At first glance, the oil and gas sector in the US is an enigma. The exploration and production companies as a whole lose money. At the same time, these companies continue to grow production. Not only do they grow production, total production in the US is bouncing around all-time highs. The chart below shows the 4-week average daily production of crude oil in the US. At its low point, daily production dipped to about 4 million barrels per day. As fracking techniques took hold production rebounded rapidly and now production hovers just under 10 MMBPD.
We have witnessed the same phenomenon in natural gas production. The chart below shows the annual production figures for dry US natural gas (i.e. pure methane, does not include nat gas liquids like propane and butane). You will note the natural gas production has never been higher.
The real question one must ask is "why is production growing in an environment where industry profitability does not exist?"
