Investors, frustrated by years of poor industry returns, punished companies that sought to increase production at the expense of returning shareholders and rewarded those who exercised capital discipline.
Drilling of new wells could increase supply at a time when oil sells for $ 70 a barrel, a level of profitability for shale producers Americans and OPEC.
These high prices, the ironHurricane metrics in US offshore wells and a rapidly declining order book of drilled but unfinished shale wells may prompt producers to restart drilling and test their commitment to keep spending flat.
The delay of shale wells waiting to be activated has sharply decreased, the latest US data shows, the reduction of a reserve that has allowed companies to maintain production without spending more.
Some executives say more beer sh will be needed to offset normal production drops and hurricane losses , and investors will have to accept it.
"Spending in 2022 will need to be higher just to maintain the volumes appreciated in 2021 and I believe that 'Wall Street in general is aware of this "said Nick O ' Grady, Managing Director of Northern Oiland Gas Inc (NOG.A) , which owns interests in wells in Texas and North Dakota.
FOUR YEARS LOWEST
The new wells cost about $ 7 million each, with drilling accounting for about 30% of the total. With oil at $ 70 a barrel, producers could invest more money in drilling while still managing to increase shareholder payouts, analysts say.
The number of drilled but unfinished wells, called DUCs, fell to 5,957 in July, the lowest in four years, from nearly 8,900 at its peak in 2019, based on US data Energy Information Administration.
Operation of DUCs has kept investment spending stable. A group of 31 oil and gas producers followed by investment firm Cowen plans to spend just 1% more this year than last year, even though oil prices have jumped.
we companies have increased their crude volumes by 11% to 12 million barrels per day in 2019. But this year's production is around 11.4 million barrels per day (bpd), according to the EIA, and will decrease by 100,000 bpd until the late this year, on losses caused by Hurricane Ida, the EIA said.
Linda Htein, director of a Le energy consultant Wood Mackenzie, said that completing the DUCs was a great way to maintain productivity.one without adding a bunch of platforms or increasing capital spending.
Pioneer Natural Resources (PXD.N) has reduced its DUC backlog in the past 18 months. The shale producer may soon hire a third fracking crew, chief executive Scott Sheffield told Barclays CEO's Energy-Power conference this month.
" Right now we're sticking to two, "he told investors.
REDUCED THE INVENTORY
At current well completion rates, the EIA estimates that the main US shale deposit responsible for oil gains in the United States over the past decade has less than six months of DUCs remaining.
Unless the producteShale urges do not start drilling new wells, the depletion of DUC's backlog "could limit the growth of oil production in the United States in the coming months," the EIA said.
The number of recently drilled oil rigs in the United States was around 401, according to data from Baker Hughes Co (BKR.N) aired on Friday. But that number of rigs is historically low compared to other periods when crude oil futures prices were near similar levels or at even lower prices.
As the number of US oil rigs has increasednty, it has been historically low compared to other periods when crude oil futures prices at the start of the month were close to similar levels or at even lower prices.
DUCs have been a "very powerful short-term fix, but not a long-term fix," said Mark Finley, a former BP Plc (BP.L) economist who is an energy researcher at the Baker Institute for Public Policy at Rice University.
"At one point, the inventory of wells drilled but excess unfinished will run out. " By Arathy Nair in Bangalore; edited by Gary McWilliams and Jane Merriman
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