Breakeven

Natural gas production from the oil- and condensate-focused SCOOP/STACK combo play in Oklahoma—one of the most productive plays in the U.S. currently—grew through 2016, even as other producing areas in the state, and in the Midcontinent as a whole, declined. As one of just a handful of locations that returning rigs are targeting, the SCOOP/STACK has the potential to single-handedly offset production declines in other parts of the U.S. Midcontinent and make Oklahoma a natural gas growth state again. Moreover, the RBN production economics model shows the natural gas output from the SCOOP/STACK has the numbers and the proximity to be directly competitive with gas supply from the Marcellus/Utica. Today, we continue our SCOOP/STACK series, with a look at the production economics driving interest in this play.

When the Apollo 13 astronauts realized their oxygen tanks were badly damaged, they famously said “Houston, we’ve had a problem.” Today, this phrase could well describe the U.S. oil and gas industry.  The issue isn’t only today’s low prices, but also the industry’s resilience and its response to low prices.  U.S. producers may have created a price ceiling for the world. Today we reflect on a new age of abundance in U.S. energy markets.

On Friday (January 23, 2015) West Texas Intermediate (WTI) futures prices closed under $46/Bbl for the second time this year. RBN’s analysis of producer internal rates of return (IRRs) for typical oil wells indicates that Bakken IRRs have fallen from 39% in the fall of 2014 to just 1% today. IRRs for typical Permian wells are down to 3% and typical Eagle Ford wells are at breakeven. Everything is underwater or close to it except for the sweet spot wells with higher production. Today we present highlights from RBN’s IRR and breakeven analysis – published in full today in our latest Drill Down Report.