HOUSTON: US shale producers are redeploying cash, rigs and workers, cautiously confident the energy sector has turned a corner after Donald Trump’s election victory and OPEC’s recent signal that it plans to curb production.
The downturn produced a leaner, more efficient US shale industry that was forced to develop and quickly adapt new technology to compete with conventional oil supplies during a two-year period of depressed prices.
“You’re starting to see a little bit of light at the end of the tunnel,” said Ryan Lance, CEO of ConocoPhillips, the largest independent US oil producer. “We’re beginning to put capital back to work, but we’re being cautious.”
Specifics of the deal by the Organization of the Petroleum Exporting Countries — especially what it means for each member — need to be finalized at a meeting later this month in Austria.
But the tentative agreement indicated an end to a damaging price war. That prodded US producers to action.
“The industry is looking forward to a tepid recovery in early 2017,” said John Chisholm, CEO of Flotek Industries Inc., which supplies chemicals used in fracking and other oilfield products.
Demand for Flotek’s CnF, a nontoxic fracking fluid, during the first nine months of 2016 has already eclipsed 2015 sales volumes, with projections higher for 2017.
“These oil producers have reconstructed their business so they can make money at these low oil price levels. They’re pressing forward.” The US oil drilling rig count has grown 6 percent since OPEC’s September accord, according to oil field analytics firm NavPort, with additions across the country’s top shale fields including the Permian (7 percent) and the Bakken (17 percent).
Also, Trump’s victory is expected to bring to the White House an advocate for oil and gas drilling, who will slash regulations and encourage new energy industry development.
Occidental Petroleum Corp, Chevron Corp, Pioneer Natural Resources Co. and ConocoPhillips are among those adding rigs or preparing to do so.
Oasis Petroleum Inc, a major North Dakota producer, bought 55,000 acres last month from SM Energy Co. for $785 million, a bullish bet on the future of oil prices. The company also plans to add rigs.
“This all reflects more of a confidence around our business plan in a lower oil price environment,” Oasis CEO Tommy Nusz said in an interview last week.
“We feel like we can hold our own now in a $40 (per barrel oil) world and grow in a $45 to $50 world.”
Citing its technology and other improvements, EOG Resources Inc. raised its growth projections and now expects to boost output 15 to 25 percent each year through the end of the decade if oil prices stabilize near $50 per barrel.
“After two years of this down cycle, we are more than ready to resume higher-return oil growth,” EOG CEO Bill Thomas told investors in early November.