• 3 days Nuclear Bomb = Nuclear War: Saudi Arabia Will Develop Nuclear Bomb If Iran Does
  • 3 days Statoil Changes Name
  • 3 days Tillerson just sacked ... how will market react?
  • 2 days Russian hackers targeted American energy grid
  • 2 days Is $71 As Good As It Gets For Oil Bulls This Year?
  • 3 days Petrobras Narrows 2017 Loss, Net Debt Falls Below $85bn
  • 3 days Proton battery-alternative for lithium?
  • 3 days Ford Recalls 1.38 Million Vehicles (North America) For Loose Steering Wheel Bolt
  • 2 days Oil Boom Will Help Ghana To Be One Of The Fastest Growing¨Economies By 2018!
  • 2 days Country With Biggest Oil Reserves Biggest Threat to World Economy
  • 3 days I vote for Exxon
  • 2 days HAPPY RIG COUNT DAY!!
  • 3 days UK vs. Russia - Britain Expels 23 Russian Diplomats Over Chemical Attack On Ex-Spy.
  • 3 days Why is gold soooo boring?
  • 3 days South Korea Would Suspend Five Coal - Fire Power Plants.
  • 2 days Spotify to file $1 billion IPO

Shale Drillers To Lose At Sub-$50 Oil


Shale oil and gas producers need WTI prices at least US$50 oil to be able to see significant returns, analysts from Moody’s said in a research note today. For natural gas, the minimum price level to ensure reasonable profitability is US$3 per MMBtu, the analysts said.

The team studied the capital efficiency indicators of 37 shale drillers, focusing on operating cash margins and the costs associated with finding and developing oil and gas resources.

Over the first eight months of the year, WTI averaged US$49.34 a barrel, while the Henry Hub price per MMBtu of natural gas was US$3. Even though WTI prices are now above US$50 a barrel, the latest price forecast from the Energy Department sees the average for this year at US$48.83 and the average for 2018 at US$49.58.

While the Moody’s analysts acknowledged the progress that shale oil and gas producers have made in reducing their production costs, they argue that there isn’t much space left to further reduce these costs. What’s more, any additional cost reduction is more likely than not to be offset by the higher prices that oilfield service providers are now charging for their services amid the higher oil prices.

The research note suggests that the hard times are not over for many shale drillers. In his report on the note, CNBC’s Tom DiChristopher notes the substantial debt load of shale drillers, and how low breakeven levels are an insufficient indicator of profitability for the very simple reason that breakeven and profit are two different things.

As the Moody’s researchers put it, E&Ps in the shale patch, like other producers, need to be able to "recover their costs, earn a meaningful return on their investments, reinvest in further development of their acreage, repay debt and reward shareholders for the risk and cyclicality associated with the industry."

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment

Leave a comment

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