At last, U.S. shale firms see output falling, but is it enough?

Tue Mar 1, 2016 1:11am EST
 
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By Amrutha Gayathri and Swetha Gopinath

(Reuters) - In a ray of hope for oil bulls, leading U.S. shale producers are at last predicting output declines this year - a long-anticipated turning point for a market reeling from an epic supply surplus.

The bad news is that - taken together - the declines they are disclosing to investors appear milder than some analysts have predicted.

According to a Reuters analysis based on forecasts from 18 U.S. shale oil-oriented firms released over the past several weeks, from global independent Occidental Petroleum Corp (OXY.N: Quote) to small Denbury Resources Inc DNR.N, total oil and gas production would fall 5.6 percent this year. The same firms saw output grow by around a tenth last year.

Even excluding the eight larger companies with operations outside the shale patch, where output is falling less quickly, production would decline by about 6 percent, the data show. (Graphic: tmsnrt.rs/1KQZIGw)

In contrast, the U.S. Energy Information Administration is forecasting an 11 percent drop in national production outside of Alaska and the Gulf of Mexico, where output is expected to rise.

In broad terms, the data confirm a long overdue reversal for U.S. firms that have kept production rising throughout much of the oil price rout despite deep cuts in spending and drilling. On a monthly basis, nationwide oil output has been ebbing - though very slowly - since it reached a near 44-year high in April.

The decline has quickened after oil tumbled to $30 a barrel for the first time in over a decade, with some companies leaving new wells idle rather than opening up the taps after drilling.

Apache Corp (APA.N: Quote) would "rather leave those barrels in the ground" and wait for prices to rebound than finish the fracking process, Chief Executive John Christmann said last week. Apache expects production, nearly two-thirds of which is onshore in North America, to fall by 7 to 11 percent.   Continued...

 
A pump jack stands idle in Dewitt County, Texas January 13, 2016.  REUTERS/Anna Driver