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Frackers Say Bottlenecks Slow Them From Ramping Up as Oil Prices Soar

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American shale drillers say there are limits to how much and how quickly they can boost shaky oil supplies following Russia’s invasion of Ukraine, cautioning that supply-chain issues, investors wary of overspending, thinning inventories and other problems constrict growth.

Leaders of the fracking companies that helped make the U.S. the world’s top oil producer say they are responding to calls by the Biden administration and others to increase production after oil prices this week topped $130 a barrel and gasoline prices surged, threatening to dent the broader economy.

But the executives say that some investors, who felt burned after shale drillers gave priority to expansion over profits last decade and lost billions, are still concerned that the companies might spend too much if they return to rapid growth.

They also say that a flight of capital from the fossil-fuel industry in recent years has left U.S. oil patches without enough fracking equipment to bring a ton of new wells online, and that a resurgence of go-go drilling would deplete companies’ most valuable drilling locations.

Scott Sheffield,

chief executive of

Pioneer Natural Resources Co.

, said his company, the largest oil producer in the Permian Basin of West Texas and New Mexico, isn’t currently considering lifting its previous long-term target to increase oil production by 0% to 5% a year.

Analysts and executives say the U.S. shale business has matured.



Photo:

Steve Gonzales/Associated Press

Pioneer’s plan reflects conversations with investors who want the company to retain its renewed focus on free cash flow and dividend yields. But he said those attitudes could change if global markets lose Russian supplies for a longer period, noting that U.S. shale drillers, along with oil-rich nations such as Saudi Arabia and Iran, might be the only ones capable of growing output enough to fill a sizable portion of the gap.

“We have shortages of labor, sand and equipment, and it’s going to take a good 18 months just to ramp it up,” Mr. Sheffield said of the industry. “If it’s a long-term problem, U.S. shale can respond and help the world, but it’s going to take time and a lot of caveats.”

John

Hess,

chief executive of Hess Corp., said at this week’s CERAWeek by S&P Global energy conference in Houston that his company is looking to increase its oil production in the Bakken Shale of North Dakota by 20% this year.

But he warned that U.S. shale is no longer the world’s swing supplier, as the business has matured. Shale companies have a limited remaining inventory of drilling locations following a decade of exploiting shale rock, he said. The Wall Street Journal wrote about the industry’s emerging inventory problems in February.

CEO John Hess says Hess is looking to increase its oil production in the Bakken Shale of North Dakota by 20% this year.



Photo:

F. Carter Smith/Bloomberg News

“It’s a 10-year-old business. There’s only about a 10-year inventory of shale drilling locations left, maybe 15,” Mr. Hess said. “People are going to be more judicious about how they accelerate in this emergency situation.”

U.S. oil production ended last year at about 11.6 million barrels a day, according to the Energy Information Administration. Many analysts and executives are projecting output will rise by between 500,000 to 1 million barrels a day this year, representing a smaller increase, on a percentage basis, than in years before the pandemic.

Occidental Petroleum Corp.

CEO

Vicki Hollub

said it would be hard for shale drillers to rapidly increase production even in the Permian Basin, the most active U.S. oil field.

Executives, officials and analysts say the extent to which shale companies will turn on the taps remains an evolving issue affected by the world’s escalating response to Russia’s attack. But they generally agree that the primary constraint is nuts-and-bolts limitations in America’s pandemic-battered oil patches, rather than regulatory constraints imposed by the Biden administration.

Amos Hochstein,

the U.S. State Department’s energy envoy, said that in recent meetings and phone calls with oil companies, executives indicated the federal government has little to do with their difficulties lifting output.

“I asked most of them, ‘Is there anything you need from the administration to increase production,’ and they said, ‘No, unless you can help me with sand or labor or other supply chains,’” Mr. Hochstein said.

Vicki Hollub, president and CEO of Occidental Petroleum, says it would be hard for shale drillers to rapidly increase production.



Photo:

LUCY NICHOLSON/REUTERS

Lenders—who have become more wary of funding oil-related ventures as environmental, social and governance ideas catch on in financial circles—are still unwilling to give money to most of the nation’s crop of oil-field service companies, or to smaller oil producers that want to expand their operations, executives and analysts said.

That has left small but instrumental players short of the financing they need to repair fracking equipment sidelined during the start of the pandemic, or invest in building drill bits, drilling rigs and blowout preventers.

Chris Wright,

chief executive of

Liberty Oilfield Services Inc.,

one of the largest U.S. hydraulic fracturing companies, said the nation’s fleet of available, working fracking equipment is almost fully deployed already.

“A lot of equipment has been retired, a lot of equipment is past its useful life,” Mr. Wright said.

He added his company estimated the U.S. oil industry is only going to add about 15 more fracking fleets to the 235 that were operating in key basins by this summer. “The market goes from tight to quite tight,” he said.

The oil industry’s hired hands have raised prices for tools and labor to some extent but aren’t yet benefiting enough from higher oil prices to be able to dispatch with new equipment, said Richard Spears, vice president at energy consulting firm Spears & Associates Inc.

President Biden announced Tuesday a ban on Russian oil imports into the U.S., amid growing calls from bipartisan lawmakers to take action. The U.S. will also ban imports of Russian natural gas and other energy sources, Biden said. Photo: Kevin Lamarque/Reuters

To reduce emissions, Mr. Spears said service companies that provide fracking trucks in recent years have parked many older units that ran on diesel while they have shifted to units with dual-fuel engines that can run on diesel and natural gas.

That shift has left about a third of the fracking trucks in North America in a state of disrepair that will take two years to fix, as companies wait to get key parts such as engines and transmissions for vehicles they had not been using.

“They’ve already got all of their available equipment out there already,” Mr. Spears said. “The constraint on growth is going to be, where do you get another [fracking] truck?”

Write to Collin Eaton at collin.eaton@wsj.com

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Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

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After pandemic drop, Canada’s detention of immigrants rises again By Reuters

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© Reuters. FILE PHOTO: Two closed Canadian border checkpoints are seen after it was announced that the border would close to “non-essential traffic” to combat the spread of novel coronavirus disease (COVID-19) at the U.S.-Canada border crossing at the Thousand Isla

By Anna Mehler Paperny

TORONTO (Reuters) – Canada is locking up more people in immigration detention without charge after the numbers fell during the pandemic, government data obtained by Reuters shows.

Authorities cite an overall rise in foreign travelers amid easing restrictions but lawyers say their detained clients came to Canada years ago.

Canada held 206 people in immigration detention as of March 1, 2022 – a 28% increase compared with March 1 of the previous year. Immigration detainees have not been charged with crimes in Canada and 68% of detainees as of March 1 were locked up because Canada Border Services Agency (CBSA) fears they are “unlikely to appear” at an immigration hearing, according to the data.

The rise puts Canada at odds with Amnesty International and other human rights groups that have urged Ottawa to end its use of indefinite immigration detention, noting CBSA has used factors such as a person’s mental illness as reason to detain them.

A CBSA spokesperson told Reuters that “when the number of entries (to Canada) goes up, an increase in detention is to be expected.” CBSA has said in the past it uses detention as a last resort.

A lawyer told Reuters her detained clients have been in Canada for years.

In the United Kingdom, too, immigration detention levels rose last year after dropping earlier in the pandemic, according to government statistics. Unlike Canada, the United States and Australia, European Union member states have limits on immigration detention and those limits cannot exceed six months.

The rise in detentions puts people at risk of contracting COVID-19 in harsh congregate settings, refugee lawyers say.

Julia Sande, Human Rights Law and Policy Campaigner with Amnesty, called the increase in detentions “disappointing but not surprising,” although she was reluctant to draw conclusions from limited data.

The number of immigration detainees in Canada dropped early in the pandemic, from a daily average of 301 in the fourth quarter (January through March) of 2019-20 to 126 in the first quarter (April through June) of 2020-21.

FEW NO-SHOWS AS DETENTIONS DROPPED

Detaining fewer people did not result in a significant increase in no-shows at immigration hearings – the most common reason for detention, according to Immigration and Refugee Board data.

The average number of no-shows as a percentage of admissibility hearings was about 5.5% in 2021, according to that data, compared to about 5.9% in 2019.

No-shows rose as high as 16% in October 2020, but a spokesperson for the Immigration and Refugee Board said this was due to people not receiving notifications when their hearings resumed after a pause in the pandemic.

Refugee lawyer Andrew Brouwer said the decline in detention earlier in the pandemic shows Canada does not need to lock up as many non-citizens.

“We didn’t see a bunch of no-shows. We didn’t see the sky fall … It for sure shows that the system can operate without throwing people in jail,” Brouwer said.

He added that detainees face harsh pandemic conditions in provincial jails – including extended lockdowns, sometimes with three people in a cell for 23 hours a day.

Refugee lawyer Swathi Sekhar said CBSA officials and the Immigration and Refugee Board members reviewing detentions took the risk of COVID-19 into account when deciding whether someone should be detained earlier in the pandemic but are doing so less now.

“Their position is that COVID is not a factor that should weigh in favor of release,” she said.

“We also see very, very perverse findings … [decision-makers] outright saying that individuals are going to be safer in jail.”

The Immigration and Refugee Board did not immediately respond to a Reuters request for comment.

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Nasdaq futures rise as market attempts comeback from April sell-off, Meta shares soar

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Stock futures rose in overnight trading as the market shook off the April sell-off and investors reacted positively to earnings from Meta Platforms.

Futures on the Dow Jones Industrial Average added 70 points or 0.2%. S&P 500 futures gained 0.7% and Nasdaq 100 futures jumped 1.2%.

The moves came as shares of Meta surged more than 18% after hours following a beat on earnings but a miss on revenue, a sign that investors may see signs of relief in the beaten-up tech sector. Shares were down 48% on the year heading into the results.

Meanwhile, shares of Qualcomm gained 5.6% in extended trading on the back of strong earnings while PayPal rose 5% despite issuing weak guidance for the second quarter.

“I think a lot of people want to believe that earnings are going to pull us out of this, but earnings are not what got us into this,” SoFi’s Liz Young told CNBC’s “Closing Bell: Overtime” on Wednesday. “… But the reality is there are so many macro headwinds still in front of us in the next 60 days that the market is just hard to impress.”

The after-hour activity followed a volatile regular trading session that saw the Nasdaq Composite stoop to its lowest level in 2022, as stocks looked to bounce back from a tech-led April sell-off. The index is down more than 12% since the start of April.

In Wednesday’s regular trading, the tech-heavy Nasdaq ended at 12,488.93, after rising to 1.7% at session highs. The Dow Jones Industrial Average rose 61.75 points, or 0.2%, to 33,301.93 propped up by gains from Visa and Microsoft, while the S&P 500 added 0.2% to 4,183.96.

Investors await big tech earnings on Thursday from Apple, Amazon and Twitter, along with results from Robinhood. Jobless claims are also due out Thursday.

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