Halliburton CEO, Jeff Miller commented on the prospects for a recovery in activity in their recent quarterly investor conference call. One thing that will limit the rebound, is the capacity simply is not there from a service and supply standpoint. I covered one in an OilPrice article last week, where I laid out a case for WTI rising to over $100/bbl by early next year. It should be noted that there are alternate scenarios out there. At least in the most likely pricing scenario being forecast, where WTI stays in the mid-$40's to a high of around $50.
With a little help from the OPEC+, which after realizing the enormity of their mistake in March, also voluntarily shut-in wells with the same goal in mind, prices responded.īut drilling and completion activity hasn’t rebounded, and it’s not going to do so. Peaking at nearly 13 mm BOE in March of this year, a failure of OPEC+ nations to agree on production cuts that same month, led oil to begin a precipitous decline in price.Ī decline that was soon matched in production as drillers laid down rigs, and then in April took the unprecedented step of actually shutting-in wells with the single-minded goal of forcing prices higher. Production grew from advances in technology and a deeper understanding of key reservoirs to record levels. That was the moment shale activity began to falter numerically, while at the same time, a miracle was taking place. In 2018 much of that laissez-faire mentality in the boardrooms of the drillers and in the vaults of the bankers came to an abrupt halt as profits and cash flow were demanded. Much of the expansion from 2016 onward was fueled by growth at any cost mindset in the drillers, and aided by bankers willing to accept ever-increasing estimates for the value of reserves. The service providers who do the actual work like Halliburton, (NYSE:HAL), Schlumberger, (NYSE:SLB) have written off tens of billions worth of fracking-related equipment, closed facilities and laid off thousands of workers. Why?ĭriven by low prices not seen much in modern history, formerly high-flying shale drillers like Chesapeake Energy have gone bankrupt.
With occasional ebbs and flows, it had gradually drifted down to the start of the current calamity, where active rigs stood at a somewhat healthy 805 rigs turning to the right.įracking has also taken a commensurate dive over the last eight months, defying the conventional wisdom that as prices began to improve, activity would increase. That was the year shale activity first began to pick up from essentially nil and hit all-time peaks in 2008. Shale drilling and completions activity has collapsed to levels not seen since before 2000 (as far back as records are kept). It’s been a long dry spell in the Permian.