A Tale of Two Cycles
As the new year kicks off, Harry Stahel, Reese Energy Consulting’s Director of Strategic Planning and Financial Forecasting takes a quick “then and now” look at commodity price changes that will impact E&P reserve calculations and investor presentation narratives. For the 2017 reserve report, the SEC WTI price was $45.19 but the 5-year WTI forward strip on Jan 1, 2018 was $54.78 and we heard the “future is $10 per barrel brighter than the past” story. Natural gas was mostly lost in the discussion since the 5-year NYMEX strip of $2.84 was only $0.06 lower than the $2.90 SEC price. Fast forward a year. Now, the 2018 SEC reserve report shows commodity prices are now higher than the 5-year strips for both oil and gas. Although the 2018 SEC WTI price increased by more than $10 higher from 2017, the fourth-quarter drop in oil prices has lowered the 5-year WTI strip on Jan 4, 2019 to $55.54, which is $3.63 lower than the SEC price of $51.91 so we expect the oil narrative to change. We think natural gas will be a bigger part of the discussion this year since the SEC gas price rose to $2.96 for 2018, but the Jan 4, 2019 5-year NYMEX strip is $0.27/MMBtu lower at $2.69. We’ve seen the 2-year cycle flip-flop before and I’m sure we’ll see it again. How can we help you strategically plan for changing commodity prices? Learn more about Harry Stahel at https://www.linkedin.com/in/harrystahel/ and our collaboration with Reese Energy Consulting at www.ReeseEnergyConsulting.com.