New U.S. well permits fell by 40 percent from October to November, according to an industry report. In the face plummeting oil prices, firms are scaling back investments, and that draw-down is especially apparent in American onshore shale formations. Reuters reports:
Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October…The pullback was a “very quick response” to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info. […]New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota’s Bakken shale.The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.
This isn’t a huge surprise, but neither is it a sign that the boom is going bust. Companies are still reacting to what has been a very rapid price decline, and may be acting out of an abundance of caution as they wait to see where prices stabilize. Even at its current level, plenty of shale formations can be profitably plumbed, and the industry is constantly seeking ways to increase profit margins and squeeze more oil out of shale for less investment.But a 40 percent drop in new well permits is still a significant bump in the road, and a sign that the Saudi strategy of challenging U.S. shale for a share of this bear market is bearing some fruit. Winter is fast approaching for fracking in America.