Daily Management Review

New Chapter being eyed by Resilient US Shale Producers with Oil Price near $50


06/21/2016




New Chapter being eyed by Resilient US Shale Producers with Oil Price near $50
Confounding OPEC and Saudi Arabia with their resiliency, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel after about two years into the worst oil price rout in a generation.
 
While it would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared, the shale giants Hess Corp, Apache Corp and more than 25 other companies have beaten back OPEC's attempt to sideline them.
 
Despite growing global oversupply, the Organization of the Petroleum Exporting Countries in late 2014 pumped more oil to regain market share. With shale oil seen as especially vulnerable, the move was aimed to drive prices lower and force higher-cost producers out of the market.
 
This move caused acute pain. Stock valuations plunged and scores of small producers filed for bankruptcy, the U.S. drilling rig count dropped by more than 70 percent from when oil was still above $100 per barrel and the industry revenue fell more than 30 percent in 2015 from the previous year.
 
However despite this there has been no bankruptcy for U.S. producer that pumps more than 100,000 barrels per day (bpd). Why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd is partly explained by the survival of these big producers.
 
The industry is now cautiously focusing on growth again thanks to their agility which required doubling down on improved techniques to squeeze more oil from each new well while slashing costs in half.
 
Having abandoned a culture of maximizing production regardless of costs, this time U.S. producers say they will stay focused on capital returns.
 
Les Csorba, a leadership consultant at Heidrick & Struggles who works with shale executives said that OPEC and Saudi Arabia "thought that there would be major capitulation and damage to U.S. shale producers as a result of the deep downturn."
"But what happened was that it actually created a new paradigm among U.S. producers to transform their businesses," said Csorba.
 
With Devon Energy Corp finding buyers for more than $2 billion in non-core assets, acquisition activity has picked up markedly in recent weeks. Part of that cash I being used by the company to boost its capital budget by $200 million.
 
45 million new shares earlier this month were sold by WPX Energy Inc which spent more on acquisitions last year than any U.S. oil company. The company plans to drill new Texas wells with these funds.
 
"We're a leaner organization than we were before the price crash," said Rick Muncrief, WPX's chief executive.
 
"There's a perception out there that if commodity prices go back up, you're going to lose those cost savings," Muncrief said. He however stressed, "that's simply not the case."
 
Though high-tech advancements in sand, drilling and chemical technologies should stick around, costs for oilfield services - fracking and the like - may rise in tandem with oil prices is the industry consensus.
 
"Real progress for us has come on the cost side. We plan to maintain a methodical approach to the cycle with a focus on returns," said John Christmann, Apache's chief executive.
 
Almost doubling from the 13-year lows hit in February to reach over $51 in early June, U.S. oil prices CLc1 have recouped nearly half their losses from mid-2014 highs.
 
"People are not necessarily freaking out anymore. Instead of trying to keep their heads above the water, they're now trying to get back in the game," said Sam Xu, an investment banker with CohnReznick Capital Market Securities LLC.
 
(Source:www.reuters.com) 






Science & Technology

30,000 Fake Accounts Cracked Down Upon In France by Facebook

First Laser Sensors Set To Be Rolled Out By Self-Driving Start-Up

To Keep Elderly On The Move, Japan Automakers Look To Robots

AMD purchases wireless VR developer Nitero

In Order To Combat Fraudsters, Experian Enlists Behavioral Biometrics Startup

Daimler and Robert Bosch to create a self-driving car

Miniature Lab Conducts Successful Experiments In The Outer Space

Germany is not afraid of digitalization

Driver-less Car Sector Shaken Up By Intel's $15 Billion Purchase Of Mobileye

Talk To Appliances, Or Text Them? Smart Condo Conundrum

World Politics

World & Politics

US Aircraft Carrier Could Be Struck At Any Point, Says North Korea

Various Countries’ Computer Security Watchdogs Collaboratively Discover Activities Related To Large Scale ‘International Cyber-Attack’

Europeans keep € 15 billion in obsolete money

Japan invited to conclude a trade agreement with the EU

Present “Great Repeal Bill” Punches Holes On Prime Minister May’s Worker’s Rights Agenda

China to become second largest importer of wine

EU Ambassador Tells US To Think Twice Before Making UN Irrelevant,

Skytrax names best airports in the world