BAKU, Azerbaijan, May 26
By Leman Zeynalova – Trend:
Near-term ramp-up in US shale supply is unlikely, Joseph Gatdula, Head of Oil and Gas Analysis, Fitch Solutions, told Trend.
“Weekly active rig counts are a key aspect that we monitor for a significant return of US shale. Since the Covid-19 related downturn in prices led to a collapse in activity we’ve seen activity slow return to key US shale basins. While the number of working rigs targeting oil in the US has roughly doubled since the lows in August 2020, counts remains well below the levels seen in previous boom cycles. Another key factor we monitor are the quarterly and operational updates from major producers in the shale patch. Most have highlighted much more modest growth plans than in earlier years with a preference to divert free cash flow to shareholders via dividends and share buy backs,” he said.
Gatdula pointed out that at this point, all indicators show no impending rise of US shale output at the current price levels.
“Rigs rates remain lower than during past booms with the current number of working rigs drilling for oil at 356 vs. the pre-pandemic levels of roughly 600 rigs. Drilled but uncompleted (DUC) wells also provide another source of short-term potential shale output with levels reported in April at 23 percent below the 2020 inventory high from June. Shale producers have been bringing more of the DUC wells online in the past year to account for lower drilling activity so these reserves of near-production wells also look unlikely to provide a significant near-term boost to output. Coupled with modest growth numbers and focus on profits and shareholder returns most companies in the shale patch also support a slower return to growth making a near-term ramp-up in supply unlikely,” added the expert.
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