5 Questions: Energy firms explain expectations

Energy firms based in the Tenth Federal District of Missouri, Kansas, Colorado, Nebraska, Oklahoma, Wyoming and New Mexico answer critical questions on energy trends.
By The Bakken Magazine Staff | May 03, 2016

Energy firms based in the Tenth Federal District—Missouri, Kansas, Colorado, Nebraska, Oklahoma, Wyoming and New Mexico—believe oil prices need to be roughly $51 to turn a profit. The Federal Reserve Bank of Kansas city, which serves the Tenth Federal District, recently completed a survey of energy firms within the district. Firms were asked several questions, including:

What oil price is needed in areas where you are currently active?
Participating firms said oil needed to trade between $40 and $70. Last fall, respondents said $60 per barrel was needed.

What will WTI trade at by year-end 2016 and 2017?
Year-end 2016 prices will equal $45/b. By the end of 2017, oil will trade at $56/b. Both projections were down from previous quarter survey answers.

How will 2016 oil production change, and, why?
While a small group of respondents said a slight production drop will occur, most pointed to an accelerated drop. The reason for the production drop varied. Some believe a decline in the drill rig count and capital spending will push production lower. Others believe high decline curves in unconventional wells combined with a lack of replacement wells being drilled will not make up for lost production.

How has your company’s debt level changed?
Slightly more firms said they decreased debt in 2016 rather than increasing debt. Most firms plan to reduce debt in 2016.

How has financing changed in recent months?
Banks are requiring more collateral on both existing and new loans, survey respondents said. Alternative sources were more expensive.