October 2016 

Shale breakeven prices have dropped ~50%, but not for long

NAS Solutions 

Product Webinar

Speaker: Bielenis Villanueva Triana
NAS Team Leader 

Request Recording

NASReport Highlights

Content Webinar

Speaker: Sona Mlada, 
Senior Analyst

Request Recording

Article: Permian Midland


Article: Mixed evidence from shale well decline rates: more stable initial output, but more aggressive terminal decline


RYSTAD ENERGY PRODUCT HIGHLIGHTS

NASWellCube: Database with daily updates of official US & CA well data, covering over 220,000 horizontal and vertical fracked wells. It contains detailed analysis of well curves, pad drilling, re-frack trends and well economics to provide a complete well by well overview of the North American shale industry. 

NASReport: Consists of monthly insights on industry trends, forecasts (short and medium term) for both production and spending. Detailed analysis of key North American shale plays and operators and a deep-dive into well data for drilling, completion and productivity trends. Delivered electronically on a monthly basis and a hard copy version every year of the full year edition. 

NASCube: Database with monthly updates of the US and Canada shale gas and tight oil data for 400+ companies and 90+ shale plays and sub-plays with NPV estimations and long term forecasts. Data derives from Rystad Energy’s global upstream database UCube, with additional information regarding acreage and well data.

NASMapsGeological data, company acreage and well location maps for the main North American shale plays. Maps are available as pdf-layers and GIS files with embedded information for import to GIS software.


CONTACT
NAS@rystadenergy.com 


Newsletter Subscription: If you are not yet a subscriber to this email or you would like to receive one of our other industry newsletters, please fill out the Newsletter Subscription Form 

Since the oil price started to drop, North America shale producers have reduced activity levels. At the same time, the main focus for companies has been to reduce the costs per well and increase the well performances.

By following the cost and the production for every US shale well, Rystad Energy is able calculate how the breakeven prices have improved because of these changes.

The first figure shows the development of the average wellhead breakeven price for the key shale plays in the US. For a play such as Bakken, average breakeven prices have dropped from around 67 USD/bbl in 2013 to 29 USD/bbl in 2016. This represents a reduction of 55% over just three years. The question then becomes how these operators managed to achieve such a reduction, and how much of the reduction is sustainable in the future.

To answer these questions, Rystad Energy created a case study of Whiting Petroleum in Bakken. Bakken is one of largest and most competitive shale plays in the US, and Whiting is the largest operator within this play. The company’s average breakeven price has dropped from around 66 to 29 USD over the last two years. To understand this reduction, the following key drivers have been studied:

In terms of high grading, Figure 2 shows the distribution of wells between the core and non-core parts of the play for different spud years. This shows that Whiting has shifted its focus to the core part of the play. Whiting drilled 30% of its wells in the core region in 2014, compared to over 80% so far in 2016. 

By studying high grading and the other drivers, Figure 3 shows the breakdown of the reduction in the breakeven prices. This shows that improved well performance is the largest contributor to the lower breakeven prices experienced by Whiting since 2014. Out of the total drop of 37 USD/bbl in breakeven prices, about 16 USD/bbl is due to structural factors. The remaining is caused by what Rystad Energy considers as cyclical costs. If the unit prices for well costs, the LOE activity and unit costs come back, it could represent an increase in the breakeven price of 40% for Whiting in Bakken. In the medium to long term, most companies will need to start drilling outside the core areas; hence, there will be a reversal of the high grading effect. . If all the cyclical effects are reverted, the breakeven might grow by 65% over the next few years in general for US shale plays.

 ---

Join Rystad Energy at Rio Oil and Gas 2016. Pavilion 3, Stand Q9. Rio de Janeiro, Brazil, October 24-27. Industry presentations, including a discussion about Vaca Muerta in South America, and one on one meetings to be held at the booth. To book a meeting with one of the team, contact our Rio office.