Latest market news

US shale firms boost output goals on efficiency gains

  • : Crude oil, Natural gas
  • 24/08/26

The efficiency gains that were one of the key drivers behind last year's surprise jump in US crude output are now back, and are spurring shale producers to increase 2024 targets just as Opec is gearing up to unwind its supply cuts.

Upward revisions from publicly-traded US operators including Diamondback Energy, Devon Energy and Permian Resources are modest for the most part, but they may still be enough to ruffle some feathers in Vienna as Opec+ prepares to start reversing a combined 2.2mn b/d of production cuts in the coming months. "With domestic energy production a key topic in the 2024 US presidential election and Opec+ perhaps having prematurely expected lower shale oil volumes, [second-quarter] earnings serve as a reminder that shale will continue to be a growing, albeit perhaps more predictable, supply source on the global stage," consultancy Rystad senior analyst Matthew Bernstein says.

Overall US crude production growth is still expected to slow in 2024 after last year's 1mn b/d gain defied all expectations. But improved techniques that have sped up the drilling process are helping operators get more bang for their buck, and are leaving more cash on the table for shareholder returns. Such gains are also bolstering the case for further consolidation in the shale patch as firms benefit from lower costs for oil field services. "What was unexpected is the scale of efficiency gains that have helped deliver lower [capital expenditure] as operators drop rigs and hydraulic fracturing (frac) spreads," analysts at bank Jefferies say.

The gains have come from drilling three-mile lateral wells along with the adoption of electric fracking fleets, which has increased pumped hours and led to faster cycle times when it comes to well completions. Diamondback typifies the new industry spirit after boosting its full-year production outlook despite reducing drilling activity to 10 rigs from 12 and its frac fleet count to three from four. "We are clearly doing more with less and becoming more operationally efficient each quarter," chief executive Travis Stice says.

Frac competition

Healthy competition among crews is driving productivity gains, Devon Energy says. The producer has 16 rigs and three frac crews active in the prolific Permian basin of west Texas and southeast New Mexico. "We rack and stack all 16 rigs every day on how they're doing," chief operating officer Clay Gaspar says. "There's a first place and there's a last place... and those companies know, those engineers know exactly where they stand."

The US majors are also getting in on the act, with Chevron upping its full-year production growth outlook for the Permian to about 15pc from 10pc, after flagging new techniques such as the ability to frac three wells at the same time. "We're one of the first operators to deploy triple-frac, delivering cost reductions of more than 10pc and shortening completion times by 25pc," chief executive Mike Wirth says.

The downside to efficiency gains can be seen when it comes to natural gas, where production remains robust even as activity slows in response to lower prices. "But the industry appears ready to respond by pulling the curtailment lever again," bank Citigroup analysts say. US independent EOG Resources expects oil output from the lower 48 states will exit this year the same as at the end of 2023, with limited gains expected for total US supplies from offshore operations. "Activity levels, as reflected in the rig count, indicate continued lower oil production growth through to at least mid-2025," EOG chief executive Ezra Yacob says. Yet that did not stop the company from increasing its own full-year output guidance while keeping spending unchanged.

US tight oil production

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more