Shale drillers are outperforming the oil giants

Bloomberg:
The biggest oil explorers in the world are being left in the dust by the production gains registered by nimbler shale oil specialists who are confounding OPEC’s glut-killing efforts.

None of the so-called supermajors increased output by more than 3.6 percent in the first quarter, according to company statements. Production actually shrank by 4 percent at Exxon Mobil Corp., the biggest of the group, and tumbled 9.5 percent at Mexico’s state oil company, Petroleos Mexicanos. Compare that to Diamondback Energy Inc., which raised production 61 percent.

The stout shale production gains rattled the oil market Thursday, sending oil prices to 5-month lows and effectively canceling out positive earnings news from U.S. producers, which fell along with crude.

Measured or even non-existent production growth hasn’t hurt the bottom line for Exxon, Chevron Corp., Royal Dutch Shell Plc or even Pemex, all of which easily beat earnings from a year earlier on rising oil prices and cost cuts. But the rising output of independent, shale-focused drillers such as Diamondback is hampering efforts to siphon off a glut that’s kept prices at $50 a barrel or less.

“Over the last decade, we spread our capital out and tested many different zones and many different geographical locations trying to find the sweet spots of the Permian Basin,” said Chief Executive Officer Tim Leach of Concho Resources Inc., in a Thursday conference call. “Well, that phase is kind of ending. I think we’ve got the answers we need, and so you’re going to see intense development.”

Concho, which operates mostly in the prolific Permian shale basin, on Wednesday said its production rose 30 percent in the first quarter, compared with a year earlier. RSP Permian Inc. reported an 84 percent rise.
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There is much more.

One of the biggest mistakes OPEC made was engaging in predatory pricing which not only hurt their own revenue flow, but it forced shale producers to become more efficient and they are still doing it.  Many of them can now make money at a lower price than most of the OPEC countries.  

What the shale producers really need now more than most is for refineries to change over to refining the light crude that is coming from the shale wells rather than the heavy crude they have been refining from Saudi Arabia and Venezuela.  If they did that switch over the US could gain energy independence much quicker.

The state of Texas and the Trump administration need to find ways to promote this switch over to take advantage of US energy production.

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