The new boss of Devon Energy Corp. said he won’t let this week’s rally in oil prices tempt him to return to the days of rampant production growth at any cost, becoming the latest shale executive to call for restraint.
“I have a hard time seeing the need for U.S. producers over the next several years to get back to double-digit growth,”Chief Executive Officer Rick Muncrief said in an interview.“For this management team, if we really think about 2021, let’s keep it flat.”
Muncrief’s comments echo those of Scott Sheffield, who heads up Pioneer Natural Resources Co., and Occidental Petroleum Corp.’s Vicki Hollub, after Saudi Arabia’s surprise plan to cut production in the next two months sent oil prices surging. All three executives urged caution, mindful of the industry carnage caused by years of unchecked growth that burned through cash and left investors with little to show for even before the pandemic took its toll.
Devon, which closed its acquisition of WPX Energy Inc. on Thursday, is planning to keep output flat compared with fourth-quarter levels, according to Muncrief, who previously ran WPX for six years. Pioneer is sticking with its initial production growth target of just 5%, while Hollub said her main focus is debt reduction.
“Flat is the new growth right now,”Doug Suttles, CEO of Ovintiv Inc., another driller, told an investor webcast hosted by Goldman Sachs Group Inc. on Thursday.“We need to see the global markets recover and our industry needs to show discipline and that’s what we’re going to do.”
U.S. crude production is currently hovering around 11 million barrels a day, about 12% of global demand last year, and some 2 million barrels below its peak at the beginning of 2020. Shale operators’financial weakness and newfound pledges for discipline suggest that lost production, equivalent to the entire output of the U.S. Gulf of Mexico, won’t come back anytime soon.
