U.S. shale producers reveal extent of hit from Texas freeze
By Shariq Khan
(Reuters) - Occidental Petroleum Corp, Diamondback Energy Inc and a number of smaller Perm-focused U.S. shale producers on Monday forecast lower oil production for the first quarter, the first signs of the blow to the industry from last week's winter storm supplies.
Areas in Texas unused to the cold saw sub-zero temperatures and record snowfalls last week.
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While natural gas producers benefited from the cold weather and forced wells to close, shale oil drills have been on the losing side of trade as frozen pipes and power cuts should slow a recovery in production, according to operators.
Shale oil producers could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude oil production lost during the cold snap, and some production could never be due to the cost of restarting edge drilling return, said analysts.
Diamondback estimated that it lost four to five days of total production compared to the current quarter's profit, causing its shares to fall nearly 4% to $ 65.95 in late trading.
Oil stocks had rallied during the day due to higher oil prices.
Occidental forecast that the storm would cut about 25,000 barrels of oil and gas from its production in the first quarter. Its stocks also reversed after the bell, falling around 2%.
Among other things, production bursts: Cimarex Energy Co forecast an increase in volume of up to 7% in the first quarter. Laredo Petroleum Inc also said well closures and completion delays will reduce total oil and gas production by approximately 8,000 bpd in the first quarter. Production is starting to return to pre-storm levels, officials said.
Shale's prospects were questioned before the latest storm and "will remain difficult," said Peter McNally, global industry, materials and energy leader for research firm Third Bridge.
Diamondback forecast full-year oil and gas production between 308,000 and 325,000 bpd, more than the 300,300 bpd produced in 2020 when production was curbed due to pandemic-induced slumps in crude oil prices.
Occidental, which cut production forecasts to cut costs, forecast a full-year decline in oil and gas production from 1.35 million bpd in 2020 to an expected 1.14 million bpd in 2021 as it sells assets to pay off the debt it took over to acquire Anadarko Petroleum Corp in 2019.
(Reporting by Shariq Khan in Bengaluru; editing by Maju Samuel and Sonya Hepinstall)
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