Lundin Petroleum, one of the Nordic region’s biggest hydrocarbon exploration and production companies, has predicted a rebound in the global price to $50-$60 per barrel this year, following the 75% price fall in less than two years.
The comments came at an investor meeting hosted by Carnegie Fonder in Stockholm. There, Babak Houshmand, fixed income manager of the Carnegie Corporate Bond fund noted that the swings in pricing affecting the oil and gas industry were important because of the proportion of the high yield market accounted for by the energy sector, particularly in the US.
The Carnegie Corporate Bond fund has had limited exposure to the sector, but with some 15% of US high yield bonds linked to the collapse in the oil price, there are fears that fixed income investors could be hit by defaults.
Lukas Lundin, part off the Lundin family that has given its name to the company, said the impact of Saudi Arabia’s efforts to maintain global market share at any cost is likely to be a continued lower rig count in the US given higher production costs in its shale oil and gas sector; at its peak in recent years, the US had some 2,000 rigs in operation, but this has fallen to some 600 in response to the oil price fall, according to figures quoted by Lundin He suggested that bond investors, who financed much of the previous expansion in the US are going to be cautious about doing the same again, even if the price of oil recovers.
According to Lundin there is, globally, just 1%-2% overproduction as measured by daily output. This suggests that the price volatility that has hit the market may be overdone, and prices could stabilise relatively quickly should production be trimmed even slightly.
Lundin Petroleum is in the European region looking to shift away from the North Sea to both the giant Johan Sverdrup field in Norwegian waters, as well as further north in the Barents Sea, which Lukas Lundin described as offering a good opportunity to find the next great untapped fields globally.