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January 2017 EIA Estimates: Will US Shale Oil Production Steady?

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Key US shale oil production

The EIA (U.S. Energy Information Administration) expects crude oil production to slow down at key US shales. According to its Drilling Productivity Report released on December 12, 2016, the EIA expects crude oil production to fall at four of the seven key shales by January 2017.

Overall, crude oil production at the seven key shales is expected to steady, falling by a marginal 0.60% in January 2017 compared to November 2016. The EIA also estimates that crude oil production will fall 0.60% in December 2016 compared to November 2016. The aggregate crude oil production at key shales already fell 0.90% in November 2016 compared to October 2016.

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January 2017 estimates: Permian Basin to gain, Bakken and Eagle Ford to lose

The Bakken Shale is a major crude oil resource shale. The EIA estimates that it will produce ~0.91 MMbpd (million barrels per day) of crude oil in January 2017. It produced ~0.94 MMbpd in November 2016. Production is expected to fall 3.3% by January 2017.

The Eagle Ford Shale, the second-highest crude oil–producing shale, is expected to see production fall 5.4% in the next two months. That’s the second-steepest production fall among key shales.

The Permian Basin is the largest shale and has been one of the most prolific crude oil–producing shales in the United States. Its production is expected to rise 3.1% by January 2017. The shale, which accounts for only 1.0% of key shale production, could see a fall of ~11.0% in crude oil production in the next two months.

What’s the impact on oilfield services companies?

A fall in crude oil production in many of the key US shales will negatively impact the performances of oilfield services companies such as McDermott International (MDR), Carbo Ceramics (CRR), and Precision Drilling (PDS). It will also negatively affect rig operators such as Patterson-UTI Energy (PTEN) and Fairmount Santrol Holdings (FMSA).

Patterson-UTI Energy makes up 0.24% of the SPDR S&P MidCap 400 ETF (MDY). However, if the recent rise in rig count continues, it could outweigh the effects of lower production and improve the performances of oilfield services companies in the coming months.

See the next part of this series for the EIA’s projections for natural gas production in the key resource shales.

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