OREANDA-NEWS. RnR Market Research Offers Report by Research on United States Oil and Gas Report Q3 2016

BMI View: The US will lead gains in non-OPEC crude oil production over the next decade despite the fall in oil prices. High growth rates seen in recent years will moderate through our 10-year forecast period, reflecting abrupt depletion rates in shale oil fields, a glut in the domestic market for light sweet crude and lower oil prices dampening a portion of production. Fuels consumption growth will temper over the course of the next decade as energy efficiency gains take root. In the gas market, we forecast a ramp-up in production as new LNG export facilities and petrochemical plants come online.

- The more pronounced spending pullback by North American oil producers supports our view that a supply-side correction of the market will primarily be led by this region in 2016. The US will witness the most dramatic decline, supporting a strengthening of international benchmark prices beginning in H216.

- A reduction in the borrowing base available to US exploration and production (E&P) companies following the spring redeterminations does not pose a major liquidity risk to the sector. Leveraged companies with highly utilised borrowing bases and poorer asset quality are at higher risk of default.

- O&G debt issuance in the United States in the year-to-date signals that the risks of a sector-wide credit crunch have been overstated. Liquidity risks will remain contained to a small pool of highly-leveraged producers and will not spill over to the O&G sector more broadly. With the market pricing in a more systemic credit risk, we believe the low corporate bond pricing does not accurately reflect the underlying fundamentals of the sector.

- Weakness in crude prices will spur greater resourcefulness on the part of shale oil producers, with companies targeting uncompleted well inventories, identifying refrac opportunities and bringing in new partners. New drilling will be limited in 2016, supporting our downbeat production trend for the year.