HOUSTON--David Stover took over Noble Energy Inc. (NYSE: NBL) in October 2014, just as the energy industry was beginning one of the most severe slides in oil prices of the past 30 years.

Stover has that kind of timing. He graduated from Penn State in 1979 with his classmates scratching their heads at his decision to become a petroleum engineer.

“The outlook at that time was, there was probably a 10-year supply of oil left in the world,” Stover said Sept. 19 at the third annual Energy Tax Conference sponsored by Bloomberg BNA and Mayer Brown.

Stover has seen extreme outlooks during his career. In the past 10 years, U.S. shale oil and gas flipped the dynamics of the world on its end. In a “state of the energy industry” discussion, he said optimism among operators remains as abundant as the U.S. resource base beneath their feet.

Somewhat philosophically, Stover mused about how conversations would be different without the discoveries and ingenuity of the shale revolution.

“It’s interesting to think about, ‘what would this world look like if that hadn’t happened,’” Stover said. “Especially when you think about the unrest and uncertainty around the rest of the world, and how much of that has grown up just in the last five to 10 years.”

What’s been lost in the narrative of nosediving commodity prices and slowly declining Lower 48 production is that the U.S. E&P community has been working harder and smarter than ever and reducing costs enough to change federal oil production forecasts.

“When you step back and look at it, it's pretty amazing-- the resiliency of this industry,” Stover said. “Especially when you think about an industry that almost overnight, two years ago, lost 50% of its revenue base.”

Yet the industry hasn’t merely survived; it’s made remarkable strides with technology.

Global Interpretation

Noble Energy has a more global perspective than many of its E&P kin, though it operates in some of the most prolific shales in the U.S, including the Denver-Julesburg (D-J) and Delaware basins and the Marcellus and Eagle Ford shales. The company also operates in the Eastern Mediterranean offshore Israel and in the U.S. Gulf of Mexico.

“We have a mix of commodity exposure of international and U.S. oil exposure and liquids exposure, U.S. gas and international gas,” Stover said. “So we get to see a different perspective not just on global operations, but on a global commodities mix.”

The oil and gas business is all about trying to decide where to put the next investment, he said. “And that goes into how we manage risk and how we deal with uncertainty.”

For most of the time after Stover left college, from roughly 1980 until 2016, commodity prices were relatively stable.

From the mid-1980s almost until the 2000s, the U.S. gas outlook was fairly consistent, Stover said.

Normalizing prices in 2016 dollars, natural gas varied from about $3 per thousand cubic feet (Mcf) to $5/Mcf.

“Then we saw this at least, perceived vast undersupply expectation,” he said. “I can remember that mid-2004, 2005 period where everybody was on the boat that you plan for $6 to $8 gas,” he said. “This is when the shale revolution really started.”

Prices dipped as it became clear that rather than scarcity, the U.S. had close to a 100-year inventory of natural gas.

Anomalous Value

Oil was on a similar path.

“Most of my career, we’ve been dealing with $30 to $40 oil price when you compare it in 2016 dollar terms,” he said. “It seems like coming out of this higher-price environment, you kind of forget that’s not where we’ve always been.”

Following the loss of oil revenue, companies have been working to make the breakeven point in plays fall. Many plays have been successful because well economics have improved by about 25% in the past year.

“It’s driven by improved productivity, recovery, low drilling costs and lower operating costs,” he said.

On Sept. 7, crude oil production was projected to decrease to an average of 8.8 million barrels per day (MMbbl/d) from 9.4 MMbbl/d, the Energy Information Administration (EIA) said. For 2017, production levels have been revised up by 200Mbbl/d.

“The upward revisions to production largely reflect an assumption of higher drilling activity, drilling efficiency and well-level productivity than assumed in previous forecasts,” the EIA said.

Rigs, at the same time, have become far more efficient.

“On a horizontal rig--and we’re seeing it on operations in the D-J Basin--you can drill twice as many wells with the same rig as you could just a few years ago,” he said.

Stover said that uncertainty has to be dealt with, especially at the ground level. Many consumer products, for instance, are directly or indirectly tied to the oil and gas business. Working more closely with communities will require investment, too.

“A lack of understanding of this business creates a lack of trust,” Stover said. “That trust in this business is our license to operate.”

Darren Barbee can be reached at dbarbee@hartenergy.com.