US oil and shale output – Apr 2019

Published at 20:09 28 Jun 2019 by . Last edited 11:18 22 Aug 2019.

US liquids output rose m/m by 0.35 mb/d to 18.1 mb/d in April, higher y/y by 2.2 mb/d. NGL and crude production rose m/m by 59 thousand b/d and 0.25 mb/d respectively, with crude hitting a new high of 12.2 mb/d. The m/m change in crude was above our projected production increase of 0.14 mb/d m/m, primarily due to a surprise in Gulf of Mexico (GoM) production; we had forecast April output to fall by 7 thousand b/d and it instead rose by 77 thousand b/d. Texas and New Mexico (a proxy for the Permian and Eagle Ford) output rose by 0.10 mb/d m/m to 5.85 mb/d. Wyoming and Colorado production (a proxy for the Niobrara) also increased m/m by 27 thousand b/d to 0.76 mb/d. Also, Oklahoma and Kansas production (proxy for Anadarko basin) was up by 35 thousand b/d to 0.71 mb/d. However, output in North Dakota fell marginally m/m.

US crude production growth started the year slow, growing by 0.23 mb/d between January and April versus 0.48 mb/d over the same time in 2018. By the end of April, crude output was only 0.20 mb/d above December 2018 levels. The slow start to 2019 was not just due to the winter weather that has become commonplace for areas such as the Bakken and parts of Texas, but also due to infrastructure bottlenecks in places like the Permian, as well as increased producer discipline with investors insisting on positive free cashflow. Production is expected to accelerate in H2 19 as new pipelines start up in the Permian (adding 2 mb/d of takeaway capacity) and new projects ramp up in the Gulf of Mexico. Between end-June and end-December, we forecast 0.44 mb/d of growth in the Permian and 0.15 mb/d in the Gulf of Mexico.

US production has been a wildcard for balances, outperforming expectations over the past few years. Yet at the inaugural Energy Aspects conference held 17 June, several CEOs and senior representatives of leading US upstream, midstream and service companies suggested, controversially, that US black oil production growth had already peaked or was very close to doing so. While others have suggested as much over the past year, this was the first time we heard this from executives of major US producers. According to EIA figures, the US increased total crude production by 1.6 mb/d y/y in 2018 (with 1.0 mb/d in the Permian alone). That growth may never be replicated again. The conference panel pegged the 2019 y/y increase in US crude production at 1.0–1.2 mb/d for 2019, lower than our estimates of 1.3 mb/d this year, and at 0.8–0.9 mb/d for 2020 versus our 1 mb/d estimate. If the panel is correct, this means there will be very little growth in H2 19, in contrast to our (and consensus) forecasts. Importantly, no one claimed that US liquids production growth had peaked. In fact, some had downgraded their black oil growth figures and raised their NGLs estimates, confirming our view that US production is getting lighter and the incremental acreage where production is coming from is gassier.

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