Lower 48 service sector: how much does a recovery cost?
Lower 48 operators are optimistic about a return to growth in 2017. As companies beef up capital budgets and accelerate drilling programs, cost inflation will be an inevitable consequence for profit margins. On the flipside, the onshore oilfield services sector has taken a beating during the downturn. As activity ramps-up onshore, and service companies begin to recapture margins, will we see a return to 2014 pricing levels? In this insight we analyze the three major cost components of D&C capex from a utilization perspective to quantify what level of pricing increase can be expected in 2017. Overall cost inflation will vary basin-to-basin with the Permian, and its accelerated pace of activity, leading the way. How are the economics of other key tight oil basins impacted by an increase in upstream costs? Which operators are most exposed to pricing increases and what is being done to mitigate pressure? Read on to see Wood Mackenzie's view on onshore cost inflation and more.