Tuesday, June 21, 2016

Forbes Article On The Permian; Break-Even Price Is $61 -- June 21, 2016

Long Forbes article on the Permian.

Data points:
  • break-even price: $61 (but ranges from $45/boe to $177/boe by operator)
  • well completion costs: $6 - 7 million / well
  • not commercial at current oil prices
  • "negative" article on hyperbole associated with advanced technology
  • current production: 1.9 million bopd crude oil; 6.6 billion cfd natural gas 
This interesting statement:
The tight oil plays in the Permian basin are not shale plays. Spraberry and Bone Spring reservoirs are mostly sandstones and Wolfcamp reservoirs are mostly limestones.
That would be true of Bakken crude oil, also, coming mostly from the limestone/dolomite between the shale sub-formations.

A few days ago I posted a note about tight oil/tight gas. Shale, by definition, is tight. One does not talk about "tight shale." Sands may or may not be "tight." Tight oil in North American is coming from sand; tight natural gas in North American is coming from shale. There are, of course, exceptions.

Other quotes from the article:
Sprayberry Field, tight oil, "low recovery efficiency of 8 - 10% and was only commercial prior to the recent phase of tight oil drilling.
Writer analyzed three main tight oil plays:
  • the Trend Area-Spraberry (Midland Basin)
  • Wolfcamp (Delaware Basin)
  • Bone Spring (Delaware Basin)
All plays produce considerable gas
  • only the Trend Area-Spraberry is technically an oil play
  • Wolfcamp and Bone Spring are classified as gas-condensate plays
  • has produced the most oil and gas: 205 million boe; largest number of producing wells
  • breakeven price, depending on operator; some $61/boe; others, $75/boe
Bone Spring:
  • most commercially attractive of the tight oil plays; $49/boe breakeven price
Spraberry play:
  • breakeven price for boe: $55/boe
Five (5) key operators in the Trend AreaSpraberry play:
  • Pioneer
  • Laredo
  • Diamondback
  • Apache
  • Energen
  • Difficult to analyze for various reasons.
  • EURs
    • average Trend Area-Spraberry: 265,000 boe
Five (5) key operators in the Wolfcamp:
  • Cimarex
  • Anadarko
  • EOG
  • Devon
  • EP
  • EUR average: 228,000 boe
  • Devon, EP break-even price: more than $100/boe
  • EP break-even price an astouding $177/boe
  • Anadarko break-even price: $45/boe
Five (5) key operators in Bone Spring:
  • Cabot
  • Devon
  • Cimarex
  • Energen
  • Mewbourne
  • EUR, average: 294,000 boe
  • average breakeven price, $49/boe
Infill density 
  • Wolfcamp: lowest well density, 1,269 acres/well, 
    • therefore, the most development potential
  • Bone Spring: considerable infill potential with 725 acres/well
  • Trend Area-Spraberry: least potential
    • already has well density of 281 acres/well
Projected 2016 break-even prices:

For newbies: the problem I have with this graph is that the the graph shows only "one" Bakken. In fact, there are many "Bakkens" -- based on productivity. I don't know if the break-even price for the Bakken in the graph above is across the entire Williston Basin in North Dakota, or just the "sweet spots."

That would also be true for the Permian.  

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