From the Wall Street Journal
U.S. oil-and-gas companies offer little relief for tight global markets
Despite an extended streak of strong profits, shale companies are slowing their oil-field activity, keeping U.S. oil production roughly flat and offering little relief for tight global markets.
What was expected to be a banner year for U.S. oil production has failed to materialize as creeping inflation-related costs, supply-chain snarls and disappointing well performance for some companies have coalesced to limit domestic output, executives and analysts said. Global oil prices averaged about $100 a barrel in the third quarter, according to Bank of Nova Scotia, and in past years such prices have prompted increased shale production. This time, companies like ConocoPhillips, Pioneer Natural Resources Co. and Devon Energy Corp. are focused on profits instead of drilling and say there are constraints to growth.
ConocoPhillips on Thursday reported a profit of $4.5 billion, almost double the same period last year. Pioneer recently said it netted about $2 billion, while Exxon Mobil Corp. posted a record profit of almost $20 billion, and Chevron Corp. said it earned its second-largest quarterly profit, of $11.2 billion.
Many of the companies simultaneously lowered their projections for oil production as they reported strong profits. Pioneer said its wells in the Permian Basin of West Texas and New Mexico—the most active U.S. oil field—this year had produced less oil than expected and that it was reshuffling its portfolio to generate higher returns starting in 2023. The company on average produced 352,421 barrels of oil a day in the third quarter, a slight decline from the previous quarter, it said.
ConocoPhillips had previously said overall U.S. oil production growth could rise by 900,000 barrels a day this year. But spokesman Dennis Nuss said U.S. oil output growth is coming in lower than the company originally anticipated for this year because of supply-chain bottlenecks and labor shortages. “Rapidly escalating costs combined with extremely tight supply are limiting the pace of industrywide production growth,” said Ryan Lance, chief executive of ConocoPhillips.
The American shale boom that upset the world’s oil hegemony is losing steam just as global markets need the once fast-acting producers to pump more to keep up with a recovery in demand. The Biden administration has urged drillers to pick up their sluggish pace, to help ease high pump prices, and to invest their profits in growth instead of increasing shareholder dividends and buybacks.
Lofty projections by the federal government and others for robust U.S. oil production growth in 2022 are proving overly optimistic, and doubts are emerging about how many barrels of oil shale drillers can add next year.
In the contiguous U.S., oil production through August has increased only 3% since December, up 288,000 barrels a day to 9.77 million, according to the Energy Information Administration. It had earlier expected total U.S. oil output—including Alaska and the Gulf of Mexico—to hit 12.64 million by December, growing more than 1 million barrels a day compared with the same month last year. It has since lowered its projection almost 500,000 barrels a day...
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