Tuesday, December 10, 2019

US Shale Sector Performs Well

November 15, 2019

Graph: Rystad Energy

U.S. shale operators are on track to grow 2019 oil production by around 16% over 2018 thanks to impressive operational execution so far this year.

The third quarter earnings season revealed that shale companies increased their oil production by about two percent, all while cutting the midpoint guidance for yearly drilling and completions expenses, according to Rystad Energy.

The energy research and consulting firm headquartered in Norway said that U.S. shale operators will continue expanding in the fourth quarter, growing oil production by at least 1.3 percent on a quarterly basis.

“The actual results so far this year reaffirm our optimistic expectations for the remainder of the year. US shale companies are well-positioned to see an oil increase of about 9% in the fourth quarter this year relative to the same period last year, growing 2019 volumes by approximately 16% over 2018,” says Veronika Akulinitseva, vice president on Rystad Energy’s shale team.

Early guidance for 2020 indicates that capital expenditure budgets will be softer, although a number of large independent operators have come out with robust capital programs for next year.

“We expect continued reductions in capital expenditure and a renewed focus on cash flow next year. However, this does not imply a reduction in oil output. We are still likely to see another year of oil production expansion in US shale – although at a slower pace than seen this year,” Akulinitseva added.

Rystad Energy analyzed the third quarter 2019 earnings results of around 40 US shale operators. On average, companies decreased their 2019 capital guidance by 0.6% in the third quarter, compared to a reduction of 0.4% registered in the previous quarters. So far in 2019, companies decreased D&C guidance by around 1% relative to their original capital budgets communicated at the beginning of the year.

“With three reporting quarters of 2019 behind us, we can conclude that a number of US producers showed impressive execution this year and continued to increase oil production guidance throughout the year, while remaining at the lower end of capital guidance. Permian players and companies active in multiple plays were especially successful in outperforming their original estimates,” Akulinitseva remarked.

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