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Harold Hamm, the billionaire wildcatter and a major donor to President Donald Trump, has challenged a claim from the new US energy secretary that domestic oil companies could increase production even at prices as low as $50 a barrel.
Hamm’s words represent one the first signs of public push-back from the US shale industry against the Trump administration’s energy policy. Hamm, 79, was one of the president’s biggest financial backers in last year’s election.
Many in the sector have welcomed the new administration’s policy of cutting regulations and boosting domestic oil and gas production. But that support sits uneasily alongside Trump’s statements calling for significantly lower energy prices.
Energy Secretary Chris Wright told the Financial Times this week that while new supply will push down prices, oil companies will learn to innovate and bounce back.
Speaking Thursday, Hamm, 79, the co-founder and chairman of closely held shale driller Continental Resources, warned that US drillers need $80-a-barrel oil to be able to cover costs at some wells.
“There are a lot of fields that are getting to the point that’s real tough to keep that cost of supply down,” he said in a Bloomberg Television interview. “When you get down to that $50 oil that you talked about, then you’re below the point where you’re going to ‘drill, baby, drill.’”
West Texas Intermediate crude currently trades at around $67, having fallen from $80 in January amid concerns about weak Chinese demand and more supply from OPEC+.
Shale operators are slowing production growth after years of drilling up their best locations. At this week’s CERAWeek by S&P Global energy conference in Houston, executives for some of the largest US shale companies forecast US oil production will peak in the next three to five years.
Scott Sheffield, who expects US output to peak at about 14 million barrels a day, said in a Bloomberg Television interview this week that the oil price needed for publicly traded drillers to cover costs and turn a modest profit is in the range of $50 to $55 a barrel.
“That includes paying your dividend,” Sheffield said. “Nobody’s going to cut the dividend. It’s a no-no.”
Hamm said he has yet to speak with Wright, the former chief of frack-provider Liberty Energy Inc., about the costs that shale operators face and the oil prices they need to thrive.
“He and I are good friends and understand each other quite well,” Hamm said. “I look forward to that conversation.”
Hamm added that Trump’s import tariffs are a concern because of the steel pipe needed to line oil wells.
“That’s another thing that can add a great deal of cost to what we do,” he said. It’s helpful that there are some steelmakers in the US, Hamm said, “but they can’t supply it all.”
Updates with comment from Scott Sheffield beginning in ninth paragraph.
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