Shale producers on track to deliver all-time high Q3 volumes, while defending cash flow balance

August 15, 2017

At the beginning of 2017, shale producers were aggressive in their spending and production guidance, with investments expected to be up more than 50% this year. Since then, the shale producers have been squeezed on several fronts. Lower oil price has reduced revenue, costs have increased for many operators as activity started to pick up again, efficiency gains have started to diminish, and well performances have entered into a stagnation mode.

“In the latest quarterly results, we observe the impact of these challenges that the shale industry is now going through, and see that companies have started to adjust to this reality”, Espen Erlingsen, a Partner at Rystad Energy comments. The gap between what the E&P companies earn and how much they invest increased in the second quarter. In Q2, this gap was 3 billion USD, compared to a surplus in Q3 last year. “The gap is still much lower compared to the 2014 – early 2016 period, but this illustrates that companies are struggling financially and this is viewed as a key reason for the recent drop in stock prices of dedicated shale players”, Mr. Erlingsen adds. Because of this, shale companies have started to revise their 2017 capital budgets. For the top shale producers, the 2017 capital was revised down 3% in the latest reporting. Among the companies with the largest revisions were Marathon Oil, Whiting Petroleum and Pioneer Natural Resources.

Despite the reduction in activity, most shale producers did not change their production guidance for this year. The large shale producers are still guiding around 10% increase in oil production this year. This shows that shale producers will try to protect production in the second part of 2017. “We observe that several companies plan to reduce rig counts, and this will primarily affect next year’s projected output”, Mr. Erlingsen explains. Rystad Energy maintains its original expectation that the US Shale oil production will surpass the previous record from March 2015 already in Q3 2017.


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Contact: Espen Erlingsen, Partner
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About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.

Rystad Energy’s headquarters are located in Oslo, Norway. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), as well as Singapore and Dubai.