Shale sweetspots created many winners in the past five years – and they in turn helped carry out the oil and gas shale revolution.

At the moment, the E&Ps sitting in the best U.S. plays and the best counties are predicting a 3% decline in production. If the decline stretches across the industry the result will be the first year-on-year decline since 2010.

To Bob Brackett, senior analyst, Bernstein Research, a dip in production isn’t far-fetched. The winners are powerful.

“They are not a cartel and I refuse to coin the term "Shale-PEC," but this concentration means these actors are as worth observing as their brethren that will meet in Vienna in a few weeks,” he said.

Out of 3,007 shale counties in the U.S., just eight counties have delivered the oil – a whopping half of the shale revolution’s production. At 80% of oil volumes, the number of counties where most oil was produced rises to 27.

And the winners? In both the top eight and top 27 counties, just 10 operators drilled about half of the wells.

“Those winners are telling you they are shrinking, on average guiding to 2015 production declines,” Brackett said.

Brackett said predicting continued oil production growth requires “logical gymnastics.” His observations suggest the top dogs know how their companies will perform:

  • Companies’ capex has been consistent with observable rig count.
  • Operators know what they plan to drill and how they plan to complete.
  • For production to grow, volumes either have to come from the winners or an operator that grows astronomically fast.

“These operators have steep economic moats. They hold the rights to drill in the sweet spots and no one can access these lands without either acquiring the acreage from the company or acquiring the company outright,” Brackett said.

The ruling operators in those counties are companies such as EOG Resources (EOG), Anadarko Petroleum Corp. (APC), Chesapeake Energy (CHK), Devon Energy (DVN) and Whiting Petroleum (WLL).

Brackett said the concentration of operators has “incredibly important implications to the structure of the shale industry.”

Indeed, the top producers in the U.S. have been instrumental in the shale revolution, based on Brackett’s statistics.

“An alternative to the mental gymnastics is to assume that shale production will modestly decline, balancing global oil markets and driving higher oil prices,” Brackett said.

From March 2010 to February, U.S. onshore production grew 4 million barrels of oil per day (bbl/d) to 7.2 MMbbl/d from 3.2 MMbbl/d.

During that time, 70,000 horizontal wells were drilled. Examining the delivery of oil by county reveals that four counties in North Dakota and four in Texas delivered 50% of the oil.

The next best 19 counties were in the Bakken, Eagle Ford, Permian, Denver-Julesburg (D-J), Powder River and Anadarko basins.

“This is more concentrated than population,” Brackett said. “Half of the U.S. lives in 146 counties, for example.”

Brackett said flattening to falling supply growth should balance global oil markets and allow oil prices to rise toward $85 in 2016.

But that prediction includes many risks, including how service cost deflation, highgrading, efficiency gains and other factors are embedded in analytical models.

“A final key risk to equity upside worth considering is that markets are already embedding a rebound,” he said.

Energy was cheapest vs. the S&P in 2007 and absolutely cheapest in 2009.

“It was relatively most expensive a year ago and it is absolutely more expensive today,” he said.

Energy stands at 8x trailing EBITDA, which was earned at an average of $77/bbl Brent. As time goes on, trailing EBITDA could fall by as much as 20% by October 2016.

In the absence of a strong oil price move, investor interest may wane from its frenetic pace at the end of 2014 and the first quarter of 2015, Brackett said.