North American capital investments are forecast to rise by 30 percent next year.
As many observers predicted, recovering oil prices due to the Organization of the Petroleum Exporting Countries (OPEC) cutback initiative is compelling U.S. shale drillers to ramp up spending and exploration in 2017 by as much as 30 percent, according to Raymond James.
But although this, combined with president elect Donald Trump promising to ease industry regulations, points to shale companies being poised to upset the supply/demand balance that the OPEC deal will presumably achieve, U.S. producers are promising not to overspend.
Harold Hamm, chief executive officer of Continental Resources Inc., told Bloomberg, "There's a real concern by industry that we could be in for another one of these price adjustments, if we get carried away with development.
Kyle Owusu, analyst, Reorg Research
The 'animal spirits,' seem to be coming back to the exploration and production market, albeit slowly
"They're going to be disciplined going forward."
Tim Dove, chief operating officer for Pioneer Natural Resources Co., added that while his firm will boost production by 15 percent next year and add rigs in the West Texas permian shale basin, it's taking a wait-and-see approach on further expansion.
Peter Pulikkan, an analyst for Bloomberg Intelligence, calls 2017 "the year where you are going to see shale's reflexes tested," with producers waiting to see whether OPEC follows through on its cuts before increasing their development budgets (which means no decisions will likely be made until the second quarter, when there is enough accumulated market data).
Another factor said to prevent a rapid U.S. resurrection is labour, or lack of it: Reuters reports that although U.S. refiners are expected to spend $1.26 billion on maintenance next year (the highest level since at least 2010), a severe labour shortage will delay work, with the coastal region from Brownsville, Texas to New Orleans - the nation's largest refining region - being short about 37,400 craftsmen.
Still, the Raymond James data paints a picture of an industry maneuvering for a substantial recovery: the latest round of talks with banks in the fall resulted in 34 companies having their available credit lines raised an average of about 5 percent, or over $1.3 billion.
Of the 34 companies, 12 saw increases of 5 to 90 percent, and in addition to the increased borrowing base, lenders have extended maturities on loans.
Overall, the U.S. Energy Department forecasts that American crude production will fall to 8.8 million barrels per day (bpd) next year from 8.9 million bpd this year, but shale could increase from 200,000 to 500,000 bpd.
Kyle Owusu, analyst for Reorg Research, stated, "The 'animal spirits,' seem to be coming back to the exploration and production market, albeit slowly."
Hamm, who is now preaching moderation, earlier this year in his capacity as energy advisor to Donald Trump told the press that the president elect's "unleashing" of U.S. shale will result in energy independence by 2022.