LONDON: US shale firms are drilling themselves into a deep hole despite warnings from industry leaders about the risk of flooding the market with too much crude.
Drilling and production are rising. Prices are declining. Companies are barely breaking even or losing money. Costs are starting to rise. And share prices are sliding.
Current oil prices are not sustainable, Harold Hamm, the chief executive of Continental Resources, said in an interview on June 28.
Prices need to be above $50 per barrel to be sustainable and below $40 would force producers to idle rigs, Hamm said.
“While this period of adjustment is going on, drillers do not want to drill themselves into oblivion. Back up, and be prudent and use some discipline,” he urged rival chief executives.
Many of Continental’s leases are in North Dakota’s Bakken and Oklahoma, where wells are typically more expensive to drill and yield less oil than some other shale plays.
The resurgence in shale drilling over the last year has been concentrated in the Permian Basin of Texas and New Mexico, where costs are much lower and yields higher. There are now almost 370 rigs drilling for oil in the Permian compared with 50 in the Bakken, according to Baker Hughes.
The number of rigs drilling in the Permian has almost tripled since the end of April 2016 and the Permian now accounts for almost half of the rigs drilling for oil in the US. But even in the Permian, shale firms have struggled to make money with oil prices stuck below $50, raising questions about the sustainability of the drilling boom.
Many shale drillers claim they can drill wells profitably even with benchmark West Texas Intermediate (WTI) prices below $50 as a result of significant cost reductions and improvements in efficiency. But most shale firms were still losing money or at best breaking even in the first quarter of 2017, even before the renewed slump in prices.
Pioneer Resources said it has the largest acreage in the prolific Spraberry/Wolfcamp section of the Permian and low average royalty and acreage costs.
Pioneer has been praised by equity analysts for its active hedging program that aims to protect cash flow from short-term volatility in oil prices.
But the company reported losses (negative net income) of $273 million in 2015 and $556 million in 2016.
Pioneer reported a further loss of $42 million in the first quarter of 2017 despite the substantial rise in oil prices compared to the same period a year earlier.
Continental lost $354 million in 2015 and $400 million in 2016 before just about breaking even with net income of less than $0.5 million in the first quarter of 2017.
EOG Resources, another prominent producer, reported a loss of $4.5 billion in 2015 and $1.1 billion in 2016 before turning a small profit of $29 million in the first quarter of 2017.
Since the first quarter, WTI prices have fallen by more than $3.50 per barrel, or 7 percent, from an average of $51.78 in January-March to just $48.14 in April-June, intensifying pressure on shale producers even further.
Many shale firms have hedging programs that should protect them from the decline in prices in the short term, but most have hedged only a small proportion of next year’s production.
The current calendar strip allows producers to lock in WTI prices at just $50 for 2018, so most are waiting for a renewed rise in forward prices.
But every week they wait, their hedging cover declines by around 2 percent, assuming they have an average hedge maturity of 12 months.
In the meantime, producers are braced for cost inflation, with the major oil field services firms pressing for price increases by the end of the year and into 2018.
Since WTI prices peaked in late February, shale producers have added more than 150 extra rigs drilling for oil.
The rig count is up by 430 over the last 12 months even though WTI prices are now $3 per barrel lower.
But share prices for all the major producers are sliding. Pioneer’s share price is down almost 15 percent since the start of the year. Continental is down 39 percent. EOG has fallen 13 percent.
Many shale producers seem to be relying on the Organization of the Petroleum Exporting Countries (OPEC) to bail them out by cutting its own output further to drive WTI prices back above $50 per barrel.
But it may not be rational for OPEC to cut output if the only consequence is to encourage continued growth in US shale. Key OPEC producers appear unenthusiastic about further cuts.
If something cannot go on forever, it will stop. The slide in oil prices over the last four months is sending a signal to shale firms about the need to moderate drilling and production programs.
Either the drilling boom moderates very soon, or WTI prices are likely to fall below $40 per barrel to make it stop.
n John Kemp is a Reuters
market analyst. The views expressed are his own.
US shale producers drilling themselves into a hole
US shale producers drilling themselves into a hole
What MENA’s wild 2025 funding cycle really revealed
RIYADH: The Middle East and North Africa startup funding story in 2025 was less a smooth arc than a sequence of sharp gears: debt-led surges, equity-led recoveries, and periodic quiet spells that revealed what investors were really underwriting.
By November, the region had logged repeated bursts of activity — culminating in September’s $3.5 billion spike across 74 deals — yet the year’s defining feature was not just the size of the peaks, but the way capital repeatedly clustered around a handful of markets, instruments, and business models.
Across the year’s first eleven months, funding totals swung dramatically: January opened at $863 million across 63 rounds but was overwhelmingly debt-driven; June fell to just $52 million across 37 deals; and September reset expectations entirely with a record month powered by Saudi fintech mega facilities.
The net result was a market that looked expansive in headline value while behaving conservatively in underlying risk posture — often choosing structured financing, revenue-linked models, and geographic familiarity over broad-based, late-stage equity appetite.
Debt becomes the ecosystem’s shock absorber
If 2024 was about proving demand, 2025 was about choosing capital structure. Debt financing repeatedly dictated monthly outcomes and, in practice, became the mechanism that let large platforms keep scaling while equity investors stayed selective.
January’s apparent boom was the clearest example: $863 million raised, but $768 million came through debt financing, making the equity picture almost similar to January 2024.
The same pattern returned at larger scale in September, when $3.5 billion was recorded, but $2.6 billion of that total was debt financing — dominated by Tamara’s $2.4 billion debt facility alongside Lendo’s $50 million debt and Erad’s $33 million debt financing.
October then reinforced the playbook: four debt deals accounted for 72 percent of the month’s $784.9 million, led by Property Finder’s $525 million debt round.
By November, more than half the month’s $227.8 million total again hinged on a single debt-backed transaction from Erad.
This isn’t simply ‘debt replacing equity.’ It is debt acting as a stabilizer in a valuation-reset environment: late-stage businesses with predictable cash flows or asset-heavy models can keep expanding without reopening price discovery through equity rounds.
A two-speed geography consolidates around the Gulf
The regional map of venture capital in 2025 narrowed, widened, then narrowed again — but the center of gravity stayed stubbornly Gulf-led.
Saudi Arabia and the UAE alternated at the top depending on where mega deals landed, while Egypt’s position fluctuated between brief rebounds and extended softness.
In the first half alone, total investment reached $2.1 billion across 334 deals, with Saudi Arabia accounting for roughly 64 percent of capital deployed.
Saudi Arabia’s rise was described as ‘policy-driven,’ supported by sovereign wealth fund-backed VC activity and government incentives, with domestic firms such as STV, Wa’ed Ventures, and Raed Ventures repeatedly cited as drivers.
The UAE still posted steady growth in the first half — $541 million across 114 startups, up 18 percent year-on-year — but it increasingly competed in a market where the largest single cheques were landing elsewhere unless the Emirates hosted the region’s next debt mega round.
The concentration became stark in late-year snapshots. In November, funding was ‘tightly concentrated in just five countries,’ with Saudi Arabia taking $176.3 million across 14 deals and the UAE $49 million across 14 deals, while Egypt and Morocco each sat near $1 million and Oman had one undisclosed deal.
Even in September’s record month, the top two markets — Saudi with $2.7 billion across 25 startups and the UAE with $704.3 million across 26 startups — absorbed the overwhelming majority of capital.
A smaller but notable subplot was the emergence of ‘surprise’ markets when a single deal was large enough to change rank order.
Iraq briefly climbed to third place in July on InstaBank’s $15 million deal, while Tunisia entered the top three in June entirely via Kumulus’ $3.5 million seed round.
These moments mattered less for the totals than for what they suggested: capital can travel, but it still needs an anchor deal to justify attention.
Events, narrative cycles, and the ‘conference effect’
2025 also showed how regional deal flow can bunch around events that create permission structures for announcements.
February’s surge — $494 million across 58 deals — was explicitly linked to LEAP 2025, where ‘many startups announced their closed deals,’ helping push Saudi Arabia to $250.3 million across 25 deals.
September’s leap similarly leaned on Money20/20, where 15 deals were announced and Saudi fintechs dominated the headlines.
This ‘conference effect’ does not mean deals are created at conferences, but it does change the timing and visibility of closes.
Sector leadership rotates, but utility wins
Fintech retained structural dominance even when it temporarily lost the top spot by value.
It led January on the back of Saudi debt deals; dominated February with $274 million across 15 deals; remained first in March with $82.5 million across 10 deals; topped the second quarter by capital raised; and reclaimed leadership in November with $142.9 million across nine deals — again driven by a debt-heavy transaction.
Even when fintech fell to ninth place by value in October with $12.5 million across seven rounds, it still remained ‘the most active sector by deal count,’ a sign of persistent baseline demand.
Proptech was the year’s other headline sector, but its peaks were deal-specific. Nawy’s $75 million round in May helped propel Egypt to the top that month and pushed proptech up the rankings.
Property Finder’s debt round in October made proptech the month’s top-funded sector at $526 million. In August, proptech led with $96 million across four deals, suggesting sustained investor appetite for real-estate innovation even beyond the megadeal.
Outside fintech and proptech, the year offered signals rather than dominance. July saw deeptech top the sector charts with $250.3 million across four deals, reflecting a moment of investor appetite for IP-heavy ventures.
AI repeatedly appeared as a strategic narrative — especially after a high-profile visit by US President Donald Trump alongside Silicon Valley investors and subsequent GCC AI initiatives — yet funding didn’t fully match the rhetoric in May, when AI secured just $25 million across two deals.
By late year, however, expectations were already shifting toward mega rounds in AI and the industries built around it, positioning 2025 as a runway-building year rather than a breakout year for AI funding in the region.
Stage discipline returns as valuations reset
In 2025, MENA’s funding landscape tried to balance two priorities: sustaining early-stage momentum while selectively backing proven scale. Early-stage rounds dominated deal flow. October saw 32 early-stage deals worth $95.2 million, with just one series B at $50 million. November recorded no later-stage rounds at all, while even September’s record month relied on 55 early-stage startups raising $129.4 million.
When investors did commit to later stages, the cheques were decisive. February featured Tabby’s $160 million series E alongside two $28 million series B rounds, while August leaned toward scale with $112 million across three series B deals. Late-stage equity was not absent — it was episodic, appearing only when scale economics were defensible.
B2B models remained the default. In the first half, B2B startups raised $1.5 billion, or 70 percent of total funding, driven by clearer monetisation and revenue visibility.
The gender gap remained structural. Despite isolated spikes, capital allocation continued to overwhelmingly favour male-led startups.
What 2025 actually said about 2026
Taken together, 2025 looked like a year of capital market pragmatism. The region demonstrated capacity for outsized rounds, but much of that capacity ran through debt, a handful of megadeals, and a narrow set of markets — primarily Saudi Arabia and the UAE.
Early-stage deal flow stayed active enough to keep the pipeline moving, even as growth-stage equity became intermittent and increasingly selective.
By year-end, the slowdown seen in November read less like a breakdown than a deliberate pause: a market in consolidation mode preserving firepower, waiting for clearer valuation anchors and the next wave of platform-scale opportunities.
If 2025 was about proving the region can absorb large cheques, 2026 is shaping up to test where those cheques will go — especially as expectations build around AI-led mega rounds and the industries that will form around them.
