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America’s shale industry emerges from downturn more productive and propels spectacular output growth

“We are in the BOOM of FRAC SAND HAULING” proclaims a job advertisement on the website Dozens of companies are looking for truck drivers in west Texas to haul the sand used for hydraulic fracturing, one of the processes that has unleashed the US shale oil revolution of the past decade. The sand is mixed with water and chemicals and pumped into wells at high pressure, to open cracks in the rock through which oil can flow.

Drivers in the oilfield lead a rugged existence — they might work a rotation of three weeks on, one week off, and rely on truck-stop bathrooms for washing when they are on the road — but it has its rewards. Employers are offering $100,000 per year, sometimes more, and new vacancies are opening up all the time. There have been 12 new job adverts for sand truck drivers in west Texas posted just in the past week. To rev up excitement, one has a simple message: “THE OILFIELD IS BOOMING!!!!”

The drivers wanted ads are a sign of how rapidly the US oil industry is changing. Over 2010-14, US crude production put on one of the strongest bursts of growth in the history of the oil industry, but the industry became a victim of its own success as oversupply in world markets sent prices tumbling, pushing it into a downturn. Activity slumped and dozens of companies were forced into bankruptcy.

The rebound in crude prices to over $60 a barrel has brought shale oil producers roaring back to life again, but the industry has not simply returned to where it was before the collapse. Geographically and technologically, it has evolved, and the companies that have survived are more capable, more efficient, and better able to survive lower crude prices.

As Bill Thomas, chief executive of EOG Resources, one of the most successful shale producers, put it last week: “Our potential for financial returns, operational performance and overall capital efficiency is much better today than before the downturn.”

Since 2010, as US shale production has soared, the great uncertainty has always been whether the industry was built on shaky financial foundations. Shale producers have needed constant cash inflows to finance their investment in new wells. Over the past 10 years, the 55 leading US exploration and production companies, the vanguard of the shale revolution, paid out about $230bn more in capital spending than they earned in cash from operations, covering the rest with disposals, share sales, and debt….

Activity has also shifted towards the more productive areas. The two regions where the shale oil industry began were the Eagle Ford shale of south Texas and the Bakken formation of North Dakota. Today it is the Permian Basin of west Texas and eastern New Mexico. The numbers of rigs drilling oil wells in the Eagle Ford and the Bakken are still well below their 2014 peaks, but in the Permian it is at a record high.

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