Still-low oil prices will likely force another round of cuts from the drilling budgets of global integrated oil companies next year, Moody’s Investors Service says in a new analysis.
As FuelFix.com reports, the debt rating agency forecast that companies such as Royal Dutch Shell and Chevron could see cash flow shrink by as much as 20% in 2015 and only see a modest recovery in the next year. The shrinking base of cash flow has led companies to cut back on expenses and pare back drilling by an average of about 10% thus far, though a number have cut more.
“Companies continue to re-phase, defer and cancel high cost projects as prospects dim for price recovery in 2016,” analysts write. “Despite a roster of large new projects, sustained spending cuts will hurt longer-term production growth.”
Moody’s analysis included a U.S. benchmark oil price of $52 per barrel in 2016 and an international benchmark of $57 per barrel. In 2017, the firm predicted $60 per barrel U.S. oil and $65 per barrel oil abroad. Oil prices are currently hovering around the $47 per barrel mark.
