The Golden Age of Shale Is Ancient History

The golden age of shale is over… but that’s a good thing for investors.

Bear with me for a minute. 

The shale boom that ignited in 2008 was unquestionably a game-changer. Within just a few years, we went from being shackled to foreign oil sources like Venezuela and the Middle East to being the world’s largest oil producer on the planet. 

That wasn’t by sheer luck, either. 

For more than two decades, U.S. drillers tweaked and refined and then tweaked their formula again to unlock a veritable ocean of tight oil thousands of feet beneath the Earth's surface. 

Back then it was like the Wild West, with companies drilling themselves into a frenzy to push output to record levels. 

Granted, that drilling rush came with a price. Companies took on massive debt to fuel their drilling addiction, putting as many rigs into play as they possibly could to develop their acreage. 

The success was euphoric, and our domestic crude production doubled within 10 years. Output surged higher even despite the brutal sell-off that took place in crude prices in 2014. 

During that downturn, dozens of companies went bankrupt as acreage changed hands and names were changed. 

And yet the rigs kept turning and the oil kept flowing — as much as 13 million barrels per day on the eve of the COVID-19 pandemic. 

Today, U.S. oil companies know that the situation has changed. 

Why?

Because the golden age of shale is kaput.

The Golden Age of Shale Is History

Whatever you do, don’t make the mistake of thinking this is the end for oil. 

In fact, it’s quite the opposite. 

The golden age of shale in the United States was marked by intense drilling activity and wild year-over-year output growth. As you can see below, we not only turned the corner around 2008, but our field production obliterated the previous highs made back in the 1970s:

That era is over, and the oil industry fully understands that fact. Pioneer Natural Resources’ CEO echoed that sentiment a few months ago. 

That doesn’t mean all is lost, though — far from it. 

You see, while the golden age of shale was all about growth, the class of oil companies that survived the latter half of the 2010s is leaner and much more fiscally fit. Rather than rush to drill, companies will throttle back and stay conservative. 

One reason is that the cheap and easy fruit may have already been plucked and eaten. We saw a little bit of this in the Bakken a few years ago when it became apparent that most of the sweet spots were already tapped, forcing drillers to move further out. 

Now, before you throw up your hands and run for the exit, consider this…

This is a GOOD thing for investors.

I won’t speak for anyone else, but I like seeing one of my positions looking out for its shareholders. The best part about this new age of shale is that the focus will be on returns, not taking on more debt to fuel another drilling bonanza. 

Don’t worry — we may eventually get our output back to record levels. However, it’s not going to happen overnight. 

If you’re new to the sector, I’ve laid out my favorite gems inside the U.S. oil industry right here. I recommend you take a few minutes out of your day to check them out. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

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