UK Upstream is Leaner and Tougher

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The UK upstream oil and gas sector has become leaner and more resilient over recent years.

That’s according to GlobalData, which noted that pullbacks in investment and reduced operating costs have helped provide a stronger cash flow outlook under newly weakened oil and gas prices.

Under a base case oil price of $45 per barrel for 2020, the outlook for post tax cash flow per barrel of oil equivalent in the UK is in line with 2013 levels when oil prices were over $100 per barrel, GlobalData oil and gas analyst Daniel Rogers outlined.

“Despite a relatively expensive operating environment, a favorable fiscal regime and vast active infrastructure has helped the UK oil and gas sector to remain attractive,” Rogers said in a statement sent to Rigzone.

“The country has been able to improve cash flow margins as investments are reduced and costs optimized,” he added in the statement.

According to Rogers, the UK has a steady near-term production outlook through already sanctioned developments and Covid-19 disruptions are unlikely to drastically hamper 2020 volumes. Despite this, however, Rogers warned investment in the sector is forecast to dip this year from 2019 levels and said the capital expenditure outlook “remains particularly weak”.

Oil prices have been weighed down this year by the demand impact of the coronavirus and an OPEC+ dispute back in March, which has since been resolved. As of July 20, there have been 294,796 confirmed cases of Covid-19 in the UK, with 45,300 deaths, according to the latest figures from the World Health Organization (WHO).

GlobalData is a data and analytics company that covers a range of sectors, including oil and gas, mining and technology. Formed back in 2016, the business is based in London but has offices all around the world.