U.S. oil and gas companies are beginning to open their wallets wider given higher commodity prices.
According to a report out last week from Rystad Energy, selected shale producers boosted their yearly capital budgets by $3.7 billion, or 8%, in the second quarter over their initial estimates earlier in the year.
While part of the increased spending is due to higher service costs, a big chunk of budgets is going toward increased drilling through this year to support more well completions and production growth next year.
Some of the big boosters were Occidental Petroleum, which increased capital guidance in West Texas’ and New Mexico’s Permian Basin by $900 million (it plans to add two rigs and pre-build facilities for activity next year); and Pioneer Natural Resources, which increased Permian spending by $400 million (it’s adding four extra rigs to support its 2019 plan and a higher number of well completions), the firm said.
Apache and WPX Energy also stood out as having the highest capex revisions in the period, Rystad found, with Apache adding $400 million and WPX $200 million.
Apache said it needed the capital to optimize drilling and completion activity and fund investments in longer laterals, larger completions and facility expansions.
WPX said it’s making additional investments in non-operated wells, facilities and infrastructure in the Delaware Basin along with more intensive completions in the Williston Basin, where it experienced a 30% increase in oil volumes in the second quarter, Rystad said.
The firm said companies active in multiple plays reported plans to increase investments by $1.24 billion, including Anadarko Petroleum in the DJ and Permian Basins ($450 million) and Continental Resources in the Bakken and Oklahoma shale plays ($400 million).
Oil production volumes, however, were revised upward by only 1.4%, which suggests that the shale industry requires more capital than before to achieve healthy production growth, Rystad said.
Permian oil and gas explorers hiked production targets the most, including Jagged Peak Energy, Matador Resources and QEP Resources.
There were some companies that reduced their production targets, including Resolute Energy (due to less-than-expected oil count realized so far this year) and Noble Energy (it’s deferring production in the Delaware Basin due to industry constraints).
None of the well-established Permian players reported a planned decrease in completion activity in the basin this year, Rystad reports. However, in South Texas’ Eagle Ford Shale, EP Energy is expected to temporarily shut-in recently completed wells, which would lower near-term production.
Forbes Magazine | Claire Poole Senior Contributor