OPEC’s Greatest Opponent Is Disappearing, Shale CEO Warns

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The independent shale drillers that undermined OPEC’s decades-long grip on global oil markets soon will be a thing of the past as international giants swallow them up, according to one of the industry’s founding members.So-called pure-play shale explorers will be acquired by larger companies within the next five years amid intensifying financial pressures and demand for drilling targets, Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield said just hours after announcing the $60 billion sale of his company to Exxon Mobil Corp.“Shale companies cannot survive on their own long term,” Sheffield said during an interview with Bloomberg Television on Wednesday. “They’re going to have to merge up, consolidate, and be part of diversified companies.”

The consolidation of small and often closely held shale specialists will eliminate a thorny problem for Saudi Arabia and its fellow OPEC members. Independent drillers played a major role in diversifying global crude supplies over the past decade, weakening the ability of a handful of major producers to hold sway over energy markets.

The power of independent shale drillers in recent years shouldn’t be underestimated. As recently as 2020, when a historic collapse in energy demand created a massive worldwide crude glut, Texas regulators considered imposing production caps to force the state’s hundreds of small drillers to curb output and arrest a price slump.

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A drastic reduction in the number of companies drilling wells in places like the Permian Basin will make it easier for analysts from Wall Street to OPEC to assess near- and long-term supply trends, reducing market instability.

Even if Exxon’s takeover of Pioneer presages mass consolidation of shale drillers, OPEC planners will remain focused on macro factors, said Clay Seigle, Rapidan Energy Group’s director of oil service.

“The key things to keep an eye on will still be total US supply generation and we don’t expect that to change with this merger,” Seigle said in an interview at Bloomberg’s Houston office on Wednesday.