Business Outlook 2018

a. All data shown in 2017 money. b. Refers to the average unit development costs of projects approved within year. c. 2016 and 2017 may not fully represent the long-term outlook due to the nature and low number of field approvals. d. Including geological sidetracks but not mechanical sidetracks or respuds.

1

Forecast ‘14 ‘15 ‘16 ‘17 ‘18 Our outlook explained

2

Neutral - Decommissioning expenditure is expected to remain within £1.7-2 billion per year through to 2020.

1.1

1.1

1.2

1.8

1.7-1.9

Decommissioning Spend (£ billion) a

-6% +2% +11% +48% 0%

3

Although the spot price briefly surpassed $70/bbl in January 2018, futures contracts for 2020 delivery are still sub-$60/bbl. new capital and operational spend in 2018, although a lack of cash flow remains a major concern for many companies. Challenging - After one of its toughest periods, the UK supply chain is well placed to maximise Challenging - Development drilling has fallen sharply, partly due to the deployment of technologies enhancing drilling efficiency, but also because only the most profitable wells are being drilled. Challenging - Exploration wells are expected to fall in 2018 due to intense international competition for capital, although there is a healthy mix of wildcat and infrastructure-led opportunities. Challenging - Limited exploration success in recent years has been the primary factor behind the fall in appraisal activity. Challenging - Although start-ups are set to fall this year, Clair Ridge and Mariner are two of the largest in the last decade and are expected to provide more than 160,000 barrels per day of oil at peak production rates.

4

8

9

12

4-6

New Field Start-Ups

4

-69% +100% +13% +33% -58%

13

13

14

14 10-12

5

Exploration Well Count d

-13% 0% +8% 0% -21%

6

18

13

8

9

7-10

Appraisal Well Count d

-38% -28% -38% +13% -6%

7

126 129 88

71 70-80

Development Well Count d

8

+5% +2% -32% -19% +6%

40.9 35.7 30.2 27.4 25-30

9

Supply Chain Revenues (£ billion)

+4% -13% -15% -9% 0%

10

99 52.5 43.7 54.2 55-65

Brent Oil Price ($/barrel)

-9% -47% -17% +24% +11%

11

Volatility and seasonal swing have returned to the NBP gas market in 2017-18, driven by a cold winter, lack of domestic storage and unplanned outages across Europe.

50 42.6 34.6 45 40-50

National Balancing Point Day-Ahead Gas Price (pence/therm)

-26% -15% -19% +30% 0%

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