Shale players in the United States have been acquiring assets, building infrastructure, and increasing spending at a furious pace since the first of the year. Drilling budgets are up significantly, and production has exceeded expectations. If what we hear is correct, companies are earning fat profits even as prices have fallen below $50 a barrel, as of this writing.
Much of the spending has targeted wells being sunk in the Permian Basin of West Texas and southeastern New Mexico. These wells are prolific, have high IPRs, and the sites have multiple zones that can enable the wells to produce for decades.
Taken together, all this has sparked a spending frenzy by shale operators, particularly those operating in the Greater Permian, which includes new discoveries in the Delaware Basin that cross the Texas state line into New Mexico.
As OPEC has agreed to continue its oil production cuts for another nine months, banks have loosened their purse strings and private capital has been eager to participate in this latest Black Gold Rush. Oil production is down worldwide, but it's definitely on the increase among North American shale companies.
In this special report on energy capital, Greg Milano and JinBae Kim of Fortuna Advisors deliver a nuanced take on oil and gas finance and investment as they discuss "behavioral finance" and "loss aversion" and their impact on decision-making. They also examine how a "herd mentality" affects both E&P companies and the investment community and aggravates the commodity cycle. Read their article to get their suggestions about investing in the current commodity market.
Speaking of markets, it's a buyers' market for M&A transactions, say Christopher Williams and Paul Jones of Bracewell's Dubai office. Depressed crude oil and natural gas prices squeezed corporate profits in 2016, but they say the outlook for 2017 is brightening and it's looking like a buyers' market in M&A activity. For more details, read their article.
