Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil.
Using a proprietary app called iSteer, Brian Tapp, a geologist for EOG Resources Inc., dashed off instructions to a drilling rig 100 miles away. This tool is among the reasons the little-known Texas company says it pumps more oil from the continental U.S. than Exxon Mobil Corp.—or any other producer. A rig worker received Mr. Tapp’s iPhone alert and tweaked the trajectory of a drill bit thousands of feet underground, to land more squarely in a sweet spot of rock filled with West Texas crude. U.S. shale drillers transformed the energy industry over the past decade with hydraulic fracturing and horizontal drilling, in the early days using brute force to unleash a torrent of oil and gas that altered the balance of power among oil-producing nations and triggered a global glut. Now, with oil currently trading near $50 a barrel, these producers are trying to unleash fracking 2.0, the next step in the technological transformation of the sector that is aimed at extracting oil even faster and less expensively to eke out profits at that level. The promise of this new phase is potentially as significant as the original revolution. If more producers can follow EOG’s lead and profitably ramp up output from shale drilling even at lower prices, the sector could become a lasting force that challenges OPEC’s ability to control market prices. For a sector in which the previous era’s success was tied to the rapid expansion of output, the shift toward finding more cost-effective ways to get to that oil and gas is full of challenges. When oil prices dropped, critics wondered if the shale industry—rife with heavily indebted companies that had never turned a profit—would collapse. EOG, with its longtime focus on low-cost production, is the producer many hope to emulate, thanks to the iSteer app and dozens of other homegrown innovations. Dubbed the “Apple of oil” by one analyst, EOG made its name as a pioneer in horizontal drilling and in finding ways to get oil out of shale—often dense layers of rock that hold oil and gas in tiny pores—a feat many once believed impossible. Competitors such as Chesapeake Energy Corp. and Pioneer Natural Resources Co. also are finding new ways to profit amid low energy prices. Many are experimenting with longer, supersize wells, and fracking them with millions of pounds of sand. Other producers, however, have said the industry needs oil prices of at least $55 to $60 to truly rebound.
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