Business Outlook 2019

BUSINESS OUTLOOK 2019

2. Key Performance Indicators

Forecast ‘19 Our outlook explained

‘18

‘14 ‘15 ‘16 ‘17 Year-On-Year % Change

The fields which have started production in recent years have been predominantly oil and have led to significant increases in total output. Oil production will continue to be supported by new fields coming on stream. Production in 2018 was up 4% compared with 2017 and 20% higher than 2014. This has mainly been driven by new fields starting up along with continued improvements in production efficiency.

517 571 598 595

610-630

619

Total Production (million barrels of oil equivalent)

4%

+0%

0% +11% +5% 0%

311

352

371

365

390-400

397

Liquids Production (million barrels of oil equivalent)

-1%

+13%

+5%

-2%

0%

9%

220-230

206 220 227 230

222

Gas production is expected to increase, driven by the start-up of the Culzean field which at peak production will supply 5% of UK gas demand.

Net Gas Production (million barrels of oil equivalent)

+1% +7% +3% +1%

+1%

-3%

With improved investment conditions, three more fields were approved in 2018 than the previous three years combined. A similar number is expected in 2019. Capital investment looks to have levelled, at least in the short term, and will be supported by recent project announcements. A continued stream of approvals will be required to support investment into the 2020s. E&P companies are focused on maintainting business and operational improvements. However, a small increase in operating expenditure is possible this year, driven by new fields coming on stream.

8

5

2

12-15

3

13

New Field Approvals

0%

50%

333%

-20% -38% -60%

5

16.3 12.5 8.7 5.7

5-5.5

Capital Expenditure (£ billion) a

+5%

-12%

-1% -23% -30% -34%

8.4 7.2 7.1

10

7-7.5

7.1

Operating Expenditure (£ billion) a

+7%

-15%

-1%

+2%

0%

-14%

15.3

15-16

31.7 22.4 16.2 15.4

Unit operating costs (UOCs) have remained flat, with companies focused on maintaining improvements.

Unit Operating Costs ($/barrel of oil equivalent) a

-1%

-5%

0%

+13% -29% -28%

Industry is demonstrating that it is able to manage expenditure effectively, with cost reductions and efficiencies seen. Following a 'peak' in 2019, decommissioning spend is expected to average £1.5 billion per year to 2027.

1.8-1.9

1.1

1.1

1.3

1.2

1.7

Decommissioning Spend (£ billion) a

+8%

-6% +0% +18% -8% 42%

6