A little over a month ago when oil was near six-year lows, the survival mantra for US producers was simple: hunker down and wait it out.
But within the short span of a few weeks, the gloom and doom outlook is getting replaced by one of optimism, accompanied, of course, by a large dose of caution, recent commentaries of chief executives and senior management suggest.
The change is a twin result of a recovery in oil prices, of about 35pc, and a fall in costs of services, of around 20-30pc, both quick and surprisingly steeper-than-expected. Benchmark WTI futures broke above $60/bl last week for the first time this year.
So the new mantra? Prepare for a recovery.
Occidental stood out of the crowd. The producer, which took a write down of $5.1bn in assets earlier this year and posted a first quarter net loss of $218mn, raised its output guidance by nearly 40pc than the one given earlier. It is able to do so because “we are learning to do more with less,” chief executive Steve Chazen said.
Chesapeake is following suit, although its new guidance is only marginally higher.
But others like EOG Resources and ConocoPhillips aren’t so sure. They are, instead, planning to wait for a little longer to see that the recovery in the market is going to sustain itself. EOG will resume “strong double digit growth in 2016,”if oil recovers and holds around $65/bl.
For some, the wait may be longer. “$70/bl is a price that turns it on for us,” key Bakken producer Continental Resources’ chief executive Harold Hamm said. But with WTI already at $60/bl, that cut-off may not be too far away. “As we start looking at this short supply situation that obviously is apparent out there on the horizon, with the amount of rigs shut down, that [$70/bl oil] could happen fairly soon,” Hamm said.
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