Shale producers explain why they won’t increase drilling

The White House’s top energy advisor Amos Hochstein criticized shale drillers for their refusal to increase oil production. As it was stated by CEO of Pioneer Natural Resources Scott Sheffield, U.S. shale producers aren’t going to drill more.

Sheffield tied this decision with a possibility of an outflow of investors and plummeting energy stocks.

According to Sheffield, if the circumstances are such that there’s a 2% return on employed capital, the stocks will inevitably fall. As he assumes, in case of returning to production growth, the company will go back to the bottom.

But besides the mentioned difficulties, there are also purely practical headwinds as well. Oilfield services prices have significantly increased, and equipment shortages also exist.

As it was explained by Sheffield, officials are now criticizing the companies without taking into consideration some meaningful factors. Among these factors, he mentioned the company’s service contractors, who would raise prices by 30%-40% in case of production growth, a time period of about a year required for equipment building, and also a two-year period needed for the production to become efficient. Sheffield concluded that by that time, the markets might go through an oil price collapse.