Shale Survives, and May Soon Thrive

US energy sector equities have rallied almost 50% over the last month as prices have improved and storage has burnt off from the highs.  OPEC cuts accommodate the US as the world’s number one oil producer. Restarting of shut-in wells seems to restore them to prior production levels with no reservoir damage, preserving ultimate expected recovery. With the CAPEX of having to refrack such well, they are a form of low-cost below-ground storage and a source of ready free cash flow to meet financing needs in a bond market with still-wide spreads in the energy sector. The biggest uncertainty facing US oil producers is Biden’s potential lifting of Iran sanctions, bringing 2 million barrels per day of new oil to the market.