Home / News / Bakken News / As oil teeters at $50, a few shale producers still drilling more
Image via Flickr

As oil teeters at $50, a few shale producers still drilling more

WILLISTON, N.D./HOUSTON – A handful of optimistic U.S. shale drillers are sticking with plans to deploy more rigs in the coming months even as oil prices take a sharp dive well below many producers’ $60-a-barrel breakeven point.

On Wednesday, Pioneer Natural Resources Co. became the first big company to publicly confirm it was drilling more wells, saying it had already added two rigs in the Permian Basin of Texas this month and would keep on adding two a month as long as the oil price “remains constructive.”

Smaller shale oil producer WPX Energy Inc, whose operations are focused on North Dakota’s Bakken shale, said this week that its decision to add two rigs later this year was unaffected by a nearly $8 drop in crude prices since June to toward $50 a barrel.

While half a dozen or so other companies in the U.S. shale industry have indicated they may add rigs, none have publicly confirmed a move, although a few have quietly done so.

Last week the U.S. oil drilling rig count rose for the first time since December, inching up by 12 to 640 across the country.

The industry is now in a difficult bind. While executives were quick to slash rigs to a five-year low as oil prices halved through the first quarter, many were beginning to grow hopeful that a new equilibrium was settling in the market, as U.S. crude traded steady in May and June at around $60 a barrel.

In related news, Oil under $60 beyond 2016 suggests market rethinking shale.

“Based on recent discussions with operators, companies were planning on increasing activity at $60 to $65 a barrel,” analysts at Houston-based energy investment bank Simmons & Co said in a note on Tuesday.

That’s just shy of the level Whiting Petroleum Corp and others have said would mark an impetus for returning some rigs to the field. Others like Hess Corp say they won’t add any rigs at all this year.

This month’s slump has injected renewed uncertainty into the outlook, with Wall Street analysts wide apart on the outlook.

Goldman Sachs this week reiterated its bearish view, calling for prices to fall to $45 a barrel by October. Morgan Stanley, however, said the latest decline looked overdone, and that it expected a “modest price recovery” followed by a return to range-bound trading for the rest of the year.

More rigs are planned for early next year. Pioneer said it plans to add eight horizontal rigs in Texas shale basins, bringing the total rig count to 36, or the same number it had before the price of oil collapsed by more than half.

In North Dakota, the No. 2 U.S. producing state, one industry official said he was “a little shocked” when he saw prices drop and hoped for a rebound soon before budgets for 2016 are planned, which typically happens in the late fall.

“I hope to head into the fall with price levels that encourage activity in 2016 budgets,” said Ron Ness, president of the North Dakota Petroleum Council, an industry trade group. “I hope (the price) recovers quickly.”

(Reporting by Anna Driver and Ernest Scheyder; Editing by Peter Galloway)

This article was from Reuters and was legally licensed through the NewsCred publisher network.

28 comments

  1. How much of the drlg is to met contractural agreement with mineral right holder
    And how many will be DUCs ?

  2. How does an economic implosion in China affect that equilibrium?

  3. I’ve heard some more rigs are being stood up and that is good news.

  4. Why are gas prices steadily climbing back up if oil is so cheap right now?

  5. The output pf the refineries. And peak travel season.

  6. They SHOULD continue to produce. If we quit farming because the price was low, you’d all be mighty hungry. We would also lose our operations. And the price of oil doesn’t seem to fluctuate for long before it goes back to the magic number. Oil companies are worse than congress when it comes to living on their own planet, with their own rules. Now they want to export….. And they always talk about jobs…. Well we would ALL love to hire people. But the Deisel gods think that a barrel of oil grows food all by itself.

    • The last time OPEC piulled trhis power play it lasted 6 yrs

    • Difference is Edwin is farmers are subsidised by the government through the farm bill and other state programs. This situation is a catch 22. We want the US to be energy independent Due to modern technology we can be however its a lot more expensive to recover that oil in these shale formations. If oil goes below $55.00 per barrel then new drilling is a losing proposition. Right now the world is producing more oil than is needed so price is down (supply vs demand). The OPEC states don’t want America to produce more than they do so they have have over produced to drive oil prices below the amount needed for profitability for US producers. They are hurting themselves in the process so will eventually cut back on production to raise prices. Then US will start up again and back and forth we’ll go.

    • Lol….. oh where to begin… I don’t even know where to start. Subsidies eh? Farm bill?? ROTFLMAO!!!!!! Maybe it’s just time to trim the fat like everyone else.

    • He says that like the oil industry doesn’t receive government money.

    • Anytime you want to trade in your lobbyists for a farm bill is fine with me. Remember when the price of oil just HAD to come up because things were just so so hard? And the next quarter profits broke records? Or how “drill baby drill!!” Rolled out with all the job talk? We got the price down alright… then my buddy was unemployed. Not alone either. It’s always bull crap. Wouldn’t energy independance mean we bring the price down and move forward economically?

  7. I have a buddy telling me they have rigs about to go back to work. So

  8. Cmon drill baby drill!!! And while we’re at it lets get the price per barrel UP^^^

Leave a Reply

Your email address will not be published. Required fields are marked *

*