“The Outlook for US Unconventional Oil & Gas Production”

In a period of high oil prices between 2010-2014, many smaller US exploration and production (E&P) companies took advantage of cheap and readily available financing to cover capex costs to expand shale oil production.

US shale oil production continued to increase, year-on-year, even as oil prices tumbled 50 percent, from mid-2014 onwards, as timely hedges in oil prices combined with continued access to finance and increased operational efficiency helped to bring down breakeven costs of shale drillers.

Going forward, sustained drops in production are expected as oil hedges expire, financing from secured lending is tightened and the high yield debt market becomes too expensive.

There will not be a collapse in shale oil production as a period of sector consolidation, via global integrated oil companies and private equity, ensures that shale oil remains a key player in the global oil market going forward.

Aside from shale oil, the lower oil price environment will also impact global oil supply, with capex cuts in major integrated oil companies leading to tighter oil markets from 2017 onwards.

Although the fight for market share will lead to lower short term oil revenue, Saudi Arabia is likely to be the main beneficiary when global oil markets become tighter and prices rebound by 2020.

For more detailed commentary and statistical analysis, please refer to the full version of the Report (see attached)

Following review, should you have any subsequent enquiries relating to this Report, please do not hesitate to contact one of the corporate communication team.