27:

Can U.S. Shale Add 1 Million Bpd In 2017?
Oil prices are up on expectations that OPEC will contribute to a faster balancing in 2017, with up to 1.8 million barrels per day in cuts along with some non-OPEC countries. That has put a floor beneath prices, with fears of another downturn largely dissolved after OPEC’s announcement.

But what if U.S. shale comes roaring back and ruins the price rally? Estimates run the gamut on how quickly U.S. shale production can rebound and by what magnitude. Citigroup sees output rebounding by 500,000 barrels per day if oil prices average $60 per barrel. A December 12 report from Macquarie said that oil prices above $60 could spark a 1 million barrel-per-day revival.

U.S. shale is already up about 300,000 barrels per day from a low point in the summer of 2016, at least according to preliminary data. The gains are expected to continue. The industry is producing about as much oil as it was two years ago, with only one-third of the more than 1,700 rigs in 2014. Drillers are producing just as much oil with a lot less effort.

If U.S. shale surges back by 1 mb/d as Macquarie suggests, it would offset most of the cuts from OPEC and non-OPEC countries. Additionally, one would have to assume some degree of non-compliance and/or “cheating” on the cuts from participating countries, plus an expected increase in supply from Libya and Nigeria. Altogether, a rise in oil prices could be self-defeating, leading to prices falling once again later in the year....MORE