Which Way to Grow: U.S. Oil Supply Likely To Increase

Here's a look at private and public companies and key regions poised to grow.

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CALBARY, ALBERTA — Enverus Intelligence Research, a part of Enverus, A global energy data analytics and SaaS technology company, has released a new report examining the likely responses by U.S. oil producers, both public and private, to high oil prices and increased concerns about energy security in the wake of Russia's recent invasion of Ukraine. Included are regions that are likely to boost output and identifies the barriers and costs of adding production. 

“The E&P industry can grow while remaining profitable and environmentally responsible. Private operators have been and will continue to take advantage of the outsized returns, and we believe continued drilling activity increases from large U.S. independent are likely and warranted,” said Farzin Mou, lead report author and vice president at Enverus Intelligence Research. 

Jen Snyder, co-author, managing director and head of North America Macro Intelligence Research, added, “Once operators lock in new long-term midstream and services commitments, they are handcuffed with off-balance-sheet leverage during a price downturn. The trajectory of the 2024-25 WTI strip therefore will be an important driver of operators’ 2022-23 capital commitments even if wells earn attractive returns by year-end 2023.”

Key takeaways from the report:

  • Russia’s invasion of Ukraine and the subsequent sanctions on Russian energy fundamentally changed the oil market, highlighting the potential of an increased long-term call on U.S. oil barrels.
  • The U.S. upstream sector already had transformed from one of the least-profitable industrial sectors across the S&P 500 to one of the most profitable, with improved environmental stewardship.
  • Public shale oil producers went from reinvesting nearly 100% of operating cash flow from 2018-20 to less than 35% in 2022 at current strip prices.
  • Private operators are taking advantage of the outsized rates of return and raising their share of horizontal drilling to near-record levels.
  • Large U.S. independents' drilling activity already is up ~15% since November, and we believe continued moderate increases are likely — and warranted — based on pre-war price expectations.
  • Should long-dated prices move over $90/bbl, another step-change in activity would be justified. The E&P industry can return to strong growth while remaining profitable and environmentally responsible.

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Enverus is an energy SaaS company delivering highly-technical insights and predictive/prescriptive analytics that empower customers to make decisions that increase profit. Enverus’ innovative technologies drive production and investment strategies, enable best practices for energy and commodity trading and risk management, and reduce costs through automated processes across critical business functions. Enverus is a strategic partner to more than 6,000 customers in 50 countries. Learn more at Enverus.com.

Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters. Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser.

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