Goldman Sachs Predicts Strong Oil Exploration this 2013

Banking giant Goldman Sachs said that this year will be another great year of growth in the activities of the oil exploration industry.

According to a recent note of industry analyst Michael Rae, the appetite for oil exploration among petroleum giants has been strong since 2009, when the crude prices per barrel have started to consistently increase.

The analyst said that this has led to a rise in capital spending, especially on activities related to seismic exploration. Consequently, the day-rates that oil services companies have been charging have also increased, added Rae.

Goldman projects a further increase on the average day rates of 15 percent this 2013. However, that is then expected to decrease in the next two years as the price of oil flattens.

According to the bank, it anticipates a high but dropping price of oil within 2014 and 2015, and it believes that the trend will lead to a fall in activities related to oil exploration.

The analysis of the firm regarding the correlation of the price of oil with exploration expenditure matches with the total picture of the constraints on cash flow that has developed for the petroleum giants, said Rae.

According to Goldman’s forecasts on oil prices, the major oil firms in the world will be free from negative cash flow this year and the next. However, this does not prevent progress from growth. Goldman Sachs thinks that the oil giants will be more careful and picky when it comes to future oil investments.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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