US Shale Industry Is Painfully Adapting to Low Oil Prices

by Global Risk Insights
Financial Sense

Low oil prices wreaked havoc with US shale producers, but increasingly the industry appears to be adapting successfully to new market conditions.

The rise in oil prices over the past six months has come as a blessing for the battered US shale producers. Oil prices have risen more than 50% since January, giving a glimmer of hope to the US oil industry that the worst of the oil crisis might finally be behind them. Moreover, it forced the shale producers to adapt by reducing production costs and increasing efficiency.

According to data publicized by Reuters, the decline rates of oil wells in the most productive fields in the US—the Permian and Bakken Basins – were almost halved over the past several years. In practice, this means that shale people will get more bang for their buck; due to a slower decline of the wells, they will have to drill fewer new wells to sustain output and therefore lower their capital demands.

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