Shale Production to Drop | Russell T. Rudy Energy LLC
“World Oil” reports that shale oil and gas production is finally going to fall. In spite of a 70% drop in the price of crude oil over the last 20 months, production has remained relatively flat. Shale operators have proven very resourceful, employing a number of strategies such as using drilling wells but not completing them (DUC’s), refracking, retreating to the core of major plays, hedging via futures contracts, selectively shutting in wells, cutting capital and laying off workers.
Unfortunately, all these efforts to keep production up have just sustained a world-wide oil glut. With OPEC in general, and Saudi Arabia in particular, determined to maintain market share regardless of the price impact, it appears that domestic shale producers will have to cut output if the surplus is going to be reduced.
Apache, Continental Resources, Whiting and Devon all expect their oil production to be down from 10-15% in 2016, as operators try to hoard cash in order to meet debt payments. Scott Sheffield, CEO at Pioneer Natural Resources Co., expects output in the Eagle Ford shale of South Texas to drop by 100,000 barrels of oil per day to 1 million.
Executive V. P. Robert Daniels with Anadarko summed it up well, concluding that at $30 per barrel, “we’re just not getting the returns that we would want to get.”
Subash Chandra with Guggenheim Securities observed, “We know which direction we’re going-we’re going down-in terms of volumes. The only question is at what velocity we’re going down that path.” He went on to say that he sees the oil glut continuing well into 2017, and concludes, “The changes that have to occur industrywide to deal with what we see coming are going to be dramatic.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/2/26/shale-drillers-are-finally-buckling-as-opec-pumps-on .
