BAKU, Azerbaijan, April 16
By Leman Zeynalova - Trend:
Production of oil and gas majors should fall by single-digit percentages, Trend reports citing Fitch Ratings.
However, Fitch Ratings believes that the financial performance of oil and gas companies will continue to be driven by prices more than volumes.
“Oil producers, even those implementing voluntary production cuts, will benefit from the OPEC+ agreement. Production of oil and gas majors, such as Shell, Total and BP, should fall by single-digit percentages compared to our previous expectations, given their exposure to both oil and natural gas, and larger focus on non-OPEC+ countries,” reads the report.
Fitch solutions expects that Russian oil producers will need to cut oil production by around 15 percent-20 percent in the May-June period compared to the current level, and by around 10 percent-15 percent in 2H20, which will translate into their full-year 2020 production falling by around 8 percent-10 percent year-on-year.
“Russian producers with more diverse asset bases, such as Rosneft, Lukoil and Gazprom Neft, will be able to accommodate cuts more easily than producers with modestly diversified or more depleted assets, such as Tatneft and Russneft,” reads the report.
The company believes that a production recovery is likely to require additional investments once demand improves. “Gazprom and Novatek's output will not be materially affected as condensate production is not covered by the deal.”
Although the US has effectively coordinated the production-cuts deal, US producers have not assumed any formal responsibility to reduce output, reads the report.
“Several oil producers in Texas and Oklahoma have asked their regulators to consider mandatory production cuts, but the industry is split on whether this is necessary. We believe that US shale production will fall due to lower investments, but will rebound once prices recover, similarly to the 2015-2017 pattern,” said Fitch Ratings.
The US Energy Information Administration expects US liquids production to fall by around 2MMbpd by July compared to end-2019, and to start recovering in 2Q21.
“Middle Eastern producers, such as Saudi Aramco, ADNOC and Kuwait Petroleum, should be able to cut and later increase production with minimal additional investments, given their record of production adjustments and relatively simple geology. Norway has indicated that it would consider voluntary production cuts, which could affect the near-term production profiles of local companies such as Equinor and Aker BP, although the cuts are yet to be confirmed.”
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