US Shale Drilling Set for 20% Drop at Current Prices, Quantum Says

image is BloomburgMedia_RRVM5KDWLU6801_22-03-2023_15-00-04_638150400000000000.jpg

Machinery used to fracture shale formations stands at a Royal Dutch Shell Plc hydraulic fracking site near Mentone, Texas, U.S., on Thursday, March 2, 2017. Exxon Mobil Corp., Royal Dutch Shell and Chevron Corp., are jumping into American shale with gusto, planning to spend a combined $10 billion this year, up from next to nothing only a few years ago. Photographer: Bloomberg/Bloomberg

The US shale patch may lose as much as 20% of its activity over the next year if energy prices hold at current levels, according to one of the biggest private equity players in the industry.

Crude would need to rise by about 15% to $80 a barrel, and gas would have to climb by more than a third to $3 per million British thermal units for drilling and frack work to maintain its current pace, Quantum Energy Partners Chief Executive Officer Wil VanLoh said in an interview Tuesday. Oil and natural gas prices have slid since mid-2022 on fears of a global economic slowdown. 

“There’s a risk of a pretty big rollover this year at these current prices,” said VanLoh, whose Houston-based firm has managed more than $20 billion since its 1998 inception. While publicly traded explorers and closely held drillers both would drop rigs and frack crews, the private companies would cut back more because their balance sheets aren’t as strong, VanLoh said.

The number of rigs drilling for oil and gas has slipped 3% since the start of the year, according to Baker Hughes Co., as the biggest shale explorers stick to commitments to keep production growth flat and return profits to shareholders.

©2023 Bloomberg L.P.

By David Wethe


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