Page 4 - NorthAmOil Week 48 2022

NorthAmOil COMMENTARY NorthAmOil

Questions linger over shale’s future

US tight oil output from shale formations continues to rise for now, but there are longer-term

uncertainties over the industry’s future

US US tight oil production continues to grow and continued to urge and exercise caution. This is
hit new records, but the overall pace of growth is linked to continued pressure from investors,
WHAT: slowing and there are concerns over the indus- who took a hit during the early years of the shale
There are uncertainties try’s future over the longer term. Much of this boom, especially as many debt-laden producers
over the future of shale has to do with the evolving approach taken by fell into bankruptcy in the mid-to-late 2010s. As
drilling in the longer shale drillers in recent years. Oil price downturns a result, shareholders’ focus shifted from the pur-
term. during the past decade have put an end to the suit of growth to returns and rising oil prices do
unrestrained pursuit of growth among produc- not appear to have changed this.
WHY: ers, who have also become fewer in number as The industry also looks considerably dif-
Leading tight oil the industry has consolidated. ferent now compared to its early days. Years
producers have taken Now, a smaller group of large shale producers of consolidation have resulted in the smaller
a more restrained continues to act with restraint even as oil prices independents largely being absorbed by their
approach recently and have risen to multi-year highs over the past larger counterparts, to the point that a handful
this does not appear to year. There have been some predictions that of major players dominate shale production.
be changing. this could change, but shale drillers’ attitudes These companies tend to have more cash at
largely do not appear to be shifting, regardless their disposal, but have also learned from recent
WHAT NEXT: of price trends. Output keeps rising, but more years to spend with caution. Much of the discus-
There are concerns over slowly than it had done in the past. And over sion from these companies remains focused on
future productivity as the long term, there are further concerns over returning cash to shareholders.
shale wells continue to productivity as shale plays mature and wells
mature. become depleted. Production trends
The Permian Basin still accounts for the majority
Shale restraint of tight oil output – with the US Energy Infor-
Despite occasional speculation that shale drillers mation Administration (EIA) projecting in its
will ramp up production once again if oil prices latest monthly Drilling Productivity Report that
keep rising, most of the major players have Permian production will hit 5.499mn barrels per

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