Shale Drillers Face Record Cost Pressures

Shale Drillers Face Record Cost Pressures
Oil drillers in the biggest U.S. fields are shouldering record costs.

Oil drillers in the biggest U.S. fields are shouldering record costs at the same time that some banks are increasingly reluctant to loan money to the sector, according to the Federal Reserve Bank of Dallas.   

Equipment, leasing and other input costs for oil explorers and the contractors they hire surged to an all-time high during the current quarter, the Dallas Fed said in a report released on Wednesday. Drillers also are seeing the universe of willing lenders shrink in the Eleventh Federal Reserve District that includes Texas and parts of Louisiana and New Mexico.

“The political pressure forcing available capital away from the energy industry is a problem for everyone,” an unidentified survey respondent said. “Banks view lending to the energy industry as having a ‘political risk.’ The capital availability has moved down-market to family offices, etc., and it is drastically reducing the size and availability of commitments regardless of commodity prices.”

Meanwhile, supply-chain snarls are hindering efforts to replace diesel-burning pumps with cleaner, electric-powered gear in the Permian Basin, where components such as transformers are in “extremely short supply,” another respondent said.  

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