The largest U.S. shale producers have not been tempted to drill aggressively by $90 oil, and they will not be tempted by $150 or even $200 oil to change their conservative production growth plans, executives at the biggest public shale firms said this week.
The U.S. shale patch has been vowing capital discipline over the past two years, but the recent rally in oil prices—which are now 20 percent higher than they were on January 1, 2022—has started to pose questions for the market whether or when that discipline will break.
Some private producers have boosted spending on more drilling, but the biggest listed independents are holding the line and vow to continue doing so in the medium term.
"Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans," Pioneer Natural Resources' chief executive Scott Sheffield told Bloomberg Television in an interview. "If the president wants us to grow, I just don't think the industry can grow anyway," Sheffield added.
The capital discipline from the public independents in the U.S. shale patch doesn't bode well for U.S. gasoline prices and for President Biden's approval ratings. Yet, companies like Pioneer Natural Resources, Continental Resources, and Devon Energy are keeping discipline and plan to grow production by no more than 5 percent annually.
"We project generating flat to 5% annual production growth over the next five years as we have previously noted," Continental Resources CEO Bill Berry said on the Q4 earnings call this week.
Sheffield said on Pioneer's call, referring to production growth: "Long term, we're still in that 0% to 5%. It's going to vary. We're not going to change, as I said, at $100 oil, $150 oil, we're not going to change our growth rate. We think it's important to return cash back to the shareholders."
"In regard to the industry, it's been interesting watching some of the announcements so far, the public independents are staying in line. I'm confident they will continue to stay in line," Sheffield said.
The private independents, those that have announced growth rates in the 15-25 percent per year range, are unlikely to be able to continue to grow at these rates, or "they will significantly reduce their inventory fairly quickly," he added.
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By Tsvetana Paraskova for Oilprice.com
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Despite the hype by the US Energy Information Administration (EIA), a comeback of US shale oil production to pre-pandemic level isn’t going to happen soon or ever.
The maximum shale oil production could rise is estimated at 200,000-300,000 barrels a day (b/d) in 2022.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London