When Exxon Mobil's new CEO spoke to Wall Street this week, high on his list of growth opportunities were the nontraditional oil fields in the United States, where the diversified energy giant can make a profit even when crude prices are just $40 per barrel.
For the multinational Exxon, which invested globally in more expensive, deepwater and other long-term projects, the focus on its home base highlights how much U.S. oil majors see American production as a brighter part of the future.
A big chunk of Exxon's upstream spending will go to shale this year. "More than one third of the capex [capital and exploration spending] will be invested in advancing our large inventory of … short-cycle opportunities. They are primarily Permian and Bakken unconventional plays and short-cycle conventional work programs. This component of our investment plan is expected to generate positive cash flow less than three years after initial investment," CEO Darren Woods told analysts.
Woods' comments resonate across the U.S. oil sector, where domestic producers have been restarting operations as oil prices hold steadily in the $50-per-barrel range.
Producers large and small are also reassessing capital and exploration spending and cautiously returning to develop projects, but the U.S. shale industry has also become more efficient during the industry downturn.
"I think what you're seeing is the shale play was totally without majors," said Randy Foutch, founder and CEO of Laredo Petroleum, pointing back to a time years back when the majors were land holders but not such active players.
"Chevron has a big position in the Permian, and Exxon just bought a new position. That's the kind of proof of the pudding that the independents like myself are saying, 'It's the best basin the world.'" Laredo is active in the eastern part of the Permian, in the Midland Basin.
Like many in the industry, Foutch has found efficiencies during the oil-price downturn. In the last two years, drilling has improved so much, individual Laredo rigs are drilling 2.5 times more than they used to. "I don't think it's a question of getting back to the rig count we had. I would suggest we expand our activity more dramatically," he said.
Chevron says it has about 2 million net acres of resources in the Permian Basin, and Occidental Petroleum is also a big player. Independents Concho, Pioneer Natural Resources and Apache are also active there.
"The Permian has been around for a long, long time. It never left the stage, but its career has been relaunched. They understand the geology better, and there's a lot more oil to unlock there. It's the repercussion of the great revolution and the drilling that took place and everything that's been learned over the last decade. This is part of the reaction that we're seeing in the global oil market," said Jim Burkhard, vice president and head of oil market research at IHS Markit.