Go Back   This Blue Marble, a Global Current Events Discussion Forum > Main Floor > Economy > Investing for Peak Oil

Investing for Peak Oil Surviving Peak Oil financially is a problem we will all confront sooner or later.

Reply
 
Thread Tools Search this Thread Display Modes
Old 02-06-2016, 12:56 AM   #1
Sonny
Star Witness
 
Sonny's Avatar
 
Join Date: Aug 2008
Location: the safe house
Posts: 5,656
Blog Entries: 1
Thanks: 1,718
Thanked 695 Times in 461 Posts
Default Shale gas, oil extraction costs vary wildly; some drillers profit with crude below $30 a barrel

Shale gas, oil extraction costs vary wildly; some drillers profit with crude below $30 a barrel

Texas has a message for $30 crude doomsayers: Bring it on.

A handful of shale patches in the state, which would be the world's sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence.

In DeWitt County, which produced more than 100,000 barrels a day in November from the Eagle Ford formation, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year.

Drive 200 miles southwest to Dimmit County, and drillers need $58 oil. The wide range of break-evens, a term for the price at which a well goes from unprofitable to profitable, illustrates one reason why shale production from exploration and production companies has been more resilient than expected, filling storage tanks to levels not seen in 85 years.

“It may be harder to kill many U.S. E&Ps than analysts originally thought,” Bloomberg Intelligence analyst William Foiles said in the report. “The wide range of break-evens undermines efforts to come up with a single threshold for U.S. shale producers.”

Since oil started falling in June 2014, U.S. shale drillers have survived by cutting costs, experimenting with new techniques and technology, and boosting output to keep their wells competitive.

West Texas Intermediate crude settled at $31.72 a barrel Thursday on the New York Mercantile Exchange.

Still, the big picture is not pretty. Two out of every three drilling rigs in the country have been idled, and scores of roughnecks who worked them have been laid off. Law firm Haynes and Boone said 42 companies filed for bankruptcy as of Jan. 6.

On the other hand, U.S. crude output last week was 9.2 million barrels, the highest January level since 1971 and just 5 percent below last year's peak.

It's easier to survive low prices in some places than in others. Bloomberg Intelligence analyzed everything from average output per well to the level of local school taxes to calculate break-even costs to drill in rock formations across Texas' two big shale regions, the Eagle Ford in south Texas and the Permian Basin.

Nine areas had break-even costs at $30 or below. Those include some of the biggest oil-producing counties in Texas, such as DeWitt, Midland, Martin and Reeves, with combined output of 430,000 barrels a day in November, according to the Texas Railroad Commission.

Oil prices can be even lower to justify completing wells that have been drilled but haven't yet been hydraulically fractured, or fracked, the last step before production begins. There are more than 4,000 of those wells in the United States.

It makes economic sense to complete wells in 18 areas in the Permian and Eagle Ford at sub-$30 oil. In Reeves County in the Permian, oil prices above $14 justify fracking an already-drilled well.

Even within counties, break-even costs can vary widely depending on which company is drilling and the richness of the rocks they're tapping, said Kathryn Downey Miller, a principal at Lakewood, Colo.-based energy research firm BTU Analytics. In DeWitt, for example, about 45 percent of wells drilled in 2014 would have been profitable with oil below $20. Five percent would need $70 oil.

“You see a great amount of variability between operators, even in a small geographic area like a county,” she said by phone.

That variability makes it difficult to tell when companies will give up drilling. Companies reduced the number of new wells in Dimmit County to 65 in the third quarter last year from 226 in the first quarter, while boosting activity in DeWitt County by 77 percent.

For shale drillers that have been battered during the price downturn, there may be a silver lining. Those that can maintain the cost reductions and productivity improvements when prices eventually rise may be stronger than before the crash.

“The good news is we're primed and ready for when we need to see a return to activity in North America,” Miller said. “This lower-price environment is making companies defer big oil projects, so there will be an opportunity for U.S. shale producers to contribute to production growth, and they'll be better able to compete than they've ever been.”

http://triblive.com/business/headlin...il-shale-texas

~
Sonny is offline   Reply With Quote
Old 02-08-2016, 09:35 AM   #3
Exodia
Khan of the Golden Horde
 
Exodia's Avatar
 
Join Date: Aug 2008
Location: Southeast PA
Posts: 10,981
Thanks: 2,440
Thanked 4,415 Times in 2,022 Posts
When you have big tech companies like GE, Nalco, Haliburton etc working on solutions in the industry, they will drive innovative solutions to push the break-even point lower and lower.
__________________
"Now, mark my words. So long as we are a young and virtuous people, this instrument will bind us together in mutual interests, mutual welfare, and mutual happiness. But when we become old and corrupt, it will bind us no longer" - Alexander Hamilton about the US Constitution.
Exodia is offline   Reply With Quote
Reply

Tags
$30, barrel, costs, crude, drillers, extraction, gas, oil, profit, shale, vary, wildly

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 03:07 PM.


Powered by vBulletin®
Copyright © Jelsoft Enterprises Ltd.