Posted on 09/30/2015 5:46:33 AM PDT by thackney
For the top U.S. shale plays that once seemed immune to the downturn, persistently low oil prices are starting to take their toll.
The lingering crude slump is expected to drive down production next year in the nation’s premiere oil patches — West Texas’ Permian Basin, South Texas’ Eagle Ford and North Dakota’s Bakken shale — as operators spend less to stay within cash flow, according to a report by investment banking firm Tudor Pickering Holt & Co.
With oil hovering around $50 per barrel, or less than half the price it fetched last year, output from the so-called Big Three basins could fall by about 400,000 barrels per day next year compared to 2015, TPH said.
Under that scenario, Permian output will tumble 7 percent, Eagle Ford production could fall about 13 percent and Bakken production would slip by about 6 percent.
Any further plunge in oil prices could drive down the rig count even more as oil companies pare back and figure out more efficient ways to drill, allowing them to use fewer rigs to wrangle as much oil and gas from the ground, the analysis found. In the oil-rich Permian, which has been seen as more resilient to crude slump than other more risky plays, the horizontal rig count has fallen more than 50 percent from its 2014 peak. If prices remain below $50 per barrel, operators would likely idle an additional 50 percent of the horizontal rigs in the region, according to the analysis.
However, the production declines may not be as steep as analysts predict in the Permian Basin if exploration and production companies outspend their cash flow as they historically have in recent years. Companies operating in the Permian tend to be in the best position to access cash from capital markets and that fundraising ability, coupled with the basin’s strong base of legacy production, could help bolster output while operators throttle back activity in the Bakken, Eagle Ford and elsewhere, the analysis found.
Still, the TPH analysis said that for operators to produce as much oil as the did this year from the Permian and Bakken, domestic benchmark crude needs to rise to $60 a barrel or higher. In the Eagle Ford, operators need a price of $65 to sustain current production levels, the analysis found.
Some operators have banked on being able to bolster production numbers by turning on the taps at a vast array of wells that have been drilled but not completed. In the Bakken alone, exploration and production companies have stores of crude locked away in 914 wells that have been drilled but not turned on, TPH said. Although some companies had expected to tackle those wells in the second half this year to offset output declines, they may be reconsidering those decisions amid the persistently weak oil price environment, the analysis said.
“Conversations in the last few weeks suggest that activity may be halted to some degree,” the TPH researchers said.
Well, then maybe we need some “inexplicable” explosions in the oil fields of Isistan and the land of the Soddomite Kings.
Kill two birds with one stone.
Likely a gentle slope down rather than anything dramatic.
Operators are concentrating only on those areas considered core in which $50 oil remains attractive, and suppliers are dong everything in their power to keep their equipment busy as they ride out this dip.
“have stores of crude locked away in 914 wells that have been drilled but not turned on...”
So much for ‘peak oil’.
“That’s a huge increase in costs, way more than it should be..?
“
Yes, costs have dramatically risen, alongside the amount of oil production which made US the world’s biggest producer.
Many of the people you are referring to chose to believe nirvana of high prices lasts forever, while those of us around awhile know there are always cycles.
Down cycles like we are in now root out those not smart enough to plan accordingly for them.
The current stock market is the same, as some in it now believe it will never go down, while the smarter ones know better.
Since 1986, the world has consumed about 840 Billion Barrels of oil. That oil is gone.
The wells from that time all produce less oil year after year. It takes more money to add enhanced recovery methods, to find new fields, to go deeper, to go farther offshore, to add horizontal laterals, to add multi-stage hydraulic fracturing.
All while the world demand for oil continues to grow. In 1986 the world used 61.5 Million BPD. Today we use over 95 Million BPD.
Oil company profit margins have jumped. In those 3 decades it has gotten a lot more expensive both to find as well as produce oil. Most of the cheap easy stuff is gone.
Oil company profit margins NOT have jumped.
sigh, a stupid left out word that changes the entire meaning of the post...
“but several are companies that have been around a while.”
Like to know who on this list you are referring to.
Some big ones like Chesapeake, survived by a shell game cooked up by its snake-oil salesman founder Aubrey McClendon, who is no longer around, so shareholders are holding the bag for past follies.
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