In this week's edition of Let's Talk Energy, Ryan Hassler, VP of Analysis at Rystad Energy, and Marauder Capital's Roe Patterson joined Noah to dig into the companies that are drilling, fracking and producing oil and gas in the US shale plays. Oil and gas companies working onshore US are cautiously increasing activity to bring on more production, incentivized by the currently high prices for oil. While the price outlook remains highly fluid, the continued conflict in the Middle East and the need to refill the resulting 1-billion-barrel deficit in global storage levels is giving CEO’s confidence to marginally increase production. Stream the full episode now: How data center growth is slowing the US shale comeback

Noah Brenner: We've upped our outlook for US oil output by about 500,000 barrels per day this year. What are we anticipating in terms of the increased need for equipment, and which operators might be driving that activity? 

Ryan Hassler: "With that call of increased demand from the operators, we're seeing a maximum of around 30 additional horizontal rigs by the end of this year. That 30-rig addition would also be chased by anywhere between 10 to 12 frac fleets on the pressure pumping side. There's not really been an immediate response, and compared to previous cycles, with a price signal this high, the response is somewhat muted. While we're in a much more consolidated upstream environment this time around, largely the increase is being announced from public operators today. The remaining rigs could be brought into the market still by private operators. Just certainly not to the extent that we saw a big private ramp-up like we did in 2022." 

NB: What are the types of inbound calls you're seeing on the production services side? Does it support this kind of modest increase in activity? 

Roe Patterson: "Most of what we've seen is really an increase in volumes based on capex budgets that were set in 2024 and 2025. We haven't seen a flood of capex come back to the market based just on the price escalation from the war. Most of our customers have been pretty much trying to keep one foot on the gas, one foot on the brake; stick with their return capital to shareholders mandate, not get over-levered and not chase too much growth." 

NB: What's the feeling out there as to whether this uptick in price is sustainable? How are operators thinking about the upcycle? 

RH: "Operators have been really reinforcing that cautious tone, capital discipline. We're in an environment where hedging contracts have improved marginally, and many operators are happy just cash-harvesting in the open market. It's really a question of confidence in the tail end of that price curve, and that's what's been holding up a quicker or more sustained response from the upstream side." 

NB: How are operators thinking about the sustainability of the upcycle? 

RP: "The confidence in oil prices today is pretty weak. Most people think it's momentary. We saw prices go from $100 to $87 a barrel in the last couple of days; that's what everyone was expecting to happen. If a firm peace agreement is made and the strait is wide open and moving, I think you'll see prices migrate lower. As far as the response from the sector broadly, it's been muted, because the confidence in these wild swings to the high side; people don't think there's staying power there." 

NB: What are you forecasting in terms of the potential for general onshore OFS inflation? 

RH: "Broadly, what we're forecasting for core drilling and completion categories is between 7% to 10% inflation from the bottom of Q4 2025. Doing exit-to-exit, Q4 2025 to Q4 2026, we're calling for around 7% to 10% inflation. The upside risk to slightly more inflation for pressure pumping is a little more outsized than on the drilling contractor side. Diesel surcharges were originally quite difficult for suppliers to push through, but that pushback has pretty much fallen away, and that contributes to around 2% inflation on well costs just at a baseline level." 

NB: Does the inflation actually translate into a better margin for OFS companies? Or does it get eaten up? 

RP: "These inflationary expense numbers aren't going away. Pretty much every component that we use (solenoids bought overseas, parts manufactured domestically for replacement components), they're still more expensive today than they were a year or two ago. The inflation is sticky. It rarely comes away. Even today, most service companies are not making replacement cost economics or new-build economics for their return on capital. The operators are going to have to allow these companies to make enough margin to replace equipment and to do new builds at some point."

Stream the full episode now: How data center growth is slowing the US shale comeback

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