Texas Shale Is Big Winner as OPEC Deal Brightens Oil Outlook

Blog Post created by kmillspaugh on Dec 5, 2016

The U.S. shale industry, gutted by 2 1/2 years of bankruptcies, writedowns, credit downgrades and layoffs, is poised to step back from the brink, thanks to an old enemy: OPEC.

Abandoning a policy that sought to starve shale explorers and other high-cost drillers into submission, the Organization of Petroleum Exporting Countries relented on Wednesday and agreed to curb output by 1.2 million barrels a day. Other producing nations that aren’t cartel members also signaled plans to cut back by as much as 600,000 barrels, OPEC said.

The deal could boost prices through at least the first half of 2017, according to Chris Kettenmann, chief energy strategist at Macro Risk Advisors. The result: U.S. shale fields could raise the amount of crude produced within four months, said Antoine Halff at Columbia University’s Center on Global Energy Policy. First to pounce should be drillers in the Permian Basin of Texas and New Mexico, home to gushers prolific enough to spur a recent land rush.

If the deal holds, “U.S. oil production growth is all but guaranteed to return in 2017,” said Joseph Triepke, founder of Infill Thinking, a Dallas-based oil research firm, and a former analyst at Citadel LLC’s Surveyor Capital unit. “All U.S. tight-oil plays will benefit, but none more than the Permian, where we estimate as many as 150 rigs could be reactivated next year.”

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