Permian breakeven changes and core movements

By Staff | March 15, 2017

Rystad Energy is a great, independent research, consulting and intelligence data firm serving the oil and gas market. The team recently released their take on well breakeven prices and other valuable insights on shale and the Permian in particular.

The average decrease for breakeven prices through the main U.S. shale plays is right around 46 percent, Rystad said in its shale update. The main cause is linked to a reduction in unit prices (by 57 percent). Efficiency improvements saw a 26 percent change and acreage high grading was 19 percent of the reason for lower breakevens.

In the Permian, breakeven prices are down to $36/b, compared to $71/b in 2014.

Research by Rystad shows that operators have certainly moved to the core of the Permian, as well. In 2014, only 60 percent of the wells spudded were considered to be in the core. But in 2016, 80 percent of the wells spudded were in the core. The flight to the core—or highgrading—has helped those operators produce more oil per well in the core.

It might be easy to think that highgrading has helped operators maintain appropriate initial rates of return, but there is most likely more to the story. That is one of the most compelling facets of the growing Permian and Delaware Basin. The more we or you talk to industry and the more we sift through the data, the more we learn that we don’t everything about the play yet. In the past month, we’ve run multiple stories that include sentiment from operators showing their excitement for the fact that there is still much to be learned about the play and that it, like other plays such as the Bakken or SCOOP/STACK, is still in “early innings” despite the fact there has been so much production to date already.