Source: Platts Land Rig Newsletter, October 2018

In addition to speaking with representatives in the completions and workover markets, Platts Land Rig Newsletter survey team spoke with five E&P drilling executives working for mid-sized independent companies in the Midcontinent, Arklatex, Permian Basin and South Texas areas. The consensus among the five survey respondents is that 2019 capital expenditures will likely grow by up to 10% above 2018 expenditures. All predicated their responses on oil prices stabilizing in the $65 to $70 range.

Four of the five survey participants said they would rather fund next year’s field activity from ongoing internal cash flow rather than go to private equity or public markets for working capital, though several agreed there was money available from those external sources. Coming off the most recent downturn, some respondents said they were hesitant in borrowing money or giving up equity to get wells drilled and completed, especially when older or newly completed wells were producing a solid stream of revenue. Meanwhile, the fifth respondent said he would consider accepting capital investments from external sources for “the right deal”, but continues to fund field activity from internal cash flow for now.

Should oil prices hold above $65 as the year ends and 2019 begins, some sources said they will likely fund the drilling of some new exploratory wells in addition to their developmental drilling program in their new 2019 budgets. In addition, completions will likely keep pace with newly drilled wells in areas where there are no constraints and workover activity could increase as E&P managers keep older wells -- in which ROI (return on investment) has paid out -- producing for cash flow reasons.

This is an excerpt from Platts Land Rig Newsletter, October 2018 issue. To read the complete issue call 800-371-0083 and request a sample copy.

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