$19.8 Billion Private Equity Investment In US Shale Oil Ventures In Q1 2017

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Despite the hit that many investors in the US shale oil industry have taken in recent years as a result of various producers going bust, a total of around $19.8 billion was invested in the sector by private equity funds during the first quarter of 2017, according to the financial data provider Preqin.

This makes for a roughly 3-fold year-on-year private investment increase (as compared to Quarter 1 2016) in the US shale oil sector. These private investments originate with a variety of different types of investors — private equity funds, investment banks, hedge funds, etc.

What’s notable is that this increase in investment is despite the fact that oil prices haven’t been rising much beyond the $50-a-barrel mark — and the investments are apparently occurring with the expectation that recent drops in production costs (for some producers, in some locations) will hold or continue.

The head of the private equity fund Pine Brook Road Partners (which announced an investment of $300 million into the West Texas focused startup Admiral Permian Resources LLC last month), Howard Newman, explained the situation succinctly: “Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range.”

Reuters provides more: “Data on investments by hedge funds and other nonpublic investment firms is scant, but the rush of new private equity money indicates broader enthusiasm in shale plays. … This year’s drilling rush could be tested if global supplies grow too fast or if demand cools. The US drilling rig count is rising at its fastest pace in 6 years and US crude stockpile are close to 533 million barrels — near an all-time high and enough to supply the United States for 25 days. … Since the US lifted its oil export ban last year, crude exports have climbed to about 746,000 barrels per day, according to US Energy Information Administration data.”

So that’s the current situation in the US shale oil sector. … We’ll see what happens.

Image via US EPA

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James Ayre

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.

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