The U.S. oil fracker's dilemma: crouch or pounce?

Mon Jun 1, 2015 3:58pm EDT
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By Terry Wade

HOUSTON (Reuters) - U.S. shale oil producers, having weathered the worst price plunge in their industry's brief history, now face a dilemma: whether to stay in a defensive crouch after slashing their rig fleets, or start drilling more wells to capture a partial recovery in prices.

In a way, the conundrum is as old as the first oil well. If producers start pumping more crude, as some executives have said they might do if prices edge a bit higher, they risk contributing to another slump in a fragile global market; if they hold back, they forego regaining revenue lost during a price slide of 60 percent that started in June.

Yet it is also a changed world.

For decades the global industry has been dominated by a handful of mega-majors, which made shifts to the supply and demand balance less rapid and more predictable.

Today, about 100 public firms and many more private ones are shaping the North American shale industry, raising the risk that hundreds of rigs might quickly reenter service, even if individual companies tread lightly.

Many say they are aware of the dilemma. The June 5 meeting of U.S. rivals in the Organization of the Petroleum Exporting Countries adds to the uncertainty.

"We do not want to get in a hurry. We want to stay disciplined," Bill Thomas, Chief Executive of EOG Resources Inc, a top shale oil producer, said in May. "We certainly don't want to jump start completions and (have) the price maybe fall back."


A sign is seen in Quitman, Arkansas, August 5, 2013. REUTERS/Jim Young