Oil and gas executives are painting an increasingly bleak picture of the US shale industry, with one anonymous CEO warning of the “twilight of shale” as companies struggle with low prices and rising costs.
The comment comes from the Federal Reserve Bank of Dallas’ latest Energy Survey, released Wednesday, which found oil and gas activity contracted for the second consecutive quarter in the key producing states of Texas, Louisiana, and New Mexico.
“We have begun the twilight of shale,” an exploration and production executive told the Dallas Fed, adding that major firms previously focused on US onshore drilling are now “making investments in foreign countries and riskier (waterborne) geologies.”
The survey’s business activity index fell to -6.5 in the third quarter, while the company outlook index plunged to -17.6, signaling deep pessimism among the 139 firms surveyed. Oil and gas production both declined during the period.
Related: US Oil Rig Count Drops to New Cycle Low
Company executives blamed a combination of factors, including low oil prices, rising input costs from tariffs, and policy uncertainty. Many producers need prices around $65 per barrel to turn a profit, but companies expect West Texas Intermediate crude to average just $63 per barrel by year-end.
Related: Do the “Drill, Baby, Drill” Economics Make Sense at $50 per Barrel?
“Right now we are bleeding,” one oilfield services executive said in the survey’s anonymous comments section.
A decade ago, US shale was hailed as revolutionizing global energy markets. Now, executives describe an industry in retreat, with 50% fewer public companies than 10 years ago and tens of thousands of job cuts.
“The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch,” another executive said. “Those who can are running for the exits.”
Related: Is US Shale Running Out of Time?
About 77% of survey respondents expect shale drilling to become commercially viable in international locations within the next decade, suggesting the industry’s focus may shift abroad as domestic economics deteriorate.
The Dallas Fed survey, conducted September 10-18, samples energy companies headquartered in the Eleventh Federal Reserve District but includes firms with national and global operations.
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