Kemp: US Shale Breakeven Price Revealed Around $50
(John Kemp is a Reuters market analyst. The views expressed are his own)
LONDON, Aug 9 (Reuters) - U.S. shale producers need a WTI oil price around $50 per barrel to break even, according to an analysis of financial statements for the second quarter.
Fifteen of the largest shale oil and gas producers reported total net losses of $470 million for the three months between April and June when benchmark WTI prices averaged $48.
Total losses were down from $3.7 billion in the first three months of the year and $7.4 billion in the same period in 2016, according to earnings statements published in the last week (http://tmsnrt.rs/2ftmgnd).
Nine of the companies in the sample reported positive net income in the second quarter, down from 10 in the first quarter, but well up from none in the same period last year.
Shale companies have staunched the losses thanks to a combination of cost cutting, improved efficiency and the rise in oil prices.
But there is considerable controversy about how high prices need to be for shale producers to cover all their costs and earn a return for their investors.
Some firms claim they can break even and even make large profits with benchmark WTI prices below $50 or even $40 per barrel.
It remains unclear if these figures apply to full lifecycle costs (including overheads) and all the parts of all the shale plays (or just the most productive sweet spots).
However, Harold Hamm, chief executive of Continental Resources, a large shale producer in North Dakota and Oklahoma, has said prices need to be above $50 to be sustainable.
Prices below $40 would cause drillers to idle rigs again, Hamm said in a television interview earlier this summer ("Harold Hamm warns oil prices below $40 will idle U.S. drilling", CNBC, June 28).
Following a cyclical downturn between the middle of 2014 and the middle of 2016, the oil market has discovered the breakeven price for the U.S. shale sector.
Some shale producers have lower breakeven prices than the average, and some higher, but the sector as a whole seems to need around $50 to grow production profitably.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension