Inflation in the oil sector is worsening and industry executives do not expect cost pressures on everything from steel pipe to frack sand to ease any time soon.
The increase in prices has been so swift that oil chief executives are being forced to increase the size of their annual budgets to preserve crude and natural gas output targets.
Those same executives have issued a warning that rampant oilfield inflation make any significant increase in domestic oil production much more difficult to attain despite the incentive of $100-a-barrel crude.
Benchmark US and international oil prices have surged by more than 40 per cent this year as strong post-coronavirus demand crashed headlong into anaemic growth in crude supplies and the worldwide market dislocations caused by Russia’s invasion of Ukraine.
“Given the substantial supply chain bottlenecks and scarcity of oil service equipment and field personnel, any attempt to increase activity in the US will be logistically challenging and capital inefficient,” Apa chief executive John Christmann said during a conference call on Thursday.
Apa, the oil explorer formerly known as Apache, this week raised its full-year drilling budget by 8 per cent, startling investors unaccustomed to such revisions a few months after the plan was minted.
The stock fell by as much as 10 per cent, wiping out more than $1.5 billion in market value in less than three hours on Thursday.
ConocoPhillips also increased its spending plan by 8 per cent while Murphy Oil and Laredo Petroleum raised theirs by 7 per cent and 6 per cent, respectively.
The inflationary trend has hit every corner of the oil exploration and production cycle. Drillers said they are experiencing sticker shock on everything from rigs and workers to diesel fuel and frack sand.
Shale company Continental Resources said the price of steel tubes used to line the interior of oil wells jumped by about 7 per cent in the month of March alone.
Meanwhile, another shale specialist, Coterra Energy, noted that it can take as long as two years to take delivery of pipes, compressors and other production equipment.
Both companies said their drilling and production costs are up 16 per cent to 20 per cent from last year.
That represents an acceleration from earlier this year, when the sector was expecting cost increases in the range of 10 per cent to 15 per cent.
“I think it is here with us for a while,” ConocoPhillips chief executive Ryan Lance said on inflation during a conference call. “I don’t think it is transitory and we are going to have to deal with it.”
Hess is raising its capital budget by as much as $100 million this year, mainly because of a 7 per cent increase in drilling and fracking costs in the Bakken Shale region of North Dakota.
Scott Sheffield, the chief executive of Pioneer Natural Resources, expressed worry that supply constraints will hamper production.
“I just think it is going to be tough to hit” some of the Wall Street forecasts for oil supply growth, he told investors. “It makes me even more bullish about some of the oil price numbers that are out there.”
Shale executives are trying to minimise the pain from rising costs by ordering supplies earlier and reducing unit expenses through strategies such as drilling longer lateral wells.
UAE currency: the story behind the money in your pockets
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
Salah in numbers
€39 million: Liverpool agreed a fee, including add-ons, in the region of €39m (nearly Dh176m) to sign Salah from Roma last year. The exchange rate at the time meant that cost the Reds £34.3m - a bargain given his performances since.
13: The 25-year-old player was not a complete stranger to the Premier League when he arrived at Liverpool this summer. However, during his previous stint at Chelsea, he made just 13 Premier League appearances, seven of which were off the bench, and scored only twice.
57: It was in the 57th minute of his Liverpool bow when Salah opened his account for the Reds in the 3-3 draw with Watford back in August. The Egyptian prodded the ball over the line from close range after latching onto Roberto Firmino's attempted lob.
7: Salah's best scoring streak of the season occurred between an FA Cup tie against West Brom on January 27 and a Premier League win over Newcastle on March 3. He scored for seven games running in all competitions and struck twice against Tottenham.
3: This season Salah became the first player in Premier League history to win the player of the month award three times during a term. He was voted as the division's best player in November, February and March.
40: Salah joined Roger Hunt and Ian Rush as the only players in Liverpool's history to have scored 40 times in a single season when he headed home against Bournemouth at Anfield earlier this month.
30: The goal against Bournemouth ensured the Egyptian achieved another milestone in becoming the first African player to score 30 times across one Premier League campaign.
8: As well as his fine form in England, Salah has also scored eight times in the tournament phase of this season's Champions League. Only Real Madrid's Cristiano Ronaldo, with 15 to his credit, has found the net more often in the group stages and knockout rounds of Europe's premier club competition.
The%20specs
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ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
Key findings
- Over a period of seven years, a team of scientists analysed dietary data from 50,000 North American adults.
- Eating one or two meals a day was associated with a relative decrease in BMI, compared with three meals. Snacks count as a meal. Likewise, participants who ate more than three meals a day experienced an increase in BMI: the more meals a day, the greater the increase.
- People who ate breakfast experienced a relative decrease in their BMI compared with “breakfast-skippers”.
- Those who turned the eating day on its head to make breakfast the biggest meal of the day, did even better.
- But scrapping dinner altogether gave the best results. The study found that the BMI of subjects who had a long overnight fast (of 18 hours or more) decreased when compared even with those who had a medium overnight fast, of between 12 and 17 hours.
Red Joan
Director: Trevor Nunn
Starring: Judi Dench, Sophie Cookson, Tereza Srbova
Rating: 3/5 stars
PLAY-OFF%20DRAW
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Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
COMPANY PROFILE
Name: Akeed
Based: Muscat
Launch year: 2018
Number of employees: 40
Sector: Online food delivery
Funding: Raised $3.2m since inception
