America Is Still an Energy Superpower (And An Oil and Gas Boom Is Coming)
The financing market for new shale projects remains tight but that shale producers who have spent the last two years heavily focused on cutting costs, increasing efficiencies, and deploying improved technologies are now able to present a far more attractive profile to potential investors than they could in 2018.
It appears that it really is difficult to keep the oil and gas business in the United States down and out—because it always rallies like a scintillating fourth-quarter comeback.
Industry expert David Blackmon of Forbes used the Enverus Daily Rig Count as one example: On Sept. 1, 2020, that metric showed the number of active drilling rigs in the United States was near its all-time low of roughly two hundred eighty—but today, that figure has surged to four hundred sixty active and working rigs. That represents a whopping 67 percent increase in only half a year.
Moreover, the Primary Vision count of active U.S. frac spreads had recovered to one hundred seventy-five as of Feb. 12, more than doubling the eighty-five seen on August 28 last year. However, that plummeted to forty-one active spreads during the mid-February arctic freeze of Texas, Oklahoma, and other shale states. By Feb. 26, it bounced back up to 140.
“Granted, these rig and frac spread numbers remain well below the highs of late 2019/early 2020, but they still represent a remarkable turnaround from the depths of the depression in just half a year,” Blackmon wrote.
“This becomes especially impressive when one considers that it has been achieved amid continuing mediocre financial results from big shale producers and ongoing tightness in the financial markets related to the funding of major shale-related projects in the U.S.,” he added.
Analysts are taking note. Goldman Sachs recently raised its forecast for the mid-year West Texas Intermediate price to $72 per barrel. This particular forecast was released on Feb. 22, well before the OPEC+ group surprised markets by signaling that it won’t change its current production and export levels through the end of April.
That announcement has already resulted in tacking on 10 percent to the price of WTI.
“Key will be the potential shale supply response, although the latest earnings season suggests investors are still a long way away from rewarding growth,” the bank said while elevating its forecast for 2022 U.S. shale production by three hundred thousand barrels per day.
“Let’s all remember that the U.S. shale industry boomed like never before throughout 2018 and 2019, a time during which WTI traded in a range of $53 to no higher than $72 per barrel. While it is true that the financing market for new shale projects remains tight, it is also true that shale producers who have spent the last two years heavily focused on cutting costs, increasing efficiencies and deploying improved technologies are now able to present a far more attractive profile to potential investors than they could in 2018,” Blackmon wrote.
He added that the U.S. oil industry’s “outlook equation all still revolve around the central element of ‘what will OPEC+ do?’”
“Given that caveat assuming that the current discipline of the OPEC+ group continues to hold together for the coming two-year time frame, the domestic oil and gas business is likely headed for another boom time. It will probably be more modest than the last boom, given the more disciplined outlook of the corporate players, but a boom it will most likely be,” he concluded.
Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.