The shale sector needs to consolidate even more, in order to quell production increases from smaller producers that could potentially undermine efforts of publicly traded companies focusing on shareholder returns, said Scott Sheffield, CEO of Pioneer Natural Resources.
Firstly, private, as we have reported previously, the rig count in the U.S. has been growing exponentially. Particularly from privately held firms that are increasing production in the Permian Basin.
However, this exponential growth could potentially undermine production curbs efforts by OPEC, and the focus of bigger, public companies on securing shareholder returns rather than substantial volume growth when the market is well supplied.
Consequently, Scott Sheffield warned. “I hope other privates are taken out that are growing too much.” He said this during a conference with investors; after he was questioned about whether Pioneer’s deal-making contradicted the company’s philosophy of not adding to global oil supply.
Nevertheless, according to what Reuters reports, Sheffield said the uptick in drilling from private firms has not yet come to a point it could undo the positive impact from OPEC in supply curbs. However, he warned about a potential harm if the growth keeps uncontrolled.
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Shale production from Pioneer to peak during this year
On the other hand, pushed by the vaccine roll out, and precisely, production curb efforts by OPEC and other major producers, oil prices have climbed to almost $66 per barrel. Up from the $20 from a year ago; and even from the historic below zero crash after the wake of the pandemic.
In addition, during the midday trading session of this Thursday, shares of shale producer Pioneer were up 3%, to $163,32.
Furthermore, Pioneer aims to expand its shale output about 5% annually; by adding one or two drilling rigs. On the other hand, some publicly traded peers, like Diamondback Energy have said they would not increase their production for all 2021.
Finally, Pioneer this week closed a $6,4 billion acquisition of privately held DoublePoint Energy; a few months after acquiring rival Parsley Energy for $4.5 billion. According to analyst Andrew Dittmar, An uptick in offerings this year in the Permian and other shale fields is “mainly a result of higher crude prices”; making more acreage potentially profitable to drill.