With capital budgets under pressure, US shale producers are looking to unlock further productivity gains to boost recovery rates and prolong output from maturing assets.
At the same time as they are drilling ever-longer laterals and using multi-well hydraulic fracturing techniques, companies from ConocoPhillips to Diamondback Energy are reporting encouraging early results from the latest generation of surfactants — specialised chemicals designed to free oil trapped in shale and improve its flow through reservoir rock. "Operators are leaning into the productivity side of the capital efficiency equation, with their surfactant trials and positive results thus far," consultancy Enverus senior analyst Drew Depoe says.
ConocoPhillips cites a productivity lift of up to 20pc from Permian basin oil wells that have been treated with surfactants over the past year compared with untreated wells. Diamondback has carried out a 12-well surfactant project. "We're just scratching the surface on the potential for this technology, and we're really excited about it," executive vice-president Albert Barkmann says. And Devon Energy is extending trials to 50 wells this year after favourable initial results.
The shale sector is in cost-cutting mode as investors demand higher returns, and that strategy is spurring operators to find new ways of becoming more efficient. Concerns that the best acreage is close to being used up are also providing incentives for companies to look to boost shale recovery rates that remain around 10pc. "What we've seen over the past number of years has been sort of a slow but steady degradation trend across Lower 48 oil plays, some steadier than others, and new technologies serve to flatten out that trend more than anything," Depoe says.
The independents are joining US majors ExxonMobil and Chevron in looking to expand their suite of new technologies to squeeze more out of US shale operations. ExxonMobil has more than 40 technology developments in the pipeline as it hopes to double recovery rates from its Permian operations.
Inflation in the pipeline
Efficiency gains are already helping some independent producers to hold budgets steady this year and offset tentative inflationary pressures. As activity and rig counts pick up across the shale patch with higher oil prices, cost pressures could become more of an issue heading into next year. While Diamondback recently noted that it has not seen significant service cost inflation yet, apart from higher fuel costs, it does expect prices for casing pipe and other items to increase through the rest of this year and into 2027. "We have a track record of offsetting inflation with efficiency gains in the field, and we will challenge our teams to do so again during this cycle," chief executive Kaes Van't Hof says.
Near-term inflation is seen in rising costs for the tubular goods sector. "A number of public E&Ps have locked in steel costs for 2026, so the impact will be felt more in 2027 for the industry as a whole," Roth senior research analyst Leo Mariani says.
Negative natural gas prices in the Permian basin limited the overall free cash flow for some producers from a surge in oil prices driven by the Mideast Gulf conflict. "The upside was there, but not wildly unconstrained upside," Novi Labs research director Robert Polk says. Market fundamentals have since staged a rebound, and the launch of additional shale gas takeaway capacity will help alleviate bottlenecks in the second half of the year. Even so, few firms are likely to shift their focus more in favour of gas. "Improved fundamentals aren't enough to overcome the oil economics that are still driving capital allocation," Polk says.
