Shale producers still have room for growth
North American shale taking over the world?The writer sees room for growth in the Permian while fields elsewhere are seeing more depletion.
US shale has become the world's swing producer because it sits lower on the cost curve and has a shorter lead time than other global producers (six to eight months versus three years). For these reasons, US exploration and production (E&P) companies are becoming more important in global oil supply and will provide significant production growth. Within US shale, the Permian Basin has been at the forefront of the revolution. In fact, Rystad Energy stated that the US could now hold more oil reserves than Saudi Arabia due to the potential resources in the Wolfcamp area of the Permian Basin; estimates suggest more than 150 recoverable billion barrels of oil equivalent remain.
Indeed, from a cost curve perspective, the Permian Basin was the only US major shale formation to see production growth since the downturn began in November 2014. We continue to expect strong growth out of the Permian Basin, from around 2 MMb/d today to some 4 MMb/d in 2019. As a result, we are increasingly positive on US E&P companies.