Blogspot: U.S. Shale's Battle Droids March On and Take No Prisoners

May 15, 2018

Analysis by Pat Davis Szymczak for Oil&Gas Eurasia


You can almost hear the drums beat month on month, as U.S. shale production marches on like a battle-droid army in a Star Wars film. Most recently, the U.S. Energy Information Administration issued its monthly drilling productivity report saying that U.S. shale production is expected to rise by about 145,000 barrels per day to a record 7.18 million bpd in June, 2018.


That is mostly from the Permian basin centered around the West Texas towns of Midland and Odessa, the most prolific U.S. oil bearing region. Output in the Permian is expected to climb by 78,000 bpd to a new record of 3.28 million bpd, the EIA reported.


But there is more. Output in North Dakota’s Bakken field is expected to rise 20,000 bpd to 1.24 million bpd, the highest since June 2015. In South Texas, Eagle Ford production is set to rise 33,000 bpd to 1.39 million bpd, the highest since February 2016.


Meanwhile, U.S. natural gas production is projected to rise to a record 68.1 billion cubic feet per day (bcfd) in June. That would be up almost 1.1 bcfd over the May forecast and would be the fifth monthly increase in a row. A year ago in June output was just 56.4 bcfd. The EIA projected gas output would increase in all of the big shale basins in June.


Output in the Appalachia region, the biggest shale gas play, was set to rise almost 0.4 bcfd to a record high of 28.1 bcfd in June. Production in Appalachia was 23.5 bcfd in the same month a year ago.

EIA said producers drilled 1,297 wells and completed 1,242 in the biggest shale basins in April, leaving total drilled but uncompleted wells up 55 at a record high 7,677, according to data going back to December 2013.


So this means what? The U.S. is on a fast track to become the world’s largest liquid petroleum exporter, displacing Russia and Saudi Arabia. Certainly this is true in the short term. But perhaps in the longer term as well. It all depends on production fundamentals, infrastructure capacity, refining and price spreads, analysts muse. 


With regard to production fundamentals, U.S. independents loudly touted technology innovations to the investment community during early May earnings calls. New well designs and more efficient fracturing techniques earned the moniker Permian 3.0 in the media hype. But you can’t argue with the numbers. Pioneer Natural Resources reported a 35 percent rise in production; Devon Energy, up 20 percent; Parsley Energy Inc., up 70 percent; Anadarko up “dramatically,” as its CEO told the media; and Apache Corp., up 19 percent.


The question of course is sustainability. Independent producers control U.S. shale production and their operations are driven by financial and commodity markets. Crude oil prices take a dive and nimble Texas-style oil men and women shift their businesses into less risky ventures — only to get back in the game when the