$110 Oil Prompts Private Shale Firms To Open The Taps

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When rebounding oil demand began pushing benchmarks higher last year, forecasters and traders alike watched the U.S. shale patch with bated breath to see when drillers would start drilling again. Most didn't. The ones that did were the smaller, privately held players.

Public shale companies suffered a serious blow from the pandemic when growing shareholder disgruntlement combined with the unprecedented destruction of demand for oil to pressure them into a rearrangement of priorities, to which these companies appear to have stuck despite the price rise.

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The chief executive of Pioneer Natural Resources put it quite bluntly last month in an interview with Bloomberg. "Whether it's $150 oil, $200 oil, or $100 oil, we're not going to change our growth plans," Scott Sheffield said. "If the president wants us to grow, I just don't think the industry can grow anyway."

Devon Energy's Rick Muncrief, on the other hand, indicated that big public shale drillers are simply wary of any adverse consequences so soon after the pandemic to start boosting production in any major way.

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Private drillers, on the other hand, have no shareholders to make happy. They do not have the constraints of their public sector players. And they are drilling. The Energy Information Administration said in its last Short-Term Energy Outlook that U.S. crude oil production could hit 12.6 million bpd on average next year: a record high.

With large shale producers sticking to their discipline guns, most of the increase would inevitably have to come from smaller, private players in the shale field. As already noted, they don't have shareholders to answer to. But they have got debts to pay off and cash to generate to insulate themselves from the next market crash.

Rystad Energy this week forecast that the latest price surge could see an additional 300,000 bpd boost to already rising U.S. shale production, Reuters reported. This, the Norwegian energy consultancy said, could bring the total production increase in the U.S. shale patch to 1.2 and 1.3 million bpd.

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