Lower 48 + WCSB H1 2019 Supply: core inventory continues to be a limiting factor

US Lower 48 onshore crude and condensate production is forecasted to reach ~13.3 million b/d by 2024, growth of almost 5 million b/d from 2018 levels. The peak is now 1.3 million b/d higher than our H2 2018 forecast, and one year earlier. One of the biggest drivers of the change is a shift in the cost curve compared to the last update, mostly due to the responsiveness of service costs to lower activity levels in late-2018. As a result, associated gas has been upgraded by over 5 bcfd on average in the outlook. This has pushed out Northeast gas yet again this outlook as corporate health risks continue to put limitations on capital flexibility. Because of capital discipline in both the Northeast and WCSB, higher hurdle rates will be needed for long-term growth as operators shift from growth for growth's sake. Meanwhile, Haynesville has been upgraded supported by delineation that has resulted in new hot spots, specifically on the Texas side of the play.