Current oil price: $100.36 WTI| Latest US rig count: 548

A note from our Partner and Head of Shale Research, Artem Abramov

US tight oil producers are now facing tremendous pressure to fast track production growth and contribute to the stability of the global energy system. The investor community is becoming more open towards slightly looser capital budgets, but rejects potential degradation in industry environmental performance, which might accompany accelerated tight oil production growth. Equipment lead times in the supply chain are currently at the highest level since 2017-2018 and persistent service industry and labor bottlenecks restrict the ability of operators to bring additional rigs and frac spreads into the operation. 

The US is still positioned for approximately 1 million bpd growth through 2022 despite these bottlenecks and the growth capacity might increase substantially by 2023 if market fundamentals do not change materially.

US shale companies scale back 2022 oil hedging as prices climb

US exploration and production (E&P) companies have reduced hedges for 2022 as they seek to benefit from rising oil prices. Operators currently have 35% of their total guided and estimated oil output for 2022 hedged at a Nymex West Texas Intermediate (WTI) average price floor of $57 per barrel. This is down from 37% in our November update of 2022 hedging, and the current floor price is $10 higher than last year’s floor and $2 above the November figure. Overall, producers that do hedge have on average hedged 47% of their expected 2022 crude output. The step-down in hedging reflects expectations of higher crude oil prices and an unstable geopolitical situation where other risk management strategies are preferred to derivative hedging.  

The full dcoument provides deeper insights into the US onshore oil and gas industry's hedging strategy and how it's been closely tracked as a key barometer for cash flows. 

US onshore drillers constrained by operator uncertainty 

After months of steady growth in rig count and day rates, US onshore drilling contractors face what looks to be a turbulent rest of the year given the uncertainty surrounding how long the current market disruption may last.

Building off insights from our previous US onshore drilling contractors update, the dwindling supply of high-spec rigs along with the long turnaround and higher capital expenses that accompany reactivating and refurbishing stacked equipment will require a balancing act for the industry. Operators would need to pick up high-spec rigs with active crews and efficiency gains to fulfill their drilling programs, and contactors finding labor, increasing rig day rates and contract terms to justify the capital necessary to meet demand.

The full document takes a look at the US onshore drilling constraints in 2022, highlighting the pace at which the addition of horizontal rigs in the US is set to be balanced between both public and private operators, and much more. 

Introducing our newly launched North America Sustainability Solution!

Sustainability and the energy transition are defining efforts of our time and we are at a defining moment. As the world hastens its speed in the race against climate change and the reduction of carbon footprints, Rystad Energy is here to help provide you with the necessary tools to visualize the ongoing efforts toward a greener future. We are excited to announce our ground-breaking, regionally-focused upstream emissions solution – the North America Sustainability Solution.

Active subscribers can benchmark key operators and contrast key trends in the upstream space for all oil and gas fields in North America, analyze North American onshore and offshore CO2 and CH4 emissions and intensity down to individual assets, examine relevant peer fields or companies, and benchmark on both absolute and intensity basis. Additionally, users can evaluate CO2 and CH4 emissions by emission source and use maps, charts, and forecasts to gain insight on performance.

Want to learn more about this new solution? Our team will be delighted to set up a meeting and discuss further details.

Rystad Energy Product Highlights