Shale Producers Eye Possible Fracking 'Revival' With Oil at $30 a Barrel

MIDLAND, TX – Two leading shale producers hint that all they need is oil to rise and hang around $30 a barrel in order to resume normal crude oil output and fracking on new well sites.

Diamondback Energy Inc. cut back its production this month by 10 to 15 % after sending home a majority of all their hydraulic fracturing crews for the remainder of the quarter. The Midland-based company expects to end the year with over 150 wells in service that were initially drilled but never tapped into as many U.S. producers avoid pumping oil into a severely saturated supply market.

In the meantime Parsley Energy Inc., has slashed a quarter of its yearly output and temporarily abandoned their five-rig locations,as their two-frack crew program takes a hit.

The historic drop in crude oil prices amid the COVID-19 pandemic has shocked the economy and forced an unprecedented retreat from shale drilling exploration. Top producers from Chevron Corp. and Exxon Mobil Corp. as well as "mom-and-pop" drillers are repressing production output as the industry runs out of ample storage to house a surplus of oil supplies.

The Benchmark U.S. crude oil  futures rose roughly 20 % up to $24.34 a barrel at 12:20 p.m. Midland time on the New York Mercantile Exchange on May 5. This growth came a little more than two weeks prior to a direct collapse into negative territory. Still, futures remain roughly 60 % below the $65.65 peak the industry recorded in early January. 

When questioned at what oil price Diamondback needs to see before before ramping up production, Chief Executive Officer Travis Stice noted the company’s first priority would be restarting production which has been held back. As production increases, Diamondback would reconsider bringing back fracking crews to tap into previous supplies from wells that have been drilled but were never completed.

According to MRT, Stice said on a call Tuesday afternoon, “There’s a lot of factors that weigh into that, but you’ve got to have prices in the high-20s or low-30s before we kind of signal going back to work in an aggressive or even in a non-aggressive way. As we evolve as an industry into this new world order, I think it’s going to look a lot different than what we’ve historically been accustomed to.”

Parsley said it would ultimately need at least one or two weeks in order to have wells back to previous levels of output. The company noted $30 a barrel as the best case scenario for the normal production of four to five drilling rigs and one or two frack crews, according to an earnings presentation. The Austin, Texas based driller is currently waiting for the vulnerability of oil supply and the demand to die down, executives told analysts and investors Tuesday during a conference call.

 CEO Matt Gallagher said, “This is a choice.., Currently the world does not need more of our product.” Parsley said at most, the company would maintain roughly a 25 % reduction level for the month of June.

Shale wells typically peak early and decline so quickly that new ones are constantly needed in order to maintain an aggressive production output. Unfortunately, Stice declined to disclose what price the company would need in order to actually increase the companies output on a quarter-by-quarter basis.

“If you look at some of the prices that we got in 2019, that certainly is a signal that you can get more aggressive on the growth,” Stice said, “But I think we’ve got to be pretty careful on being too prescriptive on what exact price signals are going to look like before you get back to growing again.”