It'll Take More Than An Oil Rally To Restart Shale Boom
(Bloomberg) -- Explorers in U.S. oil fields stung by the quick rise and fall in the market last year are expected to move cautiously when crude prices begin to climb again.
Bill Thomas, chief executive at EOG Resources Inc., the largest landholder in Texas’s Eagle Ford shale formation, told attendees at an industry conference in Houston on Wednesday that his company won’t start boosting output the first time oil hits $60 a barrel.
"We’re going to make sure the market is in good shape, it’s balanced, and we’ve got a future," Thomas said. "We don’t want to ramp it up and drive the price of oil down again."
West Texas Intermediate, the U.S. benchmark, swung wildly between a bull and a bear market last year, and the industry followed by adding rigs and then immediately parking them again. The global oil industry slashed more than $100 billion in spending last year to cope with crude prices that are down by more than two thirds since the middle of 2014.
Pioneer Natural Resources Co. became the latest producer to scale back, announcing plans to ditch a budget increase and shut down drilling in two fields after swinging to a loss in the fourth quarter. The Texas shale operator will cut spending by about 9 percent from last year, according to an earnings report Wednesday.
The oil industry will eventually settle into a price range of $70 to $80 a barrel as the level they need to operate profitably, down from what the industry thought just two years ago was a range of $100 to $110, Thomas said.
The biggest factor that will keep the industry from charging back quickly is the oil services industry, said Allen Gilmer, chief executive officer of energy consultant Drilling Info Inc. The service providers, rig contractors and equipment makers have felt the greatest pain from more than 250,000 job cuts globally since the downturn.
“They weren’t just cutting skin deep,” Gilmer said. “They were cutting into the meat and then pretty quickly into the bone.”
Equipment that’s been idled since the cutbacks began hasn’t been well maintained and will eventually be cannibalized for parts, according to Gilmer. When prices do rise again, the memory of the crash will still be fresh, which will make everyone from bankers to former roughnecks wary about getting involved with the oil industry again.
"It’s not really like just turning on the light switch," Thomas said. "The industry kind of tried that last year and it didn’t work. We’re not going to do that again."
--With assistance from Joe Carroll.
To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Carlos Caminada, Jeffrey Taylor.
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
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- I Squared Eyes Full Ownership of Europe Gas Storage Firm
- 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