While troubled companies may not be saved by $45 oil, some of the better operators will turn profitable at $50, said Subash Chandra, an analyst with Guggenheim Securities in New York. Companies best able to take advantage will be those with with acreage in North Dakota’s Bakken shale, the Permian in Texas or the Scoop and Stack prospects in Oklahoma.
"If oil is at $50, fortunes turn dramatically," Chandra said. "But the problem is they turn so much that the service companies come in and raise prices and take a share of it, or if production responds so quickly that oil has a hard time staying at $50."
While some of the best operators in the most prolific acreage may boast well break-evens of $35 a barrel, that only includes the cost of drilling, said Spencer Cutter, a credit analyst with Bloomberg Intelligence. Expenses like overhead, salaries, taxes and interest expenses easily add another $10 to $15 a barrel, he said.
"The short answer is $45 a barrel doesn’t save anybody," Cutter said. "Anyone who was going bankrupt at $30 is still going bankrupt at $45. You need to see oil sustained at $60 to $65 before you see a real turnaround in profitability for the sector."And so it goes.