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WRAPUP 2-U.S. shale producers reveal extent of hit from Texas freeze

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Shariq Khan
·2 min read
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(Updates shares, adds background)

By Shariq Khan

Feb 22 (Reuters) - Occidental Petroleum Corp,Diamondback Energy Inc and a host of smallerPermian-focused U.S. shale producers on Monday forecast loweroil output in the first quarter, giving the first indications ofthe hit to the industry caused by last week's winter storm.

Areas of Texas not used to the cold were hit by sub-zerotemperatures and record snow falls last week.

While natural gas producers benefited from cold weatherforcing closure of wells, shale oil drillers stood on the losingside of the trade as frozen pipes and power supply interruptionswere expected to slow an output recovery, operators said.

Shale oil producers could take at least two weeks to restartthe more than 2 million barrels per day (bpd) of crude outputlost during the cold snap and some production may never returnbecause of the cost of restarting marginal wells, analystssaid.

Diamondback estimated it lost four to five days worth oftotal production from its current-quarter earnings, sending itsshares down nearly 4% to $65.95 in late trading.

Oil shares had rallied during the day on higher oil prices.

Occidental forecast the storm would cut about 25,000 barrelsof oil and gas from its first-quarter production. Its sharesalso reversed course after the bell and were down about 2%.

Among others posting production knocks: Cimarex Energy Coforecast a hit of up to 7% to first-quarter volume.Laredo Petroleum Inc also said well shut-ins andcompletion delays will reduce first-quarter total oil and gasproduction by about 8,000 bpd. Its production is starting toreturn to pre-storm levels, officials said.

Shale's outlook was challenged even before the recent stormand "will remain difficult", said Peter McNally, global sectorlead for industrials, materials and energy at research firmThird Bridge.

Diamondback forecast full-year oil and gas production ofbetween 308,000 and 325,000 bpd, higher than the 300,300 bpd itproduced in 2020 when production was curbed because ofpandemic-driven plunges in crude prices.

Occidental, which cut production guidance to reduceexpenses, forecast full year oil and gas output to drop from2020's 1.35 million bpd to an expected 1.14 million bpd in 2021,as it sells assets to pay off debt it took on to acquireAnadarko Petroleum Corp in 2019.

(Reporting by Shariq Khan in Bengaluru; Editing by Maju Samueland Sonya Hepinstall)