Energy Giants Prepare for Explosion in US Shale Sector


As international oil producing countries continue to restrict the supply of oil in order to increase prices, we’ve seen a number of nations move towards a more energy-independent policy. Most notable is the United States, who under the current administration has moved to expand the nation’s domestic energy production.

Recently, two of the country’s largest energy companies have drastically increased production targets for the Permian Basin, the main area behind the US shale boom. Both Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX)have gone on to state that they’re seeing America become a dominant shale producer and that an explosion in output is coming.

In a presentation to analysts, Exxon increased its oil and shale output from 600,000 barrels a day up to 1 million barrels per day in five years time. Chevron posted similar figures earlier today, raising its estimates from 650,000 barrels per day to 900,000 per day by 2023. Both companies figures are representative of the US energy industries growing confidence in national output, expecting strong growth figures throughout the sector.

“This doesn’t end where our charts end. Not even close. We’re right now recovering high single-digits [percentages] of the hydrocarbon in place. If we left 90 percent of the oil and gas behind, it would be the first time in the history of the industry,” said Chevron’s CEO Michael Wirth in a presentation for analysts in New York. “Shale returns are the highest in our portfolio. Returns on our shale investments are north of 30 percent, at low oil prices. There’s nothing we can invest in that delivers higher rates of return. So this will improve returns over time, not dilute them.”

The shale industry, previously pioneered by smaller niche companies, has attracted the interest of larger energy giants with an ever-increasing share of their energy output coming from shale as the years go on. Both Exxon and Chevron said that operations in the Permian basin are expected to be highly profitable, despite the sector’s history of requiring constant infusions of capital to remain in operation.

“Shale returns are the highest in our portfolio,” added Wirth. “Returns on our shale investments are north of 30 percent, at low oil prices. There’s nothing we can invest in that delivers higher rates of return. So this will improve returns over time, not dilute them.”

The growth of shale in the U.S. is part of the nation’s move to energy independence, and eventually being a net exporter of energy to the world. This is one of the main factors exerting a downward effect on oil prices, with only OPEC’s supply cuts pushing prices up regardless of this. Traders will notice that on days where news comes out concerning the U.S.’s growing energy surplus, energy-related commodities tend to fall.

Exxon Mobil Company Profile

Exxon Mobil Corporation, incorporated on August 5, 1882, is engaged in energy business. The Company is engaged in the exploration, production, transportation and sale of crude oil and natural gas, and the manufacture, transportation and sale of petroleum products. The Company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and a range of specialty products. – Reuters

Chevron Company Profile

Chevron Corporation, through its subsidiaries, engages in integrated energy, chemicals, and petroleum operations worldwide. The company operates in two segments, Upstream and Downstream.

The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as operates a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil and refined products; transporting crude oil and refined products through pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing commodity petrochemicals, and fuel and lubricant additives, as well as plastics for industrial uses. – Bloomberg