Texas has a message for $30 crude doomsayers: Bring it on.
A handful of shale patches in the state, which would be the world’s sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In the Eagle Ford’s DeWitt County, which produced more than 100,000 barrels a day in November, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year.
“You see a great amount of variability between operators, even in a small geographic area like a county,” she said by phone.
Drive 200 miles southwest to Dimmit County, and drillers need $58 oil. The wide range of break-evens, a term for the price at which a well goes from profitable to unprofitable, illustrates one reason why shale production from exploration and production companies has been more resilient than expected, filling storage tanks in the U.S. to levels not seen in 85 years.
“It may be harder to kill many U.S. E&Ps than analysts originally thought,” Bloomberg Intelligence analyst William Foiles said in the presentation. “The wide range of break-evens undermines efforts to come up with a single threshold for U.S. shale producers.”
Since prices started falling in June 2014, U.S. shale drillers have dodged countless death warrants by cutting costs, experimenting with new techniques and technology and boosting output to keep their wells competitive. West Texas Intermediate crude fell 19 cents to $32.09 a barrel at 8:32 a.m. Thursday on the New York Mercantile Exchange.
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