Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Oil

US shale 'magic' stalling; investments shrinking: Standard Chartered's Horsnell

Commodities | Coal | LNG | Natural Gas | Natural Gas (North American) | Oil | Crude Oil | Steel | Shipping | Coronavirus

Market Movers Americas, Aug 3-7: Brent-WTI spread at widest since May

Oil

Platts Market Data – Oil

Capital Markets | Commodities | Oil | Crude Oil | Refined Products | Fuel Oil | Gasoline | Jet Fuel | Naphtha | Marine Fuels | Equities | Financial Services | Banking | Non-banks | Private Markets

North American Crude Oil Summit, 3rd annual

Oil | Crude Oil | Refined Products

Crude oil futures retreat after overnight rally, steady US dollar

US shale 'magic' stalling; investments shrinking: Standard Chartered's Horsnell

Highlights

Shale largest area of oil market uncertainty

$65/b WTI needed to lift sentiment

Majors' shale expansion brings no quick fix

London — The US shale boom is stalling as productivity declines and investors and lenders shun the sector, while the expansion of major international oil companies into shale will take time to have an impact, Paul Horsnell, global head of commodities at Standard Chartered bank, said Tuesday.

Speaking at Platts' Essential Commodities Exchange conference, Horsnell said US shale represented the largest area of uncertainty in oil market forecasting, with estimates of total US oil production growth next year ranging among forecasting organizations from 400,000 b/d to over 1.5 million b/d.

Horsnell said he detected a change of mood, not only among shale investors, but in the industry itself, with formerly bullish executives such as Pioneer Natural Resources President Scott Sheffield sounding uncharacteristically downbeat. Horsnell estimated the sector would need WTI oil prices to reach around $65/b for a decisive renewal of confidence, and improvements in rig numbers.

"At some point the magic stops," Horsnell said, attributing the new mood to poorer performance and to the growing importance of Environmental Social and Governance criteria.

"You can't just keep dropping rig counts, moving to more marginal acreage, failing to increase productivity as much as in previous years," he said. "All of those offsets that there used to be have gradually disappeared."

For Permian oil production to remain constant around 420 wells/month needed to be completed, which is currently happening, but in other plays such as the Eagle Ford "critical levels" of well completion were not being achieved, he said.

On the finance side, "everybody hates the industry," Horsnell said. "Money is not going in. In terms of US independents, the median equity performance this year is a loss of more than 40%. While people are shopping around within the sector, overall there's still a massive amount of negative feeling, from the equity markets, spreading into the private equity markets, at precisely the time when the industry needs to roll over an awful lot of debt," he said, estimating the sector is looking to "roll over" around $200 billion of debt in the next three years.

Standard Chartered's own forecast is for US liquids production to increase by 700,000 b/d next year, of which 500,000 b/d is crude oil, 400,000 b/d of this being derived from shale.

MAJOR ADVANTAGE

Horsnell went on to describe the expansion by the major companies such as BP and ExxonMobil as "very important" for the shale sector's long-term future, particularly given their more resilient finances, but cautioned these companies' impact would not necessarily be transformative.

The majors "aren't suddenly arriving with all kinds of wonderful things that the independents haven't tried before," he said. "The independents have worked really hard on this. They've done all of the innovation. I'm not certain [the majors] are arriving with a great big toolkit.

Their' "financial toolbox is a very good thing," Horsnell added. "They also have the ability to gradually pick up bits of acreage. It's the second-mover advantage, but it's not that all the technical problems of shale are necessarily going to be solved next year. Who are the majors hiring from? It's the independents."

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com