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April 2014

Vol. 19, No. 15 Week of April 13, 2014

Revenue sees some production improvement

Spring revenue forecast an update from the primary fall forecast; changes show $374 million increase in unrestricted revenue

Kristen Nelson

Petroleum News

The Alaska Department of Revenue released its spring revenue forecast April 7 showing an uptick of $374 million from the department’s fall forecast for 2014 fiscal year general fund unrestricted revenue. The state’s fiscal year runs from July 1 through June 30.

Revenue said the 10-year forecast, starting with FY 2016, showed a modest increase in revenue, while FY 2015 showed a slight decrease of 0.2 percent from the previous forecast, based on reductions expected in investment earnings.

Revenue Commissioner Angela Rodell said the spring forecast also shows an increase in production.

“Based on actual production data, we have seen an increase of 13,300 barrels per day of North Slope oil production in FY 2014 compared to what we had forecast just five months ago,” Rodell said in a statement.

She also said that “in both FY 2014 and FY 2015, unrestricted revenue from oil production is higher than the fall 2013 forecast.”

The department’s production forecast “follows a consistent and prudent methodology, and while we have incorporated some increase in production, as well as a significant increase in capital investment into our fall 2013 forecast, please note that the spring 2014 forecast is simply an update of the previous fall 2013 forecast.”

The commissioner said the fall 2014 forecast will be the first “under the new tax system” and the first budget cycle for companies where they “can evaluate projects with tax certainty.”

“I expect to see many questions answered between now and then, hopefully resulting in high enough levels of certainty to begin incorporating new production into our revenue forecast,” Rodell said.

Stable unrestricted state revenue will require “higher oil prices and/or stable or increased production,” Rodell said.

Increased production

Rodell said the spring forecast shows, in general, “more Alaska oil production, especially in fiscal years 2016 and beyond.”

She also noted short-term revisions related to increased drilling activity and changes in planned summer 2014 North Slope maintenance activity.

While unrestricted revenue from oil production is higher than the fall forecast for both FY 2014 and FY 2015, “a slight reduction in the forecast of unrestricted revenue in FY 2015 is due to reductions in expected investment earnings.”

General fund unrestricted revenue is forecast at $5.3 billion for FY 2014 and $4.5 billion for FY 2015. Actual general fund unrestricted revenue for FY 2014 was $6.9 billion.

The fall forecast is when the department collects planned production information from companies.

The spring forecast is for 521,500 barrels per day for FY 2014, up from the fall forecast of 508,200 bpd, a change which the department said “reflects actual daily production levels that have consistently outperformed what was forecast in the fall of 2013.”

The revised oil price forecast is also up, $106.61 per barrel vs. $105.68 per barrel in the fall forecast, “based on actual prices realized over the past several months and an overall better market outlook for oil prices.”

Because there have been “no structural changes or significant change in oil price triggers” since fall, the longer term, FY 2015-FY 2023, forecast prices remain unchanged.

North Slope lease expenditures were $6.06 billion in FY 2013 ($3.12 billion in operating expenditures and $2.95 billion in capital expenditures). For FY 2014 the total is estimated at $6.96 billion ($3.31 billion opex and $3.66 billion capex) and $7.75 billion for FY 2015 ($2.9 billion opex and $4.85 billion capex).






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