World Bank report: Shale breakeven range shrinking

By North American Shale magazine staff | December 18, 2017

The range of breakeven prices in North America’s multiple shale plays is now less than $10, according to a new report from the World Bank. As part of the organization’s 2018 commodity price outlook, breakeven prices were reviewed and predicted for next year. In 2018, most shale-focused operators will reach breakeven rates with oil trading in the $40-per-barrel range. Breakeven prices for 2018 are much different than those present in the past three years.
In late 2014, data from the World Bank indicates that some shale players could breakeven in the mid-$50/b range while others needed oil to trade near $80/b.

Advancements in drilling and completion techniques since 2014 are a big reason breakevens are lower and within a smaller range across all shale plays, according to the World Bank. Multi-well pad developments, which cut down on drilling and fracking times, along with longer laterals and heavier sand loading, which leads to higher well productivity are also reasons for the breakeven prices in 2017 and beyond. While many producers have also benefited from hedging activities, many have, are or will experience service cost inflation or difficult staffing environments. In particular, the World Bank said Permian producers are struggling the most to find skilled labor.

Next year, a steady growth in global oil demand, production curtailment strategies implemented by OPEC and Russia along with stabilizing U.S. shale oil production levels will all help keep oil prices above $55/b—a rise of $3/b over 2017 levels. Brent crude has traded in the $60/b range in 2017.