• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 41 mins Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 17 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 19 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 5 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 4 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 1 day U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 2 days Nord Stream - US/German consultations
  • 4 days An Indian Opinion on What is Going on in China
  • 4 days Can Technology Keep Coal Plants Alive and Well?
  • 5 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 22 hours Forecasts for Natural Gas
  • 1 day Australia sues Neoen for lack of power from its Tesla battery
  • 4 days Storage of gas cylinders
  • 5 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
Saudi Arabia: Patience Is A Virtue In Oil Markets

Saudi Arabia: Patience Is A Virtue In Oil Markets

Saudi Arabia appears confident that…

Oil Unchanged On Small Crude Inventory Build

Oil Unchanged On Small Crude Inventory Build

Crude prices saw little movement…

Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

More Info

Premium Content

U.S. Shale Needs To Rethink Its Strategy To Survive

U.S. shale is hurting. While the entire global energy industry has been hit hard by the novel coronavirus pandemic and its disastrous effect on oil prices and oil demand, West Texas shale takes the cake for the biggest economic collapse. While the international Brent crude benchmark did take a beating, the West Texas Intermediate crude benchmark stunned the world when it plunged below zero on April 20, closing out the day at nearly $40 in the hole.  The results have been devastating. The Permian Basin has been swept by a tidal wave of bankruptcies, shut-in wells, and legions of fired and furloughed employees, converting untold numbers of Texan oil towns from boomtown to ghost town. Just this Sunday, Permian basin pioneer and industry titan Chesapeake Energy declared bankruptcy. It’s difficult not to read the shuttering of this shale golden child as a bad omen for the industry as a whole. Not that we didn’t see it coming. 

“The collapse of Chesapeake Energy, one of the pioneers of the US shale industry, took few people by surprise,” the Guardian reported this week. “The embattled fracker slumped into bankruptcy weeks after the darkest month in oil market history, in a financial mess of missed interest payments, looming bond deadlines and crippling debts.”

Chesapeake Energy is not the first U.S. shale casualty of the COVID-19 pandemic, and it almost certainly won’t be the last. CNN reports that as much as 30 percent of all U.S. shale companies could go bankrupt if the price of crude doesn’t improve. “Broadly speaking, it all sounds like a near-term abyss for the sector, writes Rig Zone in a report this week. “What’s more data analysis by Deloitte suggests frackers have burned through $300 billion since 2010, and yet 30 percent of operators both large and small can barely break-even at $35 per barrel.” 

Related: 3 Oil Stocks With Good Upside And 3 To Avoid

But it’s also almost certainly too soon to start writing a wholesale obituary for United States shale (not that plenty of headlines haven’t already taken that leap). And while it’s true that there is no quick fix for the United States shale industry’s myriad woes, a slow recovery is possible, and even likely. As Rig Zone reports, while the short-term outlook is grim, “at the same time, an agile group of shale players with viable acreages saw the approaching near-term abyss. These firms scaled back their respective operations down in such a way that it left room for a slow but sure footed bounce-back within the same tumultuous cycle.”

As Oilprice reported back in May, “U.S. shale needs to slow down to survive.” The kind of long-term strategy and measured decision-making described by Rig Zone is crucial to keeping shale alive. Panicked decisions to reopen shut-in wells all at once will destroy the industry’s chances of bouncing back. “With WTI futures now firmly above $30 and having even flirted with $40, it is these very companies who are leading a slow recovery,” the report continues. “Their ranks include Parsley Energy, a company which demanded a coordinated oil production cut in Texas, and having failed to get one voluntarily cut 20 percent of its 126,000 bpd output.”

The road to recovery in the Permian will be slow, but steady, and it certainly will not reward impatience. But for those companies who are able to hang on--and, crucially, are able to work together to build a coordinated recovery--there is still hope for the future. The permian of the future, however, will never reach the heights of the shale revolution, and will be a much more consolidated field than before. 

By Haley Zaremba for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Mamdouh Salameh on July 02 2020 said:
    The only survival strategy for US shale is to produce sensibly at a profit rather than trying to fulfil President Trump's slogans of US oil dominance and oil self-sufficiency. The former is possible while the latter is unachievable.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News