Category Archives: shale breakeven

NEW EIA Report Shows Evolution of Drillng Costs and Profitability: Trends in U.S. Oil and Natural Gas Upstream Costs

Trends in US Oil and Gas Upstream Costs EIA Mar16

Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg

Oil’s biggest bust since the global recession was good for a few cases of whiplash.Just two months ago, Continental Resources Inc. (CLR), the shale driller founded by billionaire Harold Hamm, budgeted for $80-a-barrel oil and planned to spend $4.6 billion in 2015. Six weeks later, with crude down 29 percent in the interim, Continental cut its 2015 budget to $2.7 billion.Halliburton Co. (HAL), the world’s biggest provider of fracking services to oil companies, announced Dec. 11 that it would dismiss 1,000 workers. Two months earlier, Chairman and Chief Executive Officer Dave Lesar said “our sector will be fine” if oil prices range between $80 and $100 a barrel.Oil PricesThe U.S. shale boom that’s brought the country closer to energy self-sufficiency than at any time since the 1980s will be challenged in 2015 as never before. The benchmark U.S. crude price fell below $50 today for the first time since April 2009. Demand growth is weakening and OPEC, which controls 40 percent of supply, is unwilling to cut output.“The extent and rapidity of the price decline has been a surprise,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consultant in Houston. “They’re facing a new reality.” Photographer: Daniel Acker/BloombergPioneer Drilling Co. operations near Montrose, Pennsylvania, U.S.West Texas Intermediate reached a 2014 peak of $107.73 in June before dropping as low as $49.77 today on the New York Mercantile Exchange. The grade settled at $50.04 a barrel. That’s below the break-even price for 37 of 38 U.S. shale oilfields, according to Bloomberg New Energy Finance.RBC Capital Markets and CIBC World Markets predict prices will remain below $60 for the first three months of 2015. Societe Generale SA’s Michael Wittner forecasts an average of $64.50 in the first quarter and $61.50 in the second.

via Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg.

The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance

The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year. Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.

via The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance.

Saudi Arabia Said to Have No Price Target for Crude Oil for Now – Bloomberg

Saudi Arabia has no target for crude prices and will let the market decide at what level oil should trade for now, according to a person familiar with the nation’s oil policy, who asked not to be identified.The comment echoes those made by Oil Minister Ali Al-Naimi, who said Nov. 26 that the oil market will “stabilize itself.” OPEC decided the next day not to cut its oil-output limits, triggering the biggest one-day drop in futures in more than three years.

via Saudi Arabia Said to Have No Price Target for Crude Oil for Now – Bloomberg.

Shale play producer equities take big hit on Friday November 28

Shale producer equities experienced their largest one day decline as a group on November 28, 2014 in reaction to the OPEC announcement from the previous day stating they would not be curtailing production.  The OPEC announcement resulted in an over 10% decrease in WTI taking oil down to prices not seen since May 2010 and in 2009.

Shale Play Producer Equity Returns Dec 1 2014

Oil Seen in New Era as OPEC Won’t Yield to U.S. Shale – Bloomberg

OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers.The 12-nation Organization of Petroleum Exporting Countries kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer. Yesterday’s decision in Vienna propelled futures to the lowest since 2010, a level that means some shale projects may lose money.“We are entering a new era for oil prices, where the market itself will manage supply, no longer Saudi Arabia and OPEC,” said Mike Wittner, the head of oil research at Societe Generale SA in New York. “It’s huge. This is a signal that they’re throwing in the towel. The markets have changed for many years to come.”

via Oil Seen in New Era as OPEC Won’t Yield to U.S. Shale – Bloomberg.

Pioneer will sell $1B in stocks and pipeline to ride out falling oil prices

Pioneer Natural Resources will continue operating in the Permian Basin despite falling crude oil prices by selling a pipeline in the Eagle Ford Shale, CEO Scott Sheffield said in a conference call.The Irving-based company also plans a $1 billion stock offering.”It allows Pioneer to really prudently develop its assets in what I believe could easily be a $70 to $80 per barrel oil price environment over the next two years,” said Scott Sheffield, CEO of Pioneer.

via Pioneer will sell $1B in stocks, pipeline to ride out falling oil prices – Dallas Business Journal.

U.S. shale driller Continental cashes out hedges

Continental Resources CLR.N, the pioneering U.S. driller that bet big on North Dakota’s Bakken shale patch when its rivals were looking abroad, is once again flying in the face of convention: cashing out some $4 billion worth of hedges in a huge gamble that oil prices will rebound.Late on Tuesday, the company run by Harold Hamm, the Oklahoma wildcatter who once sued OPEC, said it had opted to take profits on more than 31 million barrels worth of U.S. and Brent crude oil hedges for 2015 and 2016, plus as much as 8 million barrels’ worth of outstanding positions over the rest of 2014, netting a $433 million extra profit for the fourth quarter. Based on its third quarter production of about 128,000 barrels per day bpd of crude, its hedges for next year would have covered nearly two-thirds of its oil production.

via Factbox: U.S. shale driller Continental cashes out hedges, sees oil rebound | Reuters.

Oil price slump yet to hit US shale oil production: IEA chief

The vast majority of shale oil in the United States is produced at costs far below the current price of crude, the head of the west’s energy watchdog said, which means U.S. projects can withstand the market slump squeezing other producers.Brent oil stands at around $88 per barrel, down more than 23 percent from the year’s peak above $115 in June, raising concern that some shale oil projects will become un-economic.However Maria van der Hoeven, executive director of the International Energy Agency said that only a tiny minority of shale oil production would be affected by the slump in prices to near-four-year lows.”Some 98 percent of crude oil and condensates from the United States have a breakeven price of below $80 and 82 percent had a breakeven price of $60 or lower,” she told Reuters in an interview on the sidelines of the launch of the Africa Energy Outlook publication.Saudi Arabia is quietly telling oil market participants that Riyadh is comfortable with markedly lower oil prices for an extended period, a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch.Some OPEC members are clamoring for urgent output cuts to push global prices back up above $100 a barrel as they rely heavily on oil exports to balance their budgets, but others like the Saudis are thought to be more relaxed.

via Oil price slump yet to hit US shale oil production: IEA chief | Reuters.

Unsustainable energy | The price of oil has been tumbling. The cost of finding it has not

THIS has been a nerve-racking summer for oil companies. Since June the price of a barrel of Brent crude oil—the global benchmark—has slumped from $115 to $92, a decline of 20% and the lowest for more than two years. That drop is partly thanks to economic weakness. Growth is slowing, particularly in China and the euro zone, reducing oil consumption with it. The International Energy Agency IEA, US Energy Information Administration and OPEC have all recently lowered their forecasts for global oil demand.But there is also a growing glut of supply. America’s output of shale oil has risen by around 4m barrels a day since 2008, cutting American imports from OPEC almost by half. The club of oil exporters itself is in disarray. On October 1st Saudi Arabia, the cartel’s dominant producer, unilaterally and unexpectedly cut its official prices to shore up its global market share. The kingdom had already trimmed them earlier in the northern summer, as had Kuwait and Iraq. Most Middle Eastern OPEC members are now engaged in a price war in Asia.

via Oil companies: Unsustainable energy | The Economist.