Halliburton Co. (HAL:US) Chief Executive Officer Dave Lesar is joining the chorus of oil executives who say they aren’t worried about falling oil prices, and expect them to climb next year.
“Despite what people are thinking, demand is creeping up, albeit at a lower rate than it has been,” he said. The downward pressure on prices is mostly due to an oversupply, and Lesar said that will quickly prove self-correcting, especially when it comes to U.S. shale production.
Unlike with conventional oil, shale wells peter out quickly and companies depend on constant new drilling to maintain production levels. This also makes shale more responsive to price movements. Lower prices will discourage new drilling, quickly removing the glut in crude supplies, Lesar said.
The breakneck pace of shale drilling in recent years has pushed oil output to 31-year highs just as forecasts for global demand were cut. U.S. crude prices plunged more than 25 percent since June to hover around $80 a barrel, and the industry is poised for them to drop even more.
Falling prices may be detrimental to Halliburton because oil producers would have less cash for the equipment and hydraulic fracturing services Lesar’s company provides.
Lesar sees North America as its most promising region (HAL:US) for deploying its new fracking gear. To make shale drilling economic, a country needs three things: good rock soaked in oil and natural gas, ample infrastructure such as pipelines to carry the petroleum to market and a profitable price.