E&P | United States | FY24 Outlook

Key Takeaways:

• Among the thirty-one (31) US-based E&Ps researched, I have analyzed and modeled the quarterly results for D&C activity (rigs & net wells drilled; frac crews & net wells completed/turn-in-line), as well as production and Capex.

• Among these thirty US-based E&Ps,

  • Capex: Aggregated FY24 Capex is estimated at ~$72B, representing +3% YoY growth from FY23 ($70.0B)

  • Production: Aggregated FY24 production is forecasted to average ~14.8MMboepd, representing +5% YoY production growth

  • Production: Oil guidance is expected to grow 7% YoY, while gas guidance is forecasted to remain static at 0%

  • D&C Cost per Lateral Ft.: Among the aggregated E&Ps analyzed across all basins, D&C cost per lateral foot for FY24 is estimated at $925/lateral ft., a 4% cost improvement from FY23 ($954/lateral ft.). This can be attributed to longer laterals, coupled with well productivity gains, though offset by E&P-specific YoY cost inflation ranging in the low single digits

With the majority of US-based E&Ps having released their 4Q23 earnings results, I have updated thirty-one (31) producers with their 4Q and year-end 2023 financial and operating results, while also confirming their FY24 guidance for production and capital expenditures (“Capex”). I have reconciled the rigs & wells drilled (net)/frac crews & TILs (net)/well depth counts for FY22 and FY23, which includes the reconciliation breakdown between Drilling & Completion (“D&C”) Capex and non-D&C Capex (gathering systems, infrastructure, land, seismic). For FY24, modeled production is aligned to each E&Ps guidance parameters, however, note that ExxonMobil (XOM) does not specifically disclose its onshore United States production guidance, while FY24 guidance was not disclosed due to pending acquisition processes for Southwestern (SWN) with Chesapeake (CHK), and Callon (CPE) with APA Corp. (APA).

The FY24 production outlook (onshore US only) is expected to flatten on a year-over-year basis with single-digit aggregated growth forecasted among the E&Ps covered. As illustrated in the chart below, Capex is projected to be front-end loaded with 55% of spend forecasted in the first half of the year. The Permian will remain the focal point for upstream activity with ~$45-50B estimated for FY24. Among the gas-weighted basins, production is forecasted to remain static YoY (0%), based on Capex of ~$6.2B in the Appalachian region and ~$2.6B in the Haynesville.

Estimated FY24 capital spend among other US-based basins includes the Eagle Ford ($5.0B), the Bakken ($3.8B), Niobrara ($3.9B), Anadarko ($0.8B) and other US regions ($2.8B).

YoY aggregated Capex growth among E&Ps is 3%. This is forecasted to be driven by the Permian with 10% YoY growth, which will be offset by a -14% decline in Capex spend in the consolidated Appalachia and Haynesville basins. Positive capital spend growth is also expected in the Niobrara (+1%) and Anadarko (+10%) basins, while the Eagle Ford (-3%) and Bakken (-12%) are anticipated to experience year-on-year declines in capital spend.

Among operating metrics, D&C Cost per Lateral Foot highlights the cost improvements being seen across each of the basins. Overall, YoY cost improvements on a lateral foot basis are -3%, which corresponds with the YoY cost improvement that I am forecasting in the Permian. Also note that aggregated lateral length totals are estimated to get longer based on E&P guidance, which has been incorporated into my modeling.

_{Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Patrick Enwright accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Patrick Enwright makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.}