Page 7 - NorthAmOil Week 33

NorthAmOil COMMENTARY NorthAmOil
Continental’s earnings call. en speaking on August 13 at a conference in Denver, Hamm urged OPEC and shale producers to rein back spending and production as oversupply contin- ues to hurt global markets.
OPEC and certain non-OPEC countries including Russia recently extended production curbs until March 2020 in an ongoing e ort to prop up oil prices. But US producers – which do not act as a single entity but rather respond to short-term market conditions – have contin- ued to drill, buoyed by e ciency gains that have allowed them to produce more while spending less. us the ood of US tight oil into the market is o setting some of the price relief provided by OPEC and its allies.
US shale producers “need to row our own boat,” Hamm said. “We need to make sure we don’t oversupply the market.” He added that capital discipline was more important than ever in this operating environment.
Despite these comments, Continental’s capex budget for 2019 remains unchanged at $2.6bn following its second-quarter results.
Under pressure
Meanwhile, EOG Resources posted what it described as “outstanding” second-quarter results, but its rise in quarterly pro t was smaller than expected, with greater production failing to offset weak commodity prices and higher expenses.
EOG reported second-quarter net income of $848mn, up from $697mn in the same quarter of 2018, with gains from derivate con- tracts and asset sales included in the result.
e company’s crude production grew 18% year on year in the second quarter to 455,700 bpd, which was a new company record, while its overall volumes were up 16% from a year ago to 812,800 boepd.
EOG’s expenses rose 9%, which was primar- ily attributed to marketing, depreciation, amor- tisation and administrative expenses.
Another driller that nds itself under pres- sure is Concho Resources, which was described by investment banking advisory rm Evercore ISI as a bellwether for the shale industry. e company’s rig count in the Permian Basin at the start of 2019 was only behind that of ExxonMo- bil, at 33. In its second-quarter earnings, Concho revealed that it had scaled back the number of rigs to 18, and reported a loss of roughly $97mn, down from a pro t of $137mn a year ago, while its output fell short of expectations. is was partly attributed to the fact that the 23 wells that make up Concho’s Dominator project in the Per- mian were spaced too closely. Now the company is having to slow production to avoid overshoot- ing its capital budget.
While not all shale drillers have experienced such problems with their acreage in the Permian Basin or elsewhere, several other producers, including Whiting Petroleum and Apache, are also lowering their growth expectations. The trend points to a broader pessimism over the shale industry’s prospects than was evident a year ago. ere is an increasingly widespread expectation that oil and gas prices will remain lower for longer, and the pressure felt by drillers because of this price environment is becoming increasingly apparent.™
US production is still rising despite a drop in the number of active rigs.
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