Shale Players Hit Sweet Spot with Higher Volumes, Lower Costs: EIA

U.S. E&Ps, averaging a record 13.1 MMbbl/d through the first eight months of 2024, are on track to becoming the world’s top producing country for the seventh consecutive year, the U.S. Energy Information Administration (EIA) says.

But they’re setting records without spending more.

Over the past two years, publicly traded E&Ps have generally increased production, with oil volumes in second-quarter 2024 averaging 3.9 MMbbl/d— the most in the past five years.

Even as production has increased, 34 public companies examined by EIA have kept costs flat. Upstream capex per boe has averaged around $21/boe in real terms since mid-2022 while oil increased by 21%. By comparison, in 2019, the E&Ps produced crude oil at an average cost of $32/boe.

At the same time, E&Ps continue to send cash back to shareholders through dividends and stock buybacks, according to an EIA analysis released on Dec. 11.

“Increasing well productivity, primarily due to advances in horizontal drilling and hydraulic fracturing technologies, has been a key driver in U.S. crude oil production growth, enabling U.S. producers to extract more crude oil from new wells drilled while maintaining production volumes from legacy wells drilled previously,” EIA said in a Dec. 12 report.

Second-quarter 2024 financial results for 34 publicly traded U.S. oil E&Ps suggest increasing well productivity is helping these companies reduce production costs on a per barrel basis and freeing up cash for other uses, including shareholder returns.

In the Permian Basin, the largest source of crude oil production growth in the EIA’s November Short-Term Energy Outlook forecast, output from newly completed wells has steadily increased over the last two years even as the number of active drilling rigs has declined.

Many publicly traded E&Ps have also been slower to return to pre-pandemic production volumes compared with private companies. Instead, publics have prioritized increasing shareholder returns and debt reduction while limiting production growth in response to post-pandemic supply chain issues and cost inflation.

EIA’s analysis doesn’t represent the entire sector, since private companies weren’t included. EIA excluded private E&Ps because they do not publish financial reports.

The included 34 publicly traded companies accounted for 30% of U.S. crude oil produced in second-quarter 2024.