The oil price is falling but so is the breakeven price for shale
Rystad Energy now offers a wide product range of North American shale products (NASAnalysis) as an advancement and extension to the previous North American Shale Quarterly report published until 2012.

NASReport: Up-to-date play coverage incorporating prospectivity maps, company-specific data, acreage and reserves, production forecasts of plays up to 2025 as well as infrastructure and economics of plays.

NASCube: Database that provides US and Canada shale gas and tight oil plays data for more than 200 companies and 30 plays. Data derives from Rystad Energy’s global and complete upstream database UCube, in addition to well data.

NASMaps: Geological, company acreage and well location maps. Maps are available as pdf-layers and GIS files with embedded information for import to GIS software.

NASWellData: Listing of official well data for key plays in addition to estimates for average well curves for selected acreages, NOW AVAILABLE in CUBE BROWSER.


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Much speculation and analysis is being published on the volatility of the oil price, the oil price floor and the impact it has on shale development in North America. A significant focus has been given to the breakeven price for different shale plays to predict which plays will be most affected with the currently falling oil price. Rystad Energy estimates an average WTI breakeven oil price of $58/bbl for the main shale plays in the US for the given selection (Figure 1). However, not all companies are exposed to the same acreage quality within the same shale play. Hence, when analyzing average breakeven prices per play it is important to remember that companies in the core areas of a play and first movers i.e. EOG in Eagle Ford will have a significantly lower breakeven price than the average for the play. Figure 1 shows that at WTI oil prices below $50/bbl only the core areas of the Eagle Ford and Niobrara will remain economical.

When looking at the bigger picture and comparing breakeven prices among global developments, Rystad Energy estimates a Brent breakeven oil price of $65/bbl at a $90/bbl scenario for shale development (Figure 2). This Brent breakeven price includes the entire lifecycle of an average shale well and such value is among the lowest when compared to other global developments. Only legacy onshore developments have a lower breakeven oil price. Shale and deepwater have a similar Brent breakeven price. Consequently, shale competes with offshore developments when it comes to breakeven prices; however, there are other parameters to take into account such as IRR and payback time for which shale offers significantly better metrics than other developments.

North American Shale has the largest IRR among other common global oil developments while it also has the shortest payback time. The latter has been the strongest trigger for the steep shale activity increase of recent years and the emergence of small independent players. The latter needed just enough up-front investment in order to obtain an economical return in a timely manner. These companies will most likely either continue developing shale if they are in the core areas of a play or significantly drop activity in a low oil price reality. However, for bigger players i.e. majors and large independents, the flexibility of shale activity (short payback time) is driving them towards non-shale developments for the allocation of their 2015 budget in the low oil price reality. This is based on the belief that shale activity can be easily turned on and off according to oil demand and that breakeven price for shale is constant, as it normally does for other developments. However, recent analysis shows that for most plays breakeven prices for shale are falling every year (Figure 3).

A yearly reduction of the shale breakeven price in the main plays is a result of both a reduction on well cost  and an increase in EUR per well. A reduction in well cost (Figure 4) is due to shorter drilling time (increase pad drilling) and shorter completion time (increased use of zipper fracs). An increase in EUR has been observed when estimating it at 30 years with wells decreasing initial decline thanks to better well placement and advances in known completion techniques i.e. modified zipper fracs.

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy advisory and research products for E&P and oil service companies, investors and governments. We are headquartered in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), for Africa as well as South East Asia.