Monday, May 15, 2017

Breakeven Points In The Bakken -- Platts -- May 15, 2017

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North Dakota's breakeven price for crude production averaged $24/b in the first quarter of 2017, with the breakeven in the state's most active county averaging $21/b, according to estimates from the state's Department of Mineral Resources.

The breakeven price puts the Bakken Shale play in economic competition with nearly any play in the world, including Saudi Arabia, but analysts caution that the latest data out of North Dakota may not be telling the whole story of what drillers are seeing there.

"These numbers don't make that much sense to me," said Graham Walker, an oil market analyst with Petrologica. "It's very much an art, these breakeven prices. There are so many factors you can include or not include."

Walker said that, when calculating their breakeven prices, North Dakota officials may be including only sanctioned wells, or only wells that are successfully completed and put on production while ignoring unsuccessful attempts. Rather than a point where wells make money, the state's breakeven price may be a threshold that needs to be maintained before a well is shut in.

Walker pointed to McLean County in the central portion of the state, where there were no rigs and only 64 wells capable of producing in Q1. The state estimated that the breakeven price in McLean was $17/b.
"If it's $17/b in McLean, where is everybody?" Walker asked.

During a press briefing Friday, Lynn Helms, the state's top oil and gas regulator, said that the $17/b figure represents the relatively small sample size of the producing wells in the region, particularly three highly successful wells that are "pushing the limits" of drilling technology.

"We're a bit at the mercy of statistics," Helms said.

Alison Ritter, a spokeswoman for the state agency, declined to comment further Monday on how the state determines breakeven prices.

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