US oil producers start storm impact tally

First quarter oil and natural gas production will take a noticeable hit from the winter storm that plunged much of Texas into icy darkness last week, according to companies reporting earnings this week.

Occidental Petroleum said it expects the storm to cut its first quarter production from the Permian basin by about 25,000 b/d oil equivalent (boe/d). That would put the company's expected Permian output in the 450,000-460,000 boe/d range — but well above the 382,000 boe/d it produced in the fourth quarter.

Independent oil producer Diamondback Energy said last week's extreme cold will reduce its first quarter oil output by the equivalent for 4-5 days of production, or about 878,500 bl.

"Production has nearly returned to pre-storm levels as of today, and we expect to make up a majority of the lost production throughout the year, but will not be able to make it all up in the first quarter," Diamondback said during an earnings call today.

Laredo Petroleum, a small producer operating in the Permian said the storm will cut its full year output by about 8,000 boe/d, to a range of 80,000-85,000 boe/d.

"Multiple challenges impeded our production operations over this 12-day time frame, including lack of fuel gas and electricity, shuttered takeaway and processing capacity, limited access to well sites and facilities and inoperable vapor recovery units, which are necessary for environmental compliance," said Loredo chief operating officer Tommye Chandler.

Producer Cimarex Energy said it expected first quarter production to take a 5-7pc hit from the storm in the Permian and midcontinent, bringing output to average 205,000-225,000 boe/d.

Peak output cut estimates vary

Market sources have put the peak of the production outages last week at between 2mn-3mn b/d, but analysts at Simmons & Co put the figure as high as 4mn b/d at the height of the crisis.

Goldman Sachs estimates the storms will cut February's total production rate by about 700,000 b/d, "… with relatively quick recovery based on past disruptions." Consultancy Rystad Energy estimates storm-related shut-ins in the Permian basin will total about 660,000 b/d in February and another 160,000 b/d in March.

The storm came just as the level of activity in onshore US oil fields was showing signs of growth. Before last week the number of hydraulic fracturing crews at work climbed by nearly 15pc over the prior month, from between 160-165 crews to a 185-190 crew range, notes Tudor Pickering Holt, with Permian basin activity leading the way.

"We are now at active frac fleet levels we did not expect to broach until April/May and we are firmly in the range that should be sufficient to hold US onshore crude oil production flat y/y on an exit-to-exit basis," the investment bank's researchers said in a note this week.

By Tom Fowler