Top U.S. shale producer offers bleak view of U.S. output growth

(Reuters) - Pioneer Natural Resources, one of the largest U.S. independent oil producers, on Wednesday warned that the U.S. shale boom could end in all but one region by 2025, as producers exhaust the richest resource areas and drilling slows due to weak prices.

Pioneer Chief Executive Scott Sheffield said just one area of the Permian Basin, the largest U.S. shale field, would continue to expand output past 2025 as oil prices remain low and many producers pull back drilling.

The bearish comments came as the U.S.-China trade dispute is expected to depress demand, and as investors pressure oil producers to focus on returns rather than increasing production during periods of low prices.

Sheffield, who identified the Permian’s Midland basin as the sole U.S. shale growth region by the middle of the next decade, predicted oil prices would remain below $55 a barrel for the next three years, prompting a “significant fallback in Permian growth.”

Brent crude futures were trading at $56.4 a barrel on Wednesday and U.S. futures were trading at about $50.85 a barrel.

“Tier 1 acreage is being exhausted at a very quick rate” due to aggressive drilling in parts of the Permian, Sheffield said on a call with analysts to discuss its second-quarter results.

The company’s shares rose nearly 3% to $123.83 at midday after the company late Tuesday reported a 40% jump in adjusted profit and lower-than-expected spending on new production.

Pioneer also repurchased $200 million of its common stock during the quarter as part of its $2 billion share buyback program.

Sheffield is not the first executive of a major shale producer to warn of shale production challenges.

On Tuesday, Continental Resources said despite continuing reductions this year in the number of active U.S. drilling rigs, he felt the figure was 100 more than needed.

Shares of Concho Resources last week plummeted after the company disclosed disappointing output from wells drilled in close proximity, as reserves were depleted more quickly than expected.

Sheffield said Pioneer’s large footprint was shielding it from similar “parent-child” well issues, with subsequent wells producing less oil than the original in the same set.

Reporting by Liz Hampton in Denver; Additional reporting by Arathy Nair in Bangalore; Editing by Bernadette Baum and Richard Chang