US oil executives bemoan ‘twilight of shale’

Howdy y’all and welcome to Energy Source.

The storm clouds are gathering here in Texas and it doesn’t bode well for the energy sector. Today I’m focusing on the growing outspokenness among oil and gas executives about how the erratic policies of the Trump administration and the attendant low crude prices are decimating the sector.

Before I get into that, I’d like to draw your attention to a story this week by my colleagues Attracta Mooney and Aime Williams about how the Trump administration is taking its anti-climate change pressure campaign to the world stage and lobbying the World Bank to finance more fossil fuel projects.

The move is in line with the US president’s move to roll back green energy policies domestically and boost gas production. The World Bank and other multilateral development institutions have imposed lending restrictions to fossil fuel projects in a bid to cut rising greenhouse gas emissions.

Thanks for reading — Kristina

Gloom deepens among US shale companies

The mood is getting darker down here in Texas and it has nothing to do with the weather. Energy executives polled in the recent quarterly survey by the Federal Reserve Bank of Dallas stepped up their criticism of Donald Trump and his policies, warning of the demise of the US shale industry.

“We have begun the twilight of shale,” one respondent wrote. “The US isn’t running out of oil, but she sure is running out of $60-per-barrel oil.”

Prices for West Texas Intermediate, the US benchmark, have plunged nearly 10 per cent this year to less than $65 per barrel on the back of Trump’s changing energy policy and tariffs, moribund economic growth and Opec+ overproduction.

Energy executives don’t see much to smile about and are growing increasingly pessimistic, according to the bank’s survey released yesterday. The company outlook index dropped from -6.4 in the second quarter to -17.6 in the third. The uncertainty index remained high, edging down from 47.1 to 44.6 in the third quarter.

The Dallas Fed’s survey was conducted September 10-18 and measured the sentiments of 139 oil and gas executives in the bank’s coverage area of Texas, northern Louisiana and southern New Mexico. The anonymous survey is followed closely because the bank’s assessment area accounts for more crude than some of the world’s biggest producers.

“The noise and chaos is deafening!” an executive wrote. “Who wants to make a business decision in this unstable environment?”

Most energy executives have postponed investments because of lower oil prices and higher production costs. Among the respondents, 78 per cent reported they delayed investment decisions during the third quarter. 

“The uncertainty from the administration’s policies has put a damper on all investment in the oil patch,” another executive wrote. “Those who can are running for the exits.”

The business activity index, the broad measure of conditions in the bank’s coverage area, remained negative at -6.5.

“The US shale business is broken,” one respondent was quoted as saying. “What was once the world’s most dynamic energy engine has been gutted by political hostility and economic ignorance.” 

During the third quarter, the oil and gas production indices remained negative, and relatively unchanged, at -8.6 for oil and -3.2 for natural gas.

“Day to day changes to energy policy is no way for us to win as a country,” one boss said. 

Oilfield service groups and exploration and production companies were hit with rising expenses during the quarter. For drillers, higher steel prices helped to increase the finding and development costs index from 11.4 to 22. The lease operating expenses index climbed from 28.1 to 36.9.

“It’s going to be a bleak 3-plus years for the oil patch,” another respondent wrote. 

Trump’s regulatory changes in the energy industry since January have brought slight reductions in the break-even price to drill a new well. Fifty-seven per cent of energy executives estimated the changes had cut costs by less than $1 per barrel, while 25 per cent of respondents reported the declines were between $1 and $1.99 per barrel.

The “One Big, Beautiful Bill Act” reduced federal royalty rates and increased federal leasing offerings. Fifty-eight per cent of oil executives expected crude oil production to rise slightly, while 36 per cent reported no change.

Since the previous survey in July, respondents expected lower average crude prices to end the year. They now forecast an average of $63-per- barrel WTI, down from $68 per barrel. (Kristina Shevory)

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Kristina Shevory, Tom Wilson, Rachel Millard and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.