• 5 minutes Oil prices forecast
  • 8 minutes Nuclear Power Can Be Green – But At A Price
  • 11 minutes Projection Of Experts: Oil Prices Expected To Stay Anchored Around $65-70 Through 2023
  • 16 minutes Europe Slipping into Recession?
  • 33 mins *Happy Dance* ... U.S. Shale Oil Slowdown
  • 1 day U.S. Treasury Secretary Mnuchin Weighs Lifting Tariffs On China
  • 7 hours Socialists want to exorcise the O&G demon by 2030
  • 1 day Chevron to Boost Spend on Quick-Return Projects
  • 11 hours Germany: Russia Can Save INF If It Stops Violating The Treaty
  • 21 hours Connection Between Climate Rules And German's No-Limit Autobahns? Strange, But It Exists
  • 11 hours Maritime Act of 2020 and pending carbon tax effects
  • 1 day UK, Stay in EU, Says Tusk
  • 1 day Conspiracy - Theory versus Reality
  • 2 days What will Saudi Arabia say? Booming Qatar-Turkey Trade To Hit $2 bn For 2018
  • 1 day Regular Gas dropped to $2.21 per gallon today
  • 2 days German Carmakers Warning: Hard Brexit Would Be "Fatal"

Increase In Well Productivity Drives U.S. Production Jump

oil pipeline

New shale oil well productivity drove U.S. production higher in the last few years, with the average daily rate for the first month of operation rising from less than 100 barrels for most shale plays to between 200 and more than 600 barrels, the Energy Information Administration said in a new report.

Image courtesy: EIA

Last year, the energy authority said, shale oil production came to account for 54 percent of the United States’ overall oil production, in part thanks to this higher new-well productivity. The EIA said this higher productivity was the result of a combination of factors including the wider use of hydraulic fracturing and the drilling of more—and longer—horizontal wells, but most notably the increase in the amounts of frac sand used in new wells.

This combination of factors helped shale drillers to stay afloat and keep production going even during the downturn. In 2015 and 2016 there were fewer new wells drilled, but those that did get drilled were located in more productive areas and were drilled more quickly. Now that the worst is over, they are focusing on the Permian, the EIA noted, which holds more untapped reserves than the rest of the oil patch.

Related: Shell Wants Deepwater Breakevens Below $40

Average full-cycle breakeven costs in the Permian are US$42 per barrel, according to Rystad Energy. This accounts for the costs of the whole process—from drilling a well to starting production from it. If you add to its exploration costs for new locations, the cost comes in at US$48 per barrel—still significantly less than, say, offshore fields, and a lot below current oil prices.

What’s more, a shale oil well makes its money back in one year, compared to six to seven years for offshore projects. No wonder, then, that investors strongly prefer shale and the Permian in particular, and so do drillers.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • Industry Person on May 04 2018 said:
    Irina, the break even quoted does not include royalties, taxes, pipeline fees, or any of the G&A overhead. Real break evens are a good deal higher, and very few of these wells are profitable at today's prices.

    These companies piling into the shale are making poor to negative returns on investment, so the real question here is how long will this go on for?

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News