GlobalData’s latest report, “Unconventional Production in the US Lower 48, H2 2020” provides a comprehensive review of the shale oil and gas appraisal and development activity across the US Lower 48 in 2020 in the wake of easing of COVID-19 restrictions worldwide.
In 2020, the US shale operators responded to the pandemic by focusing on returning value to investors. Majority of the operators have stated that they are planning to operate within free cash flow to fund their future capital expenditures. The next few years of oil and gas production growth in the United States will hinge on the discipline of operators with their capital budgets.
The Covid-19 pandemic led crash in commodity prices and the price war between Saudi Arabia and Russia compelled operators to reduce their capital expenditure and rig count during first half of 2020. However, commodity prices rebounded over the second half of 2020, and since September, operators have started to slowly increase their rig count that has now almost doubled from the third quarter numbers. West Texas Intermediate (WTI) futures are currently averaging US$60.51 for the rest of 2021 and US$56.36 for 2022.
The new US President has added a degree of uncertainty for oil and gas operators with acreages located on federal lands. He ordered a 60-day pause on issuing new drilling permits and leasing on federal lands. However, a hiatus on drilling permit on federal lands would not have an immediate effect on overall production level, with operators shifting their capital to acreage on public lands. As the 60-day ban on federal land leasing came to an end on March 21, the US Bureau of Land Management (BLM) stated that it would resume processing oil and gas drilling permits on federal lands. If a long-term ban on federal drilling permits was to be a permanent policy, it could have an overall effect on oil and gas production levels in the upcoming years.