Wood Mac: Happy days for U.S. oil

HOUSTON, Jan. 11 (UPI) -- Energy companies are learning to do more with less and nowhere is that more evident than in U.S. shale basins, consultant group Wood Mackenzie said.

Wood Mackenzie in a report said it expected investments in the oil and gas sector to record growth during the first quarter of the year, after strains emerged during a market downturn characterized last year by historically low oil prices.

Low oil prices curbed profits and put pressure on exploration and production spending. Recent analysis from the U.S. government, however, found that some shale basins in the United States were more resilient than expected and Wood Mackenzie found some U.S. reservoirs, the Permian shale in Texas in particular, will be standouts this year. Total spending in the Lower 48 states, the group said, is expected to grow by 23 percent to $61 billion.

"Nowhere is the mantra 'doing more with less' more evident than onshore United States," analyst Malcolm Dickson said in a statement. "There has been a dramatic increase in efficiency in the sector, exemplified by the drillers, who are managing to complete wells up to 30 percent quicker."

After forecasting a slump in production this year, the U.S. Energy Information Administration said total U.S. oil production for 2017 should increase slightly to 9 million barrels per day and expand again by 3 percent the following year.

For deepwater U.S. basins, Wood Mackenzie said those will "spring back to life" in 2017, though that sector may require more long-term investment commitments. According to EIA, much of the growth in production for this year is from production in the Gulf of Mexico.

Overall, Dickson said companies are doing better with a 16 percent return on investment expected this year. Spending on exploration and production should grow by 3 percent to $450 billion, though Wood Mackenzie's report said that's still 40 percent lower than the level from 2014, when oil was selling for more than $100 per barrel.

West Texas Intermediate crude oil, which serves as the benchmark U.S. price, was selling at around $51.30 per barrel early Wednesday.