US Shale Oil Drillers Earn Greater Returns than International Oil Majors

Due to rising prices in domestic oil in the US, those companies focused on high-margin shale oil drilling from Texas to North Dakota are far outperforming giant international oil majors this year. Gianna Bern, the founder of Brookshire Advisory and Research Inc., and a former crude oil trader with BP, has told Bloomberg that the boom in domestic prices “is bullish for U.S. shale development and benefits producers with a high U.S. production profile.”

Since the beginning of the year West Texas Intermediate, used to price US oil, has risen by around 16%, offering a boost to US producers, whereas Brent Crude Oil, the basis for most international prices, has fallen by 2.2% over the same period, hurting international producers.

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EOG Resources Inc., Pioneer Natural Resources Co., and Continental Resources Inc. are just some of the smaller companies that focus on high-margin domestic crude production, which are set to record larger returns than the big oil companies that are 15 times their size. For example; EOG Resources is expected to more than triple its profit this year to $1.92 billion.

Pioneer has grown by 68.8% so far this year, Continental has grown by 32%, and EOG, has grown by 28%. In stark contrast, Exxon Mobil has only grown by 6.2% whilst Shell has actually shrunk by 1.3%.

The main problem for many of the large oil majors is that natural gas is the worst performing commodity by far, falling to a ten year low in 2012, and attracting less than one-fifth the price of oil on the market.

Related article: $1 Billion of Natural Gas Wasted in North Dakota through Flaring in 2012

More than 80% of Shell’s output from shale wells is in the form of natural gas, rather than crude oil, forcing it to reduce the value of its shale assets for the second time in less than a year. Exxon Mobil has spent $52 billion over the past three years to grow its range of shale assets, but again, unfortunately the majority of that was in shale gas.

By. Joao Peixe of Oilprice.com