Posted on 05/11/2015 5:29:18 AM PDT by thackney
When Houston’s Swift Energy Co. reported first-quarter results Thursday, it offered a glimpse at the level of cost-cutting oil and gas companies are making in the Eagle Ford Shale.
“We are seeing cost concessions in some cases greater than we originally budgeted,” said Terry Swift, president and CEO, said in a call with analysts.
Swift’s average drilling cost this year is $2.6 million per well, down from $3.2 million last year. And its most recent Eagle Ford well was drilled for $2.2 million.
Its lease operating costs dropped 16 percent from the previous quarter.
Swift on Thursday reported its first-quarter results. Its Eagle Ford production increased 19 percent over the previous year.
But lower commodity prices have taken a toll on all oil and gas companies this year. Swift had a net loss for the first quarter of $36.5 million. It also had a write down of $502.6 million of its oil and gas properties.
Swift gave an insightful breakdown of what it costs the company to produce oil and get it to market, as well as the level of cost-cutting companies have been making:
- The company said it cost $8.48 per barrel of oil to operate its leases in the first quarter of last year. In the first quarter of this year, that dropped to $6.21 per barrel as the company cut costs — “primarily field head count, corporate overhead allocations, and repair and maintenance costs, along with compression and produced water disposal costs.”
- Transportation and processing: $1.74 per barrel of oil, down from $1.80.
- General and administrative expenses of $4.10 per barrel during the first quarter of 2015. That was up $3.57 per barrel from the same months the year before due to “expenses related to a corporate reduction in force” – in other words, layoffs at headquarters.
- Interest expense of $5.95 per barrel in the first quarter, down from $6.27 per barrel for the same period in 2014, because of production increases.
- Severance and ad valorem taxes were 7.6 percent of oil and gas revenues in the first quarter of 2015, compared to 6.2 percent the year before, due to lower commodity prices.
“We have aggressively sought to reduce our drilling and completion costs for 2015,” said Bob Banks, executive vice president and chief operating officer at Swift, in a call with analysts. “We have negotiated lower prices for goods and services, including chemicals, trucking, labor rates, saltwater disposal costs, and some of the examples of the cost reductions on our lease operating expenses include both labor and repairs and maintenance costs, each by over $200,000 a month from 2014 levels. Additionally, compression costs are down over $150,000 a month compared to 2014 levels.”
Swift officials said they think this lower-cost environment could be here for some time.
In all, Swift realized an average price of $21.99 per barrel of oil equivalent during the quarter, down from $50.62 in the first quarter of 2014.
The company has one drilling rig in South Texas now. It drilled four wells in Webb County in the first quarter and one in McMullen County.
that high interest cost shows a lot of debt.
they gotta be running scared should these lower prices remain around with the present negative cash flow they are experiencing.
If this means the Saudis will have to drive oil down to $22 a barrel to break the back of new oil, then I think the Saudis will change their minds.
$50 PPB oil is here to stay.
No more sending our young lads to fight the Muzzies, let them drink their oil we don’t need it.
Lets sell oil to EU and tell Putin to stick it.
Ah, lets keep our oil to ourselves.
But Obama and the news media say that oil is causing global warming and must be replaced with “green” energy. They say this when ice is growing in the north Pole and at the South Pole (Antarctica) and when the world is getting cooler.
That would angry the globalist here and elsewhere that think we have to openly run amok in the world markets to protect capitalism and diversify our market.
Ever notice that gloBULList have the same mind set as a rapist? “Just shut up and take bitch”.
I think so too.
There's an even better story in the natural gas markets. While crude has been rising recently, nat gas has remained well below $3 per mmbtu, $2.86 today. We see the price at the pump, quantified in each purchase, but the effect of low natural gas is hidden in the prices of nearly everything we buy. Natural gas manifests now a steeper price decline than crude, and it didn't rise in the recent bounce.
Plastics, packaging, manufacturing of the American variety, transportation, electricity, chemicals and many other goods benefit from lowered nat gas pricing, in a big way.
At best, it may at this point in time be only holding inflation at bay, but the benefits of lower nat gas prices come over a longer period of time than lower crude, so the best is yet to be, IMHO.
It’s only “our” oil to those who own it. If any of the Eagle Ford oil belongs to you, then by all means you should be free to not sell it to the highest bidder.
Well we can slap an export tariff on it. It isn’t “mine” but the border means something. They can sell it freely inside the USA, when you cross the border I HAVE A SAY.
“In all, Swift realized an average price of $21.99 per barrel of oil equivalent during the quarter, down from $50.62 in the first quarter of 2014.”
I am confused. So, if this is what they realized, what is their breakeven point? What does Eagle Ford oil need to be for them to now break even?
Oil being a fairly fungible commodity, government attempts to limit the profitability of the domestic industry don't injure the buyer nearly so much as they injure the domestic industry.
There is no single magic number. Parts of the play cost more to produce, parts cost less.
Ever dollar it climbs and stays, makes a little more economic to produce.
When the mass media give a single number, they are talking about the average. And the average changes. If the price of oil is high, they include more expensive portions. If the price of oil is low, they don’t go after those expensive areas and the average breakeven cost goes down.
Having the government selecting winners and losers is always a bad deal for the consumer in the long run.
I am okay with tariffs, if they are equally applied. Don’t ask politicians to uniquely punish one industry and not the others.
once again - great insight. I wonder how many barrels they produce each day?
I was looking for what the average is now.
Any idea?
Keep in mind, this year average is less than last year.
Average is just what they are going after now. If they only go after the cheaper stuff, the average is lower. What I’m trying to say that number is pretty worthless, it doesn’t mean what most people believe it does.
And the Eagle Ford has bigger variations than most with the oil, wet gas, dry gas variations.
All that said:
Eagle Ford oil side has been described as breakeven as:
$43, 55, 65, 60~80, 80~90.
http://www.reuters.com/article/2014/10/23/idUSL3N0SH5N220141023
Eagle Ford is about 1 million barrels a day.
http://www.rrc.state.tx.us/media/7078/eaglefordproduction_oil_perday.pdf
To get a better idea of what I am trying to convey, look at page 7 of the following link for the breakeven prices for the Bakken play, listed by county.
https://www.dmr.nd.gov/oilgas/presentations/FullHouseAppropriations010815.pdf
They range from $29 to $77 per barrel.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.