Key Shales to Witness Lower Crude Oil Production by October



Key shales—crude oil production will likely fall

The EIA (U.S. Energy Information Administration) expects the oil and gas production to slow down at most of the key US shales by October. According to its Drilling Productivity Report released on September 14, 2015, the EIA expects the crude oil production to fall at five key shales in October. However, it forecasts a rise at two other shales.

Overall, the aggregate crude oil production at the seven key shales is expected to drop 3% in October compared to the levels in August. It’s expected to fall 1.50% in September.

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Bakken and Eagle Ford may lose, Permian may gain

The Bakken is one of the major crude oil resource shales. It’s expected to see a fall between August and October. The EIA estimates that it will produce 1.18 MMbpd (million barrels per day) of crude oil in October. It produced 1.22 MMbpd in August. It fell 3.40%. The oil production at the Niobrara Shale, one of the smaller crude oil producing regions, is expected to fall 8.80% in the next two months. This is the highest percentage fall among these key shales. According to the EIA, the Eagle Ford Shale is expected to witness a 7.80% fall in crude oil production over the next two months.

The Permian Basin is the most prolific crude oil producing shale in the US. It’s expected to increase production by 2% by October.

How it will affect producers

Companies like EOG Resources (EOG), Concho Resources (CXO), and Matador Resources (MTDR) may drive higher production in the Permian Basin. This would be positive for them. Reduced Bakken oil production could be led by producers like Denbury Resources (DNR) and Continental Resources (CLR). This would be negative for these companies. Denbury Resources forms 0.80% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Changes in production and the rig count in the key US shales will affect the performance of OFS (oil field service) companies as well. These companies include National Oilwell Varco (NOV), Dril-Quip (DRQ), and rig operators like Helmerich & Payne (HP).


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