We truly live in an Alice in Wonderland world. Ahead of a 2017 debt refinance schedule that is sure to leave many oil companies in ruin, new propaganda is being leaked out to suggest that the Bakken Shale is now profitable as low as $30 per barrel.
Industry insiders, please opine on this.
Ever since WTI collapsed, we were reminded of Bakken breakevens in excess of $75 per barrel, some even higher. Since then, we’ve witnessed companies in the patch hemorrhage cash– due to career ending operating losses. The share prices of those stocks have collapsed, some as much as 100%. But now we are entreated to “new news”, suggesting that everything we knew of the Bakken was a lie. Moreover, and with considerable magic, we are now able to produce crude oil– in a region that is renowned for arduous extraction– quite profitably.
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Love,
Bakken Shale
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I’ll be sure to tell that to all my recently laid off friends
This article from Petroleum Economist is a bit more truthful. Bit of a longer read, but essentially refutes the numbers that are thrown up by the news puppets:
http://www.petroleum-economist.com/Article/3541440/Pain-in-the-Permian.html
(h/t to FT Alphaville)
I don’t know if there is any substantial difference in the cost of extraction in West Texas vs Northwest North Dakota, but I doubt it is more than 20%. If Permian is flat at $45/b, then $30/b in Bakken is nuts.
Unless HAL and SLB are giving away frack jobs for free, $30 per bbl break even is bullshit. Nice try fellas.
On average, it costs $3 million to drill a Bakken shale oil well and about $6 million to frack and complete it.
Hell, I watched CHK dump 3.5 million in OBM alone downhole on one pad…not to mention the tons of chemicals and bar…then p&a the fucker.
So, if it costs $9 million for a productive shale oil well, and assuming break even is at $30 /bbl, you would have to produce 300,000 bbls for break even. That means you would have to produce at flow rates of 1,000 bbls/day for 300 days to recover the costs. That kind of flow rate is unsustainable for that long a duration. You will deplete your well much faster if you tried that. The numbers don’t work.
Good stuff, bushwacker
Oil patch shenanigans.
Preposterous!!
From Dec 2014: “Morse writes that if Brent price move towards $60 — they’re currently around $72 — a “significant” amount of shale production would be challenged.”
http://www.businessinsider.com/citi-breakeven-oil-production-prices-2014-11
Unless production has gotten a lot cheaper in the past year, almost none of the shale plays are profitable under $40.