In a rather unconventional warning, Continental Resources chief executive Harold Hamm said on Wednesday that should the U.S. oil industry embark on another spending spree, it could “kill” the market.
Speaking at the CERAWeek conference in Houston – one of the largest gatherings of oil executives and ministers, including this year Saudi Arabia’s oil minister Khalid Al-Falih – Hamm said that U.S. crude oil output “could go pretty high”.
But Hamm was quick to add, as quoted by Bloomberg:
“But it’s going to have to be done in a measured way, or else we kill the market.”
The warning of Hamm came on the day in which WTI prices plunged 5 percent, to below US$50 for the first time since December amid concerns over record-breaking inventories in the U.S.
Many U.S. companies have announced higher spending plans for this year, having seen prices stable above US$50. Hamm’s Continental Resources will be investing US$1.95 billion, aiming to accelerate production growth in the second half of 2017. Continental Resources sees full-year 2017 output at between 220,000 boepd and 230,000 boepd, versus around 217,000 boepd for 2016. The company will spend more than 80 percent of its drilling and completion budget on completing the deep inventory of uncompleted wells in North Dakota, additional drilling in the Bakken, and further STACK development. Related: Oil Prices Under Pressure From Record Breaking Inventories
Hess Corp said in January that its 2017 E&P capital and exploratory budget will be US$2.25 billion, up from the 2016 actual spend of US$1.9 billion.
Oklahoma City-based Chesapeake Energy Corporation plans total expenditures in the range of US$1.9 billion–US$2.5 billion this year, compared to total capital expenditures of US$1.65 billion–US$1.75 billion last year. The company plans to operate an average of around 17 rigs in 2017, up from an average of 10 rigs in 2016.
On the sidelines of the Houston conference, the head of the International Energy Agency (IEA), Fatih Birol, told Bloomberg:
“We are witnessing the start of a second wave of U.S. supply growth.”
And Continental’s Hamm is calling for growth “in a measured way”.
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By Tsvetana Paraskova for Oilprice.com
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