Investing in US Tight Oil Sector: A Resilient Opportunity in 2024
The US tight oil sector has displayed impressive resilience in 2024, particularly in the Permian Basin, despite facing challenges such as a decline in rig count and a wave of mergers and acquisitions (M&A).
According to analysts at Macquarie, the sector has been able to maintain strong activity levels by improving efficiency, reducing costs, and strategically drilling, potentially leading to an unexpected increase in US oil supply.
Despite the decrease in rig counts, the US tight oil sector has managed to sustain its activity levels, especially in the Permian Basin, where efficiency gains and cost management have offset industry consolidation and lower rig activity.
Macquarie analysts believe that these factors could drive growth in US oil supply, particularly if crude prices remain stable in the current range. The stability in the sector is attributed to significant gains in drilling efficiency, particularly in the Midland side of the basin, which has allowed production to continue growing despite a decrease in the number of rigs in operation.
Publicly traded US producers have reported strong sequential growth in the second quarter, with increased guidance for the second half of 2024 indicating further upside potential. This trend reflects the broader industry trend where efficiency gains are helping to mitigate the impacts of reduced drilling activity.
Furthermore, permitting trends in the Permian Basin have remained strong, signaling ongoing confidence in the region’s production potential. Macquarie analysts expect that these factors will contribute to sustained growth in US oil production, especially if current efficiency trends persist.
In conclusion, investing in the US tight oil sector, particularly in the Permian Basin, could present a resilient opportunity for growth in 2024. By capitalizing on efficiency gains, cost management, and strategic drilling, investors may benefit from the sector’s ability to maintain strong activity levels and potentially drive unexpected growth in US oil supply.