US oil production is set to pick up steam again — this time led by little-known privately owned companies impervious to the demands of the stock market.
Forecasters project that the nation’s crude oil output will increase by about 800,000 barrels a day over the course of 2022, accelerating sharply from this year and making the US the fastest-growing supplier outside of a producer alliance that includes members of the Opec cartel.
Marquee oil companies are not driving the rise. Instead, privately held producers, often smaller companies, will account for more than half of total US output growth next year compared with about 20 per cent in a typical year, said Raoul LeBlanc, an analyst at IHS Markit.
The anticipated output gains come as US oil prices hover at about $70 a barrel, which make most shale wells profitable to drill. But many of the largest producers have promised their shareholders they will cap spending on growth after racking up huge losses during a decade-long drilling binge.
Private companies, by contrast, have led the rise in the number of rigs drilling for oil and gas in the US this year, which has more than doubled from this time last year. The businesses include larger producers such as Endeavor Energy Resources and Tap Rock Resources along with scores of tiny groups.
“The privates are not on board with this whole capital discipline thing. For them, this is their window,” LeBlanc said. “They’re thinking, ‘here’s my chance and I’m going to take advantage of it’ because they see it as maybe their last, best chance.”
Prolific production from shale oilfields enabled the US to eclipse Saudi Arabia and Russia as the world’s largest oil producers, but the onset of the coronavirus pandemic hollowed out oil demand and crushed prices, forcing American producers to throttle back output from a peak of about 13m b/d in late 2019 to about 11.1m b/d by the end of 2020.
The US Energy Information Administration now expects domestic crude oil production to begin to tick higher this autumn after Hurricane Ida disrupted offshore supplies, eventually reaching about 12.2m b/d by the end of 2022. Spending on drilling and bringing new wells into production in shale patches onshore will rise from about $65bn in 2021 to more than $80bn next year as activity picks up and some drillers start to see cost inflation, LeBlanc said.