Americas News
$40 is the New $70 to Trigger More U.S. Shale Production
Two leading U.S. shale producers said they will increase spending and output if oil prices reach the low to mid-$40 per barrel range.
Less than a year ago, both Continental Resources Inc. and Whiting Petroleum Corp. said the threshold was above $60 per barrel.
John Hart, chief financial officer for Continental, told reporters his company is prepared to increase capital spending if U.S. crude CLc1 reaches the low- to mid-$40s range, a figure that will enable it to boost 2017 production by over 10 percent.
Jim Volker, chairman and CEO of Whiting, said he would "consider completing" new fracking wells in North Dakota's Bakken formation if oil reaches $40-$45 per barrel (Volker's previous threshold was $70).
Even Apache Corp., which predicts it will decrease output as much as 11 percent this year, has stated it will probably be able to match 2015 North American production if oil averages at $45 for 2016.
One reason for this display of confidence is the growing number of wells that have already been drilled but are awaiting fracturing (945 and counting in North Dakota, compared to 585 in mid-2014, according to reports).
Critics say that fracking these wells would only achieve a short-term supply boost, and John Kilduff, partner at Again Capital LLC, says the threat of a shale rebound is "putting a cap on oil prices.
"If there's some bullish outlook for demand or the economy, they will try to get ahead of the curve and increase production even sooner."
Some producers have reportedly already begun hedging future production, with prices for 2017 oil trading at near $45 a barrel.
The can-do spirit of the U.S. shale industry was recently exemplified by Joe Barton, Republican congressman for Texas, who in late February said if the Organization of the Petroleum Exporting Countries (OPEC) slashes production to rebalance the global oil market, U.S. producers will correspondingly boost production and grow their market share.
