OREANDA-NEWS. ExxonMobil's purchase last week of US shale acreage despite weak crude prices reflects oil majors' sustained interest in the unconventional side of the business.

Most US independent oil and gas producers have raised their output guidance even while spending less on the back of a better-than-expected improvements in technology and the fall in costs of services. The deal by ExxonMobil possibly points to other cash-rich producers snapping up acreage on the cheap in a weak oil price environment to position themselves for a recovery.

ExxonMobil said earlier this month it acquired drilling rights for more than 48,000 acres in Texas' Permian basin through two agreements. One was an acquisition and a farm-in in an area adjoining the company's existing acreage in Martin and Midland counties. The company didn't disclose the price for the acreage or who it acquired it from.

"We expect to drive continued improvements in productivity and cost as we develop our substantial inventory of wells across the multiple stacked plays," says Randy Cleveland, president of ExxonMobil subsidiary XTO Energy. "We are encouraged by the horizontal well productivity and cost reductions we have achieved to date."

ExxonMobil is carrying out measured US onshore drilling activity. The company's output in the Bakken, Permian basin and Woodford (Ardmore/Marietta) basin averaged about 240,000 b/d of oil equivalent (boe/d) in the second quarter, up by more than 20pc year-on-year. Its rig count is down by about 10 to 34 rigs in those three basins compared with the first quarter, but it has captured savings of about 30pc in drilling and completion costs from the peak in 2014.

The major has executed five agreements in the Midland basin in Texas since January 2014, providing it with operating rights over 135,000 net acres. XTO is currently operating 11 horizontal and four vertical rigs across its Permian basin leasehold of more than 1.5mn net acres, with output exceeding 115,000 b/d of oil equivalent (boe/d).

Even during boom times "when everybody was really picking up a lot of rigs, we took a measured pace and made sure that we were going at a pace that we can fully capture the benefits of the learnings that we were realizing," ExxonMobil's vice president of investor relations Jeff Woodbury said.

"Likewise in the down cycle, our rig counts have not come down as significantly as you see in the industry because we have been able to capture those learnings. The economics of these investments are still robust," he said.

Chevron recorded an 11,000 boe/d production growth from its shale and tight assets globally — but primarily in Permian — in the second quarter compared with January-March of this year. Unconventional resources are still in the minority of Chevron's holdings but have grown by about 15pc over the last five years.

BP, which is operating its Lower 48 assets as a separate business beginning this year, is implementing capital and operating efficiency improvements.

"Operating costs are trending lower, and in our Woodford and Haynesville assets we have halved the cost of bringing new wells on-stream," says BP chief executive Bob Dudley. "We have actually increased the number of rigs running from around two up to 10 now across the business units" since last year.

BP's output across the lower 48 is about 280,000 boe/d. "We continue with the desire for it to be a market visible, high return, onshore operator in the US".

Shell, which has reduced its North American shale footprint since 2013, said that there's a limit to the level of production improvement the industry will see while continually reducing rig count.

"This whole idea that... you can actually continuously bring down rigs and somehow miraculously production will keep going up, that I think is finally sort of coming to an end," says Shell chief executive Ben van Beurden.

Shell won't exit the US unconventional industry, however, despite the outlook.