This Is What Shale Growth Will Hinge On

The next few years of oil and gas production growth in the U.S. will hinge on the discipline of operators with their capital budgets.

That’s according to data and analytics company GlobalData, which made the statement in a comment sent to Rigzone on Thursday. In the comment, GlobalData highlighted that oil and gas operators have been focusing on production growth at all costs over the past ten years but switched their initiative to returning value to investors last year.

GlobalData noted that the majority of operators have stated that they are planning to operate within free cash flow to fund their future capital expenditures. This strategy has been brought on by banks and lenders having stricter requirements when lending to the energy sector, GlobalData outlined.

“If prices remain flat, at around $60 per barrel for the remainder of 2021, operators will have a chance to generate free cash flow and prove to investors that that they are able to return money to shareholders after poor results in 2020,” Andrew Folse, an oil and gas analyst at GlobalData, said in a company statement.

“However, since prices have risen, the rig count in the U.S. Lower 48 has also increased significantly, along with the U.S. production levels. If production levels continue to increase, the OPEC+ group could increase their production in a short period of time, which would directly affect commodity prices and profitability of the U.S. operators,” he added.

“U.S. President Joe Biden has added a degree of uncertainty for oil and gas operators with acreages located on federal lands. He ordered a 60-day pause on issuing new drilling permits and leasing on federal lands. However, a hiatus on drilling permit on federal lands would not have an immediate effect on overall production level, with operators shifting their capital to acreage on public lands,” Folse continued.

“As the 60-day ban on federal land leasing came to an end on March 21, the U.S. Bureau of Land Management (BLM) stated that it would resume processing oil and gas drilling permits on federal lands. If a long-term ban on federal drilling permits was to be a permanent policy, it could have an overall effect on oil and gas production levels in the upcoming years,” Folse went on to state.

GlobalData, which was formed in 2016, covers several industries, including oil and gas, technology, and banking. The company has published several oil and gas sector reports over the past few months concentrating on a variety of topics.

To contact the author, email andreas.exarheas@rigzone.com