Making Money On $25 Oil -- October 28, 2016

Updates

November 26, 2016: it is being reported that the breakeven point in the Bakken is now well below $25/bbl.
 

Original Post

 

When Saudi announced it was going to open its spigot, Whiting was the only oil company that I am aware of that said it could make money on $25 oil. So, how did that work out?

From today's Motley Fool and Whiting's 3Q16 earnings report:

Whiting was able to deliver that strong production while only spending $85 million on capital expenditures (capex) during the third quarter, which was flat with the prior quarter. That's an important number because the company's cash flow during the quarter was $151 million as a result of its high-end production, lower operating costs, and improving oil prices. After subtracting capex, Whiting still had $66 million in cash flow to spare, which is a rare feat in the oil industry these days, especially in the Bakken.

Because of the Bakken's high costs and steep production decline rates, producers have struggled to maintain their output during the downturn, which has certainly been the case for Whiting up to this point. The capital-intensive nature of the play meant that generating any excess cash flow would be tough to do. That said, it has not been impossible.

"Steep decline rates" has become a Bakken meme.