Texas wildcatters -- prospectors who drill exploratory oil wells -- are saying global analysts are underestimating just how severe the industry's slowdown is.
The International Energy Agency in Paris and the Energy Information Administration in Washington still predict robust U.S. production growth next year, despite the dire reality on the ground. The Paris agency expects an increase of 900,000 barrels a day, while the Washington group forecasts 1 million, which would mean practically replicating this year's expansion.
Those projections are disputed by some in Texas, home to about half of U.S. crude output. Capital-hungry producers are being starved of funding, stocks have plunged and there's been zero appetite for public offerings, making the downturn potentially more enduring than previous price-related busts.
"All I know is, after 47 years, they're usually wrong." Frank Lodzinski, an industry veteran of almost five decades who's chief executive officer at shale explorer Earthstone Energy Inc., said of the forecasts. "I can't remember another time when oil was $55 and the industry was in such shambles."
Guessing next year's growth from the U.S. is a high-stakes game. Whoever wins the debate is likely to also make a better call on the global oil supply and demand balance, and potentially crude prices. So far, an unclear picture has kept oil futures in New York mostly stuck between $50 and $60 a barrel for almost six months. Prices dropped 0.5% to $58.11 a barrel on Wednesday.
Gloomy views from Texas could have something to do with recent developments in the Lone Star state. Just as the industry was recovering from the last downturn, more than 1,000 layoffs have been announced this year as drillers and their hired hands seek to cut costs. Investment banks have also had to trim staff locally thanks to a lack of deal-making.
Oil analysts and investors are "a depleted and demoralized crowd, shell-shocked by the heavy losses inflicted from being the single epically losing sector on the record-breaking S&P 500 battlefield," Mizuho analyst Paul Sankey said in a recent note to clients during a visit to Houston.
The International Energy Agency is "way too optimistic on U.S. oil shale," Scott Sheffield, CEO of Pioneer Natural Resources Co., said in an interview on Bloomberg TV.
Business on 11/28/2019