The Race to Drill America’s Longest Oil and Gas Wells
Oct 13, 2023

Companies vie to impress a skeptical Wall Street by eking out growth


Elite runners long chased the 4-minute mile. Major league sluggers competed for decades to beat Babe Ruth’s 60 home runs. For Dennis Degner, the next milestone is 25,000 feet.


Oil and gas wells stretched just a fraction of that length laterally underground in 2010, when the now-chief executive of 

Range Resources joined the natural gas producer. Back then, innovations in horizontal drilling and fracking were just beginning to transform global energy markets.



Now, with the end of the shale boom in sight, Wall Street is pressuring companies to cut spending and pony up returns to boost their share prices. Growth at all costs is out. The slow grind of achieving efficiency—alongside the office downgrades and recruiting struggles that come with it—is in. 


The maturing market has pushed oil and gas producers to idle drilling rigs and bore fewer—but longer—wells. In Pennsylvania, a nearly 22,000-foot Range Resources gas well has put Degner’s target within striking distance. 


“There is still some additional length to reach,” he said.


As Wall Street becomes more skeptical of the U.S. shale patch’s growth prospects, executives are trying to win over stock pickers and potential acquirers by trumpeting the contiguous property leases and operational prowess needed to drill longer wells. 

Improvements that range from souped-up drilling rigs to specialized drill bits to technologies that provide better underground steering have helped firms recently pump out better-than-expected production—and dividends and buybacks for shareholders. The energy sector has been the S&P 500’s best performer over the past three months, outpacing even the information-technology and communications-services industries.


But some producers are boring so far underground with each lateral well that analysts say they are nearing the point of diminishing financial returns. In the long term, energy experts warn that the technological advance won’t be enough to reverse a structural decline in U.S. shale output in the coming years. 


“How else can they show their investors that they’re getting better?” said Alexandre Ramos-Peon, head of shale research at Rystad Energy. 


“We have probably reached the maximum we can do on a per-well basis,” he added. “Then it’s just a matter of being a volume game or waiting for the next technology breakthrough.” 



Horizontal wells drilled across U.S. shale basins this year will collectively stretch about 24,680 miles, Rystad projects, six times their 2008 total and nearly as long as the earth is round. The company said 16% of wells drilled this year in the oil-rich Permian basin, which spans West Texas and New Mexico, extended laterally beyond 12,500 feet. Only 1% did so five years ago. 


By drilling longer, companies have propped up and in some cases expanded their output despite much of the best land already being tapped.


ConocoPhillips, Occidental Petroleum and Pioneer Natural Resources all recently said they would churn out slightly more crude in 2023 than previously projected. Such performances contributed in August to U.S. officials bumping their forecasts for oil and gas production this year and next to new records. 


“It has certainly surprised to the upside in terms of how resilient the industry has been,” Stifel analyst Derrick Whitfield said. 

The gusher has blunted the impact of crude-production cuts in recent months by Saudi Arabia and Russia, weighing on prices at the pump. Front-month futures for West Texas Intermediate crude have traded at levels below traders’ projections for much of the year, only recently rallying to $87.51 a barrel. 


Benchmark natural-gas futures have remained relatively stable this summer, trading Friday at $2.6050 per million British thermal units, even as Americans cranked up air conditioners in record-setting heat. 



Boring farther to extract such supplies leads to more technical difficulties and geologic uncertainties, analysts say. Unexpected fractures in shale rock can destabilize operations and lead to costly equipment issues. 


Companies have grown more sophisticated in mapping out such underground fault lines, said Alexandros Savvaidis, lead seismologist and manager of the Texas Seismological Network at the University of Texas at Austin. But it is likely they don’t know about all of them. 


To avoid the minor earthquakes that Savvaidis and his colleagues have tied to shale activity in Texas in recent years, he added, “you try to avoid the faults that are sensitive.” 



After longer wells are drilled, specialists such as Step Energy Services pump chemicals, water and sand into additional sections of shale rock, providing more chances for hydrocarbons to flow into the wellbore. 


The Calgary-based oil-field-services company acts as a sort of plumber of the shale patch, snaking miles of coiled tubing into wells for tasks such as removing debris or helping flush out oil, sand and water. The reels of such piping have grown so big—14-feet wide by 16-feet tall—that 15-axle trailers take them to job sites, Chief Executive Steve Glanville said. 


“You’re moving a house down the road,” he said.


Analysts say the longest laterals are concentrated among gas producers, rather than their oil-focused counterparts, in part because of the makeup of the prolific Marcellus formation that stretches across Appalachia. Outside Pittsburgh, Range Resources boasts a contiguous position of about 450,000 net acres. 


That helped the company drill lateral wells of more than 14,800 feet on average last quarter, according to state regulatory data compiled by Stifel, greater than any other domestic gas producer.


“It’s a differentiator for us,” Degner said. 


Written by David Uberti

View on the Wall Street Journal website

Oil eases on higher US crude output, hopes of Israel-Hamas ceasefire

By Emalee Springfield • 02 May, 2024
HOUSTON, April 30 (Reuters) - Oil prices fell 1% on Tuesday, extending losses from Monday, on the back of rising U.S. crude production, as well as hopes of an Israel-Hamas ceasefire. Brent crude futures for June, which expired on Tuesday, settled down 54 cents, or 0.6%, at $87.86 a barrel. The more active July contract fell 87 cents to $86.33. U.S. West Texas Intermediate crude futures were down 70 cents, or 0.9%, at $81.93. The front-month contract for both benchmarks lost more than 1% on Monday. U.S. crude production rose to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January in its biggest monthly increase since October 2021, the Energy Information Administration said. Meanwhile, exports climbed to 4.66 million bpd from 4.05 million bpd in the same period. U.S. crude oil inventories rose by 4.91 million barrels in the week ended April 26, according to market sources citing American Petroleum Institute figures on Tuesday. Stocks were expected to have fallen by about 1.1 million barrels last week, an extended Reuters poll showed on Tuesday. Official data from the EIA is due on Wednesday morning. Gasoline inventories fell by 1.483 million barrels, and distillates fell by 2.187 million barrels. Expectations that a ceasefire agreement between Israel and Hamas could be in sight have grown in recent days following a renewed push led by Egypt to revive stalled negotiations between the two. However, Israeli Prime Minister Benjamin Netanyahu vowed on Tuesday to go ahead with a long-promised assault on the southern Gaza city of Rafah. "Traders believe some of the geopolitical risk is being taken out of the market," said Dennis Kissler, senior vice president of trading at BOK Financial. "We're not seeing any global supply being taken off the market." Continued attacks by Yemen's Houthis on maritime traffic south of the Suez Canal - an important trading route - have provided a floor for oil prices and could prompt higher risk premiums if the market expects crude supply disruptions. Investors also eyed a two-day monetary policy meeting by the Federal Reserve Open Market Committee (FOMC), which gathers on Tuesday. According to the CME's FedWatch Tool, it is a virtual certainty that the FOMC will leave rates unchanged at the conclusion of the meeting on Wednesday. "The upcoming Fed meeting also drives some near-term reservations," said Yeap Jun Rong, market strategist at IG, adding that a longer period of elevated interest rates could trigger a further rise in the dollar while also threatening the oil demand outlook. Some investors are cautiously pricing in a higher probability that the Fed could raise interest rates by a quarter of a percentage point this year and next as inflation and the labor market remain resilient. U.S. product supplies of crude oil and petroleum products, EIA's measure of consumption, rose 1.9% to 19.95 million bpd in Feb. However, concerns over demand have crept up as diesel prices weakened . Balancing the market, output from the Organization of the Petroleum Exporting Countries has fallen in April, a Reuters survey found, reflecting lower exports from Iran, Iraq, and Nigeria against a backdrop of ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance. A Reuters poll found that oil prices could hold above $80 a barrel this year, with analysts revising forecasts higher on expectations that supply will lag demand in the face of Middle East conflict and output cuts by the OPEC+ producer group. View on the Reuters Website

Oil and gas industry’s “strong” free cash flow to support increasing production targets

By Emalee Springfield • 01 May, 2024
Last year, the demand for loans from oil and gas companies fell 6% year-on-year, and that followed a decline of 1% in 2022. Oil and gas companies don’t need a lot of loans because they’re generating so much money these days from their underlying businesses, said Andrew John Stevenson, senior analyst at Bloomberg Intelligence. And that trend is likely to continue through the end of the decade, he said. “The oil and gas industry has experienced a number of booms and busts over the past few decades, but for now, it appears to be flush with cash,” he said. The healthy balance sheets reflect the boost that companies have received from rising oil prices, buoyed by robust demand and OPEC+ production cuts. The sector’s free cash flow is so strong that the group’s leverage ratio, which measures a company’s net debt relative to earnings before interest, taxes, depreciation and amortization, fell to 0.8 in 2023 from 2.4 in 2020, Stevenson said. The ratio will likely slide below zero by the end of the decade, he said.
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