Is the Shale Oil Boom Coming to an End?

February 3, 2022

The Wall Street Journal is declaring that “the end of the boom is in sight for America’s fracking companies.” Since the advent of shale oil extraction, America has become the largest producer of oil, but many of the largest wells throughout Texas, New Mexico, and North Dakota are nearly tapped.

According to the Journal’s review of inventory data from the nation’s largest shale drillers, companies could continue to run profitable wells for another decade or two, so long as they keep output flat, as it has been since the pandemic. If companies boosted production by 30%, bringing it in line with the pre-pandemic growth rate for the nation’s largest oil field, companies would the fields would be tapped in just a few years. 

This means that shale companies have little choice to keep output flat, even as oil prices surge to the highest level in years.

Some shale drillers told the Journal that the decision to keep output steady is not due to inventory concerns, but from frustrated investors who have pressured companies to return cash to shareholders instead of expanding their drilling operations. Companies have largely agreed to limit spending, but some energy executives have said that high prices mean they will look to expand this year.

Shale companies have to drill hundreds of wells each year to maintain production, as output from existing wells declines rapidly. A previous investigation from the Journal in 2019 found that thousands of wells were pumping less gas and oil than companies had initially forecast.

Shale companies will eventually have to begin searching for new deposits, but the Journal asserts that those efforts would likely add only incremental inventory.

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