JUNE 2017 OIL & GAS FINANCIAL JOURNAL | W WW. OGFJ.COM 15
F1: PERMIAN BASIN: EVOLU TION OF AVERAGE
WTI BREAKEVEN OIL PRICES BY QUARTER*
*WTI breakeven oil price is calculated with a 10% discount rate assumption. On the cost side, drilling and completion
costs, LOEs, production taxes, royalties, SG&A opex, transportation costs and price differentials are included. Gas and
NGL prices are kept flat at 2 USD/kcf and 15 USD/bbl, respectively.
Source: Rystad Energy NASWellCube Premium, Rystad Energy research and analysis
Midland (service costs from 1Q14)
Delaware (service costs from 1Q14)
0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2014 2015 20162017
fluid volume per well is almost twice as high as in other plays,
Back in 1Q 2014, a typical well in the Permian
Basin showed lower oil productivity than in
the rest of US shale, both in terms of initial
30-day potential and estimated ultimate recovery. This changed by 1Q 2017. Current
Permian completions are now expected to
deliver 553 thousand barrels of oil—25% higher
than the average of other plays.
The changes in well design, choice of completion techniques, materials, and fluids, along
with generally lower service prices, imposed
significant downward pressure on the breakeven prices for new wells throughout the
Figure 1 summarizes the evolution of average WTI breakeven oil prices by quarter in
Permian Midland and Delaware. Bold lines
show actually realized breakevens, while dotted
lines correspond to expected average breakevens assuming no changes in service costs from
the levels observed in 1Q 2014.
Driven by a combination of high-grading,
efficiency gains, and service pricing, W TI breakevens decreased
by almost 50% from early 2014 to mid-2016. Some reversion
© 2017 BOK Financial Corporation. Services provided by BOKF, NA. Member FDIC. BOKF, NA is a subsidiary of BOK Financial Corporation.
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