Amidst the COVID-19 market downturn, midstream projects are under intense scrutiny as executives look to reduce spending in a capital-constrained environment. However, data challenges prevent firms from identifying opportunities to lower cost estimates, resulting in scrapped projects and lost bids.

As the market downturn has forced Oil and Gas operators to diligently scrutinize 2020 budgets, common data challenges are impeding E&P executives from taking swift action. 

In our most recent market report, we examine two questions raised by executives grappling with the current market crisis:

Summary

We’re excited to share that PowerAdvocate recently took part in sister company Wood Mackenzie’s Energy Summit in Houston.

Summary

• The US administration recently announced two new rounds of tariffs on $300 billion of imports from China at a rate of 10%, effective September 1 and December 15.
• This is the fourth round of US tariffs on imports from China, which now covers over $500 billion of Chinese imports, covering nearly all remaining trade with China.
• China has responded by cutting US imports and by threatening additional tariffs on US goods.
• The new tariffs largely focus upon consumer products; however, the tariffs also cover numerous steel & aluminum products in both finished and intermediate states that may impact energy supply chain teams. However, the lists will not include products for which China maintains monopolistic market share, such as rare earth minerals and barite.
• While trade negotiations between China and the US are expected to continue, should the talks fail to result in an agreement, the list 4 tariff rate is anticipated to increase to 25%, in line with lists 1 – 3.
• Supply Chain teams should evaluate how exposed they are to key commodities such as steel and aluminum and be able to evaluate potential risks to cost structure.

As oil prices continually dip below $60/bbl and margins tighten, E&Ps are facing more pressure than ever to manage costs in order to deliver more shareholder value. After recent second quarter results, even top E&Ps suffered stock plummets upwards of 30%, which analysts have attributed to rising costs of production. The challenge – and the opportunity – is for operators to exercise greater capital discipline by more surgically executing cost-cutting strategies.

Summary

• Many industry players operating in the Lower 48 have a large amount of cash on their balance sheets in 2019 due to accommodative tax policy and cheap debt
• Longer-term strategic capital deployment will help firms lay a foundation for continued business growth, hedging against weakening macroeconomic fundamentals
• These economic conditions are expected to drive more funds towards M&A activity
• However, to capture M&A value by realizing merger synergies, operators should evaluate whether they have the right data insights on enterprise spend, costs, and market trends to build a savings roadmap
  

Summary

• The US raised tariffs on $200 billion of imports from China from 10% to 25% in early May. China responded with retaliatory tariffs on $60 billion of imports from the US, effective June 1.
• This is the third round of US tariffs on imports from China, which now affect $250 billion of imports. The US has threatened a fourth round of tariffs on $300 billion of imports, or nearly all remaining trade with China.
• The new tariffs cover 1,200 chemical and 500 metal products. They are also the first to include consumer products, which raises the prospect of accelerating price increases for US consumers. Neither List 3 nor List 4 includes rare earth minerals.
• Trade negotiations between Beijing and Washington remain underway. Slowing economic growth in either country would add pressure to advance the negotiations, but supply chain teams must prepare for potential price risks.

We’re thrilled to share that over sixty industry executives across more than forty firms attended the 4^th Annual Oil & Gas Executive Forum on May 22nd at the Petroleum Club of Downtown Houston for our best event yet.

As the new year begins and E&Ps continue to face pressure to focus on returns, operators remain on the lookout for incisive market data and forecasts that provide greater visibility into potential risks and opportunities.