3. Proving value in US tight oil
US tight oil production takes off in 2018, surging 1.2 million barrels per day (b/d) or 24% year-on-year. Yet tight oil will be a sector on trial in 2018. Most companies are in a better place to deliver on production targets and limit spending within cash flow. But cost inflation and technical issues could present a serious challenge as the sector embarks on its second great phase of growth. Producers will be under considerable pressure to prove their value propositions with disciplined strategies, especially if oil prices retreat.
4. Exploration back in business?
There are some signs that 2017 may prove a better year for exploration — chiefly due to attractive oil finds in Guyana, Brazil, Mexico and Alaska, and gas discoveries in Mauritania, Colombia and the Netherlands. Exploration looks primed for delivery again in 2018, with lower costs and portfolio high-grading focused on the best prospects driving improved returns.
5. Finding the right formula to win back investors
What's needed to win back investors after a year of dismal stock market performance? Firstly, the industry needs a pipeline of new projects that work at US$50/bbl, combined with proof that the industry can successfully execute them. Secondly, it needs free cash flow that can grow at US$50/bbl and fund growth in shareholder distributions. Finally, upstream companies must build compelling cases for long-term investment. This may not happen in one year, but they will need to show clear progress in 2018.