According to a report on the Wall Street Journal Chinese website on the 26th, although oil prices have rebounded recently and have risen above US$33 per barrel, U.S. production may still decline. U.S. shale drillers have made the United States the world’s top oil producer, with output exceeding 13 million barrels per day earlier this year. But it may take years to reach such heights again.
Image source: Wall Street Journal Chinese website
Oil and natural gas industry executives and experts are increasingly expressing similar sentiments, arguing that the coronavirus pandemic will lead to fewer shale oil companies and that survivors will It’s businesses that are smaller, more efficient, and less likely to pursue growth at all costs.
The report pointed out that shale oil companies have led a renaissance in U.S. oil production, helping to more than double production in the past decade. This situation has propelled the United States beyond Saudi Arabia and Russia and made it a significant player in the geopolitical competition for energy and global markets.
But before the COVID-19 epidemic weakened global crude demand and caused shale drillers to shut down oil wells on a large scale to avoid losses, many companies were already struggling to make profits, and investors were no longer optimistic about the company. industry, limiting these companies’ access to capital.
According to reports, despite the recent rebound in oil prices, back above $33 per barrel, U.S. production may still be declining because companies are not drilling enough oil wells to make up for the output of existing wells. Decline. Shale oil wells can produce large amounts of oil and natural gas in the early stages, but they decline quickly. Research firm Wood Mackenzie said that without investment in new wells, many companies’ output will fall by 30% to 50% in just one year.
A Wall Street Journal review of company disclosures found that shale oil companies have slashed their drilling budgets this year, with the top 15 companies by market capitalization cutting spending by an average of 48%. Cowen data shows that 46 U.S. independent producers plan a combined $38 billion in capital investment this year, the lowest level in dollar terms since 2004.
Thomas, chief executive of major shale oil driller EOG, said: “We believe that the capital invested in U.S. growth will be significantly reduced.” The company has already set its capital budget for this year. Cut 46%. Thomas also said that U.S. oil production is unlikely to return to pre-epidemic levels in the next few years.
Services company Baker Hughes said operators have idled nearly two-thirds of U.S. oil rigs since mid-March. The number of U.S. oil rigs has increased by This fell to the lowest level since July 2009. That will almost certainly lead to a decline in U.S. oil production, even if companies decide to restart existing wells earlier than expected.
According to reports, after companies shut down oil drilling platforms, U.S. oil production dropped to 11.5 million barrels per day in mid-May, according to U.S. Department of Energy data. Some predict oil production has fallen.
The U.S. Department of Energy currently predicts that U.S. oil production will decline to approximately 10.8 million barrels per day by early next year, down from the 13.5 million barrels predicted in January this year.
Even if the shale industry recovers, the pace of growth is unlikely to return to levels seen during the manic booms of recent years, some industry figures say, largely because of years of poor returns. The industry’s relationship with Wall Street has since soured.
The report also stated that over the past decade, large U.S. oil producers among listed companies have invested a total of US$1.18 trillion in drilling and oil production, mainly in shale business . But the companies generated $819 billion in cash from their oil operations, according to Evercore ISI, far from recouping the money.
This has led to investor disillusionment with the industry. U.S. oil producers raised about $23 billion in debt and equity in 2019, less than half of the roughly $57 billion raised in 2016, when the industry was emerging from a previous oil price drop, according to Dealogic.
Some large U.S. drilling companies have filed for bankruptcy, and shale oil drilling pioneer Chesapeake Energy has warned that it may not be able to continue operating. Fitch Ratings said the default rate on high-yield bonds issued by U.S. exploration and production companies may reach 25% in 2020, the highest level since March 2017. </p
