Last week we read that the Cline needed $96 oil to break even, oil is now at 94.61, what now?
But first, why are oil prices slumping anyway?
- Production Is Booming. In fact, oil production during the week ending October 18 averaged nearly 7.9 million barrels per day (bpd). That’s the highest U.S. weekly output of crude oil since March 1989.
Low Oil Prices Could Derail US Fracking Boom
....Bryan Sheffield, a third-generation oil wildcatter in Texas’ Permian Basin, knows what he’ll do if crude drops to $80 a barrel: shut down half his drilling rigs and go on a takeover hunt for weaker rivals. He’s among producers who have invested $150 billion in the Permian since 2010, seeking a piece of a shale-oil trove estimated to be valued at as much as $5 trillion. As the money pours in, risks of a bust are mounting; some analysts forecast that crude is heading down to $70 a barrel next year....
Read more at: http://www.midasletter.com/2013/11/low-energy-priv/
$70 barrel oil would help the average American family. I see this as a win-win.
In light of Pioneer's recordbreaking Cline IP numbers, will drilling continue at a stong pace even with sub $96 oil?
With the recent announcement of monster wells and the continued improvements in drilling effeciencies does the $96 figure still stand? Was it ever really the bottom line?
Oil Is Cheap, and May Get Cheaper
.....Prices are nearing the point where they won’t support more drilling. If they go much lower, you could see producers shutting down oil rigs amid a wave of consolidation.
Permian Problem
The Permian Basin of Texas is estimated to contain 50 billion barrels of oil, second only to Saudi Arabia’s Ghawar field. But the varied geology of the region, with as many as eight distinct layers of shale stacked atop each other, makes parts of the Permian expensive to drill.
Exploration and production companies need an average oil price of $96 a barrel just to break even on wells drilled in the Cline Shale and the Northern Mississippian Lime portions of the Permian.....
Then we have some $3.00/gallon gasoline for some time. Don't worry. The oil will still be there when the price comes back.
Further cost reductions. IMO this should lower the price per barrel to break even.
Apache: Fracking Without Fresh Water To Cut Costs
Apache Corp (APA) is reported to have completely eliminated its reliance on freshwater in the South Permian region. When drilling Wolfcamp shale wells, the company is meeting all its water requirements by taking brackish water from the Santa Rosa aquifer, treating it, and recycling frack waste water from its wells. It costs Apache around 29 cents/barrel to treat water, but $2.50/barrel to have it trucked away for safe disposal. Considering millions of gallons are often needed to frack a single well, this is a huge cost reduction on each well drilled and a strong catalyst moving forward....
Read more at: http://www.mineralrightsforum.com/group/cline-shale/forum/topics/what-now
...."Our developing view of the Permian is that it will be a more costly resource to develop than the shale oils of the Eagle Ford and Bakken," said Jefferies analyst Brad Handler. "That may not matter when crude is near $100. But if spot prices trace the futures curve to the mid-$80s, Permian companies may underperform the competition...especially if companies can't translate spectacular press releases into production beats."...
http://www.naturalgasintel.com/articles/96524-horizontal-drilling-changes-the-game-in-permian-basin
Failure to lift U.S. oil export ban may cause big drilling drop, Pioneer CEO says • 5:36 PM
- Failure to allow U.S. crude oil exports could result in a big drop in the U.S. drilling rig market, Pioneer Natural Resources (PXD) CEO Scott Sheffield says.
- The CEO also says a predicted oversupply of crude oil from the sharp and continuing production rise from prolific shale and unconventional basins could also result in a more than $30/bbl price differential for U.S. crudes to Brent.
- The rig count would drop quickly if WTI, which now hovers near $100/bbl, were to drop to $70, Sheffield says; a rig drop might start with marginal plays, but "eventually every play" would shut.