Bakken Viable at $30? | Russell T. Rudy Energy LLC
According to a recent article in “Rigzone”, some parts of the Bakken shale in North Dakota are still viable economically at an oil price of $30 per barrel. This is less than half what was previously thought. By “retreating to the core” of structures higher volume wells are possible, which can spread drilling and completion costs over more barrels. Also, drilling and completion costs have been significantly reduced as contractors lower prices to keep equipment and crews busy in a depressed market.
Lower breakeven costs per well is one reason that U. S. oil production has remained near a 40 year high despite prices at their lowest levels since 2009. This high degree of economic flexibility is especially important for operators in the Bakken because their realized well head price is lower than West Texas Intermediate (WTI) due to additional transportation costs.
William Foiles and Andrew Cosgrove with Bloomberg Intelligence point out that the breakeven for a well can vary greatly according to geology and the efficiency of the drilling contractor. In McKenzie County, North Dakota, the median break-even price is a little over $29 per barrel. This is about a third less than in neighboring Williams County and about half what had previously been calculated for the Bakken as a whole. Consequently, 26 oil rigs were running in McKenzie County last week according to Baker Hughes.
According to Foiles “A single break-even doesn’t actually exist. Rather, what the model indicates is that at a realized oil price of $29.42, half of the wells will generate returns exceeding 10%. This price is considerably lower than the $70 breakeven estimated by industry watchers at the start of the oil price slump.”
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/140083/Oil .
