US light oil production guided to grow by 8.1% in 2020, despite lower capex

Light oil production in the United States is guided to grow by 8.1% year-on-year, according to Rystad Energy’s analysis of the latest shale E&P guidance, despite an expected decrease in capital expenditure, which is estimated to drop by 11% compared to 2019.

We are likely to see another year of back-loaded growth, with strong production growth throughout the second half. Light oil output in the fourth quarter of 2020 is guided to increase by 5.9% against the same quarter last year, representing approximately 610,000 barrels per day (bpd) of oil additions if the guidance is extrapolated to the whole industry.

Assuming the companies remain committed to their initial guidance, the actual year-on-year growth to be seen in the fourth quarter will likely be even stronger due to two factors, according to Veronika Akulinitseva, Rystad Energy’s Vice President of Shale Research.

“Firstly, we are likely to see an even weaker first half in 2020 than in 2018–2019, potentially with some production declines. This implies a more aggressive production expansion throughout the second half in order to meet the operators’ full-year guidance,” says Akulinitseva.

“Secondly, we still expect private operators in the Permian Basin to achieve a steeper production growth rate than the public universe, driven by selected private equity-backed operators that have not yet reached maturation of their well programs,” Akulinitseva adds.

Overall, Rystad Energy notes that the vast majority of US operators plan to grow their oil production in 2020. Many Permian players, in particular, appear confident in setting double digit increases in their yearly targets.

Separately, we have also looked at the expected 2020 production tallies of the top gas companies. The peer group of gas-focused companies is forecast to see a 0.2% yearly increase in gas volumes.