Page 6 - NorthAmOil Week 33

NorthAmOil COMMENTARY NorthAmOil
Second-quarter results show shale struggles
The tough operating environment shale drillers nd themselves in is being illustrated by a number of companies’ second-quarter results, writes Anna Kachkova
US
WHAT:
Shale drillers have reported mixed results for the second quarter of 2019.
WHY:
Ef ciency gains were offset by the impact of lower commodity prices for a number of drillers.
WHAT NEXT:
Several producers have scaled back their growth expectations.
CONDITIONS remain tough for shale drillers, despite oil prices having recovered somewhat from the lowest point of the industry downturn in 2016. US oil and gas producers were more optimistic about price trends last year, but a new dip at the end of 2018 is now translating into a push to rein in drilling and capital spending. is is coupled with the fact that producers remain under pressure from shareholders to prioritise returns over growth.
These trends are illustrated by a number of results announced recently for the second quarter of 2019, which come amid considerable pessimism over the shale industry’s prospects, despite it not being all bad news.
Pioneer’s performance
Some of the biggest names in shale drilling have reported mixed second-quarter results. Earlier this month Pioneer Natural Resources posted a second-quarter net loss attributable to common stockholders of $169mn, or $1.01 per diluted share, down from net income of $63mn in the same quarter of 2018. is was attributed to a non-cash charge related to the sale of certain assets, while the company emphasised the pos- itive aspects of its performance. Nonetheless, Pioneer still said it was lowering the top end of its 2019 capital expenditure guidance by $150mn or roughly 4.5%, and that of its Permian Basin budget by $100mn to $2.8-3.0bn.
“We continue to be highly focused on increas- ing free cash ow and corporate returns, while executing at a high level,” Pioneer’s president and CEO, Scott She eld, stated.
In better news for the company, Pioneer reported that higher production had helped o - set the impact of lower oil prices. e producer said its output had risen nearly 2% to 334,167 barrels of oil equivalent per day (boepd) in the second quarter, while it had earned $39.35 per boe, down from $43.12 per boe a year earlier.
But on Pioneer’s second-quarter earnings call, She eld warned that the most productive acreage in the Permian Basin – now the com- pany’s sole region of operations – was quickly
being exhausted through aggressive drilling campaigns. Sheffield identified the Permian’s Midland sub-basin as the sole US shale growth region by 2025, and predicted oil prices would remain below $55 per barrel for the next three years, leading to a “signi cant fallback in Per- mian growth”.
Warnings
She eld’s comments echo warnings about per- formance from other proli c shale drillers. Con- tinental Resources’ CEO, Harold Hamm, was asked on the company’s earnings call whether it was still worth being a publicly traded oil company.
“In today’s market we don’t see a lot of value in it, just to tell you like we see it here today, but we can’t control the market,” Hamm said. “We can control what we’re dealing with here on a daily basis. And that’s what we’re doing.”
Continental has lost about $15bn of its mar-
ket capitalisation since October and is now val-
ued at less than $12bn. e company reported a
$236.6mn pro t for the second quarter of 2019,
but this marked a slight decrease from $242.5mn Continental has in the same quarter a year ago.
Similarly to Pioneer, Continental achieved
higher production in the second quarter of this
year, at 331,414 boepd, up from 284,059 boepd in
the same quarter of 2018. Citing improvements
in drilling productivity, Continental also said it
would reduce the number of rigs it operates in since October and Oklahoma to 12 from 19 this year. is illustrates
a broader trend whereby US production is still rising despite a drop in the number of active rigs. According to the latest data from Baker Hughes, a GE company (BHGE), there were 770 active oil rigs in the US in the week up until August 16, down by 99 from 869 rigs a year ago. Meanwhile, the US Energy Information Administration (EIA) estimates that oil production thus far in August is averaging 12.3mn barrels per day. e agency recently said that US output had averaged 11.7mn bpd in July.
There are “probably 100 rigs more in the US than is needed today”, Hamm said on
lost about $15bn of its market capitalisation
is now valued at less than $12bn.
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w w w . N E W S B A S E . c o m Week 33 20•August•2019