Energy consultancy Wood Mackenzie (WoodMac) said yesterday its latest oil and gas industry research had revealed a “strong survival reflex”.
Edinburgh-based WoodMac added all 56 companies surveyed were on track to generate free cash flow at oil prices above $50 a barrel.
It also said “smarter” capital spending and efforts to rework projects in order to reduce costs were paying off, while the firms had cut dividend payouts by a combined £45billion since 2004.
WoodMac warned deep cuts to capital investment had damaged production growth prospects.
But it said its study showed “the industry has a strong survival reflex, measured by dramatically tighter cash flow management.”
Tom Ellacott, senior vice president of corporate research at the firm, said: “This is some achievement, given the majority needed over US$90 a barrel in 2014.
“A growing list of companies will even be free cash flow neutral below $40 a barrel in 2016.
“Balance sheet management is front of mind across the industry – cost containment and capital discipline are still the strident messages emanating from all companies.”
He added: “Oil and gas companies’ investment strategies are now starting to adapt to the new price environment.
“Some have seized the moment, with counter-cyclical moves that have repositioned portfolios lower down the cost curve.
“But it is too early to call the start of the next investment cycle, despite some recent high profile project sanctions. Many next-generation projects still fall short of tougher economic screening criteria, particularly in deepwater.”
WoodMac said the 56 companies had cut their exploration and production spending by 49%, or about 175billion this year.
Only four firms, led by Swedish independent Lundin Petroleum, which has a stake in Norway’s giant Johan Sverdrup oil development, were likely to grow output at double-digit rates between 2015 and 2020, it said.
At the other end of the spectrum, WoodMac predicted nearly 30 companies would produce less in 2020 than in 2015.
