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Only 1 Percent Of Bakken Shale Is Profitable At These Prices

Submitted by Arthur Berman via,

Only 1 percent of the Bakken Play area is commercial at current oil prices based on my analysis that follows.

Only 4 percent of horizontal wells drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed to break even at current oil prices, drilling and completion, and operating costs.

The leading producing companies evaluated in this study are losing $11 to $38 on each barrel of oil that they produce, the very definition of waste.

Although NYMEX prices are about $46 per barrel, realized wellhead prices in the Bakken are only $30 per barrel according to the North Dakota Department of Mineral Resources. At that price, approximately 125,000 acres of the drilled play area of 10,500,000 acres is commercial (green areas in Figure 1).

Figure 1. Bakken Shale Play commercial area map at $30 per barrel wellhead price. Contours are in barrels of oil estimated ultimate recovery. Contour interval = 200,000 barrels of oil. Source: Drilling Info, North Dakota Department of Natural Resources & Labyrinth Consulting Services, Inc.

(click image to enlarge)

The break-even per-well EUR is 700,000 barrels at a $30 oil price. The underlying economic assumptions are shown in Table 1.

Table 1. Economic assumptions and outcomes used to determine the Bakken $30 per barrel commercial area shown in Figure 1. Source: Company presentations and Labyrinth Consulting Services, Inc.

(click image to enlarge)

There has been much debate about the break-even price for tight oil plays in the U.S. This discussion is largely meaningless because there is no single break-even price for any play.