(Reuters) Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding OPEC and Saudi Arabia with their resiliency.
That shale giants Hess Corp ( HES.N ), Apache Corp ( APA.N ) and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.
To regain market share, the Organization of the Petroleum Exporting Countries in late 2014 pumped more oil despite growing global oversupply. It aimed to drive prices lower and force higher-cost producers out of the market, with shale oil seen as especially vulnerable.
The pain was acute. Industry revenue fell more than 30 percent in 2015 from the previous year, the U.S. drilling rig count dropped by more than 70 percent from when oil was still above $100 per barrel, stock valuations plunged and scores of small producers filed for bankruptcy.
But so far no U.S. producer that pumps more than 100,000 barrels per day (bpd) has gone bankrupt. The survival of these big producers partly explains why overall U.S. production has slipped only about 10 percent since peaking at 9.69 million bpd.
Their agility – which required slashing costs in half while doubling down on improved techniques to squeeze more oil from each new well – is now allowing the industry to cautiously focus on growth again.
But this time, U.S. producers say they will stay focused on capital returns, having abandoned a culture of maximizing production regardless of costs.