US oil and natural gas companies have pushed down costs of fracking a shale well faster than expected, and if the trend holds up it could allow producers to keep working in oilfields.
HOUSTON, April 22 (Reuters) - U.S. oil and natural gas companies have pushed down costs of fracking a shale well faster than expected, and if the trend holds up it could allow producers to keep working in oilfields that just months ago looked uncompetitive after the oil price crash.
A more than 50 percent fall in the price of crude oil since June has left oil and gas producers insisting on steep price cuts from oilfield service companies that provide everything from drilling rigs to hydraulic fracturing.
Oil is trading around $55 a barrel, and most U.S. shale fields are seen as having break-even costs of $40-$70 a barrel.
In fourth-quarter earnings calls, operators initially were looking for prices cuts for services like fracking of around 20 percent. Now those savings appear to be steeper.
"We're seeing costs fall more for fracking than drilling," Mike Bahorich, chief technology officer at Apache Corp told a CERAWeek breakfast meeting.
He estimates Apache's fracking costs have fallen about 30 percent, while drilling costs have tumbled 20 percent.
Gary Gould, senior vice president of operations at Continental Resources Inc said his company, which has its largest operations in North Dakota's Bakken Shale, had seen service costs "falling most steeply in recent weeks and months."
Analysts at IHS CERA expect fracking costs to fall 32 percent this year, down from a prior forecast for a decline of 24 percent.
Lower fracking costs, along with steep cuts to capital spending and a focus on drilling in only the most profitable areas in shale basins are helping producers weather the downturn.
"This represents significant savings for operators," said Christopher Robart, director of unconventional resources at IHS, but he cautioned the huge savings will not be repeated in 2016.
Falling costs and better takeaway capacity from new pipelines can allow producers to keep wells profitable in the face of low prices.
Pioneer Natural Resources Co, a top oil producer in the Permian Basin of West Texas, plans to take the unusual step of adding drilling rigs in June, its chief executive officer said on Tuesday in a bold show of industry optimism.
This week, Exxon Mobil Corp CEO Rex Tillerson said it was too soon to know if falling prices and a dropping U.S. rig count would slash crude output.
"We've seen price reductions but we've also seen improved efficiencies," he said.
(Reporting by Anna Driver; Editing by Terry Wade and Chris Reese)
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