Diamondback CEO says US crude production growth will slow down with $60/bbl.
The CEO of Diamondback Energy - one of the top oil producers in the United States - said that the growth of U.S. crude oil production will slow down if oil prices remain near $60 per barrel. Fewer drilling sites can be profitable at this level.
Kaes van't Hof, speaking at a conference on energy in Austin, said "There are only so many Tier 1 rocks" in reference to the best locations for drilling. It's hard to imagine growth at $60 oil. At $50, it's even more difficult. On Wednesday morning, U.S. crude oil futures were trading at around $61.50 per barrel.
In order to control spending, many energy companies announced the elimination of thousands of jobs this year. Lower oil prices and increased costs have led to a decline in profits. Exxon Mobil announced on Tuesday that it will cut 2,000 employees globally. Chevron, meanwhile, said it would be laying off up to 20 percent of its global workforce in February. ConocoPhillips announced earlier this month that it would reduce its workforce by 20% to 25%.
Diamondback, the largest independent producer of Permian Shale, stated in May that they believe shale is nearing its peak with current oil prices. Midland, Texas based company cut its capital spending plans for 2025 by $500 million up to $3.5 billion compared to its original guidance.
Van't Ho said, "I stand by my statement." "On an adjusted basis, $60 oil is the same as $45 oil six to seven years ago."
Van't Hof said that the investor push for dividends and buybacks had also changed corporate strategies, with more cash flowing directed towards shareholder returns. Reporting by Arathy S. Somasekhar, Houston Editor: Marguerita Choy
(source: Reuters)
