Editor & Publisher, Marcellus Drilling News (MDN)
There is a shale comeback underway and it’s major, with huge technological gains and capacities to carry the shale revolution forward throughout the world.
Major multinational bank Société Générale, headquartered in Paris but with major operations here in the U.S., has just issued a 37-page report on U.S. commodities. The theme of the report caught our attention: “Five facts about shale: it’s coming back, and coming back strong.”
Analysts working for Société Générale asked themselves this question: Will the U.S. recovery in oil and gas production offset OPEC cuts? They review some of the key dynamics of U.S. shale production in their report. Specifically, they highlight five facts about U.S. shale production that all point to the same underlying trend: shale is coming back in a big way.
We won’t keep you in suspense. In brief, SG identified these five facts as evidence that shale is bouncing back:
- Rig counts are increasing at an accelerating pace, and given the technological advances of the past 3 years, this should translate into significant supply.
- Decline rates for US shale wells are still steep, but initial production levels, production profiles, and ultimate recovery volumes have increased. Going forward, higher production profiles mean stronger aggregate supply.
- Preliminary US EIA estimates indicate that net new shale supply turned positive in December, the first time since March 2015. Net new supply recovered just 7 months after rig counts bottomed out and began to increase.
- The increase of drilling activity comes on the back of a large stock of drilled and uncompleted wells (DUCs). The industry is also vigorously adding to this stock, which demonstrates that the shale sector is again recovering/expanding.
- Evidence from the Bureau of Labor Statistics (BLS) is showing the oil and gas labor market is stabilizing and reversing its declining trend.
It all adds up to a big turnaround in the shale industry–something MDN has been trumpeting since July of last year. Glad to see SG is now on board.
Here is a full copy of SG’s monthly Commodity Compass:
Editor’s Note: I have no idea how Jim finds this stuff but he does – every single day – which is why a MDN subscription is a great idea. Digging deeper into the document he shares there’s many more insights. Consider these observations for example:
“Looking at the rig count in isolation, however, underestimates future production, as it fails to capture the profound technological changes in the US shale industry…”
“The US horizontal rig count is increasing, evidence of new investments in shale-producing capacity. Furthermore, technological progress means each new rig now produces more than before. Finally, this new supply should come online faster than before.”
While the report is more oriented toward shale oil than shale gas, it provides many additional insights into where we’re headed with both. One thing is certain; both shale commodities are likely to be a consumer bargain for years to come as a consequence of the shale comeback, which is great for America.