Oil and gas companies are set to enter 2018 in their best shape since oil prices collapsed. In its 2018 Upstream Outlook, Wood Mackenzie believes many will now focus on demonstrating they can thrive at low prices. The outlook forecasts a third successive increase in project sanctions from the 2015 low. This is another indicator that recovery is under way. Wood Mackenzie expects the number of major project sanctions to increase from just over 20 in 2017 to 25 in 2018, as operators take advantage of what may represent their best chance to lock in rock-bottom costs.
Demonstrating that free cash flow can grow in a low-price environment and fund higher shareholder distributions will be a core focus. Companies must also build a compelling case for long-term investment. This may not happen in one year, but they will need to show clear progress in 2018.