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A Worrying Sign For U.S. Shale

1. Frackers working through frack-log

- After years of adding drilled but uncompleted wells (DUCs) to the field, the shale industry began working through the backlog in earnest in the second half of 2019.

- The decline in the DUC list by about 10 percent can be interpreted as a sign of financial stress because it suggests that the industry is not drilling new wells as fast as they are completing already-drilled wells. Or, put more simply, the rate of drilling has declined.

- As Bloomberg points out, this trend is horrible for oilfield services companies like Halliburton (NYSE: HAL), which makes money on activity, regardless of the price of crude.

- Wall Street analysts predict a 29 percent decline in earnings for Halliburton in the fourth quarter.

- U.S. production could also flatten out once the DUC list is worked through, absent a renewed wave of drilling.

2. U.S. exports continue to rise

- U.S. oil exports continue to trend higher, with demand remaining flat at a time when production has steadily climbed.

- Exports topped 4 million barrels per day in late 2019, a record high. That may have been a one-off spike, at least for now. Still, exports consistently exceeded 3 mb/d last year, and are on an upward trend.

- That has allowed the U.S. – for the first time in decades – to become a net exporter of petroleum products.

- The Phase 1 trade deal between the U.S. and China could lead to more…




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