Page 5 - NorthAmOil Annual Review 2021

NorthAmOil COMMENTARY NorthAmOil

Indeed, executives from both Diamondback Yacob’s comments come amid predictions of
and Devon Energy, speaking on the same web- a smaller global oil surplus this year than previ-
cast panel as Sheffield, said they would need the ously anticipated. Meanwhile, OPEC+ has been
support of shareholders if they were to signifi- struggling to meet its own production targets in
cantly increase output again. recent months. The group agreed on January 4
to stick with its plan to ease production cuts by
Production growth a further 400,000 barrels per day (bpd) in Feb-
It cannot be ruled out, however, that some ruary, but not all of this volume is expected to
producers and their shareholders could back a reach the market, potentially setting the stage
ramp-up in drilling in a higher price environ- for further price rises.
ment. Indeed, also speaking at the Goldman In the US, other producers may find them-
Sachs event, EOG Resources’ CEO, Ezra Yacob, selves increasingly tempted to follow EOG’s Some producers
said his company was ready to boost production example in planning to ramp up production if
from this summer if market demand supports market conditions call for it. And while publicly and their
such a move. listed companies in particular are likely to act shareholders
If the conditions are right, “EOG would be with more caution, and seek shareholder sup-
in a position to return to pre-COVID levels of port for any change in strategy, there are still could back a
production” potentially by the middle of 2022, plenty of smaller, private companies operating
he said. “If the world has a call on oil and there’s in US shale plays that are less constrained. ramp-up in
room to grow our low-cost, lower-emissions US’ oil output is already rising gradually even
barrels into the market, we can certainly deliver as most operators continue to practise restraint. drilling in a
on that.” The US Energy Information Administration higher price
Yacob tempered his statement by adding that (EIA) forecast last month that oil production
even if EOG does go ahead with an increase to would rise from a projected 11.63mn bpd in the environment.
production, it would only represent growth of fourth quarter of 2021 to 12.09mn bpd in the
about 5%. The goal is to invest “at a pace where same quarter of 2022. In the shorter term, the
each of your assets is getting better year after agency predicted that oil output from its seven
year”, he said. leading shale regions would rise by 96,000 bpd
Nonetheless, EOG, which is due to release its in January compared with December, largely as
capital budget and drilling plans for 2022 in Feb- a result of growth in the Permian Basin.
ruary, has gone further than most shale drillers If this is what happens when producers act
by setting out a rough timeline for when it could with restraint, what plays out when they actively
step up drilling. seek to raise output could be significant.™

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