Wildcatters and oil majors to lead US shale boom

Quantum Commodity Intelligence -  The US shale boom has bounced back with surging oil prices for the wildcatters that drove the first tight oil revolution, but some of the independents, now publicly listed companies, have had their fingers too badly burnt by the Covid slump.

Independent explorers like Pioneer and Devon account for more than half of the roughly 10.5 million barrels that America produces daily from fields in the 48 lower states, but despite surging crude prices, many will stick to previous capital expenditure schedules.

"Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans,'' Pioneer Chief Executive Officer Scott Sheffield said last week.

But the rest - closely-held outfits, family-run enterprises, as well as the oil majors - are aggressively boosting output.

ExxonMobil and Chevron are targeting 25% and 10% shale growth respectively this year.

"From an economics perspective more or less everything works well in the Permian, DJ, Bakken, Eagle Ford, PRB, SCOOP & STACK but also in non-core plays," said Artem Abramov, head of shale research at Rystad Energy.

"You can easily realize double-digit returns on Tuscaloosa Marine Shale projects now."

"This will incentivize a continuous increase in the activity from private operators, while public independents remain disciplined capping the growth at 5% per year, at least in 2022."

With $100/b WTI, growth of 1 million bpd per year is sustainable in the medium term out to 2026.

There will be more production from 2023 to 2024, but then less in 2025 to 2026, Abramov added.

But this year's response will be delayed and an uptick in rigs drilled in the second quarter won't materialise into extra production until the fourth quarter of 2022.  

Long Covid

Difficulties attracting capital, a challenging labour market, strains on international supply chains for equipment makers, and time lags between price movements, drilling and marketing all argue against a surge in domestic production in 2022, warned analysts at the Dallas Federal Reserve this week.

However, total production from US core producing regions – the Permian, Eagle Ford, Niobrara, Bakken and Anadarko – should hit 9.9 million bpd by the end of the year, up from 7.7 million bpd over the last three months of 2021, according to Rystad.

Tight oil production in the US Permian Basin is already set to hit an all-time high in March, according to the Energy Information Administration.

Output in the basin, located across the states of Texas and New Mexico, is expected to hit 5.205 million bpd, up from 5.134 million bpd in February.