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Hail Shale
Lone Star Shale Producers Defy OPEC

For a state that prides itself on being “bigger” in every sense of the word, Texas is managing to handle smaller oil profit margins awfully well, as a number of producers in the state’s two shale basins are keeping output up despite plunging prices. Bloomberg reports:

A handful of shale patches in [Texas], which would be the world’s sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In the Eagle Ford’s DeWitt County, which produced more than 100,000 barrels a day in November, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year. […]

“It may be harder to kill many U.S. E&Ps than analysts originally thought,” Bloomberg Intelligence analyst William Foiles said in the presentation. “The wide range of break-evens undermines efforts to come up with a single threshold for U.S. shale producers.”

And even as some producers find ways to turn a profit with today’s profits, many in the industry that have seen their margins erased are nevertheless still busy pursuing a forward-looking strategy: drilling but not yet fracking wells. This approach essentially lines up projects to bring online the minute prices rise high enough to justify them. This so-called “fracklog” is a widespread phenomenon, and it’s growing. For Saudi Arabia and the rest of the world’s petrostates, that’s a terrifying prospect, because it means what if and when we see the global glut erased and prices start trending back upwards, these new American supplies will flood the market and bring those prices right back down again.

And while producers amass this fracklog, plenty of companies are innovating ways to keep output up despite the fact that America’s oil benchmark is currently lingering below $32 per barrel. The shale boom isn’t done yet.

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  • Jacksonian_Libertarian

    I found this paper that was being referenced by others, it is a great read for anyone looking to get an idea of what’s going on with fracking.

    Basically the paper says that fracking technology is still advancing in leaps and bounds, and predicts that shale oil producers are going to get their break even costs down into the $5-$25 per barrel range. This price range would even undercut the Saudi’s, who are supposedly the lowest cost producer in the world.
    It says this will be done mostly by improving the fracking which is very inefficient at the moment. It has been shown that 80% of the oil comes from 20% of the horizontal well that was fracked. This indicates that there’s at least 3 times more recoverable oil when the fracking technology gets more refined. This also means that spent wells can be re-fracked with the newer more efficient fracking tech, and produce at least 3 times more oil than it initially produced. So put all the spent wells into the fracklog for future re-fracking and there is a huge cost savings right there, in wells that don’t need to be drilled to produce oil. That’s about a 40%-45% cost savings right there. Walking rigs, faster drilling speeds, more efficient equipment, more automation, data mining, improved sensors, improved mapping, and more are all improving as the fracking industry is still in its infancy, and it will take many years to fully mature.

    • Del_Varner

      Excellent! Anything we can do to undermine the Saudis–they are the biggest funders of fundamentalist mohammadanism.

      • Kristian Holvoet

        Don’t forget undercutting Russia and perhaps finally killing off Chavezism in Venezuala.

    • daehler-untermensch

      Think 100’s of thousands of existing vertical wells, in know fields, in known producing zones, un-horizontal drilled from well to well, above and below the existing 20% of producing fracked zone. Perhaps the islamic cultists would eventually eat their oil.

      build the wallS

  • Cromulent

    Drill baby drill. Frack baby frack. If you don’t support fracking you support the terrorists.

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