Shale CEO on US Oil Output, ”The economics wouldn’t support adding rigs [in 2021]”

One of the top producers in America’s shale patch doesn’t see drilling picking up significantly even after this week’s surprise Saudi pledge to curb production sent prices surging.

“I really don’t see much increase in the Permian Basin or the U.S. shale over the next several years,” said Scott Sheffield, chief executive officer of Pioneer Natural Resources Co.

U.S. oil output is expected to remain roughly flat at about 11 million barrels a day for the next several years, Sheffield said Wednesday in an investor webcast hosted by Goldman Sachs Group Inc. Meanwhile, two of the nation’s biggest shale regions — North Dakota’s Bakken and the Eagle Ford in Texas — may never see growth again, the CEO said.

Although the U.S. crude benchmark jumped above $50 a barrel this week for the first time since February after Saudi Arabia said it will cut output in the next two months, Sheffield said that Pioneer’s current production plans are unchanged.

Saudis Take Charge of Oil Market With Surprise Output Cut

“I never anticipate growing above 5% under any conditions,” Sheffield said. “Even if oil went to $100 a barrel and the world was short of supply,”the economics wouldn’t support adding rigs because service costs would cut into margins, he said.

The CEO predicted more industry consolidation could occur this year if oil stays above $50 a barrel, allowing companies to improve balance sheets.

While Pioneer is focused on completing its recent acquisition of Parsley Energy Inc., the door isn’t closed to other acquisition opportunities in the Permian Basin, he said. The company had considered buying closely-held Endeavor Energy Resources LP but decided a deal couldn’t be done.

“Anything else we would look at after bringing in Parsley has got to be double-digit accretion that’s got to be in the Permian Basin,” he said. “The chances of doing deals like that are slim.”

© 2021 Bloomberg L.P.

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