U.S. shale production will likely plateau if WTI oil prices remain in the low $60s per barrel, and decline at prices in the $50s, ConocoPhillips chairman and CEO Ryan Lance said at the Qatar Economic Forum on Tuesday.
“The breakeven probably hasn’t moved a lot,” Lance said in Doha, commenting on the breakeven for U.S. shale firms to profitably drill a new well.
Executives said in the Dallas Fed Energy Survey in Q1 indicated that their companies need an average $65 per barrel to profitably drill a new well.
Commenting on oil prices and shale output, ConocoPhillips’ Lance told the forum in Doha,
“I think long-term, if you’re going to say oil prices in a comfortable range – maybe in the 70s, or 65-75, we’ll still see continued modest growth out of the U.S.”
So there is a place of equilibrium where shale could grow and mature, “but we see plateauing production, probably the end of this decade, coming out of the U.S., unless there’s going to be another technological breakthrough in our business,” Lance said.
“And don’t bet against our industry.”
Lance said on ConocoPhillips’ Q1 earnings call earlier this month that at $60 oil, “the folks that don’t have the kind of cost of supply sitting in their portfolio are going to find themselves cash-strapped and returns-strapped.”
“Obviously, the balance sheets are in pretty good shape across the industry, better than we were in the last downturn, but you’ll see a lot of activity cut back,” Lance added.
Analysts and some major U.S. shale producers have recently said that the decline in oil prices and the prevailing uncertainty about the economy, trade, and supply chains are accelerating the peak in U.S. oil production.
“It’s looking like with the current headwinds or at least volatility and uncertainty around pricing and the economy and recessions and all of that – it’s looking like that peak could come sooner,” Vicki Hollub, President and CEO of Occidental Petroleum, said on the Q1 earnings call, adding that the Permian would grow very little this year, if at all.
By Charles Kennedy for Oilprice.com
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