Banks are holding their price forecasts steady for the most part, according to Macquarie Tristone’s “Quarterly Energy Lender Price Survey” of 34 participating regional, U.S. national and international banks that engage in reserve-based lending.
For 2013, the third-quarter survey indicates a mean base-case West Texas Intermediate (WTI) oil price forecast of $77.31 per barrel and a mean base-case Henry Hub gas price forecast of $3.20 per million Btu. The survey of Brent-based oil shows a mean base case of $78.92.
The five-year trend shows a decreasing forward price deck for oil and an increasing forward price deck for gas, with average 2017 oil and gas price forecasts of $75.33 per barrel for WTI, $77.24 for Brent and $4.07 per million Btu. Modest escalation of both oil and gas prices after 2017 is common, but prices are capped at means of $75.80 per barrel, $76.29 and $4.65 per million Btu for WTI, Brent and Henry Hub, respectively. The average discount rate used by participating banks is 9%, unchanged from last quarter’s average.
Operating costs on average are escalated 0.6% per year for WTI, 1.4% for Brent and 0.6% for Henry Hub.
The firm compared the average base case against Nymex futures pricing as of July 15, 2013, for oil and gas separately. When compared with Nymex futures pricing, the average base-case results for WTI were 74% of Nymex and for Brent, 76% of Nymex in 2013; the average base-case results for WTI and Brent increase to 84% and 86%, respectively, in 2017.
The average base-case results for gas were 86% of Nymex Henry Hub futures in 2013 and 90% in 2017.
Quarter-to-quarter pricing trends. Compared to last quarter’s survey, front-year pricing has increased by 1.1% for oil and increased by 1% for gas. In the later years, forecasts for oil prices in the fifth year increase by 0.8%, and forecasts for gas prices fall by 0.4%.
Sensitivity case results. The third-quarter survey also includes a sensitivity case, which represents
The lenders’ low or conservative price decks. Of the 34 participating banks, 28 banks provided a sensitivity case, which averaged a 21% discount to base-case lending policies for oil and an 18% discount for gas over the five-year strip. Three banks provided a sensitivity case for Brent, which averages a 19% discount to the base-case pricing over the five-year strip.
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