Chesapeake Energy co-founder Tom Ward said Friday that oil prices need to recover to about $75 a barrel in order for most drillers to ramp up production.
Crude futures have recently approached $50 a barrel after rebounding more than 80 percent from this year's lows in the mid-$20 range. Some worry those prices will incentivize high-cost U.S. oil producers to put more rigs to work, worsening a global supply glut and putting off a sustainable price recovery.
U.S. oil production has fallen from a high of nearly 9.7 million barrels per day last year to about 8.8 million barrels per day.
But $50 is not high enough to elicit a production response, said Ward, who is now chairman and CEO of Tapstone Energy. That is because the capital markets are essentially closed to drillers, and drillers need to outspend cash flow to increase production, he said.
"In our business, the dirty little secret is you can't really spend within cash flow and grow production," he told CNBC's "Squawk on the Street."
U.S. oil and gas companies deferred a total of $380 billion in capital projects through the end of 2015 due to low oil prices, according to consultancy Wood Mackenzie. Ward said the effects of that falling spending shows up on a lag.
"Whenever you make a decision to stop drilling, it takes a number of months or years in order for that decision to actually impact the market," he said.
Once the oil market rebalances and prices reach a level sufficient to invest in new projects, it will take some time before capital markets open back up, Ward said.