Unfortunately it will hit domestic shale/fracking efforts also...”break even” for them is about $90-$96/bbl.. http://www.businessweek.com/articles/2013-10-31/a-texas-oil-bubble-could-pop-due-to-low-prices
“Unfortunately it will hit domestic shale/fracking efforts also...”break even” for them is about $90-$96/bbl.. “
Every play has a variety of areas which can be identified as 1. Lucrative(money can be made at almost any crude price) 2. Modest(slightly commercial or slightly subcommercial) 3. Uneconomic(clearly subcommercial).
The amount of areas in each category expands or contracts dependent upon the rising or falling price of oil.
This is true whether in the Bakken, Eagleford or Permian.
So calling out a particular crude price as “the breakeven price of this basin” which is the price that drilling will stop is not really true.
It is also a fact that some plays which are more delineated, such as the Eagleford and Bakken, have already had the better (Lucrative) areas identified, and will not alter much drilling in these areas when prices drop as these areas will still be exploited.
For other basins where there is still the need to identify where the three different areas exist like the Permian, drilling will also not suffer dramatically unless prices go way down.
One reason for this is some players have laid some large amounts of money to obtain their acreage, and need to ‘prove up’ areas to retain acreage and will not be deterred with price decreases unless very dramatic.
Just saying, beware of the “breakeven price” for thinking where rig numbers will go.
I was listening to a panel of analyst and energy traders the other day, and they agreed that even at $60 dollars a barrel US producers would be making good profits, not that anyone expects to see oil go that low again.
Old article, more like 40 now with latest equipment and good geology. But some companies with lots of debt might go under as margins will be thinner.
U.S. shale producers could keep pumping oil economically even if Brent dropped to $60 a barrel, Bjornar Tonhaugen, an analyst with Oslo-based Rystad Energy, said in an e-mailed report. Brent would need to remain at $50 a barrel for 12 months before North American shale output drops 500,000 barrels a day, he said.
Morgan Stanley said Eagle Ford break-even costs range from $30 to $60 a barrel. Most U.S. tight-oil reserves break even from $60 to $80, Barclays Plc (BARC) said in slides presented at the Argus European Crude Conference in Geneva last week.
“We continue to be impressed by how much operators are improving their operations,” R.T. Dukes, an upstream analyst for Wood Mackenzie Ltd. in Houston, said by phone. “There’s enough out there that significant development would continue even at $75 or $80.”
Lag Time
If West Texas Intermediate, the U.S. benchmark, fell to $80 or less for an extended time, drilling activity in U.S. tight oil plays would decrease, RBC Capital Markets said in a note today. WTI fell to $81.84 today on the New York Mercantile Exchange, the lowest since June 28, 2012.
There will be a lag time between falling prices and any drop in drilling activity, Jurecky said. When oil prices dropped by $111 a barrel between July and December 2008, the oil rig count didn’t begin to decline until November, according to data from oil services provider Baker Hughes Inc. (BHI)
http://www.bloomberg.com/news/2014-10-14/u-s-shale-oil-output-growing-even-as-prices-drop-eia.html