Bloomberg
The giants of American shale prove OPEC right with discipline
(Bloomberg) – Saudi Arabia’s commitment to end the golden age of American shale appears to be secure – for now, at least. A summary of data on shale drillers shows that they keep their promise to cut. costs, give money back to shareholders and reduce debt. If they maintain the course, it will confirm the OPEC + alliance’s bet that it can limit production and drive crude prices higher without unleashing an onslaught of supply from US competitors. It’s still a big “ash”, one that the oil market retains. underway, because the contraction of crude oil makes it more attractive for shale producers to respond to their word. But the US shale spot so far shows little sign of a real return, and even a dramatic boost in activity will leave oil production below pre-pandemic levels until the end of next year. Drillers who showed signs that they had strayed from the text and increased production were punished by investors. Publicly traded and disciplined scouts help keep crude prices high, says Michael Tran, managing director of global energy strategic research at RBC Capital. Markets. The motives of meticulous producers, on the other hand, remain an open question ‘, he said. Baker Hughes’ data shows that the number of oil rigs has already jumped by 80% after the bottom dropped in August. The more limited shale drillers are this year, “the more they can grow production at higher prices next year and beyond,” Tran said. As crude prices rise, the chances of another shale boom increase, JPMorgan Chase & Co. said. ‘s analysts, including Natasha Kaneva, wrote in a March 11 note to clients. According to the bank, there are even efforts underway to maintain or grow production at low cost. At current prices, most U.S. land operators are economical, leaving a large group of operators, from large public companies to private players. , in a good position to increase activity in the second half of this year and create solid momentum for higher production in 2022, analysts said. Bloomberg compiled these maps from Bloomberg Intelligence data of listed companies. Businesses with production outside the US are excluded. Muted production Producers keep their powder dry and hardly increase their production at a time when oil prices are recovering to pre-pandemic levels. Rather, companies are focused on reducing debt and repaying dividends to shareholders. Companies that recently announced plans to increase production, such as Matador Resources Co. and EOG Resources Inc., saw a drop in their share prices. Tight ReinsCapital discipline is now the name of the game. Exploration and production companies are focused on generating free cash flow and strengthening their balance sheets. “What we really need to do is maintain our scale and generate free cash, give an excess of substantial free cash, and push it to reduce debt,” said Doug Suttles, CEO of Ovintiv Inc., in said in an interview with Bloomberg Television. capital expenditure, they can keep production flat or slightly higher compared to last year. As oilfield service businesses continue to get better with drilling and hydraulic fracturing, the explorers they hire are getting more for their money. For an explorer to make a profit in Perm-Delaware, the cheapest American to come, an oil price According to BloombergNEF, about $ 33 per barrel is needed, compared to $ 40 in 2019. So-called break-evens refer to the price at which the cost of bringing supplies online is less than or equal to the expected income. West Texas Intermediate crude rose about $ 66 a barrel on Thursday. “Contract negotiations, continuous efficiency gains and process improvements have enabled the oil industry to reduce the cost of drilling and drilling a well,” the report said. oil prices should mean that the number of rigs will continue to climb from its historic lows, especially as meticulous operators benefit from higher revenues, but even if boreholes expand at a much more aggressive pace than companies promise, it will take a long time. before U.S. shale production peaks again, according to a projection from ShaleProfile Analytics. If the count has doubled by the end of the year and is then flat, it will take until the end of 2022 before the industry recovers the production it lost during the pandemic, the projection shows. the number of drilled but incomplete wells. Merger Wave A year of consolidation in the shale industry has put a lid on production. Companies, including Concho Resources Inc. and Parsley Energy Inc., which once drilled aggressively, was acquired by larger competitors. Producers are turning their attention inward and focusing on returning capital to shareholders rather than getting more oil out of the ground. For more articles like this, please visit us at bloomberg.com. Sign up now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP