Companies Drill More, Faster

Despite the dramatic drop in oil prices, companies continue to drill more and faster. In a recent Wall Street Journal article it was pointed out that “But now, the easiest way for many producers to make up revenue lost to declining oil prices is to pump more.” Whiting set a record for volume in the second quarter, averaging 170,000 barrels per day. Devon Energy also pumped a record amount in the quarter, Anadarko Petroleum stated that in some areas they have doubled the number of wells they can drill with a single rig, and Pioneer Natural Resources announced plans to ramp up volume.

On top of that, Halliburton and Schlumberger have announced programs to help companies keep pumping. In a Reuters article entitled “Frack Now, Pay Later” the service giants’ programs are outlined. Options include the service firm taking all the upfront expenses and sharing in the production or their acting like a lender. They are also promoting “refracking” programs as a means to pump more product with lower up front costs than drilling new wells.

Related to the above articles, there is a thought-provoking Forbes article claiming the U.S. shale producers are winning the oil war against Saudi Arabia, meaning the Saudi’s have forced U.S. producers to figure out how to become much more efficient (“leaner and meaner”). And while the Saudi’s can handle current demand well, they need $100 per barrel in order to be able to afford to grow their ability to handle increased demand, whereas U.S. producers can handle demand increases at a much lower price. The claim brings together analysis far beyond my expertise, but it is an interesting and worthwhile read.

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