Oil production is tumbling quickly in the nation’s shale plays including the Anadarko basin of which Oklahoma is a part where the U.S. Energy Information Agency says it’s dropped by 28,000 barrels a day.
The EIA’s Drilling Productivity Report shows the Permian basin will suffer the highest loss in June at 197,000 barrels a day. The Eagle Ford in South Texas is expected to see its production drop by 36,000 barrels a day while production in the Niobrara in Colorado will slip 24,000 barrels a day. Production in the Bakken in North Dakota will tumbled by 21,000 barrels a day.
Natural gas production in the U.S. is also falling and in June, it is expected to slip by 1 percent or 779 million cubic feet a day.
The larger decline in Permian gas compared to the Marcellus is a reflection of the fact that natural gas prices were already in the dumps prior the pandemic, wallowing below $2/MMBtu according to a report by Oilprice.com.
Marcellus drillers began cutting late last year. Natural gas prices didn’t change much after the pandemic (in fact, natural gas prices briefly rallied). Meanwhile, the much larger loss of gas production in the Permian has more to do with the sharp downturn in oil drilling. Texas gas followed oil on the way up, and it will follow oil on the way down.
The data from the EIA shows that the decade long U.S. shale boom has come to a screeching halt and is now heading in reverse. Oil production from the top shale basins will dip to 7.8 million barrels per day (mb/d), rewinding output back to late-2018 levels.
There is now a confounding disconnect between the health of the U.S. shale industry on the ground and the stock prices for a variety of energy companies. Part of that can simply be chalked up to the rally in oil prices from worthless levels (or less than worthless) to above $30 per barrel in the course of a few weeks.