Fracked oil and gas wells experience steep production declines compared to conventional wells. Developers keep drilling to maintain output and generate cash.
For many in Texas, a slowdown is already apparent. Permian employment has lagged state job growth for the first time since 2016, according to the Dallas Fed.
“The death of shale has been wildly exaggerated,” said Leo Mariani, an analyst at KeyBanc Capital Markets. Much of the current production growth is coming from the industry majors, with Exxon Mobil Corp. and Chevron Corp. ramping up output at a startling rate in the Permian. Their huge balance sheets allow them to sustain investment through entire price cycles.
Some, like EOG and ConocoPhillips, are so far managing to walk the tightrope and generate consistent free cash flow. “They cannot veer from that course,“ said Regina Mayor, global head of energy for KPMG.The real pain is being felt among the small and mid-size publicly listed operators and private-equity-backed players.
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