Massive Spending Ahead As Industry Develops US Shale
Now that the land grab of U.S. shale oil and natural gas acreage has ended, the oil and gas industry faces a new question – how it will fund the commercialization of unconventional resources.
Cash flow issues have already been seen among oil and gas companies seeking to develop shale, raising questions about financing and how companies will handle spending, according to a panel of industry experts at the Bloomberg Oil & Gas Conference Thursday in Houston.
With most major shale plays discovered and acreage leased, the time has come for the industry to digest and drill what they might have, said Ron Hulme, CEO of Parallel Resource Partners, during a panel discussion on the amount of investment needed to commercialize shale.
To date, 60,000 unconventional oil and gas wells have been drilled in the United States, but 500,000 drilling locations remain, meaning the industry has drilled a little more than 20 percent of this inventory, given current spacing and conditions.
The development of shale resources might prove the exception to the ability of companies to raise funds in capital markets, said Gray. Estimates of the amount of capital needed range from $2 trillion to $5 trillion, but the market capital of shale participants is less than $1 trillion. Companies currently are needing to go to capital markets for $40 to $50 billion a year of capital now and have been spending beyond cash flow, but some suggestions indicate that spending may double or triple. Fundamentally, the industry could face a $2 trillion gap in funding.
A company may lease land in a perspective play at $2,000 an acre, but if it fully develops that land with 40-acre spacing and $8 million wells, that company will need $200,000 an acre, a ratio of 100 to 1, said Hulme.
“Companies are spending one-third of their capital budgets on land, but need 100 times that amount to develop shale resources,” Hulme noted.
1234
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension