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Shale Drillers Are Outspending the World With $84 Billion Spree

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thackney:
Shale Drillers Are Outspending the World With $84 Billion Spree
https://www.bloomberg.com/news/articles/2017-05-09/shale-drillers-challenging-opec-with-84-billion-spending-spree

U.S. shale explorers are boosting drilling budgets 10 times faster than the rest of the world to harvest fields that register fat profits even with the recent drop in oil prices.

Flush with cash from a short-lived OPEC-led crude rally, North American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian Basin, a sprawling, mile-thick accumulation of crude beneath Texas and New Mexico, where producers have been reaping double-digit returns even with oil commanding less than half what it did in 2014.

That’s bad news for OPEC and its partners in a global campaign to crimp supplies and elevate prices. Wood Mackenzie Ltd. estimates that new spending will add 800,000 barrels of North American crude this year, equivalent to 44 percent of the reductions announced by the Saudi- and Russia-led group.

“The specter of American supply is real,” Roy Martin, a Wood Mackenzie research analyst in Houston, said in a telephone interview. “The level of capital budget increases really surprised us.”

Drilling budgets around the world collapsed in 2016 as the worst crude market collapse in a generation erased cash flows, forcing explorers to cancel expansion projects, cut jobs and sell oil and natural gas fields to raise cash. The pain also swept across the Organization of Petroleum Exporting Countries, which in November relented by agreeing with several non-OPEC nations to curb output by 1.8 million barrels a day.

Oil prices that initially popped above $55 in the weeks after the cut was announced have since dipped to around $46, reflecting pessimism that the OPEC-led deal can withstand the onslaught of U.S. shale.So far, independent American explorers such as EOG Resources Inc. and Pioneer Natural Resources Co. are holding fast to their ambitious growth plans. Some recently finished wells in the Permian region yielded 70 percent returns at first-quarter prices, EOG Chief Executive Officer Bill Thomas told investors and analysts during a conference call on Tuesday.

EOG, the second-largest U.S. explorer that doesn’t own refineries, plans to boost spending by 44 percent this year to between $3.7 billion and $4.1 billion. Pioneer is eyeing a 33 percent increase to $2.8 billion. The sub-group that includes North American shale drillers like EOG and Pioneer is collectively targeting $53 billion in spending this year, up from $35 billion in 2016, according to the Barclays analysts led by J. David Anderson.

U.S. oil production is already swelling, even though output from the new wells being drilled won’t materialize above ground for months. The Energy Department’s statistics arm raised its full-year 2017 supply estimate to 9.31 million barrels a day on Tuesday, a 1 percent increase from the April forecast.

Next year, U.S. fields will pump 9.96 million barrels a day, 0.6 percent more than the department estimated last month....

Frank Cannon:
OPEC is circling the drain. They can't control things like they used to back in the bad old days.

thackney:
Getting close to back to the 2015 peak of 9.6 million barrels per day



4-Week Avg U.S. Field Production of Crude Oil
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=4

thackney:

--- Quote from: Frank Cannon on May 10, 2017, 07:22:38 pm ---OPEC is circling the drain. They can't control things like they used to back in the bad old days.



--- End quote ---

Those gas lines were more a product of US government over-control than real market limitations.

Frank Cannon:

--- Quote from: thackney on May 10, 2017, 07:25:31 pm ---Those gas lines were more a product of US government over-control than real market limitations.

--- End quote ---

Silly me. My memories tell me it had to do with the Rag Heads instituting an embargo because we backed Israel in a war.

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