Shale Rebound Can Be Long Off Due to Low Prices

Shale Rebound Can Be Long Off Due to Low PricesShale Rebound Can Be Long Off Due to Low Prices

Shale producers may not snap back quite as fast as hoped, if oil prices stay in the $30-per-barrel range for much longer.

Energy drillers say the US is finally beginning to see real declines in production and the longer prices stay low, the longer it will take to reverse the effects across the industry of cutbacks in production, capital spending and staffing, CNBC reported.

"Now you're starting to see the decline and I believe you're going to continue to see the decline as you move through 2016," said Devon Energy CEO David Hager to an audience at the annual IHS CERAWeek energy conference this week.

"Right now to summarize it, $30 and $2 gas do not work," he said.

US production reached a peak of 9.6 million barrels a day in April 2015, six months after OPEC moved to a market-based strategy that sent prices skidding.

US oil output was lifted by the industry's recently completed projects and production was also supported by hedging, ready financing and technology gains. But financing is no longer easy and some producers face real hardship, including fire sales or bankruptcy.

"They're going through another round of cuts and it's now about protecting your balance sheet," said Daniel Yergin, IHS vice chairman, in an interview.

IHS data show that US exploration and production companies issued about $5 billion in stock year-to-date compared to about $20 billion for all of last year.

Pioneer Natural Resources CEO Scott Sheffield also said, "This is the worst I've seen from a balance-sheet standpoint. Everybody's debt is trading at 30 cents on the dollar, 40 cents on the dollar."

He added that $50-per-barrel oil would not be enough for growth in the industry, because there would not be enough cash flow.

Oil service providers are lowering costs. On Thursday, oil-services giant Halliburton announced it was cutting another 5,000 jobs, after having already reduced its workforce by roughly one-quarter since 2014.