Shale Making Too Much Money to Rescue Biden
America’s right-leaning oil industry has little political will to help President Joe Biden lower energy prices by raising production. But there’s another reason why Texas wildcatters are refusing to help: the status quo is just so profitable.
U.S. oil explorers are making more money than at any time since the shale revolution began over a decade ago, according to Deloitte LLP. And this may just be the beginning. Free cash flow, the key metric watched by investors, probably will increase by 38% next year, presuming oil prices remain elevated, according to Bloomberg Intelligence.
After effectively subsidizing consumers through the 2010s with break-neck drilling that depressed global oil prices, the shale industry appears to have struck a winning formula: moderating production, limiting reinvestment in new wells and shaving debt. Crucially, executives now understand that any output growth must be carefully measured, and not take market share from OPEC and its allies, for fear of sparking repeats of the bruising price wars of 2014 and 2020.
U.S. oil production remains about 12% below where they were in February 2020 in the early days of the pandemic, according to Department of Energy data. That’s equivalent to removing the U.S. Gulf of Mexico’s entire output from global markets.
“Public-company investors just don’t want to see companies spend a ton of money only to slam the price,” said Nick O’Grady, chief executive officer of Northern Oil & Gas Inc. “It becomes self-defeating. And that’s the experience of public investors for the last 10 years.”
The Democratic Party’s green agenda and anti-fracking platform upset many in the oil patch and the critics now are keen to point out the irony of a president who restricted drilling at home only to ask Mideast nations and Russia to increase crude production.
Biden’s Build Back Better Act includes “clean energy fantasies” that would “make America more reliant on foreign nations to provide reliable energy,” Wayne Christian, a Republican oil regulator in Texas, said last week.
But in truth, there are no regulatory or legislative hurdles standing in the way of U.S. shale oil drillers from increasing supplies. Private oil producers, unburdened by investor demands, have expanded rig fleets at a startling pace this year and now account for most of the country’s growth in crude production.
Publicly traded companies, meanwhile, are unwilling to budge from austerity programs popular with investors. There’s no upside in gifting the Biden administration with inflation-easing supplies.
“I don’t think they realize what’s changed in the U.S. is our investors want cash back,” Pioneer Natural Resources Co. CEO Scott Sheffield said on Bloomberg TV this month. “Investors do not want us to grow anymore. If he wants us to change he’s got to change that investor mindset.”
--With assistance from Gerson Freitas Jr..
What do you think? We’d love to hear from you, join the conversation on the
Rigzone Energy Network.
The Rigzone Energy Network is a new social experience created for you and all energy professionals to Speak Up about our industry, share knowledge, connect with peers and industry insiders and engage in a professional community that will empower your career in energy.
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- UK Oil Regulator Publishes New Emissions Reduction Plan
- PetroChina Posts Higher Annual Profit on Higher Production
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- McDermott Settles Reficar Dispute
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil Demand Outpaces Expectations, Testing Calculus on Peak Crude
- House Passes Protecting American Energy Production Act
- TotalEnergies Restarts Production in Denmark's Biggest Gas Field
- Republican Lawmakers Say IEA Has Abandoned Energy Security Mission
- USA Oil and Gas Job Figures Jump
- Blockchain Demands Attention in Oil and Gas
- Houthis Warn Saudi Arabia of Retaliation If It Backs USA Attacks
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- Summer Pump Prices Set to Hit $4 a Gallon Just as Americans Hit the Road
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Equinor Makes Discovery in North Sea
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension