Another Story I Missed: Break-Even Point In The Bakken -- $60

Wood Mackenzie report in The Boston Herald. 

Put the Bakken in perspective: Argentina, China -- Wood Mackenzie.

Reuters is reporting:

New efficient drilling practices may drive breakeven rates in the best areas of the Bakken shale oil play as low as $58 per barrel, Wood Mackenzie said on Tuesday, far lower than the traditional $70 per barrel figure frequently touted by analysts.

The fast adoption of multi-well pad drilling, or the ability to drill several wells from one location, should reduce the average cost per well to $7.5 million on average in 2014, allowing companies to make more off each barrel of oil, Wood Mackenzie analyst Jonathan Garret said. 

"The major driver of (well cost) reduction has to do with the number of wells drilled from pads," Garret said. "You're now drilling 3, 4, 12, even 16 wells from a single pad." 

This year, more than 90 percent of wells drilled in the Bakken will be drilled from multi-well pads, Garret said. Multi-well pad drilling is more efficient by reducing the amount of time it takes to drill each well as well as the equipment used. 

A Wood Mackenzie report issued on Monday estimated breakeven costs based on sub-plays. Breakeven rates in the Sanish basin, one of the best areas of the play, are expected to average $58 per barrel, while breakeven costs in the Nesson anticline are forecast to be $61 per barrel.

I'm quite impressed the analysts can see a $3-difference between the Sanish and the Nesson anticline.

By the way, everything I've read in corporate presentations, suggest the break-even point is a lot lower than $60/bbl.

In addition, price of oil would have to remain lower than the break-even point for a sustained period of time for it to have an effect on the Bakken. I assume the analysts also factor in the price cost of oil support services. As oil drops in price, operators demand more efficiencies from their support services. Obviously cost of leasing has gone way down and a lot of roads to all those existing pads have already been built.

Other "Wood MacKenzie/Bakken" Stories

OGFJ is reporting: 

The Bakken and Three Forks plays hold close to $118 billion in remaining value and, unlike other key plays, every single Bakken sub-play generates positive returns, according to Wood Mackenzie's latest key play analysis.

“We expect Bakken/Three Forks oil production to average 1.1 million barrels a day (b/d) in 2014, growing to 1.7 million b/d in 2020,” said Jonathan Garrett, Americas upstream research analyst for Wood Mackenzie.

Garrett explained that, today, the Bakken produces more crude oil than any other unconventional play in the world and $15 billion will be spent on drilling and completion this year. 

Wood Mackenzie analysis shows that operators will recover more than 20 billion barrels of oil reserves throughout the life of the play, and, contrary to recent concerns, infrastructure constraints are not expected to delay the play’s future development.

Other key findings in that study:

• Wood Mackenzie divides the Montana/North Dakota Bakken into 12 sub-plays
• CAPEX in the Bakken for drilling in 2014: $15 billion, second only to the Eagle Ford
• wells now average $7 - 8 million/well; vs more than $10 million prior to 2011
• highest IPs are seen on the Nesson Anticline
• highest EURs are in the Fort Berthold sub-play at nearly 700,000 boe
• the Three Forks is the primary drilling target in the Southern Fringe sub-play
• the three Forks wells have actually outperformed those in the Bakken in this sub-play
• Three Forks wells are better than middle Bakken wells in North Williston sub-play andthe Williams Perimeter sub-plays
• CLR remains the top operator in the Bakken, 1.2 million acres; largest remaining reserves; most advanced delineation program in the deeper Three Forks benches
• some players, like WPX, have more valuable positions on a per-acre basis
• some of the most valuable positions are concentrated in areas such as Fort Berthold
• CBR accounts for 73% of oil that leaves the Williston Basin
• total rail capacity has hit 1.2 million bbls/day
• pipeline and local refinery capacity is at 783,000 bbls/day

The Oil and Gas Investor:

• Edinburgh, U.K.-based Wood Mackenzie Ltd. is an energy and metals industry consultancy group working internationally.