Shale Oil Architect Predicts Doom for Some Drillers Amid Slump

  • Explorers will be “decimated” amid a wave of restructurings
  • Low prices probably will linger for another 16 to 24 months

What Would It Take to Fix the Slumping Oil Market?

Mark Papa, the former EOG Resources Inc. chief executive officer who helped create the shale industry more than a decade ago, said drillers are “grievously wounded” as crashing crude prices exact their toll.

Shale explorers will be “decimated” in coming months amid a wave of restructurings and bankruptcies, fallout from the 70 percent drop in oil prices since mid-2014, Papa, who is now a partner at private-equity firm Riverstone Holdings LLC, said during a panel discussion at the IHS CERAWeek event in Houston on Tuesday. Low prices probably will linger for another 16 to 24 months before supply cuts cause a rebound, he said.

QuickTake Oil Prices

“From those ashes, you will see the companies that survive, a lot of them will be grievously wounded financially, and the management teams that come out of it will be a lot more conservative going forward,” Papa said.

During his 14-year tenure leading EOG, Papa oversaw its transition away from shale gas production to the then-untested use of hydraulic fracturing and horizontal drilling to extract crude from shale. EOG’s reputation for innovation and efficiency earned it the sobriquet “the Apple of oil.”

Over the long-term, Papa said U.S. shale drillers could become the dominant producers in global markets.

“The future is pretty bright for U.S. production, and I could envision the U.S. could be producing 13 to 14 million barrels a day of crude oil,” by 2022, he said. “The future could be a lot brighter than people think.”

Before it's here, it's on the Bloomberg Terminal.