![]() ![]() In the Dallas Fed Energy Survey carried out in June, an E&P executive commented, "Commodity pricing continues to soften, while operating costs have continued to increase and stay at elevated levels, which has led to a continued narrowing of profitability. E&Ps (exploration and production companies) from moving forward in a significant way" despite OPEC's efforts to push up prices, McDonald told Reuters at an industry conference earlier this month. "That squeeze in the margin is really keeping U.S. shale production growth, Pioneer's Executive Vice President Beth McDonald said, noting that oil would likely trade in the $70-$100 range over the next three to five years as supply growth remains limited and OPEC+ continues to restrict output. Higher labor and material costs are slowing U.S. shale producer, Pioneer Natural Resources, noted that the shale firms have seen their margins squeezed over the past year. The executive also noted that "Margins have been squeezed to the point that it is hard to commit to new projects, and all of the uncertain economic projections give no confidence as to what is going to happen going forward."Įarlier this month, the largest pure-play U.S. "I would drill if costs were not so high." "It seems as if the breakeven price for oil is in the mid-$70-per-barrel range at this point," an executive at an E&P firm said in comments to the survey. benchmark, WTI Crude, was trading at $69 a barrel on Tuesday, suggesting that the average producer would turn a profit, but a small one, considering the cost inflation in the shale patch over the past year. Larger firms generally expect their drilling and completion costs to be lower at year-end 2023 than year-end 2022, but smaller firms see their drilling and completion costs at year-end to be above where those costs were at year-end 2022. ![]() The cost increases slowed but remained above the series averages. In the survey, exploration and production (E&P) and oilfield services firms reported rising costs for the 10th consecutive quarter. Administration for its "war" on the industry. In comments to the Dallas Fed Energy Survey, executives continue to slam the U.S. ![]() The Biden Administration's attitude to the industry isn't helping, either. The shale companies are also conscious of shareholder demands to boost returns to investors and reduce debt before reinvesting profits into new drilling. Related: Heat Wave Pushes ERCOT To The Brink producers are holding back on drilling as costs continue to increase, although at a slower pace, while oil prices dropped from last year and from earlier this year and benchmark U.S. producers – and all other oil producers in the world – reduced output amid plunging demand with the lockdowns during the pandemic. ![]() The last time business activity in the Permian stalled this much was in 2020, when U.S. The business activity index is the survey's broadest measure of conditions facing Eleventh District energy firms, and it showed zero growth. The business activity index in Texas, New Mexico, and Louisiana – home to the biggest shale plays, including the Permian – fell to zero in the second quarter of 2023, down from 2.1 in the first quarter, according to executives of 152 energy firms who responded to the quarterly Dallas Fed Energy Survey. ![]()
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