(Bloomberg) — U.S. shale-oil companies are on track to add production equivalent to Saudi Arabia\u2019s output by 2030, without needing the external financing the industry\u2019s boom has relied on so far, according Rystad Energy AS.<\/p>\n
\u201cThey are going to be very profitable, they are going to be able to return surprisingly good cash amounts to investors and still grow one Saudi Arabia,\u201d said Per Magnus Nysveen, senior partner at the Oslo-based consultant.<\/p>\n
Although the shale revolution has helped American oil production more than double since the start of the decade, its dependence on debt and equity to grow production volumes while offering limited returns to investors has raised doubts about its sustainability.<\/p>\n
That trend seems to be reaching a tipping point, with drillers entering a new era of discipline in which they\u2019ve cut capital spending and launched share buybacks.<\/p>\n
The frugality will continue during the shale industry\u2019s coming expansion, which will see it add about 1 million barrels a day of production a year through to the end of the next decade, effectively creating a new Saudi Arabia, according to Rystad.<\/p>\n
\u201cThe financing party is over,\u201d he said. But drillers \u201chave enough cash from the producing wells to finance quite a lot of capex, so they don\u2019t need this financing any more.\u201d<\/p>\n
Companies have been cash-flow neutral this year, and will be \u201cvery positive\u201d in 2020, Nysveen said in an interview in London. Drillers learned to squeeze costs during the market downturn in the middle of this decade, slashing the oil-price needed to produce a barrel by half to about $40, Rystad estimates.<\/p>\n
Despite the flood of American crude, oil markets are unlikely to become oversupplied as demand is healthy and output is declining at ageing fields around the world, said Nysveen. In fact, markets will become \u201cdangerously tight\u201d as the growth in shale output levels off toward the end of the next decade, Nysveen predicts.<\/p>\n
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net<\/p>\n
To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Helen Robertson, Rakteem Katakey<\/p>\n","protected":false},"excerpt":{"rendered":"
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