HOUSTON, April 24 (Reuters) - Technology advances are

making it possible for U.S. shale oil and gas companies to

reverse years of productivity declines, but the related

requirement to frontload costs by drilling many more wells is

deterring some companies from doing so.

While overall output is at record levels, the amount of oil

recovered per foot drilled in the Permian Basin of Texas, the

main U.S. shale formation, fell 15% from 2020 to 2023, putting

it on par with a decade ago, according to energy researcher

Enverus.

That is because fracking, the extraction method that emerged

in the mid-2000s, has become less efficient there. In the

technique, water, sand and chemicals are injected at high

pressure underground to release the trapped resources.

Two decades of drilling wells relatively close together,

resulting in hundreds of thousands of wells, have interfered

with underground pressure and made getting oil out of the ground

more difficult.

"Wells are getting worse and that is going to continue," said

Dane Gregoris, managing director at Enverus Intelligence

Research firm.

But new oilfield innovations, which began being implemented

more widely last year, have made it possible for fracking to be

faster, less expensive and higher yielding.

The advances in the past few years include the ability to

double the length of lateral wells to three miles and equipment

that can simultaneously frack two or three wells. Electric pumps

can replace high-cost, high maintenance diesel equipment.

"Companies now can complete (frack) wells faster and

cheaper," said Betty Jiang, an oil analyst with Barclays.

A drawback to the new simultaneous fracking technology, also

called simul-frac, is that companies need to have lots of wells

drilled and ready to move to the fracking phase in unison before

they can proceed. Pumps inject fluids into and get oil and gas

out of two or three wells at the same time, instead of just one.

Because these act as an interconnected system, wells cannot

be added piecemeal. But companies eager to cut costs have not

deployed enough drill rigs to capitalize fully on the potential

of the innovations.

"Instead of drilling the wells and getting production in a

few months, you have got to drill eight wells, or 10 wells,"

said Mike Oestmann, CEO of Tall City Exploration.

"That's $100 million in the ground before you see any

revenue," he said. "For small companies like Tall City, that's a

big challenge."

The number of active drilling rigs in the U.S. this month

fell nearly 18% from a year ago.

Simul-fracking can also lower well costs by between

$200,000-$400,000, or 5%-10% apiece, said Thomas Jacob, senior

vice president of supply chain at researcher Rystad Energy

estimates.

NEW TECH SUPPORTS RECORD PRODUCTION

Oil analysts anticipate use of the new technology will

accelerate. "We saw a trend of companies shifting to simul-fracs

in the second half last year, and that is only going to

continue," said Saeed Ali Muneeb at energy analysis firm

Kayrros.

Longer wells and advancements in fracking techniques are

more than offsetting declining productivity and limited rig

count, helping the U.S. reach record oil production volumes.

The top U.S. shale-producing regions are forecast next month

to hit the highest output in five months with new-well

production up 28% from a year ago, according to the U.S. Energy

Information Administration.

"Companies are making a fine-tuning and getting better and

better in fracking," said Oestmann. "Without them, production

would fall."

Innovations are going to gain scale once top producers like

Exxon Mobil Corp ( XOM ) and Chevron Corp ( CVX ) adopt them

more broadly, shale experts said.

Mid-sized shale firms like Pioneer Natural Resources ( PXD )

that can afford the costs were first to embrace the new methods.

The positive results make them more attractive to big firms like

Exxon, which is awaiting regulatory approval to buy Pioneer.

But the biggest shale producers have committed to using oil

revenue to finance shareholder returns rather than drilling

expansion. Two of the biggest shale oil operators, Exxon and

Chevron ( CVX ), have missed targets for Permian production in the past

years.

Exxon said its own new fracking technology will allow it to

extract an extra 700,000 barrels of oil equivalent per day

(boepd) from Pioneer's assets by 2027, tripling output there to

2 million boepd.

Chevron ( CVX ) is increasing use of simul-fracs and says the

technique will help it increase Permian production by 10% this

year to 900,000 boepd. It also completed a triple-frac pilot and

anticipates using it more widely, a spokesperson said.