Another view on break-even prices from the Globe this morning:
excerpt:
The three key U.S. shale oil fields are the Bakken in North Dakota and the Eagle Ford and Permian in Texas. Scotiabank economist Patricia Mohr has calculated that the average break-even price in the Bakken and Permian is $69 and $68, respectively, but with individual wells ranging from $54 to $82 a barrel.
But even if prices are above the break-even mark, companies will have to cut their drilling operations as their cash flow plummets from heady levels this year, and financing from banks and capital markets gets tighter.
Enerplus Corp., which pumped an average 22,400 b/d (including associated natural gas production) in the Bakken in the third quarter, expects to pare its 2015 budget by an unspecified amount from about $830-million (Canadian) this year. The Calgary-based company’s break-even costs are $50 (U.S.) in the best areas of the North Dakota play, and a portion of its overall production for next year is hedged at $93 oil, chief executive officer Ian Dundas said in a recent interview.
“We’re not planning on pushing our balance sheet,” he said. “Whatever our growth aspirations would have been in a $95 oil world, they are lower in a $70 oil world. There’s just less money to go around.”
To be sure, not all shale plays are created equal. Even within a zone, analysts say break-even economics can vary from one well to the next, depending on geology and other factors. Drilling in so-called “sweet spots” of the Bakken and the Eagle Ford in Texas, or the Cardium and Duvernay in Alberta, still makes sense even at much lower oil prices, said Callan McMahon, a senior analyst with energy consultancy Wood Mackenzie Group.
A sustained drop in oil prices threatens to weed out the weaker players, pressuring high-cost producers and setting the stage for production cuts and consolidation.
“The guys that had weak balance sheets at $100 oil are in trouble now and will probably not survive,” said Scott Saxberg, chief executive officer of Crescent Point Energy Corp., which pumps crude from the portion of the Bakken that spills over the Canadian border. He was speaking about the industry as a whole, rather than just shale oil producers.
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