New OPEC+ deal reactivated US shale industry

Oil&Gas Materials 8 January 2021 10:12 (UTC +04:00)
New OPEC+ deal reactivated US shale industry

BAKU, Azerbaijan, Jan.8

By Leman Zeynalova – Trend:

The production cuts from OPEC+ have definitely fulfilled their purpose by balancing the market and supporting higher oil prices, Trend reports citing Rystad Energy.

At the same time, higher oil prices have reactivated the US tight oil industry. With the current budgeting season and improved cash flows, Rystad Energy expects to see a further increase in US tight oil activity.

The positive effect on oil prices is set to create a chain reaction in the US, where shale operators will see cash from operations (CFO) boosted by 32 percent in 2021, allowing them to increase their activity spending this year, the company believes.

“The price recovery has helped oil producers’ cash flow improve significantly since the second quarter of last year. In the US in particular, the rebound in prices – even before WTI hit $50 per barrel – helped shale producers generate record high free cash flow in the third quarter of 2020. Cash from operations is a key driver for US tight oil activity. The figure correlates with the cash available for the E&P companies to invest in new wells, and represents the revenue minus all operational costs, royalty payments and gross and net taxes,” said Rystad Energy.

“At a WTI oil price of $40 per barrel for 2021, CFO would be expected to remain flat this year. However, at the current oil price of $50 per barrel, it is expected to grow by around 32 percent. This means that if companies continue to operate within their cash flows, the current oil price of $50 per barrel will provide enough cash flow for a ramp-up in investments and a surge in US tight oil activity this year.”


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