WEBVTT - U.S. Shale Oil Walks the Line 0:00:00.520 --> 0:00:03.000 Hi, everyone. What seems like forever ago, when I was 0:00:03.040 --> 0:00:05.320 an energy analyst just starting out, I used to hear 0:00:05.320 --> 0:00:08.399 the term energy security all the time. Maybe it was 0:00:08.400 --> 0:00:10.520 because I was based in Washington, d C. But if 0:00:10.560 --> 0:00:12.719 your policy makers use it constantly to push for an 0:00:12.760 --> 0:00:15.360 all of the above energy approach, so the U S 0:00:15.360 --> 0:00:17.400 would be less relied on other nations for its energy, 0:00:17.520 --> 0:00:20.959 particularly oil. But around two thousand nine that term really 0:00:21.000 --> 0:00:24.079 peaked when shale oil and hydraulic fracturing came into play. 0:00:24.600 --> 0:00:26.680 It changed the game, taking the U S from importer 0:00:26.800 --> 0:00:29.520 to net exporter of oil and gas, and the impacts 0:00:29.520 --> 0:00:32.160 of shale oil reach across all sectors and across the globe. 0:00:32.560 --> 0:00:35.680 Today on the show, we've got Tai Lieu and Anidialinus 0:00:35.960 --> 0:00:37.920 U S oil analysts for ben F. They're going to 0:00:37.960 --> 0:00:40.280 tell us about the state of US shale oil, how 0:00:40.320 --> 0:00:43.479 oil demand rising to pre pandemic levels is impacting prices, 0:00:43.760 --> 0:00:45.680 and how oil producers are dealing with all of it. 0:00:45.760 --> 0:00:48.360 Our discussion is based on report titled U S Sail 0:00:48.440 --> 0:00:51.280 Oil Quarterly Outlook three Q twenty twenty one being if 0:00:51.360 --> 0:00:53.000 users can get this report on beef, go on the 0:00:53.040 --> 0:00:56.360 Bloomberg terminal beanef dot com and Bloomberg Mobile. As a reminder, 0:00:56.440 --> 0:00:58.760 beaneif does not provide investment or strategy advice, and you 0:00:58.760 --> 0:01:00.560 can hear the full disclaimer at the end of the show. 0:01:00.880 --> 0:01:03.240 I'm Mark Taylor and you're listening to switch on to 0:01:03.320 --> 0:01:13.760 be an f podcast. Ti Anna, Thanks for joining. So 0:01:13.800 --> 0:01:17.200 we've brought you in to talk about US shale oil today. Ana, 0:01:17.280 --> 0:01:18.760 can you start us off and tell us a bit 0:01:18.880 --> 0:01:22.080 why we're talking about US shale. So, US shale oil 0:01:22.959 --> 0:01:26.759 is a really interesting part of the global supply picture 0:01:26.880 --> 0:01:29.000 for oil, and if you think about it, it's quite 0:01:29.040 --> 0:01:30.840 different from a lot of the rest of the oil 0:01:30.880 --> 0:01:33.600 production that we have in the market. Especially for people 0:01:33.600 --> 0:01:37.280 who don't usually think about oil too much. You usually 0:01:37.280 --> 0:01:40.840 probably picture things like the Beverly Hillbillies when you're envisioning 0:01:40.840 --> 0:01:43.320 oil production. I think my generation we tend to think 0:01:43.319 --> 0:01:45.839 about armageddon, you know, when they're on the offshore rig 0:01:45.880 --> 0:01:49.480 and Harry Stamper hits the uh, the gusher and all 0:01:49.480 --> 0:01:52.680 the oil comes out the top. Yeah. Yeah, well, the 0:01:52.760 --> 0:01:55.600 same same idea, right. You kind of have this hole 0:01:55.640 --> 0:01:58.880 that you've drilled, all the oil flows out just very easily. 0:01:59.360 --> 0:02:03.560 That's oil production. Shale is quite different. Shale oil is 0:02:03.800 --> 0:02:07.400 a fairly newer technology that has come onto the market. 0:02:07.600 --> 0:02:09.840 It was developed actually, you know, sort of by the 0:02:09.960 --> 0:02:12.760 US government and stuff funded by them for decades, but 0:02:12.800 --> 0:02:16.520 it really came onto the scene around early two thousand's 0:02:16.560 --> 0:02:19.720 and in this you extract oil from solid rock, from 0:02:19.760 --> 0:02:22.720 shale rock, it's a tight oil supply. In order to 0:02:22.760 --> 0:02:25.520 do this, you have to use technologies like hydraulic fracturing 0:02:25.560 --> 0:02:28.239 and injection of fluids to help open some of these 0:02:28.280 --> 0:02:30.760 pores that hold oil molecules and allow it to flow 0:02:30.840 --> 0:02:33.760 to the surface. So it has a very different production 0:02:33.840 --> 0:02:37.800 profile than a conventional well. But the benefit is it 0:02:37.880 --> 0:02:41.440 actually takes much less time to get the well to production, 0:02:41.639 --> 0:02:44.400 and the wells don't last nearly as long as conventional wells, 0:02:44.800 --> 0:02:49.080 which actually makes them quite responsive. Anyways, shale is something 0:02:49.080 --> 0:02:50.880 that was developed, as I mentioned, in the early two 0:02:50.919 --> 0:02:54.000 thousands in the US and really started booming because there's 0:02:54.040 --> 0:02:58.240 actually a lot of opportunity for shale in across the US, 0:02:58.320 --> 0:03:01.360 and so starting around two thousand eight or so, we 0:03:01.440 --> 0:03:04.400 saw production coming online and then we just over the 0:03:04.440 --> 0:03:08.160 past few decades have seen phenomenal growth in this sector. 0:03:08.200 --> 0:03:10.760 I mean, especially you look back just a few years ago, 0:03:13.080 --> 0:03:16.200 US production was growing about twenty six percent from US 0:03:16.240 --> 0:03:20.800 shale basins on an annual basis. Production grew to the 0:03:20.800 --> 0:03:24.040 point where US was the largest producer of oil due 0:03:24.080 --> 0:03:27.480 to this shale production that was coming out. So it's 0:03:27.520 --> 0:03:32.040 been a really important feature of the U. S supply story. However, 0:03:32.160 --> 0:03:34.800 the problem is that as the US was just flooding 0:03:34.800 --> 0:03:37.320 the market with all of the shale oil, there was 0:03:37.680 --> 0:03:40.520 also competition with OPEC for who can sort of supply 0:03:40.600 --> 0:03:43.720 into this market where demand is pretty stagnant, and as 0:03:43.760 --> 0:03:46.200 a result, prices were tanking. We've had very low oil 0:03:46.240 --> 0:03:48.920 prices of the past few years, and this meant that 0:03:48.960 --> 0:03:51.920 actually the profitability for a lot of these companies was 0:03:51.960 --> 0:03:55.080 looking worse and worse. They were putting borrowing a lot 0:03:55.080 --> 0:03:59.240 of money to invest in new production, and yet they 0:03:59.240 --> 0:04:02.360 were receiving low prices for that production, and therefore they 0:04:02.360 --> 0:04:06.160 were hiteing negative cash flow, not good returns for shareholders. 0:04:06.640 --> 0:04:08.320 So all of this was kind of happening in the 0:04:08.320 --> 0:04:11.000 background of the U S shale industry, and this was 0:04:11.040 --> 0:04:13.680 all going on, this discussion of do they need to 0:04:13.720 --> 0:04:16.440 be profitable, do you grow production, how do you balance 0:04:16.520 --> 0:04:20.440 those two, and then COVID hit, which completely destroyed all demand. 0:04:20.800 --> 0:04:24.200 Oh man, what a roller coaster. I mean kind of 0:04:24.200 --> 0:04:26.840 halfway through what we're saying there is thinking like when 0:04:26.839 --> 0:04:30.960 I started in the energy industry, I guess, like in renewables, 0:04:30.960 --> 0:04:34.039 really we kept hearing, you know, we have to do 0:04:34.080 --> 0:04:37.000 all this for energy security, you know, US energy security 0:04:37.040 --> 0:04:40.359 and all that. But with shale it kind of seemed 0:04:40.360 --> 0:04:42.360 to kind of end. I didn't I don't heard much 0:04:42.440 --> 0:04:44.760 about that in years, but I guess then it became 0:04:44.760 --> 0:04:48.599 a different problem, right of profitability and keeping the flow 0:04:48.680 --> 0:04:51.720 going or keeping the oil coming. Yeah, so shill was 0:04:51.760 --> 0:04:54.119 great for security in the sense of the US became 0:04:54.320 --> 0:04:57.320 sort of a goal an exporter of oil where the 0:04:57.440 --> 0:05:00.200 we were the largest producer. But you know, the quite 0:05:00.240 --> 0:05:01.880 was what's the cost of all of that and is 0:05:01.880 --> 0:05:05.440 it sustainable? Right? So, ty, can you tell us about 0:05:05.960 --> 0:05:08.400 what did happen during COVID. I think the first thing 0:05:08.480 --> 0:05:12.320 was that it's interesting that right before COVID, Russia and 0:05:12.360 --> 0:05:15.920 OPEC was actually having a price war the head for 0:05:16.080 --> 0:05:18.479 about a week or two, and then COVID hit, So 0:05:18.520 --> 0:05:20.480 it was like a double ramby for the for the 0:05:20.600 --> 0:05:22.640 all markets. You know, first you have the price war 0:05:22.839 --> 0:05:25.200 right with Russia and OPAC, and they drove prices down, 0:05:25.720 --> 0:05:28.000 and then like two weeks after one or two weeks 0:05:28.040 --> 0:05:31.440 after that, COVID hit and prices just crumbled. I mean 0:05:31.839 --> 0:05:35.280 right after COVID struck world. I guess OPAC and Russia 0:05:35.480 --> 0:05:38.680 went into a truce immediately. But the mass took a 0:05:38.720 --> 0:05:41.200 big hit, and so did all crisis. I think all 0:05:41.279 --> 0:05:43.320 prices that w t I at one point, at some 0:05:43.400 --> 0:05:46.440 point it was like straaighting at negative prices, but that 0:05:46.640 --> 0:05:49.200 was because they were running our storage. They have basically 0:05:49.240 --> 0:05:53.520 no nowhere to put the oil in Oklahoma, so the 0:05:53.520 --> 0:05:56.960 demands took a huge hit. And all these producers because 0:05:57.000 --> 0:06:00.440 it's kind of like for surprised to catch up demand, 0:06:00.520 --> 0:06:02.800 there's usually a lag on the way up or on 0:06:02.880 --> 0:06:06.440 the way down, and you really need like all parsons 0:06:06.520 --> 0:06:08.440 to go down to web to wally low level before 0:06:08.440 --> 0:06:11.839 these producers are willing to start shutting off the weals. 0:06:11.880 --> 0:06:13.839 But that was what we saw, you know, and and 0:06:13.920 --> 0:06:17.480 producers had to like we're forced shooting out after production 0:06:18.120 --> 0:06:20.400 during the trap, during the bottom of the pandemic, when 0:06:20.400 --> 0:06:22.719 when the when demand failed out the bottom, and now 0:06:22.760 --> 0:06:25.680 they're starting to turn it back on. Well, I should 0:06:25.720 --> 0:06:28.640 say about the third quarter a fourth quarter of last year, 0:06:28.839 --> 0:06:31.000 they started turning on the worst down to all worlds 0:06:31.040 --> 0:06:34.640 back on when demand slowly recovered. And so that was 0:06:34.680 --> 0:06:37.919 what happened in the physical markets. On the financial side, 0:06:37.920 --> 0:06:40.159 for like on the police companies from the westing side, 0:06:40.360 --> 0:06:43.240 what really changed in the past years that the industry 0:06:43.240 --> 0:06:46.600 has really changed from like a growth industry as and 0:06:46.760 --> 0:06:49.960 I just mentioned, so really are for industry that's focused 0:06:49.960 --> 0:06:52.240 on returns and cash bro physically meant I know w 0:06:52.320 --> 0:06:54.640 T I is West Texas Intermediate and an oil price 0:06:54.680 --> 0:06:58.880 bantomork Okay, so tie. So it's changed for the financial markets. 0:06:58.920 --> 0:07:01.160 So what do you mean by well, I guess I'm 0:07:01.400 --> 0:07:04.040 end set. Before the US shell production was growing at 0:07:04.040 --> 0:07:07.080 a very fast group in the past, but that's a 0:07:07.400 --> 0:07:10.280 pretty much funded by that our companies to going out 0:07:10.280 --> 0:07:13.880 off that to fund this production growth. Nowadays, a lot 0:07:13.880 --> 0:07:17.640 of investors um they want these companies to de leverage 0:07:18.040 --> 0:07:21.160 because that's seen too much financial risk and they want 0:07:21.200 --> 0:07:24.400 these companies to start paying back the show that's fastest 0:07:24.680 --> 0:07:29.040 other in the ways of like higher dividend payout or 0:07:29.120 --> 0:07:33.000 insuring purchases. So the industry has really transformed in the 0:07:33.040 --> 0:07:35.120 past year. So it sounds like they went from kind 0:07:35.120 --> 0:07:39.920 of a bonanza of production, you know, where everything was 0:07:39.960 --> 0:07:43.920 just going great too a much much tighter market with 0:07:44.000 --> 0:07:48.120 much more scrutiny over returns. And how has this change 0:07:48.160 --> 0:07:50.800 in the all US oil industry, I guess the shale 0:07:50.840 --> 0:07:53.840 industry at large, but also the recent changes, how has 0:07:53.880 --> 0:07:56.760 that impacted the global oil market? Yes, so on the US, 0:07:56.800 --> 0:07:58.800 the first thing is such the U S laws about 0:07:58.800 --> 0:08:02.000 two mullion bills the day of production. During the pandemic, 0:08:02.400 --> 0:08:05.720 we were producing about thoting million barrels per day of oil. 0:08:05.840 --> 0:08:08.920 Now we're only doing eleven million barrels. So that's the 0:08:08.920 --> 0:08:12.440 first thing. The second thing is the world all demand 0:08:12.520 --> 0:08:15.680 growth was you pretty much met by us all surprised 0:08:15.920 --> 0:08:19.800 or production growth. Now we a, we pretty much lost 0:08:19.840 --> 0:08:23.480 that engine. And so when and when all demand returns US, 0:08:23.520 --> 0:08:26.960 our production is not going to be there to meet demand. Wow. Okay, 0:08:26.960 --> 0:08:30.040 so demand tanked during COVID, right, and that's what caused 0:08:30.040 --> 0:08:32.880 all that that those challenges last year with over supply, 0:08:33.400 --> 0:08:36.040 they turned off the wells. But now demand is starting 0:08:36.040 --> 0:08:38.280 to pick back up. Is that right? And then you're 0:08:38.280 --> 0:08:40.720 saying that the supply won't be there when the demand 0:08:40.960 --> 0:08:44.600 comes back, There's going to be some difficulties of securing supprise. 0:08:44.679 --> 0:08:47.120 If we assume the growth rate that we had before, 0:08:47.160 --> 0:08:50.480 I think it's still we still have like speckup spac 0:08:50.520 --> 0:08:54.400 capacity from OPAC to meet demand growth. But when we 0:08:54.440 --> 0:08:57.760 turn demand we covers. But when it starts growing again, 0:08:57.800 --> 0:09:00.360 we're gonna have to figure out where those are. How 0:09:00.400 --> 0:09:03.760 how are you going to and mark? Maybe One interesting 0:09:03.840 --> 0:09:07.160 thing to note about shale is that, as I mentioned, 0:09:07.160 --> 0:09:11.040 shale wells are different than most other conventional wells in 0:09:11.080 --> 0:09:13.880 that the production because it's you're pulling it out of 0:09:13.920 --> 0:09:16.600 this tight rock. You get a lot of production in 0:09:16.600 --> 0:09:19.240 the first few months, but then it actually declines quite 0:09:19.280 --> 0:09:22.800 significantly over the next year or two. So you lose 0:09:22.840 --> 0:09:27.160 about sev your well's output in the first few years. 0:09:27.200 --> 0:09:30.040 So that's why in the US shale patch, producers need 0:09:30.080 --> 0:09:33.600 to constantly be injecting capital into their operations in order 0:09:33.600 --> 0:09:36.839 to do drill new wells to offset the declines of 0:09:36.880 --> 0:09:39.880 old wells. So in order to keep production flat, you 0:09:39.920 --> 0:09:42.400 need to constantly be drilling new wells. Anyway, in order 0:09:42.400 --> 0:09:44.440 to grow production, you need to drill even more wells, 0:09:44.960 --> 0:09:46.959 So you just got to keep going. Yeah, exactly. So 0:09:47.000 --> 0:09:50.280 that's where because there was so little investment in new 0:09:50.320 --> 0:09:54.280 production during COVID, a lot of those wells saw massive declines. 0:09:54.440 --> 0:09:56.920 That's why a lot of the output from the region 0:09:57.280 --> 0:10:00.560 has fallen off. And now as time ENTI and US 0:10:00.600 --> 0:10:05.320 producers are just very reluctant to invest significant amounts of 0:10:05.360 --> 0:10:07.679 capital such that that output will grow and sort of 0:10:07.679 --> 0:10:10.520 replace the lost barrels. On the U S side, do 0:10:10.559 --> 0:10:12.600 you think they'll come back? Do you think they will 0:10:12.920 --> 0:10:14.640 meet the demand in time? And do you think that 0:10:14.800 --> 0:10:17.280 oil will have to come from somewhere else? I mean, 0:10:17.320 --> 0:10:19.959 you say the i A is already expecting oil demand 0:10:19.960 --> 0:10:24.200 will return to levels but sometimes in two right, so 0:10:24.280 --> 0:10:27.000 next year, yeah, I think it's going to have to 0:10:27.000 --> 0:10:29.400 come from like several places, not just from U S. 0:10:29.400 --> 0:10:32.720 Show who probably actually draw down their spank capacity compared 0:10:32.760 --> 0:10:35.240 to what they did for some of the national oil 0:10:35.320 --> 0:10:38.080 companies were probably have to pick up the slack um 0:10:38.200 --> 0:10:41.600 some of those private companies which are not so much 0:10:41.679 --> 0:10:44.680 under the financial microscope, they're not so much under the 0:10:44.720 --> 0:10:47.959 scrutiny of the investing community, they probably have a lot 0:10:47.960 --> 0:10:51.160 more leeway to grow production compared to properity companies, and 0:10:51.520 --> 0:10:55.080 we might even need some of those Urani umbrelros mak wow. Okay, 0:10:55.640 --> 0:10:58.920 so they might turn coming back from from everywhere. Will 0:10:59.000 --> 0:11:02.960 be the impact of this possible demand on price, so 0:11:03.120 --> 0:11:05.320 the price definitely go up. There is this there a 0:11:05.320 --> 0:11:07.760 scenario where we might see a price tip. I think 0:11:07.800 --> 0:11:10.680 chances are we will probably see like the market continue 0:11:10.720 --> 0:11:13.959 to tighten, especially if you continue to draw down OPEC 0:11:13.960 --> 0:11:18.400 spec capacity. Historically there's some correlation between christ and opex 0:11:18.559 --> 0:11:23.320 aspect capacity, well negative correlation, and so I think there's 0:11:23.320 --> 0:11:26.000 definitely more upside risk to prices than dan Cy risk. 0:11:26.240 --> 0:11:28.240 In terms of dancy risk. I mean, you really have 0:11:28.280 --> 0:11:32.040 to have the vaccine proout programs to hit a big 0:11:32.080 --> 0:11:34.720 bump and and you know, maybe some of these countries 0:11:34.840 --> 0:11:37.880 starts going back in terms of infection rates and then 0:11:37.920 --> 0:11:40.640 you have to shut down passes the economy again. I 0:11:40.679 --> 0:11:43.080 think that's probably the biggest risk as far as I 0:11:43.120 --> 0:11:46.720 can see. Okay, so if vaccine progress kind of stalls 0:11:46.960 --> 0:11:49.800 and then demand goes back down, then you'll see the 0:11:49.840 --> 0:11:53.280 price follow right. Yeah. The only other one would probably 0:11:53.360 --> 0:11:57.760 be if OPEC just didn't time their production correctly, right, 0:11:57.840 --> 0:11:59.920 like as time mentioned, they have a lot of spirit 0:12:00.000 --> 0:12:02.920 capacity that they're slowly bringing online as they see demand 0:12:03.000 --> 0:12:06.800 ramping up. But if they missed time that they could 0:12:06.880 --> 0:12:10.040 end up over supplying the market when demand is still 0:12:10.360 --> 0:12:13.080 instilled flux. Is there a history of that is that 0:12:13.160 --> 0:12:15.680 does that happen? I'm as an outsider, I have just 0:12:15.720 --> 0:12:18.280 no idea. Yeah for sure. I mean I think before 0:12:18.280 --> 0:12:21.360 this pandemic, OPAC member has like a history of like 0:12:21.440 --> 0:12:25.320 cheating their quotas um so they always had produced like 0:12:25.360 --> 0:12:27.560 a little bit more than what they said they would. 0:12:28.080 --> 0:12:32.040 But this time around, surprisingly that Pakistano has been surprisingly 0:12:32.080 --> 0:12:35.920 disciplined about the production. And I think special Saudi Arabia, 0:12:35.960 --> 0:12:38.560 I mean they you know that really took like bills 0:12:38.600 --> 0:12:41.120 of their own production offline. Who did this year just 0:12:41.160 --> 0:12:43.880 to keep the marketing balance. So this time around they 0:12:43.920 --> 0:12:47.360 are where we disciplined. But as we as surprises guests 0:12:47.400 --> 0:12:52.280 higher and higher, you know, the temptations to cheat higher. 0:12:53.080 --> 0:12:56.880 So yeah, cheeze okay, so needs to stay. We're in 0:12:56.920 --> 0:12:59.680 for for an exciting year in oil global oil regardless. 0:13:00.240 --> 0:13:03.240 One more question about about price, So I want to 0:13:03.320 --> 0:13:07.120 quote you, so in your report you say the following 0:13:07.160 --> 0:13:09.760 You say, although this price range is well above what 0:13:09.840 --> 0:13:12.319 the vast majority of US oil players need to achieve 0:13:12.720 --> 0:13:16.000 for profitability. We're doubtful US oil companies will turn on 0:13:16.080 --> 0:13:20.800 the production spigits yet. So my question is, even if 0:13:20.880 --> 0:13:24.120 the well has become profitable at a certain price, you're 0:13:24.160 --> 0:13:28.160 saying that oil companies will not yet turn on production. 0:13:28.320 --> 0:13:30.440 So why is that? I don't quite get it. So 0:13:30.600 --> 0:13:32.840 I think, Um, if you look at bricky even point 0:13:32.840 --> 0:13:35.400 of you, the vast majority of US show praise in 0:13:35.440 --> 0:13:38.360 the money at these while prices, but they are really 0:13:38.400 --> 0:13:41.080 resisting putting more capital into the ground to put more 0:13:41.120 --> 0:13:45.360 surprise onlines because that will be busipin done debt. All 0:13:45.440 --> 0:13:48.439 these uh mentioned they are are. They took on a 0:13:48.440 --> 0:13:51.200 lot of that during the news to feel the growth. 0:13:51.600 --> 0:13:54.400 So now, um, like all bubbles, when it bursts, you 0:13:54.440 --> 0:13:56.319 know that you just have to work off the excess 0:13:56.400 --> 0:13:59.400 on leverage. That's the first thing. The second thing is 0:13:59.640 --> 0:14:02.440 a lot of investing community, allow of investors are demanding 0:14:03.040 --> 0:14:06.280 faster payback for the investments in our companies. So even 0:14:06.320 --> 0:14:08.280 after these companies woke of the dead, there would be 0:14:08.360 --> 0:14:11.560 under pressure to increase like different and share buybacks. Okay, 0:14:11.679 --> 0:14:14.720 So effectively they're kind of on a diet in a way. 0:14:15.559 --> 0:14:18.520 So broadly speaking, what can we expect from the industry 0:14:18.559 --> 0:14:20.360 going forward for the rest of the year and actually 0:14:20.360 --> 0:14:24.040 poste anything different than we already mentioned already. So I 0:14:24.080 --> 0:14:26.920 think going forward, because the US is no longer a 0:14:26.920 --> 0:14:30.240 big growth engine of production, all prices realities will be 0:14:30.280 --> 0:14:33.160 a lot more sustainable going forward because if you look 0:14:33.240 --> 0:14:35.400 in the past, in the past like ten years or so, 0:14:35.520 --> 0:14:38.680 there were more than several occasions when the growth of 0:14:38.840 --> 0:14:42.440 US our production has like derailed price raieties and the 0:14:42.520 --> 0:14:44.800 end up that OPEC had to like cut back the 0:14:44.840 --> 0:14:48.800 production to make room for for US oil growth. But 0:14:48.960 --> 0:14:52.080 without that, all prices are probably all price rarities are 0:14:52.080 --> 0:14:55.640 probably much more sustainable than in the past. Yeah, and 0:14:55.680 --> 0:14:58.160 the other thing on the US supply side, just as 0:14:58.200 --> 0:15:02.400 time mentioned, producers really are even with the prices where 0:15:02.440 --> 0:15:04.440 they are at the moment, producers are sticking to the 0:15:04.560 --> 0:15:10.240 story of capital discipline, maintaining flat production, putting any increased 0:15:10.240 --> 0:15:14.560 revenue towards debt reduction and shareholder payout. When they think 0:15:14.600 --> 0:15:19.240 past into two, some of them are starting to talk 0:15:19.320 --> 0:15:24.200 about slow production growth, so growth of maybe three percent 0:15:24.360 --> 0:15:27.080 or five percent nowhere near the double digit growth rates 0:15:27.120 --> 0:15:29.520 that we saw before. At the moment, it seems like 0:15:29.560 --> 0:15:32.040 the investor community seems okay with that. We didn't see 0:15:32.040 --> 0:15:35.400 any major stock price movements when they made those announcements 0:15:35.400 --> 0:15:38.960 on their earnings calls. So it looks like if demand 0:15:39.000 --> 0:15:41.840 does recover and things are going well into next year, 0:15:41.880 --> 0:15:44.080 we might see a bit of growth out of the 0:15:44.120 --> 0:15:47.240 U S. Shail patch, but nothing like it was before. 0:15:47.240 --> 0:15:49.680 And they do seem to be watching what the opex 0:15:49.760 --> 0:15:53.160 doing and sort of deferring to being more reactive to 0:15:53.200 --> 0:15:56.120 OPEC rather than as time mentioned before, when they were 0:15:56.120 --> 0:15:59.920 sort of ready to compete for a market share. Okay, okay, 0:16:00.200 --> 0:16:02.880 so a little bit less ambition, more what do you 0:16:02.880 --> 0:16:05.240 call it, fiscal discipline, much better term than I used 0:16:05.280 --> 0:16:09.360 a diet. Yeah, but moderate growth coming yeah. Okay. So 0:16:09.360 --> 0:16:11.320 we're gonna take a quick break and when we come back, 0:16:11.360 --> 0:16:13.160 we're going to talk a bit more about what the 0:16:13.160 --> 0:16:15.840 players are doing, who they are, and the next areas 0:16:15.880 --> 0:16:23.080 of research for the U. S. Oil team. Stay with us. 0:16:23.120 --> 0:16:26.360 So in the report, I noticed something that that we 0:16:26.360 --> 0:16:29.960 were talking about before we hit record, was that a 0:16:29.960 --> 0:16:31.720 lot of the players that you mentioned in this report, 0:16:31.720 --> 0:16:35.280 I've never heard of so shale production comes mostly from 0:16:35.320 --> 0:16:37.840 a handful of areas in the US are basins, and 0:16:37.880 --> 0:16:40.480 the players are mostly independents, is that right? Or they 0:16:40.520 --> 0:16:42.840 listed or they just you know, companies we were just 0:16:43.120 --> 0:16:45.440 not familiar with. Can you describe it a bit in 0:16:45.480 --> 0:16:47.080 the U S all page. A lot of these show 0:16:47.120 --> 0:16:51.200 players on what we called US independent companies, So they're 0:16:51.280 --> 0:16:54.920 not like the examble or show VP majors, the all 0:16:55.000 --> 0:16:57.440 majors that most people are familiar with. They have like 0:16:57.520 --> 0:17:01.600 one names like yog Resources, Devon Energy, Diamondback Energy, just 0:17:01.920 --> 0:17:04.600 companies that people will only be familiar with. Your few 0:17:04.680 --> 0:17:07.080 in the industry. I think it's like some history to 0:17:07.160 --> 0:17:10.600 that because shore He's okay, that's not been big enough 0:17:10.640 --> 0:17:13.840 of an impact for the all majors. So a lot 0:17:13.880 --> 0:17:16.520 of these all majors dident invest in show until like 0:17:16.600 --> 0:17:19.320 the later years. So that's why we have a lot 0:17:19.359 --> 0:17:22.480 of like the smaller independent companies took over in the 0:17:22.560 --> 0:17:26.280 early days, and some of them actually produce sizeable quantities 0:17:26.280 --> 0:17:28.600 of oil. Actually at these points in times like EO 0:17:28.600 --> 0:17:33.600 G and Occidental, they're they're pretty big, publicly traded companies 0:17:33.640 --> 0:17:36.520 for what they produce. But yeah, there's a ton of 0:17:36.560 --> 0:17:39.600 those medium sized guys and a ton of consolidation in 0:17:39.640 --> 0:17:42.760 the industry actually, so you'll constantly hear of mergers and 0:17:42.760 --> 0:17:46.600 acquisitions in this space. Are they particularly active like I 0:17:46.640 --> 0:17:49.040 think they're in your report? You mentioned their five main 0:17:49.320 --> 0:17:53.119 shale basins. Do they like have home home turf for you? 0:17:53.160 --> 0:17:54.879 Know that this is that they are more active in 0:17:54.960 --> 0:17:58.240 one versus another. How does that work? There's like two models. 0:17:58.320 --> 0:18:01.480 One is that's definitely more focused in one region so 0:18:01.560 --> 0:18:04.440 they can larage all the expertise and know how and 0:18:04.560 --> 0:18:07.119 supply change in the one basin. And then they're like 0:18:07.160 --> 0:18:09.800 a couple of companies that spread out so they can 0:18:09.840 --> 0:18:12.960 diversify the risks, or they're spread out in the various regions. 0:18:13.400 --> 0:18:15.119 Can we talk about the basins for a second. Is 0:18:15.119 --> 0:18:17.480 there a basin that really stands out as being a 0:18:17.520 --> 0:18:21.240 top performer? Definitely the Permian if you're talking about size 0:18:21.320 --> 0:18:25.560 and performance, the Permans probably is producing about four point 0:18:25.640 --> 0:18:28.560 six million bells with it right now. And the significance 0:18:28.600 --> 0:18:31.280 if you consider the US is only its producing about 0:18:31.320 --> 0:18:34.040 eleven million belts today, so almost half of the US 0:18:34.119 --> 0:18:37.280 output it's coming from a one basin in the Permian 0:18:37.720 --> 0:18:40.199 and for those of you who aren't familiar with oil 0:18:40.240 --> 0:18:42.639 basins in the US geography sector, it's sort of in 0:18:42.720 --> 0:18:46.240 western Texas and the sort of southeast corner of New Mexico. 0:18:46.400 --> 0:18:48.960 That's where the Permian sits. And how are these plays 0:18:48.960 --> 0:18:51.239 different from each other? They're all shale that are they 0:18:51.240 --> 0:18:53.919 different geologically or anything like that. I think, on a 0:18:54.000 --> 0:18:57.640 very hard level, shell geologically are pretty much the same. 0:18:57.680 --> 0:19:01.359 They have the same characteristics, but the quality of the 0:19:01.480 --> 0:19:05.080 rock definitely could be very different from not only from 0:19:05.119 --> 0:19:07.880 basin to basin, but even from county to Candy. And 0:19:08.000 --> 0:19:10.879 the other questions the maturity of these play Some of 0:19:10.920 --> 0:19:13.800 these played, um, like the Legal Food which is in 0:19:13.880 --> 0:19:17.040 South Texas, They've been very drewed out. They've been around 0:19:17.080 --> 0:19:19.960 for a long time, and the productivity for these worlds 0:19:20.000 --> 0:19:22.480 are just not as good as they were before. So 0:19:22.640 --> 0:19:25.640 that's definitely like an age and quality aspect, as well 0:19:25.680 --> 0:19:29.320 as other characteristics to like infrastructure of variability and so 0:19:29.400 --> 0:19:31.760 on and so forth. Is there anything that you want 0:19:31.800 --> 0:19:35.520 readers or listeners to know about any of the you know, 0:19:35.560 --> 0:19:37.520 the outlook for any of these basins besides you know, 0:19:37.520 --> 0:19:40.280 Eagle Ford is is drawing down. Is there anything else 0:19:40.280 --> 0:19:42.439 that stands out, you know, we put you know research, 0:19:42.720 --> 0:19:45.680 We think that US a production show production will pretty 0:19:45.760 --> 0:19:48.560 much be fratished for the next eighteen months, will probably 0:19:48.560 --> 0:19:50.800 grow by only a hundred sixty tho pars per day 0:19:51.320 --> 0:19:54.560 wh should now and in December, and all of the 0:19:54.680 --> 0:19:57.560 growth will be coming from the premier. The other basins 0:19:57.600 --> 0:20:00.840 will probably be like out of threat or slightly over. Yeah. 0:20:00.960 --> 0:20:03.639 So if the perman ever stops growing for whatever reason, 0:20:04.040 --> 0:20:06.399 the growth trajectory is, it's not going to be exist 0:20:06.520 --> 0:20:09.480 in existence. So, either from the report or not. What 0:20:09.560 --> 0:20:12.320 are some of the major takeaways from your recent research, so, like, 0:20:12.640 --> 0:20:15.000 what are you seeing in the market and what are 0:20:15.200 --> 0:20:17.960 US oil producers saying. I think on that definitely a 0:20:18.000 --> 0:20:20.320 couple of big takeaways. The first one is that hire 0:20:20.359 --> 0:20:23.119 all prices, unlike in the past, it's not going to 0:20:23.320 --> 0:20:26.240 translate into a more oil production, at least in the 0:20:26.400 --> 0:20:30.040 US companies. The producers are really busy putting down to 0:20:30.160 --> 0:20:33.200 debt and returning capital to shareholders, and they are where 0:20:33.240 --> 0:20:35.920 we reluctant to invest capital more capital into the ground 0:20:35.960 --> 0:20:40.000 to increase production. So even if higher commodities prices states 0:20:40.080 --> 0:20:42.240 run for a while, production is not going to concrease. 0:20:42.320 --> 0:20:44.680 That's the first one. I think the second one would be, 0:20:44.760 --> 0:20:47.600 like that's colder of that is that all Pakis back 0:20:47.640 --> 0:20:50.520 in control of all surprise. Historically, like and I mentioned 0:20:50.680 --> 0:20:54.760