Jefferies Financial Group: Permian’s private shale operators expect modest growth in 2024

David Wethe, Bloomberg January 08, 2024

(Bloomberg) – Most of shale’s private operators in the Permian basin are planning modest growth this year as one of the main engines of U.S. oil expansion downshifts amid volatile commodity prices.

A pump jack in the Permian Basin area of Loving County, Texas. (Photographer: Angus Mordant/Bloomberg)

A survey of closely held oil operators showed 69% of Permian firms expect to grow production 5% or less this year, according to Jefferies Financial Group Inc. The same amount expects to maintain or cut their number of drilling rigs this year, the bank said Friday in a note to investors.

Nearly half indicated they need West Texas Intermediate crude to be greater than $70 a bbl to make a profit in 2024. Oil prices in the U..S have traded between $66 and $93 a bbl over the past year amid global economic uncertainty.

The survey, which also included private operators in key natural gas basins, offers the latest indication that the shale patch is slowing down.

The private producers, who led the Permian’s shale growth coming out of the pandemic, also are planning to drill longer sideways wells, pushing beyond 10,000 ft in lateral length. That’s a boost from last year’s horizontal wells averaging 9,400 ft, the bank said.

“This was an important factor in ‘23 productivity across shale drilling,” analysts including Lloyd Byrne wrote in the note. “We do expect the average to continue to push out in the year ahead (although more modestly than in 2023).”

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