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HOW MANY SHALE OIL PLAYS MAKE MONEY AT $37 PER BARREL?
Burning Platform ^ | 18 March 2015

Posted on 03/24/2015 5:56:02 PM PDT by Lorianne

I’m tossing you a softball. Now think carefully. The choices are:

A. Zero

B. Zero

C. Zero

D. Zero

I know Americans are math challenged and need a calculator to subtract 10 from 20, but I think even a CNBC bimbo or Princeton economic professor could get this one right.

Last year there was much banter from the Wall Street shysters and Bakkan shale oil experts about the true breakeven price for shale oil not being $80 (which is the truth) but actually being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies.

Well, we are now six months further down the line and Bakkan shale oil this morning is selling for $37 per barrel. Where are the babbling baboons of bullshit with storylines of shale oil breakeven prices of $30? I guess even corrupt lying scum can’t work up the gumption to try and convince the ignorant masses of that doozy.

Think about this for a minute. What business in their right mind would start a project that is guaranteed to lose $43 per barrel produced? How long will these small shale oil companies with gobs of junk bond debt last at these prices? The answer is easy. Not long. The bankruptcies have begun. The rig counts are collapsing at the fastest pace in history. And the number of layoffs is increasing exponentially. It’s like watching a devastating car crash in slow motion. And it has only just begun.


TOPICS: Business/Economy
KEYWORDS: bakken; eagleford; energy; oil; petroleum
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To: Lorianne

As others have noted, everything involved in the cost of production is dynamic, constantly changing. The people in the business know what they have to have to drill a well in a known field versus a new field, and to produce a well that is already producing.

As prices fall, they start finding ways to cut costs or they pull back until costs stabilize. This is normal. This always happens in the oil business.

One of the big factors in cutting costs is a pipeline. While the government has done everything it can to stop the famous pipeline, they have been busy building multiple pipelines under the radar to get their oil out. Trucking it out adds about $20 to a barrel but a pipeline cuts that way down. While no one was paying attention they have already built several.


21 posted on 03/24/2015 7:51:19 PM PDT by marron
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To: Lorianne

Interesting screed but irrelevant to the consumer of oil/gas. The question to ask is what is the break even point of the well. Break even in this case of a well would sales - variable (or direct) = $0. Once a well is producing what are the costs to keep it producing. Maybe around $15? Fracking new wells is viable at $60. These are anecdotal numbers but fracking new wells stops below $60 but old wells keep going to around $15.


22 posted on 03/24/2015 7:56:00 PM PDT by FreedomNotSafety
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To: FreedomNotSafety

You also have to factor in the transportation costs associated with getting it to a refiner. Put it into a pipeline and you can save some money, but of you have to transport it by rail it is going to cost more.


23 posted on 03/24/2015 8:04:34 PM PDT by Sawdring
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To: hosepipe

3/6 of my wife’s current shale wells are producing. The other three are being actively drilled and are past the point of shutting down. At this point, the only money play is to get them producing.

So, the answer for us, royalty-wise?

6/6.


24 posted on 03/24/2015 8:32:54 PM PDT by ziravan (Choose Sides.)
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To: Lorianne

[[HOW MANY SHALE OIL PLAYS MAKE MONEY AT $37 PER BARREL?]]

Alright, then make it 38$ a barrel and be done with it


25 posted on 03/24/2015 9:09:35 PM PDT by Bob434
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To: Lorianne
Most important thing to me is my living break-even-cost of a gallon of gas at the pump: $0.19.

If I can survive the massive losses I've sustained since 1946, so, for the short term, can a few oil producers...{:-)

26 posted on 03/24/2015 10:48:47 PM PDT by SuperLuminal (Where is another agitator for republicanism like Sam Adams when we need him?)
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To: Steely Tom

good stuff


27 posted on 03/25/2015 1:32:35 AM PDT by wiggen (#JeSuisCharlie)
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To: glasseye

Turkey feathers are good.....


28 posted on 03/25/2015 1:47:17 AM PDT by Osage Orange (I have strong feelings about gun control. If there's a gun around, I want to be controlling it.)
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To: SuperLuminal

HAHAHAHAHAHAAA!!!!


29 posted on 03/25/2015 1:51:00 AM PDT by Osage Orange (I have strong feelings about gun control. If there's a gun around, I want to be controlling it.)
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To: Lorianne; RitaOK; rwh; Steely Tom; crusty old prospector

At least 4 counties, the main areas for new oil wells in the Bakken, were having a breakeven cost at or below $37.

Dunn $29
McKenzie $30
Williams $36
Stark $37

https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf
Page 7

That was to drill a new well. For wells already in operations producing oil, the average is $15 a barrel before they operating cost would match selling price.


30 posted on 03/25/2015 4:12:11 AM PDT by thackney (life is fragile, handle with prayer)
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To: Zeneta
What I'm discovering however, is there seems to be a number of ways these analysts display the "costs".

Also these costs are quite variable. And you will find differenct analysts will come up with significantly different cost for the same play.

Cost are dropping at this time as well, as the most efficient rigs are getting moved to the most producing areas while the others are set aside for laters. Also the cost of steel, copper, equipment, labor is all dropping in this market as well.

31 posted on 03/25/2015 4:14:34 AM PDT by thackney (life is fragile, handle with prayer)
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To: Steely Tom

btt


32 posted on 03/25/2015 5:26:27 AM PDT by 2001convSVT (Going Galt as fast as I can.)
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To: thackney

There are counties within all of the plays that are better than others that can make money at these prices but not in the entire play. An example would be Gonzales and Karnes Counties in the Eagle Ford versus Webb or LaSalle, etc.


33 posted on 03/25/2015 6:46:24 AM PDT by crusty old prospector
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To: crusty old prospector

Yep, most any play of decent size is going to have sweet spots noticeably cheaper to produce than the average.

Some folks outside the industry may not immediately recongize the well may not be any cheaper, but if the production rate is greatly higher, the cost per barrel is significantly less.


34 posted on 03/25/2015 6:50:57 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

Thank you, thackney. I like learning about this industry as a fascinated observer.


35 posted on 03/25/2015 8:43:32 AM PDT by RitaOK ( VIVA CRISTO REY / Public education is the farm team for more Marxists coming)
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To: Zeneta; kingu

The article linked below is a good example of how varied those cost estimates are.

For example, the Eagle Ford is listed by several different analylist with the breakeven varying from the 40s to 90 a barrel.

FACTBOX-Breakeven oil prices for U.S. shale: analyst estimates
http://www.reuters.com/article/2014/10/23/idUSL3N0SH5N220141023

There are 25 Texas Counties with Eagle Ford wells. The breakeven varies in the different locations just like in the Bakken. There will certainly be parts that are economic to drill at these prices.


36 posted on 03/25/2015 10:43:13 AM PDT by thackney (life is fragile, handle with prayer)
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