Key shale crude oil production to drop
The EIA (U.S. Energy Information
Administration) expects oil and gas production to slow down at some of
the key shales by August. According to its Drilling Productivity Report
released on July 13, 2015, the EIA expects key shale crude oil
production to decrease at four key shales in August and increase at
three others.
Overall, aggregate crude oil
production at the seven key shales is expected to drop 3.1% in August
compared to June levels. It’s expected to drop 1.4% in July. So the EIA
expects the decline rate to go up.
Bakken may lose, Permian may gain
The Bakken, one of the major
crude oil resource shales, is expected to see a decrease between June
and August. The EIA estimates it will produce 1.18 MMbpd (million
barrels per day) in August after producing 1.22 MMbpd in June—a 3.4%
decrease. Oil production at the Niobrara shale, one of the smaller crude
oil producing regions, is expected to fall the most—8.6% in the next
two months.
The Permian Basin, the most
prolific crude oil producing shale in the United States, is expected to
increase production by a marginal 0.4% by August. According to the EIA,
the Eagle Ford Shale may see a 6.3% reduced oil production.
The Utica Shale is expected to
increase production the most, by 1.1% in the same period. Utica,
however, has a much smaller oil production base than the Bakken shale
and the Permian Basin.
How it will affect producers
Companies such as EOG Resources
(EOG), Concho Resources (CXO), and Matador Resources (MTDR) may drive
higher production in the Permian Basin. This would be positive for them.
Reduced Bakken oil production could be led by producers such as Denbury
Resources (DNR) and Continental Resources (CLR). This would be negative
for these companies.
Changes in production and rig
count in the key US shales will affect the performance of oil field
service (or OFS) companies as well. These companies include National
Oilwell Varco (NOV), RPC (RES), Dril-Quip (DRQ), and Core Laboratories
NV (CLB).
Denbury Resources (DNR) forms 1.3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
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