US Oil and Natural Gas Industry Hit Unprecedented Heights in 2023

by | Mar 4, 2024 | United States, Crude, Energy, Energy Information Administration, Europe, North Dakota Oil Boom, Oklahoma Oil Boom, OPEC, Production, Resiliency

In 2023, U.S. oil and gas production hit 12.93 MMbopd, defying a 4.6% drilling dip. Greg’s Insights highlight industry resilience and efficiency.

US Oil and Natural Gas Industry Reaches Unprecedented Peaks in 2023

In the dynamic landscape of the U.S. oil and natural gas industry, 2023 witnessed remarkable achievements despite a 4.6% reduction in annual drilling activity. Surpassing expectations, U.S. crude production reached an all-time high of 12.93 MMbopd, marking an 8.8% increase compared to the 2022 average of 11.88 MMbopd. This surge in output was primarily fueled by U.S. operators successfully clearing a significant backlog of drilled but uncompleted wells (DUCs) in three major oil shale plays.

Greg’s Insights: Why Direct Participation Matters

For investors considering direct participation partnerships in the energy industry, understanding these industry dynamics is crucial. The inverse correlation between reduced drilling activity and increased crude output underscores the sector’s resilience and efficiency improvements. U.S. shale operations and the strategic completion of DUCs in key regions such as North Dakota, New Mexico, and Texas played a pivotal role in driving these impressive production figures.

The intricate dance of global geopolitical events, such as the war in Ukraine, Middle East tensions, and OPEC+ production cuts, contributed to the steady climb of WTI crude prices throughout 2023. Starting at $78.12/bbl and reaching a yearly high of $89.43/bbl in September, prices eventually settled at $71.90/bbl in December.

Crude and Condensate: Regional Highlights

The surge in U.S. oil production wasn’t uniform across all regions. Notable gains were observed in New Mexico (up 16% to 1.82 MMbopd), North Dakota (up 12% to 1.19 MMbopd), Texas (up 8.6% to 5.86 MMbopd), and Louisiana (including federal waters, up 8.4% to 1.62 MMbopd). Improved efficiencies in shale operations led to a reduction in drilling activity, with operators completing a substantial number of mothballed wells in the Bakken and Eagle Ford plays.

In the western states, despite Colorado’s green initiatives, crude output surged by 5.2%, reaching 454,300 bopd, while Wyoming posted a 6.7% gain, totaling 265,700 bopd. Meanwhile, California’s declining drilling activity led to a production drop of 7.9% to 315,600 bopd. Utah, on the other hand, experienced a robust 21.4% increase, reaching 153,400 bopd.

In the Mid-continent, Oklahoma saw a 3.8% increase in production, driven by high-flow oil wells in the SCOOP and STACK plays. Kansas maintained crude production despite minimal shale activity, while Ohio emerged as the largest oil producer in the Appalachia region, recording a staggering 39.9% increase in production to 84,200 bopd.

Henry Hub spot prices averaged $2.54/MMBtu in 2023, a substantial 60% reduction from 2022, primarily due to increased casing head gas from U.S. shale fields. Despite robust LNG exports to Europe, prices experienced volatility throughout the year, settling at $2.52/MMBtu in December. The Energy Information Administration (EIA) projects the U.S. benchmark Henry Hub spot price to remain under $3.00/MMBtu in 2024 and 2025.

Gas Production and Storage: A Closer Look

The EIA anticipates U.S. dry natural gas production to grow by 1-2% in 2024 and 1.3 Bcfd in 2025, following the 4.0 Bcfd growth observed in 2023. Despite a drop in natural gas production associated with oil output in the Permian basin, U.S. natural gas production is expected to reach record highs of 105 Bcfd in 2024 and 106 Bcfd in 2025. The U.S. started 2024 with 14% more natural gas in storage than the previous five-year average, indicating a healthy balance between supply and demand.

As demand growth outpaces supply, Greg’s Insights emphasize that natural gas prices are expected to remain stable. With U.S. LNG gross exports projected to rise by 5% in 2024, reaching 12.4 Bcfd, the industry shows promising resilience and growth potential for direct participation partners.

In summary, the U.S. oil and natural gas industry’s record-breaking achievements in 2023, position it as an attractive and dynamic sector for direct participation investments.

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