Oil production peaked in the U.S. in November 2019 at 13.0 million barrels per day. This was prior to covid. Production began declining prior to any of the price declines or covid shut downs. This can very easily be verified by EIA 914 data.
The U.S. oil industry was making about zero in profits at that point and in the years running up to it. The shale industry had basically never turned a profit. They destroyed hundreds of billions of dollars of capital while growing from 2005 to 2020. There have been specific companies that have made a profit (mostly those that flipped land) and management teams made money, but the capital behind it didn't overall. Public and private equity and all the various types of debt providers basically all lost money for over a decade. They had pulled back away from the industry prior to covid and began demanding a return on their capital as opposed to the growth at all costs model that had been in effect for a decade plus. Companies began to shift to a focus on cash flow instead of production growth.
Then covid hit. Prices plummeted as demand cratered. Production declined due to normal supply and demand forces. Production hit a near term low of 9.7 million barrels per day in May 2020. Due to action taken by OPEC and due to demand recovery, prices recovered. Production that was shut in due to low prices came back on. Capex in the industry recovered as well so new production growth began to more than offset natural declines causing overall production to start growing again. By January 2021, U.S. production hit 11.0 million barrels per day.
Joe Biden takes office and says a bunch of things for political purposes, so morons think he has shut down the oil and gas industry. In reality, production has continued to grow. It currently is about 11.7 million barrels per day and rising. Due to financial discipline from the fact that capital providers demand an actual profitable return now, growth is more measured. Capital is harder to raise and more expensive. Debt providers demand lower leverage profiles. Equity providers demand dividends or other types of returns. Many companies have lower priced hedges in place that aren't allowing them to fully take advantage of current higher prices.
Due in part to the drop in the oil prices during the pandemic, a lot of oil and gas companies got upside down with their lenders and either filed bankruptcy or had to settle with their lenders by trading debt for equity. As a result, if the company was a private equity portfolio company, most of the private equity got wiped out because the value of the assets exceeded the amount of senior debt. So now, banks are skiddish about lending to oil and gas companies on a PV9 reserved based loan and private equity has pretty much vanished. Unless it is a public company that can issue stock to raise money, there is not much capital available to finance a drilling program, other than through cash flow. It costs a lot of money to drill a well, especially the two milers and three milers that are being drilled in the Permian Basin.
But if you listen to your average moron on this board, under Trump, we were energy independent and the industry was healthy while under Biden, the industry is suffering and we can't grow production. In reality, it is the exact opposite. Far healthier now and growing while it was generating no profits under Trump with production starting to decline. Neither Biden nor Trump deserve any credit or blame for any of it. It basically was a function of throwing a bunch of cheap capital at the industry for a decade and the industry spending it without any discipline until the capital providers realized they weren't making any money and industry behavior changed.
