Noah Zivitz

Managing Editor, BNN Bloomberg

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As far as Eric Nuttall is concerned, he and his peers have more sway with shale producers in the United States than the American president.

"There's still meaningful constraints on labour, but the biggest (production-growth) constraint are guys like me saying, 'We've just endured 10 years almost of misery. Now it's our turn to get rewarded and paid for our patience and we're gonna get rewarded with meaningful buybacks and we're gonna get rewarded — more importantly to us —with very, very juicy dividends,'" said Nuttall, a partner and senior portfolio manager at Ninepoint Partners LP, in an interview Friday.

There's broadly been restraint in the last few years among U.S. shale producers whose "drill, baby, drill" mantra once saw them battle with Saudi Arabia and other major oil-producing nations for market share. Some of that restraint has been chalked up to a gun-shy approach after oil prices collapsed. But cost inflation and some significant debt burdens have also played a role.

“Drill, baby drill, is gone forever,” Saudi energy minister Abdulaziz bin Salman said in March 2021 after a meeting of the OPEC+ nations that were motivated to exercise restraint.

The most recent information available from the U.S. Energy Information Administration estimates U.S. shale oil production will hit 9.05 million barrels per day this month, virtually unchanged compared to March 2020.

“They got castrated in 2016, they got slaughtered in 2020, and then they got demonized for ruining the environment after that. Why would you do anything to help the people that hate you?" Smead Capital Management chief investment officer Bill Smead told Bloomberg News last month.

But an outlier emerged this week when Permian Resources LLC said it was aiming to boost production 10 per cent by the end of next year.

Nuttall said he thinks that company will be the exception to the rule as management teams and boards of directors tune out the U.S. president and listen to their shareholders.

"We've seen the enormous political pressure from (Joe) Biden, the shale companies have basically not, you know, answered the call," he said.

"We (investors) do ultimately dictate corporate strategy because we own the companies. You know, you have a say with votes. You hire and fire CEOs and boards. And any board that violates this covenant now, where they have codified 75 per cent or more of free cash flow going back to investors? I think, you know, a CEO making $15 million a year doesn't want to lose that job."