DRILLING

EIA sees Q4 oil recovery

TEXAS-focused Aussie junior oil and gas producer Target Energy is thinking twice about divesting ...

Target had announced in November that it had agreed on a short list of advisers to facilitate the divestment of its Fairway project in the Permian Basin - the basin which accounted for 30% of all US unconventional oil and gas M&A activity in the year to September 30 2014 - with the aim of divesting it early this year.

Target shares the view of the International Energy Agency forecast on Monday that "a price recovery - barring any major disruption - may not be imminent, but signs are mounting that the tide will turn".

"While supply and demand forecasts have long pointed at a market imbalance and associated stock builds in 2H14 and beyond, few would have expected such a sudden price collapse," the EIA said.

"Today's market participants are not ruling out further declines, however, despite the recent rebound. How low the market's floor will be is anybody's guess. But the selloff is having an impact."

Hence the positive diagnosis that should eventuate by the end of this year.

Target managing director Laurence Roe said the company was feeling the effects of the steep and rapid fall in global oil prices, and is currently reviewing the valuation of its Permian Basin assets.

"In the event the sale is postponed, Target will continue to focus on maintaining production and looking for growth opportunities," he said.

The EIA believes the most tangible price effects are on the supply front, led by Canada and Colombia, the latter of which is particularly suffering economically as its economy depends so much on oil revenues.

"Upstream spending plans have been the first casualty of the market's rout," the EIA said.

"Companies have been taking an axe to their budgets, postponing or cancelling new projects, while trying to squeeze the most out of producing fields.

"For the most part the supply effects will not be felt immediately, but further down the road, through project delays and faster decline rates.

"Nevertheless, expectations of non-OPEC supply growth for 2015 have already been downgraded, with growth for the year adjusted downwards by 350,000bpd since last month's [EIA] report and more steeply so for 2H15.

"Colombia and Canada lead the declines. Expectations of US light, tight oil production growth have also been revisited, but so far the cuts do not exceed 80kb/d compared with our already conservative previous estimates, as many producers appear to be well hedged against short-term price drops."

TOPICS:

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

A growing series of reports, each focused on a key discussion point for the energy sector, brought to you by the Energy News Bulletin Intelligence team.

editions

ENB CCS Report 2024

ENB’s CCS Report 2024 finds that CCS could be the much-needed magic bullet for Australia’s decarbonisation drive

editions

ENB Cost Report 2023

ENB’s latest Cost Report findings provide optimism as investments in oil and gas, as well as new energy rise.

editions

ENB Future of Energy Report 2023

ENB’s inaugural Future of Energy Report details the industry outlook on the medium-to-long-term future for the sector in the Asia Pacific region.

editions

ENB Cost Report 2021

This industry-wide report aims to understand current cost levels across the energy industry