Page 4 - NorthAmOil Week 20 2022

NorthAmOil COMMENTARY NorthAmOil

Shale drillers anticipate

headwinds, remain focused

on returns despite high profits

High oil prices have helped shale drillers increase their profits in the first

quarter of the year, but the industry remains cautious amid rising costs

US AS earnings season draws to a close it is evi- it to decarbonise more quickly and those critical
dent that producers across the shale industry of producers for not producing more oil than
WHAT: have benefited from oil and gas prices hitting they are currently doing as demand continues
Shale drillers remain multi-year highs, owing in part to the Russian to rise.
cautious and focused on invasion of Ukraine. Shale drillers increased The domestic oil industry has also come
prioritising shareholder their profits significantly in the first quarter under fire from Democrat legislators that have
returns despite high of 2022, representing a turnaround from the accused it profiteering and price-gouging at
profits. losses racked up at the onset of the coronavirus the expense of motorists. Industry players has
(COVID-19) pandemic. Indeed, they appear to sought to point out that they have no control
WHY: be on course for a record-breaking year if com- over retail fuel prices, but ongoing pain at the
The industry has come modity prices stay high – and it currently seems pump could still translate into growing public
under a great deal of that they are highly likely to do so. anger if producers are seen to reap ever higher
pressure in recent years However, even as crude prices help bolster profits at the same time.
and still anticipates profits, the industry is contending with certain
certain headwinds now. headwinds. Earlier this month, BloombergNEF Making profits
estimated that shale producers could see a com- Large profits for the first quarter were registered
WHAT NEXT: bined $42bn worth of hedging losses by 2023, across the board as West Texas Intermediate
Inflation is expected to having made a misplaced bet that oil prices (WTI) crude prices averaged almost $97 per
strain capex budgets at would be lower. Also, rising costs were high- barrel, according to data from the US Energy
the same time as calls lighted by some producers in their first-quarter Information Administration (EIA).
to produce more oil results and are expected to continue straining For example, earlier this month, Pioneer
intensify. capital expenditure budgets over the coming Natural Resources posted an adjusted profit of
months, if not longer. $1.98bn, up from $396mn a year ago, represent-
Against this backdrop, shale drillers remain ing a fivefold increase. Continental Resources,
cautious and continue to prioritise shareholder meanwhile, more than tripled its quarterly
returns following years of pressure during adjusted net income to $960mn from $279mn
recent price downturns. Additional pressures in the first quarter of 2021.
on the industry will come from those calling on EOG Resources posted first-quarter adjusted

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