Posted on 11/03/2015 10:38:50 AM PST by thackney
Only 1% of the Bakken Play area is commercial at current oil prices based on my analysis that follows.
Only 4% of horizontal wells drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed to break even at current oil prices, drilling and completion, and operating costs.
The leading producing companies evaluated in this study are losing $11 to $38 on each barrel of oil that they produce, the very definition of waste.
Although NYMEX prices are about $46 per barrel, realized wellhead prices in the Bakken are only $30 per barrel according to the North Dakota Department of Mineral Resources. At that price, approximately 125,000 acres of the drilled play area of 10,500,000 acres is commercial (green areas in Figure 1).
The break-even per-well EUR is 700,000 barrels at a $30 oil price. The underlying economic assumptions are shown in Table 1.
There has been much debate about the break-even price for tight oil plays in the U.S. This discussion is largely meaningless because there is no single break-even price for any play.
Break-even price depends on EUR and every well has a different EUR. EUR depends on reservoir geology and geology varies geographically.
Drilling and completion technology cannot make up for bad geology. An area with poorer geology costs more to produce and will never perform as well as an area with better geology. And technology comes at a price. Longer laterals and more frack stages mean that a higher EUR is needed to to pay out the additional costs.
(Excerpt) Read more at forbes.com ...
Figure 1. Bakken Shale Play commercial area map at $30 per barrel wellhead price. Contours are in barrels of oil estimated ultimate recovery. Contour interval = 200,000 barrels of oil. Source: Drilling Info, North Dakota Department of Natural Resources & Labyrinth Consulting Services, Inc.
Table 1. Economic assumptions and outcomes used to determine the Bakken $30 per barrel commercial area shown in Figure 1. Source: Company presentations and Labyrinth Consulting Services, Inc.
Some folks don’t realize that the price of oil quoted in the papers is only for West Texas Intermediate delivered to Cushing, OK.
For a list of current domestic oil prices based on different qualities and locations today, see:
http://www.fhr.com/refining/bulletins.aspx?AspxAutoDetectCookieSupport=1
Today this list ranges from $42.50 to $19.75
The greedy oil companies are conspiring to lower prices!
They are asking the wrong question. Once you have the hole in the ground, are you going to be financially better off pumping or shutting it in. The sunk costs are gone in either event, and basing your decisions going forward on them isn’t going to help.
There is really no justification for refusing to develop 100% American independence with our fossil fuels— even if the costs are higher than those offered by Death to America retailers around the world.
Why should any of us care what OPEC is offering for a barrel of oil?
Most of the money paid to OPEC goes to pay for a genocidal fantasy that will wipe the US and Israel off the global maps.
We could save a lot of money if the 7th fleet and military projection costs were added to the price of a barrel of oil from the strait of Hormuz.
We should easily be able to get enough oil from Canada, Mexico and the US and pay whatever subsidies are necessary to make it feasible.
The free market on oil is not very free.
Exactly. It is a matter of National Security.
Even if the price drops below the breakeven point, a positive cash flow while still in debt is better than no cash flow with the same debt.
The issue is wells decline in production rates. And tight formations like the Bakken decline very rapidly in the early years. If sufficient new wells are not drilled, the total production rate declines. We have already entered into total production decline in the US.
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Unless you plan to nationalize the US oil industry and steal assets from individuals, price matter a lot.
I thought I read somewhere that an average $60/bbl was a good min. benchmark where the oil companies would be satisfied, maybe even happy. These wild swings are savage.
A big factor in the cost of production is the cost of getting it to market.
I remember reading somewhere that West Texas oil took a $20 a barrel hit due to the lack of pipeline space, so much of it has to be delivered by (I assume) rail cars and trucks.
While the pipeline network tying Bakken into the rest of the country continues to develop, that must still be a factor in determining the break-even cost of its oil. Anything that makes it harder to get a pipeline built raises the costs of the oil. My understanding is that much of this oil is still delivered by rail car.
There is not a single magic number, as is the point of this article.
Higher prices will have more drilling and production growth.
Lower prices will have less drilling, less fields economic to produce, and likes (as now) declines in production (US).
Boom and bust is the history of the industry. It is not for the faint of heart. It is also why the upside has great rewards.
Yes, location is certainly a factor of price.
WTI grade oil is worth far less in Midland or Williston compared to Houston or Chicago.
My understanding is that much of this oil is still delivered by rail car......PSSSST!...WARREN BUFFET. Keep it quiet, OK?
Not necessarily. You still have more “sunk costs” to go with personell, equipment, transportation etc.
I’ve read the average Breakeven cost in the Bakken for a well already in production is $15.
But average does not mean typical. An old well producing more water than oil has a far higher breakeven than a new well will little water and a high oil flow rate.
If we buy any oil at all from the ME, it would be from Israel (and their new discoveries). Their need for military aid would also be significantly reduced.
If a US company wants to continue to do business in the Persian Gulf, it's their choice. But, they won't have US protection for their interests.
There will still be other countries that will buy from them, but that's their choice, as well.
However, it won't be long before the entire region descends into anarchy and feudalism -- and production will drop off like it has done in Venezuela.
But, we have the reserves we can develop to fill the gap. Yes, it will be at a higher price, but we won't be funding terrorism against US interests.
Israel is an oil importer, not an exporter.
The fields I’m familiar with typically produce 90% water to 10% oil. I’m always surprised at fields that actually produce oil. :)
... but but we were told we have to care about the ME economy or it will become unstable and Russia will step in... nevermind...
There is talk of exporting oil, which we already do some some degree, right? ...to whom?
And I think you told me once that American refineries can only handle light oil, not heavy oil? ...thus the imports?
It's all confusing, how much and what type oil the US produces.
Record low fuel prices.
Yet, we still are importing and exporting oil?
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