U.S. shale production is peaking due to declining inventory quality and the inability of the industry to substantially increase drilling.
, that the era of rapid growth in shale output was coming to an end. Until recently it was a little difficult to see as production has ramped +/- a million barrels a day from 2020 lows. Still, there has been a disconnect between a couple of reports put out by the Energy Information Agency-EIA, that are used to track U.S. domestic output.
The graph above shows the productivity decline in the daily output of new shale wells, divided by the number of rigs operating over the last year and a half. Some of this is noise from the increase in the rig count over this time period, but the downward slope is undeniable. Notice how the slope for new wells has continued down even as the rig count has largely flat-lined from mid-22.
What we haven’t seen up to this point are any signs of shale output reaching “terminal velocity” in oil company filings. In quarterly calls the talk has all been about controlling capex to maintain output at just above the rate of natural decline, or in some cases single-digit growth. And then Pioneer Natural Resources, announced its third quarter production and earning numbers last week. It was the equivalent of a ripple felt in the “Force.
“Yeah, I'd say the delayed targets have underperformed where we would have anticipated. They still have great returns. It is just we have better locations in our portfolio. And so as we've gotten those results over the course of this year, we've decided that, that's not satisfactory to us, and we want to move forward the higher thresholds. And so we've just reshuffled the deck, as I said earlier, and are moving to full stack basically across the field.
Charles Meade of Johnson Rice, asked, “If the changes were to reverse changes made in 2022 from 2021,” or if there was “another dimension to the evolution?” In other words, do you have a clue what you are doing?
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