Oct 23 A sharp decline in oil prices over the
past four months has called into question the sustainability of
North American shale production.
Global benchmark Brent crude has fallen about 25
percent since June due to oversupply, weakening demand and
indications that key oil producers, particularly Saudi Arabia,
have limited appetite to intervene in prices.
Bernstein Research said this week that about a third of U.S.
shale production would be uneconomical if oil prices were to
fall to $80 per barrel.
Brent was trading at $86.40 and U.S. crude at $81.55
at 1735 GMT on Thursday.
Below are several analysts' estimates of the breakeven oil
price for various shale fields in North America.
KLR GROUP (Oct. 22)
"The U.S. E&P industry needs (more than) $90 NYMEX, about
$100 Brent, oil prices to maintain the current oil rig count of
1,500-1,600 rigs, which is intrinsic to our U.S. oil production
outlook. A comparable NYMEX oil price is needed to maintain the
projected pace of Canadian oil sands development."
MORNINGSTAR INC (Oct. 21)
"Our analysis suggests that the average breakeven for our
E&P coverage is $70 per barrel, well below our $90 per barrel
marginal cost and below today's $80 per barrel WTI (West Texas
Intermediate) oil price."
"Our estimate of the marginal cost for oil remains $90 per
barrel WTI and $100 per barrel Brent."
BERNSTEIN RESEARCH (Oct. 20)
"We estimate that about a third of U.S. shale oil production
is uneconomic at $80 per barrel WTI. We disagree with other
estimates, including those cited by the IEA, which suggest the
vast majority of shale oil production is robust at such prices.
Our expectation is that (the) oil price will revert back to a
level where a much smaller portion of production is uneconomic."
ROBERT W. BAIRD EQUITY RESEARCH (Oct. 14)
"We estimate $73 as the weighted average breakeven point for
SHALE FIELD BREAKEVEN OIL
PRICE PER BARREL
Eagle Ford Liquids Rich $53
Wolfcamp North Midland $57
Bakken Core $61
Niobrara Extension $64
Eagle Ford Oil $65
Niobrara Core $68
Wolfcamp South Midland $75
Bakken Non Core $75
Texas Panhandle $81
Mississippi Lime $84
Barnett Combo $93
MORGAN STANLEY (Oct. 14)
"U.S. oil shale is moving down the cost curve and adding to
the global oil production mix as operators continue to improve
drilling and fracturing performance - essentially getting more
from shale wells for less capex."
"U.S. shale is now no longer the marginal barrel, with cash
breakevens in some major U.S. shale plays having dropped by up
to $30 per barrel since 2012."
SHALE BREAKEVEN OIL
PRICE PER BARREL
US EAGLEFORD $60-80
UBS INVESTMENT RESEARCH (Oct. 14)
BASIN BREAKEVEN OIL
EAGLE FORD $43.34
MIDLAND NORTH WOLFCAMP $52.56
MIDLAND SOUTH WOLFCAMP $62.74
DELAWARE BONE SPRING $64.67
DELAWARE WOLFCAMP $74.86
MISSISSIPIAN LIME $85.54
DELAWARE AVALON $85.87
ANADARKO BASIN $88.83
STIFEL, NICOLAUS & CO INC (Oct. 13)
"The weaker portions of several U.S. shale plays, or newer
areas that are in the delineation phase and have not benefited
from development drilling, require oil prices above $80 per
barrel in order to generate a pretax internal rate of return of
20 percent, which is a reasonable threshold for most companies."
WELLS FARGO SECURITIES (Oct. 13)
"If the crude oil market believes a price-driven market
share war is under way and 2015 demand growth will be
meaningfully lower than prior expectations, then our updated
view is that U.S. onshore 2015 E&P budgets would need to be
trimmed so as to moderate production growth relative to lower
"In such an environment we estimate that WTI prices of
$85-90 per barrel versus our current estimate of $96 per barrel
would be required."
GOLDMAN SACHS (Oct. 10)
BASINS BREAKEVEN OIL
PRICE PER BARREL
BAKKEN CORE, $70-$80
EAGLE FORD OIL & $80-$90
BAKKEN NON-CORE $90-$110
CREDIT SUISSE (Sept. 30)
BASIN BREAKEVEN OIL PRICE
Marcellus Shale - SW liquids rich $24.23
Marcellus Shale - Super Rich $25.63
Utica - Wet gas $32.39
Mississippian Horizontal - East $42.15
Utica - Liquids Rich $44.04
Eagle Ford - Liquids Rich $46.05
Niobrara - Wattenberg $46.10
Wolfcamp - N. Midland (Horizontal) $53.92
Eagle Ford - Oil Window $55.29
Wolfcamp - S. Midland (Horizontal) $61.57
Mississippian Horizontal - West $64.05
Bakken Shale $64.74
Wolfcamp - N. Delaware (Horizontal) $68.54
Uinta - Green River $68.77
Uinta - Wasatch (H) $72.15
Granite Wash - Liquids Rich $73.10
Uinta - Wasatch (V) $74.95
Barnett Shale - Southern Liquids $84.45
(Reporting by Swetha Gopinath,; Sneha Banerjee and Manya
Venkatesh in Bangalore)