CERAWEEK-Private firms spearhead global shale push as US public operators stay home

By David French, Arathy Somasekhar and Georgina McCartney

HOUSTON, March 26 (Reuters) - Private energy companies and their backers are emerging as leaders in the next phase of global shale development, taking early positions in overseas basins while publicly listed U.S. producers focus on capital discipline and their core domestic acreage.

The pattern echoes the early years of the U.S. shale revolution, when independent wildcatters took the initial risks to prove drilling and completion techniques before larger, more established energy players moved in at scale.

The shale boom helped the U.S. become the world's largest crude producer and industry analysts strongly believe many other places around the world have similar shale-oil potential. Energy consultancy Wood Mackenzie forecast in late 2024 that non-U.S. shale output by 2030 would be in the range of 5-6 million barrels of oil equivalent per day, close to the 6.6 million boepd currently produced in America's Permian basin heartland.

In the international market, private operators are again showing a greater willingness to move first.

Continental Resources, the Harold Hamm-headed producer which helped pioneer fracking in the Bakken basin of North Dakota in the 1990s, has signed agreements in the last year to develop nascent shale plays in Turkey and Argentina.

Formentera Partners, a private equity firm co-founded by former Parsley Energy head Bryan Sheffield, has amassed a position in the Beetaloo basin of northern Australia.

"We believe that the learnings from the U.S. shale plays are directly transferable to the shale play here in Argentina and we believe that there's an extreme value proposition, not only for Argentina, but for the globe," Doug Lawler, CEO of Continental Resources, told the CERAWeek conference in Houston this week.

Argentina's shale potential could be similar to the Permian, Lawler said last month.

GENERATIONAL OPPORTUNITIES

The techniques behind U.S. shale are well-established, so much of the international expansion is about transferring knowledge to nations and state energy companies who are willing and able to put up the cash to get local shale off the ground.

Gulf nations including Kuwait, Saudi Arabia and the United Arab Emirates, already energy powerhouses through their traditional hydrocarbon industries, have shown desire to develop shale.

The U.S. shale revolution occurred in a nation with stable regulation and considerable existing energy infrastructure, which provided solid foundations to producers experimenting with hydraulic fracturing. Some countries with promising shale prospects, such as Argentina and its vaunted Vaca Muerta play, lack that stability.

This all means that larger private players with experience and resources to deploy overseas will lead the way.

Quantum Capital Group has had multiple national oil companies reach out in the past six months to potentially partner with the Houston-based private equity firm on overseas shale development, according to founder and CEO Wil VanLoh, who declined to elaborate further.

He said there was an opportunity for U.S. firms to exploit top-quality international shale plays.

"Companies going abroad now can develop generational assets," said VanLoh. "The window is now for U.S. shale players, and you maybe have five to seven years to get yourself positioned."

PUBLICS CAUTIOUS ON TREADING OVERSEAS

Publicly traded U.S. shale producers, by contrast, are moving more slowly.

After spending much of the last decade narrowing their focus to a handful of core basins and emphasizing shareholder returns, many listed operators are reluctant to pursue international expansion.

A large overseas push could raise uncomfortable questions from investors about the depth and quality of their remaining U.S. drilling inventory, while also requiring fresh spending at a time of heightened uncertainty in global energy markets.

"International expansion must not compromise the capital discipline the industry has worked so hard to establish," said Mark Viviano, managing partner at Kimmeridge Energy Engagement Partners.

"Investors will likely keep a short leash on companies that deviate from their proven areas of profitability.”

Still, some listed shale producers have signaled at least a willingness to examine opportunities abroad.

EOG Resources EOG.N signed deals with Abu Dhabi National Oil Company and Bahrain's Bapco Energies last year to partner on shale development. Ovintiv OVV.N has been pursuing a return to its Canadian roots through recent acquisitions, although Canada's shale industry is also well-established.

Most company executives, however, have largely maintained a cautious tone, saying they remain interested but disciplined until the economics clearly justify the cost.

"We've clearly been interested in understanding the potential," Devon Energy DVN.N CEO Clay Gaspar said on an analyst call last month, when asked about international expansion.

"But I would tell you, those are long-dated investments, long-dated relationship builds, things that we need to evaluate over time."