• 4 minute Hey Oil Bulls - How Long Till Increasing Oil Prices and Strengthening Dollar Start Killing Demand in Developing Countries?
  • 8 minutes Could oil demand collapse rapidly? Yup, sure could.
  • 15 minutes Oil and Trade War
  • 1 hour Could oil demand collapse rapidly? Yup, sure could.
  • 5 hours Migrants: Italy Wants EU Border Agency In Africa, Not At Sea
  • 3 hours Are EVs Safer Than Combustion Engine Vehicles?
  • 1 hour Russia, Saudi Push For Big Hike In Oil Output Despite Iran Opposition
  • 1 hour WE Solutions plans to print cars
  • 2 hours What If Canada Had Wind and Not Oilsands?
  • 1 hour Oil prices going down
  • 12 hours Sabotage at Tesla
  • 7 hours Nopec Sherman act legislation
  • 5 hours Sell out now or hold on?
  • 9 hours The Irrelevance Of BTU Rating - Big Oil's Gimmick To Hoodwink The Public
  • 11 hours China & India in talks to form anti-OPEC
  • 16 hours The Wonderful U.S. Oil Trade Deficit with Canada
  • 56 mins Gazprom Exports to EU Hit Record
  • 58 mins Australia mulls LNG import
  • 35 mins Oil and Trade War
Oil Prices Rebound On Crude, Gasoline Inventory Draws

Oil Prices Rebound On Crude, Gasoline Inventory Draws

Oil prices reversed on Wednesday…

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