Deepwater operators worldwide report that drilling expenditures for 2018 overall will be similar to levels seen in 2017.
Regionally variances are observed, however, with the Gulf of Mexico expected to be flat to possibly down 5% in 2018 whereas Asia Pacific region is poised to see some growth in deepwater drilling expenditures for 2018 versus 2017.
This view is based on interviews with deepwater operators worldwide by Kimberlite Oilfield Research and the resulting sentiment index rating of 50.0 as shown in the table below reflects the cautious approach of the deepwater operators for 2018 with approximately 68% of the deepwater operators reporting no major changes in their level of drilling expenditures for 2018 versus that of 2017.
The sentiment index is a good reflection of oil and gas operator’s future plans and Kimberlite tracks the sentiment index trend over time to reflect changes in operator sentiment and investment plans.
The diffusion process used for the sentiment index is utilized in other industries and allows each operator the opportunity to respond by stating their plan to increase, decrease or expect no change in planned expenditures for the next 12 months. The resulting sentiment index is calculated by adding the percentage of operators reporting a planned future increase in expenditures to half (50%) of the percentage of operators that reported no change in planned future expenditures. Operators with plans to decrease spending are excluded from the calculation.
The index can range from 0 to 100 and ratings over 50 reflect an improvement in future planned expenditures (increase in expenditures) and ratings below 50 reflect a decline in future planned expenditures.
Deepwater operators typically require a minimum of 12 months of oil price stability before they are willing to seriously consider increases in expenditures for future long-term plans and commitments. 2017 brought a year of oil price stability and deepwater operators are beginning to reassess their 5-year forward plans.
Kimberlite Oilfield Research will re-evaluate deepwater operator plans for 2018 – 2020 in the first quarter of 2018 and provide a market update in the spring of 2018.
While many unknowns exist in the market with respect to the geopolitical stability of the Middle East and many other oil producing regions, the current sentiment among deepwater operators remains cautiously optimistic with most current near term investment plans focused on exploitation of opportunities around existing infrastructure and fields to optimize reservoir economics.