Shale pioneer John Hess said on Tuesday that key US shale fields are starting to plateau, calling shale “important but not the next Saudi Arabia.”
The shale revolution turned the US into the largest force and crude producer in the world in energy exports over the past decade. However, that did not translate to higher returns or stock prices for investors. Far less than the 180 percent return for the broader stock market, the S&P 500 Energy sector only gaining 6 percent in a decade.
To pay investors higher dividends or buy back shares, companies remain under pressure to trim budgets and produce enough free cash flow. The lack of long-term investment is the biggest industry challenge.
Production is starting to plateau in the Eagle Ford Shale in South Texas. Meanwhile, within the next two years, the Bakken field in North Dakota will hit its peak production levels.
The Permian Basin in mid-decade will plateau and is already facing well interference issues. That means the OPEC will continue to act as the Federal Reserve of oil.
To invest in longer-term offshore investments, Hess plans to use cash flow from the Bakken. The company is relying on offshore Guyana, which is being developed by a consortium led by oil major Exxon Mobil Corp. Guyana is one of the world’s most important oil and gas discoveries in the last decade.
