Shale Wells Are On Edge of Profitability at Current Prices

U.S. shale oil plays are “riding the edge of profitability” at current prices and the industry faces a significant slowdown in fracking activity if crude falls below $50/bbl for a sustained period, according to BloombergNEF.

Hot Tip

Thousands of recruiters use oilandgaspeople.com to post jobs and find suitable candidates. We are the industry’s most popular job and news site. If you are in the market for a new job you need to have a profile on our site.

The majority of American shale wells make money based on the $51.45 average futures price, or “strip,” for West Texas Intermediate crude over the next two years, BNEF analyst Tai Liu said in a report Thursday.

But he added that the historical floor price for U.S. oil of $45, which in the past has been based on so-called half-cycle drilling costs, is likely to rise to $50 as investors use different metrics.

“These firms are now being judged by their ability to generate free cash flow,” BNEF said of drilling companies. “Free cash flow sets a higher bar than half-cycle costs from a break-even perspective.“

Source: www.worldoil.com

Leave a Reply

Your email address will not be published. Required fields are marked *