Persistently low oil prices have done little to stimulate change from customers or suppliers. Weakening growth trends from China and Europe along with a strong dollar and stable output from OPEC have helped maintain a low price environment.
However, there are signs that suppliers are reacting to their new environment. Baker Hughes worldwide oil rig counts were down 43% year-over-year at the end of June, which marked the sixth consecutive month of accelerated declines. In addition, a FactSet aggregate of global energy companies shows that exploration expenses are predicted to plunge 30% in 2015.
At the company level, the biggest contributors to the projected slide in exploration costs are Statoil and BP. Statoil maintains that its cost reductions are the result of operational efficiencies, but the company has also cited an inability to freely temper forward costs due to existing commitments with rigs. Further complicating the matter is the company's stated desire to be well-positioned following the conclusion of the current down cycle.
This could prove challenging. Though analysts are predicting an uptick in the future, they estimate that prices will still remain below $80 for the next four years. Despite the reduced exploration activity, investors seem to agree with the new cheap oil outlook. Energy equity prices are outpacing their decline in forward twelve-month earnings per share and are rapidly closing on their 2009 nadir.