The Permian Should Be Profitable -- Even With $45-Oil -- Rystad Energy -- February 7, 2019

I thought I had posted this easier but maybe not. Whatever. Here it is. The headline seems a bit confusing. Whatever.

But if this is accurate, this has to be very, very concerning for Saudi Arabia. For Saudi Arabia, $45-oil is an existential issue. Period. Dot.

This is the key data point from the article regarding the Permian:

From Oil & Gas Journal:

Having taken a closer look at the detailed economics of the most recent 1,000 wells drilled in the most popular shale hotspot—the Wolfcamp A zone of the Permian Delaware basin—Rystad Energy can see a clear pattern emerging that favors large players.

“Our conclusion is that the average well completed during 2017 and 2018, which mirrors the most likely production profile and costs, appears very profitable even at local oil prices of $45/bbl,” said Per Magnus Nysveen, Rystad Energy senior partner.

“However, there are also many wells that will not be profitable at this price level, and drilling needs to be conducted on a large scale in order to secure robust cash flows even in the hottest play. Betting on a low number of wells could give more uncertain returns than rolling the dice at the nearest casino.”

The graphic:

A few points:

• this is the same thing we saw (and continue to see) in the Bakken
• the decline rate will improve over time -- but it will always be there ... but...
• the decline rate is the wrong metric to follow

It should be noted that it's my understanding that Permian wells are much more expensive to drill/complete than Bakken wells and produce much less oil /well. I know I'm correct on the latter; could be wrong on the former.