Crude Summit: Hamm sees US shale output growth slowing

  • Market: Crude oil, Natural gas
  • 23/01/19

US shale output growth could slow by as much as 50pc at the start of this year versus 2018 if producers continue to pull back activity in a volatile oil market, Continental Resources chief executive Harold Hamm said.

He added that while the forecast is a "wild guess," the state of oil prices and 2019 capital expenditure (capex) guidance that companies share in coming weeks will provide better direction.

The deceleration would be driven by the discipline onshore producers demonstrated last year to keep their spending within cash flows and refrain from taking on more debt. That is in part bowing to investor pressure to reduce costs and improve returns, Hamm said in an interview at the Argus Americas Crude Summit in Houston, Texas.

"Producers have become more disciplined in their approach to capex," he said. "Several years back growth was a huge consideration. That consideration has been much less. The peak consideration now has been — are you overspending cash flow. Are you living within cash flow?"

Hamm's views echo comments by oilfield service giants Schlumberger and Halliburton who flag a subdued spending outlook by North American producers amid an uncertain oil price outlook. Reflecting the deceleration, UK bank Barclays' annual survey of upstream investment expectations for 2019 points to a slowdown in North American onshore spending growth to around 9pc, down from an 18pc rise in 2018.

The fourth quarter saw wide swings in crude prices, which fell some 40pc from the highs for the year touched in mid-October of $76/bl for WTI.

"Production is a direct response of capex today with this industry," Hamm said. "The more money that you inject the more you are going to extract."

Hamm also said that while he does not expect every company to stop half of its rigs, drilling activity is going to be considerably less than what it was last year.

"Looks to me like anywhere between a 25-30pc cut in rig activity may occur," he said. "That would be pretty tremendous."

Speaking specifically about Continental Resources, Hamm said the company is in a different position than many peers because of its large low-cost production base.

"It is pretty easy to stay within cash flow and basically service all of our needs," he said.

Overall, $70/bl is a sweet spot at which "the machine keeps running, it does not get overheated," he said earlier, while addressing the conference. The wide price volatility in the fourth quarter saw a sharp cut in the rig count last week largely reflecting a slowdown in activity with a lag, he said. With weak prices, producers start to question the rationale behind developing their reserves at sub-economic prices and opt to wait for better prices wherever they can.

Despite expectations of a near-term slowdown in output growth, the industry's outlook remain bright given the supply demand fundamentals and the improvements in efficiency and the reduction in costs companies have been able to achieve. Looking ahead 10 years, Hamm said the industry could see an increase in its output by 50pc from current levels.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
29/05/24

Baghdad calls KRG, IOCs for meeting over oil exports

Baghdad calls KRG, IOCs for meeting over oil exports

Dubai, 29 May (Argus) — Iraq's oil ministry has called for a meeting with Iraqi Kurdistan ministry of natural resources (MNR) and the international oil companies operating in the Kurdish region "as soon as possible", to reach a deal on resuming north Iraq crude exports via Turkey's Mediterranean Ceyhan port. "The ministry of oil called… a meeting in Baghdad as soon as possible for the purpose of… reaching an agreement to accelerate the restart of production and resume the export of oil through the Turkish port of Ceyhan and according to the quantities specified in the budget law," Iraq's ministry of oil said. Northern Iraqi crude exports averaging around 470,000 b/d from Iraq's semi-autonomous Kurdistan region have been absent from the market since March 2023 when an international arbitration ruling said Turkey had breached a bilateral agreement with Baghdad by allowing Iraqi Kurdish crude to be exported without the federal government's consent. "We acknowledge the swift, public response from Iraq's Ministry of Oil and look forward to scheduling joint discussions to restore oil exports through the Iraq-Türkiye pipeline," the Association of the Petroleum Industry of Kurdistan (Apikur) said today. Apikur called on 27 May for a tripartite meeting between the association, the MNR and the oil ministry to discuss oil exports. It was responding to Iraqi media reports blaming it for the stalling of the talks, saying that no joint discussions between IOCs and representatives of the [Kurdistan Regional Government] KRG and the [government of Iraq] GoI have occurred since the start of January. "We definitely believe that GoI seems more serious about resolving the issues after PM [Mohammed Shia] al-Sudani's visit to US," a source previously told Argus . Compliance struggles Iraq's federal government is finding it difficult to strike a balance between repairing its rift with the KRG in Erbil and complying with its Opec+ quota commitments. It recently submitted a plan to Opec outlining how it will compensate for producing above quota in the first quarter. Opec and the wider Opec+ group are holding their next ministerial meetings on 2 June, to discuss the 2.2mn b/d voluntary production cuts that eight countries, led by Saudi Arabia and Russia, began implementing from the start of the year, and which are due to expire at the end of June. The meetings were due to take place in person, in Vienna. But an announcement last week that the meetings would be moved online could suggested that the group does not plan to take any radical action. Iraq's struggles with compliance will likely continue with the spectre of returning Kurdish crude looming large over Baghdad. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

Australia’s Santos, Japan’s Hokkaido agree LNG deal


29/05/24
News
29/05/24

Australia’s Santos, Japan’s Hokkaido agree LNG deal

Sydney, 29 May (Argus) — Australian independent Santos has signed a 10-year LNG supply and purchase agreement (SPA) with Japanese utility Hokkaido Gas with shipments starting in 2027. The SPA will deliver around 400,000 t/yr from across Santos' portfolio on a des basis, which chief executive Kevin Gallagher described as a "significant step" in developing Santos' equity LNG portfolio and in keeping with the firm's strategy of maintaining long-term pricing. Santos is involved in the 6.9mn t/yr ExxonMobil-operated PNG LNG in Papua New Guinea (PNG) and Australia's 7.8mn t/yr Gladstone LNG in Queensland and the 3.7mn t/yr Darwin LNG in the Northern Territory. The firms will also work together on carbon capture and storage and e-methane development to reduce greenhouse gas emissions across their respective portfolios, Santos said on 28 May. Fellow Japanese gas firm Toho Gas is testing the use of e-methane as a feedstock for city gas as part of a three-year pilot to March 2027, producing 30,000 m³/yr by using biogas-based carbon dioxide (CO2) and hydrogen derived from clean electricity produced using LNG cold energy at the Chita LNG terminal in Aichi prefecture. Japanese utility Tokyo Gas and pulp and paper firm Oji are planning another e-methane project for Hokkaido prefecture , as Japan's trade and industry ministry is aiming for e-methane to comprise 1pc of city gas volumes by 2030 and 90pc by 2050. E-methane is typically produced from renewable hydrogen and recycled CO2. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Ex-Pioneer chief asks FTC to reverse Exxon board ban


28/05/24
News
28/05/24

Ex-Pioneer chief asks FTC to reverse Exxon board ban

New York, 28 May (Argus) — The former chief executive officer of Pioneer Natural Resources accused of attempting to collude with Opec nations over oil production and prices, said he was wrongly targeted by the US anti-trust regulator. Scott Sheffield, the oil and gas industry veteran who founded Pioneer in 1997 and stepped down at the end of 2023 when ExxonMobil said it would acquire the company, said the Federal Trade Commission (FTC) was "wrong" to imply that he had ever "engaged in, promoted or even suggested any form of anti-competitive behavior." He wants the FTC to rescind a requirement that he not take a seat on ExxonMobil's board as a condition for approving the $64.5bn deal. The FTC "publicly and unjustifiably vilifying me" will have a "chilling" effect on the ability of other business leaders to address shareholder demands and advocate for their industries, Sheffield said in a statement. The regulator alleged that Sheffield had exchanged hundreds of text messages with Opec officials discussing crude pricing and output, and that he sought to align production across the Permian with the cartel. In a filing to the FTC Sheffield argues this is a false narrative, that he had "only sporadic communication with Opec officials" and that because many of them were government officials, not just corporate, the communications fell outside the scope of the Sherman Act, which sets the basis for most US anti-trust laws. The filing called on the commission to vacate the proposed consent order and dismiss the proceeding without further action. ExxonMobil had agreed, "without any admission of liability or findings of fact," to the proposed consent order that would keep Sheffield off the board, his lawyers said. And Sheffield had no opportunity to defend himself before the ExxonMobil board either. The FTC said today it stood by the allegations. "There is no question that Mr. Sheffield publicly urged Texas oil producers to limit production, all while having regular, private back-and-forth communications with senior OPEC representatives over a period of years," said spokesman Douglas Farrar. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Energy Transfer to buy WTG Midstream for $3.25bn


28/05/24
News
28/05/24

Energy Transfer to buy WTG Midstream for $3.25bn

New York, 28 May (Argus) — US midstream company Energy Transfer has agreed to buy WTG Midstream for $3.25bn, expanding its foothold in natural gas transportation in the Permian basin. The cash-and-stock acquisition includes eight gas processing plants with 1.3 Bcf/d (37mn m3/d) of capacity, as well as two plants under construction with 400mn cf/d of capacity. It also includes more than 6,000 miles of gas gathering lines and a 20pc interest in the 125,000 b/d BANGL natural gas liquids pipeline, which is expandable to over 300,000 b/d, the companies said. Energy Transfer agreed to buy privately held WTG for $2.45bn cash plus about $800mn of Energy Transfer stock. Energy Transfer earlier this month said it was "very optimistic" that its 1.5-2 Bcf/d Warrior natural gas pipeline would be next in line to be built out of west Texas after the planned 2.5 Bcf/d Matterhorn Express gas line enters service this year. Spot gas prices near the Permian have spent much of the last two months in negative territory as crude-focused production has flooded the market with associated gas, for which there is insufficient pipeline infrastructure to ship to more distant customers. The latest acquisition comes amid a frenzy of deal activity in the US oil and gas industry over the past year, especially in the Permian basin, as oil producers there look to secure high-quality inventory. Among North American midstream companies, Energy Transfer's rival Williams in December agreed to buy gas storage assets near the US Gulf coast for $1.95bn, and US gas producer EQT in March agreed to buy Mountain Valley Pipeline developer Equitrans Midstream in a $5.5bn deal . Energy Transfer and WTG expect the transaction to close in the third quarter of this year. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Norway sees record oil, gas investment in 2024


28/05/24
News
28/05/24

Norway sees record oil, gas investment in 2024

London, 28 May (Argus) — Norway's oil and gas sector is on course to hit record investment levels this year, boosted by rising costs and a flurry of projects that got off the ground in late 2022, according to the latest forecast from government data provider Statistics Norway. Total investment in oil and gas activity in the country, including pipeline transportation, is now projected to reach 247bn Norwegian kroner ($23.5bn) in 2024, up by 15pc from 2023 and 10pc higher than the previous record set in 2014. This year's investment growth is underpinned by higher spending on field development, thanks to a record number of new project approvals in 2022. "It is common for development projects to have higher investments in the second year of development than in the first," Statistics Norway said. There was a flurry of development plans submitted to Norwegian regulators towards the end of 2022 as operators rushed to beat the end of a temporary tax relief regime that was introduced in 2020 to help the oil and gas sector weather the effects of the Covid-19 pandemic. The investment forecast for next year is around Nkr3bn higher than the previous estimate for 2024 made in February. Higher spending estimates on producing fields and on exploration drove the upwards revision. Statistics Norway has also raised its forecast for oil and gas sector investment in 2025, to Nkr216bn from Nkr205bn. Next year's forecast could be revised higher still as companies confirm future spending plans, although Statistics Norway said it expects only a few new developments to be launched in the next 12 months. By James Keates Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more