U.S. Oil Production Growth is slowing
U.S. Oil Production Growth is slowing
The EIA has revised lower its total U.S. crude oil production growth forecast. It said last week in a monthly report that output will rise 1.36 million b/d to 12.32 million b/d in 2019, 140,000 b/d less than previously forecast. That will top the current all-time high of 10.96 million b/d set in 2018. The rig count, an early indicator of future output, has declined over the past six months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: U.S. Oil Production Growth is slowing
This is why EIA lowering their forecast of U.S. oil production is so important.
Forbes: The U.S. accounted for 98% of global oil production growth in 2018
"Earlier this month BP released its Statistical Review of World Energy 2019. The Review provides a comprehensive picture of supply and demand for major energy sources on a country-level basis. For 2018, the Review reported that the world set a new oil consumption record of 99.8 million BPD, which is the ninth straight year global oil demand has increased. Oil demand in 2018 grew by 1.5%, ahead of the decade-long average of 1.2%. On the other hand, 2018 demand growth of 1.4 million BPD marked the third consecutive year oil demand growth has fallen. The U.S. extended its lead as the world's top oil producer to a record 15.3 million BPD.2 In addition (this includes NGLs), the U.S. led all countries in increasing production over the previous year, with a gain of 2.18 million BPD (equal to 98% of the total of global additions)."
In my opinion, U.S. oil production growth is falling because:
> Upstream companies are moving to "living within cash flow" and they now have a high percentage of their Tier 1 leasehold held by production ("HBP"), so they can limit drilling programs.
> Each year it will take a higher percentage of new completed well just to hold production flat. Eventually, all oilfields peak because (a) they run out of Tier One locations and (b) it is mathematically impossible to complete enough new wells to offset the decline of the oil wells.
> The GOR will continue to increase in the Permian Basin.
> Private Equity is not eager to fund new private drilling programs. Of course, if oil prices do spike this will change.
The good news for us is that the upstream companies that control a lot of Tier One leasehold that is HBP'd will be much more valuable.
Forbes: The U.S. accounted for 98% of global oil production growth in 2018
"Earlier this month BP released its Statistical Review of World Energy 2019. The Review provides a comprehensive picture of supply and demand for major energy sources on a country-level basis. For 2018, the Review reported that the world set a new oil consumption record of 99.8 million BPD, which is the ninth straight year global oil demand has increased. Oil demand in 2018 grew by 1.5%, ahead of the decade-long average of 1.2%. On the other hand, 2018 demand growth of 1.4 million BPD marked the third consecutive year oil demand growth has fallen. The U.S. extended its lead as the world's top oil producer to a record 15.3 million BPD.2 In addition (this includes NGLs), the U.S. led all countries in increasing production over the previous year, with a gain of 2.18 million BPD (equal to 98% of the total of global additions)."
In my opinion, U.S. oil production growth is falling because:
> Upstream companies are moving to "living within cash flow" and they now have a high percentage of their Tier 1 leasehold held by production ("HBP"), so they can limit drilling programs.
> Each year it will take a higher percentage of new completed well just to hold production flat. Eventually, all oilfields peak because (a) they run out of Tier One locations and (b) it is mathematically impossible to complete enough new wells to offset the decline of the oil wells.
> The GOR will continue to increase in the Permian Basin.
> Private Equity is not eager to fund new private drilling programs. Of course, if oil prices do spike this will change.
The good news for us is that the upstream companies that control a lot of Tier One leasehold that is HBP'd will be much more valuable.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group