The devastating effect of the Covid-19 pandemic on global oil and gas exploration and production (E&P) companies is better understood by looking at the industry’s expected total annual revenues for 2020. A Rystad Energy analysis shows that global E&P revenues are now forecasted to fall by about $1 trillion in 2020, a drop of 40% to $1.47 trillion from last year’s $2.47 trillion.
Before the Covid-19 pandemic, Rystad Energy expected total E&P revenues to reach $2.35 trillion in 2020 and $2.52 trillion in 2021. Now 2021 revenues are also projected lower, at $1.79 trillion.
Companies’ cash flow is also set to plunge. For 2020 we estimate free cash flow for the E&P sector will shrink to $141 billion, or one-third of what it was in 2019. This is based on our base-case oil price scenario of $34 per barrel in 2020 and $44 per barrel in 2021, so there is a considerable downside risk if the current low-level prices persist.
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