DUC Clock Ticks On Cheap Production: Low-Cost Cash Flow Won’t Last

DUC Clock Ticks On Cheap Production: Low-Cost Cash Flow Won’t Last

Oil pumps on the sunset sky background As we await second quarter earnings for publicly traded upstream producers, there are several markers and trends that suggest cash flows and profits will swell. Investment austerity and the recently resulting profits will almost certainly be bandied about on management calls. However, what might not be touted as loudly will be how much longer this can last? Existing U. S. production, much of it horizontal shale, is declining fast, operational costs and inflationary pressure are rising again, and the only way to augment production is through some combination of drilling and fracking. According to the latest Dallas Fed Energy Survey, business conditions remain about as optimistic as they were in the first quarter whilst oil and gas production has jumped. In the meantime, U. S. shale companies are on the precipice of delivering superior profits in 2021: in the neighborhood of $60 billion according to Rystad. How are they doing that? A combination of revenue boosts and near static investment levels. Analysts are pleased and management teams are crowing about cash. The industry should be able to keep it up, but only for a finite period. How long is that? Nobody knows for