Page 16 - EurOil Week 22

NorthAmOil PROJECTS & COMPANIES NorthAmOil

EOG, Parsley cautiously bring

shale wells back online

US AS West Texas Intermediate (WTI) prices stay shale players throughout the rest of the year,” he
relatively stable and rise above $36 per barrel, a said. “Starting to drill in the high $30s? I’m not
couple of stronger shale drillers are indicating sure I see that.”
that they will bring some of the production they Parsley, meanwhile, said in its own inves-
shut in back online. tor presentation that it would restore the “vast
This comes after the shale industry, which majority” of the 26,000 bpd it took offline in
can respond quickly to changes in market con- May. However, the company appears to be pro-
ditions, cut output immediately following the ceeding with caution and not taking on any new
collapse of crude prices in March. US produc- drilling.
tion has fallen by around 13% since then, with “We are not putting new capital to work,”
shale accounting for the bulk of the decline. Parsley’s CEO, Matt Gallagher, was quoted by
Shale can be brought back online just as quickly Bloomberg as saying. “Our drilling and frack
if prices start to rise, and there are now signs of operations remain suspended as we evaluate
this happening. market fundamentals.”
News came this week that EOG Resources Shale drillers have been blamed in the past for
and Parsley Energy are planning to ramp pro- keeping crude prices depressed by ramping up
duction back up, while drillers in the Bakken production as soon as it becomes profitable to
play are also reducing the rate of shut-ins. do so. The fact that this could happen again has
EOG’s executive vice-president of explora- been a cause for concern among other oil-pro- Shale can be
tion and production, Ken Boedeker, said in an ducing countries that are weighing further sup-
investor presentation that his company would ply cuts but do not want shale producers to step brought back
bring back output in the second half of this year in to make up the shortfall. However, many agree
after taking around a quarter of it – or 125,000 that the shale industry will have to be more cau- online just as
barrels per day (bpd) – offline in May. tious this time, given its reduced access to capital,
EOG’s strategy “is to really accelerate our and the fact that a further drop in the oil price quickly if prices
production into what we see as a price recovery will hurt it too. Shut-in production may thus start to rise.
in the second half of the year”, Boedeker said. be cautiously ramped up again, but the drilling
In a further sign of confidence in this recovery, and completion of new wells may be slower to
the company recently reduced its hedge posi- resume.
tion, eliminating some protection against lower According to Bloomberg, shut-ins in the
prices. Bakken totalled 475,000 bpd as of May 28, which
EOG – the US’ largest shale-focused pro- is about 7% less than had been shut in around
ducer – now appears to be betting that it is better mid-May. And Coras Research was cited as sug-
positioned than many other companies to bring gesting the number of active completions crews
back shut-in output at this price level. Boedeker had bottomed out at around 80 fleets, and more
said other companies would struggle to find the work was lined up for them in the coming 3-6
cash for drilling new wells, and oil supply would months.
still be reduced over the short and medium term Coras projects that up to 50 frack crews
as a result. could be added by the end of the year, with that
“We see very little capital flowing into the number doubling if oil prices move closer to $40
industry and we see higher declines from all the per barrel.™

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