Forum: US unconventional plays still profitable at $80/bbl oil or less

The US currently dominates global upstream capital spending, and producers in many unconventional plays can still make a profit with futures prices for benchmark light, sweet crude oil fetching a price less than $80/bbl, a Wood Mackenzie Ltd. senior analyst told an oil breakfast forum hosted by consulting firm Decision Strategies.

The US currently dominates global upstream capital spending, and producers in many unconventional plays can still make a profit with futures prices for benchmark light, sweet crude oil fetching a price less than $80/bbl, a Wood Mackenzie Ltd. senior analyst told an oil breakfast forum hosted by consulting firm Decision Strategies.

“Operators can still make money,” said Regan Dukes, who specialized in the Lower 48 and who was among a panel of speakers at the Oct. 31 forum in Houston.

He suggested that current oil prices will prompt some exploration and production companies to review whether they can maintain their high-growth strategies. WoodMac believes some US unconventional plays remain economic at $70/bbl oil, Dukes noted, adding that the break-even price in a particular play varies from county to county.

“Low prices will result in nonproven areas developing at a slower-than-expected clip,” Dukes said. He sees continuing price support for the Bakken formation in North Dakota, the Bone Spring trend in the Permian basin, and parts of the Eagle Ford in South Texas.

April Sharr, Baker Hughes Inc. business development manager for water management, said she sees break-even commodity prices dropping for many unconventional operators, which she attributed to water-treatment costs dropping along with well-completion costs dropping.

Robert Erlich, a senior vice-president with PanAtlantic Exploration Co., said he sees the oil price drop as significant but doubts that current prices levels will be prolonged.

Erlich sees unconventional plays as dominating new investment, particularly private equity investment, for 5 years.

“Money doesn’t really want to go to conventional oil and gas right now,” Erlich said of the capital market. He noted that international oil companies, however, continue to spend money on conventional assets.

Scott Tinker, state geologist of Texas and a professor at the University of Texas Jackson School of Geology, said he prefers to talk about the shale evolution rather than using the term shale revolution.

Contact Paula Dittrick at paulad@ogjonline.com.

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