HOUSTON—U.S. shale plays have recently moved production into record territory, but industry leaders speaking at CERAWeek by IHS Markit issued a few warnings during its run to the top.
Mark Papa, Centennial Resource Development’s CEO, expressed geologic concerns over prominent U.S. shale plays during a panel discussion March 6.
“I really view the Eagle Ford and the Bakken as approaching the point where they would soon be past their prime,” said Papa, who recently returned to the industry after his retirement from EOG Resources in 2013.
As certain assets in the Eagle Ford, Permian Basin and Bakken remain popular focal points of drilling, Papa said output will be threatened going forward. Though U.S. production growth has fostered many optimistic predictions, Papa argued that overactivity will hinder output than expected moving forward to 2020.
“Out of those three plays, I think we’re approaching a sense of quality resource exhaustion in two of those plays [particularly] the Eagle Ford and Bakken,” Papa said. “A hot percentage of the tier one geologic quality locations have already been drilled, and I would say 70% of the good geologic locations have already been drilled.”
For E&Ps moving forward in the popular plays, Papa said they are essentially getting the scraps because the remaining 30% of good rock will be drilled, leaving tier two and tier three rock that lacks quality. As a result, he said he expects a lot of capital to be pushed into the shale plays between 2018 and 2020.
But panelist Chris Carter, a managing director at Natural Gas Partners LLC, said he has seen growth from the Eagle Ford and Bakken since the downturn. Particularly, Carter said technology has impacted shale since that period. (Chris Carter pictured to the right. Source: CERAweek by IHS Markit)
“In the past three years we’ve roughly doubled the single well reserve recoveries from horizontal wells through longer horizontal laterals and through improved fracturing techniques,” Carter said.
With technology constantly improving, Carter is certain it will continue to spur opportunities for shale despite the hurdles Papa projects. Alongside innovation, the change in the cost curve for the U.S. makes up the foundation for Carter’s positive outlook on shale.
“We can build companies in core basins alongside great management teams and we aren’t reliant, nearly as much, on OPEC decision making as we were five or six years ago,” he said.
The forward curve for shale will see some constraints, Carter said acknowledging the timing delays from infrastructure seen in the midstream sector. Still, he insisted that he is a believer “having seen what this industry has accomplished in the past five years.”
“I think we’ll continue to see improvements along the margins,” he said.
Mary Holcomb can be reached at firstname.lastname@example.org.