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U.S. Shale Production To Double Despite Struggles

Friday, November 15, 2019

1. China’s economic slowdown

- China’s retail and industrial activity continues to decelerate, with a particular dip notable in 2019 as the trade war takes its toll.

- But Germany and Japan also just reported dismal numbers. Germany narrowly avoided a recession with third quarter GDP growth at 0.3 percent, and that anemic growth rate was actually an improvement over the second quarter. Japan’s GDP figure stood at 0.2 percent, a sharp slowdown from 1.8 percent previously.

- “We are in a manufacturing recession,” Saker Nusseibeh, chief executive officer of Hermes Fund Managers, said on Bloomberg TV. “Even in the U.S., there’s contraction in manufacturing".

- China reported that fixed asset investment grew by only 5.2 percent in the first 10 months of this year, the lowest growth rate since 1998.

2. Shale drillers balance well length, costs and production

- Shale drillers have generally increased the length of their wells over time, but there is a balancing act at play.

- After a certain length, well productivity declines. On the flip side, longer laterals can be cheaper because there are fixed costs (well construction, land acquisition, gathering lines, etc.) that can be spread out. So, even if a longer well produces less oil per foot, sometimes it makes sense in order to spread out those fixed costs.

- “A simple linear relationship suggests…




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