![]() At the recent Barclays CEO Energy-Power Conference, Pioneer CEO Scott Sheffield said some operators had started drilling in less productive tier 2 and tier 3 acreage. That has since become the consensus view. In 2018, shale pioneer Mark Papa, founder and former CEO of EOG Resources EOG, spoke of “resource exhaustion,” arguing that shale oil would not grow past 2025 because of inventory degradation. Some shale players have warned about this for years. production growth – offering the so-called "tier 1" acreage that drives profits. Prime drilling land is also disappearing, with only a few counties in Texas' Permian Basin – the engine of U.S. benchmark West Texas Intermediate crude - currently hovering around $78 a barrel for next year - would need to rise above $80 to provide sufficient incentive for shale producers to ramp up investment. Longer term, there are questions about the economics of shale and the scale and viability of the resource, which increases the breakeven point for projects to deliver both cash returns and production growth.įorward prices for U.S. They want cash returns, not growth – and companies that stray from the dividends path see their shares pummeled. Investors have been milking the oil sector for cash in the form of dividends and share buybacks for some time. Investor demands for capital discipline explain much of the underinvestment in new drilling. shale growth expected to dry up so soon, even while oil prices remain high? That is why many experts have warned about the pitfalls of underinvestment in the oil industry in recent years. ![]() ![]() ![]() And let’s face it, recent events, most notably OPEC’s decision to cut its production by 2 million barrels a day despite the world economy being on the brink of recession, show that these countries will put their interests ahead of Washington’s. Together, this will put more market power in the hands of Gulf OPEC members like Saudi Arabia and the UAE UAE. ![]()
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