Tuesday, April 26, 2016
Washington, D.C. — As U.S. oil prices near $45 per barrel, some producers could start bringing wells online, with more than 1 million barrels a day in Texas alone ready to be tapped.
Shale companies have held off on completing thousands of wells, choosing to save money and wait for oil prices to rebound. Drilling accounts for 40% of a new well’s cost, while completion accounts for 60%, according to Suzanne Minter, manager of oil and gas consulting at Platts Analytics, in prepared remarks to the Senate Energy and Natural Resources Committee Tuesday.
Producers also have been improving efficiency and slashing costs, which means that they can pump oil profitably at lower prices. The breakeven price is now about $45-$55 per barrel, depending on the play, Minter said, adding that she wouldn’t be surprised if some producers start to pump at $40 a barrel.
On Tuesday, U.S. crude futures rose 3.3% to settle at $44.04 a barrel, and Brent climbed 2.8% to $45.74.
If producers in Texas alone decided to complete all their 2,500 drilled but uncompleted (DUC) wells at once, they could add 1.25 million barrels of oil per day to the world market, Minter estimated.
Production from Texas DUCs could come back on fairly quickly, as completion times average 30 days. But Minter cautioned that the response could take longer if producers don’t have enough cash or labor on hand.
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