Shale Driller Blames Biden for Its Move to Add a Permian Rig
(Bloomberg) -- Matador Resources Co. is doing what almost no other publicly traded oil producer has attempted to do this year: Boost spending and add another drilling rig.
The Dallas-based shale explorer said it’s adding a fourth rig to the Permian Basin in response to the Biden administration’s decision to pause new oil and gas leases on federal lands, a move viewed as a step toward a permanent ban. Matador’s spending on drilling, fracking and other equipment will jump about 22% this year to as much as $575 million, while oil production is forecast to grow 10%, it said late Tuesday in a statement.
Chief Executive Officer Joseph Foran told analysts and investors Wednesday on a conference call that the new rig is on a three-month contract, and the company could also cut back to two rigs later in the year depending on what happens with federal leasing. Shares fell 1.3% to $21.11 at 10:56 a.m. in New York after dropping as much as 10% earlier on Wednesday.
“As a result of recent actions taken by the newly inaugurated Biden administration, we have elected to pick up a fourth operated drilling rig beginning in March to ensure the orderly development of our federal leasehold in the Delaware Basin going forward,” Foran said in the statement. “We cannot be sure as to what, if any, changes may be forthcoming regarding operations on federal properties and our ability to develop our federal leasehold.”
The move is counter to what most publicly traded explorers in the shale patch are planning, which is to keep production flat this year and return more cash to shareholders, acknowledging persistent pleas from investors. Oil traders and analysts are watching shale producers closely for signs that they’re opening the spigots as crude prices recover from their pandemic-driven collapse.
“Moving through the depths of the global apocalypse that was created by this pandemic, if oil and gas companies haven’t got discipline now, they probably never will,” Travis Stice, chief executive officer at Diamondback Energy Inc., told analysts and investors Tuesday on a conference call. “Diamondback continues to see no need to grow oil production into this artificially undersupplied market.”
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