Both natural gas and crude are now global commodities with highly volatile prices: shale oil, which doesn’t quite fit the US refining engine, and shale gas, which exceeds US demand, require exports to be fully monetized. Prices are subject to global supply and demand uncertainty, including economic growth, geopolitics, climate change, and exceptional events (e.g. pandemic).
Investors, the general public, and regulators have raised industry constraints: demands for returns to shareholders and sustainable operations have made access to capital and human resources harder, raised public scrutiny on operating standards, and increased operating costs and delayed ROIs.
Shale resource development, the cornerstone of US production, is highly capital intensive: with steep decline rates in the first few years, replacing and growing production makes financial health highly sensitive to prices. Cost optimization, capital efficiency, asset sales, JV financing, hedging, etc. are all mitigating tactics.
Digital Technology is the game changer for a step change in performance and generation of operating cash flow. more than deploying new tools, it is firstly about extracting value while changing workflows and retraining and redeploying people.
Skilled worker shortages, aka “The Big Crew Change”, has been underway for several years. talent retention, attraction and skill development are critical. Creating a great working environment is a competitive advantage.
Deal value realization matters. a rifle shot approach to field development (e.g. contiguous acreage) is a recent addition to typical cost reduction synergies. Critical success factors still are operational readiness and organizational integration.