As fuel demand soars, OPEC+'s ability to ramp up production has been called into question, and soaring oil prices have spurred U.S. shale producers to spend more at double-digit rates.
According to Reuters, U.S. shale companies are restarting projects that closed in the early days of the pandemic, buying assets, increasing the number of wells drilled and hiring fracking workers.
Last week, the U.S. benchmark oil price briefly exceeded $93 a barrel, a staggering 65 percent gain in a year, climbing to its highest price since 2014.
Some executives say high prices and relatively low service costs have created the industry's best economic conditions in years.
Chris Wright, chief executive of hydraulic fracturing services Liberty Oilfield Services, told Reuters: "Since the beginning of the shale revolution, the economy of drilling is better today than ever. ”
Some companies are buying assets from U.S. oil, pipeline and gas processing rivals, betting that higher prices will cover rising labor and equipment costs.
In addition, from colorado's DJ Basin, to Wyoming's Powder River Basin, Louisiana's Hainesville Basin, to North Dakota's Bakken Basin, numerous oil fields have seen new activity in recent months.
Mergers and acquisitions stimulate output
Cowen, an investment firm, noted that U.S. oil producers' spending budgets grew by about 13 percent year-over-year.
Among the secondary fields, production in Hainesville, the second largest field, has fully recovered from the 2020 oil price plunge, and in addition, this and other shale fields are acquiring assets and rigs.
Energy pipeline company Crestwood Equity Partners closed a $1.8 billion deal to acquire Oasis Midstream Partners' oil, gas and gas processing assets in North Dakota and Texas as part of its plans to become a major midstream operator in the Buckon, Pink River and Permian shale fields, Reuters reported.
Bob Phillips, CEO of the company, added:
"When you look up the oil price in Bakken, the immediate price is close to $90/barrel. This is actually not common. ”
Andrew Dittmar, an M&A specialist in the energy sector, said shale oil M&A deals could accelerate this year.
Rising oil prices benefited all oil fields
Every basin is enjoying a boost from rising oil and gas prices, said Ben Dell, interim CEO of Civitas Resources, a carbon-neutral oil and gas producer in Colorado.
"Dj basins are particularly profitable."
According to the U.S. Energy Information Administration (EIA), the average daily natural gas production in the Hinesville shale oil and gas fields climbed to a record level of 141 cubic feet this month.
In fact, production is growing too fast and proves that forecasts are too low in some regions.
For example, Hinesville has 42 active rigs, more than the 37 estimated by analyst firm East Daley Capital.
Rob Wilson, vice president of East Daley, said: "Our current forecast has further upside. ”
How much room is left for oilfield production?
While production continues to increase, other fields, with the exception of Hinesville and the Permian, are still lagging behind the peak.
The Bakken Basin's average oil production is about 1.2 million barrels per day, down from its peak of 1.52 million barrels at the end of 2019. Eagle Ford Shale oil production in Southern Texas averaged 1.1 million barrels per day, down from a peak of 1.7 million barrels in early 2015.
According to Reuters, Bakken producer Hess plans to increase its overall production by 12 to 15 percent this year, driven by production from the Barcon and Guyana fields.
Chevron plans to increase its Permian shale oil production by 10 percent, and ExxonMobil says it can produce 25 percent more oil and gas from its Permian fields.
Mizuho analysts said U.S. producers are increasing the number of wells drilled at a rate of 3 per week, but maintaining production at current levels would require an increase of 11 per week.
Ron Ness, head of the North Dakota Petroleum Commission at trade group, said supply chain challenges could limit production growth this year and investors could demand higher returns.
"Unless oil prices break above $100 to change investor mentality and turn to growth, I'm not sure we'll ever see 1.5 million barrels a day in production again," he said. ”
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