US Shale Oil Dynamics in a Low Price Environment

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PetroNerds co-founder Trisha Curtis’ report “US Shale Oil Dynamics in a Low Price Environment” has been released by the Oxford Institute for Energy Studies, part of the University of Oxford. Trisha is a visiting research fellow at the Institute.

The report examines how US tight oil producers are adapting to the now year old low oil price environment. It also looks at how the downturn is affecting activity levels in the three major US oil plays (the Bakken, the Eagle Ford, and the Permian Basin) and how production volumes will be affected going forward.

The full report can be downloaded here: http://www.oxfordenergy.org/wpcms/wp-content/uploads/2015/11/WPM-62.pdf

An excerpt from the paper follows:

“One of the biggest unanswered questions facing the market is whether or not relatively high-cost US shale oil production can survive in a relatively low oil price environment (sub $60 per barrel). This is the first economic test of the shale oil renaissance. While shale production has thus far proved resilient (due to a combination of factors, such as enhancing efficiency gains, lowering the cost of services, and retreating to the more productive areas), signs of weakness are beginning to show. This paper seeks to answer a number of questions, including:

  • Can the efficiency gains made over the past several months sustain current production levels?
  • Which of the main shale plays are likely to be impacted the most?
  • Will debt levels and bankruptcies put US companies and production at risk?
  • Can US shale players assume the role of the swing producer?

This paper will first address the changes in drilling activity and their impact on crude oil production. It will then provide a thorough examination of production and activity levels in the three major US oil plays: the Bakken (Williston Basin), Permian (Permian Basin), and Eagle Ford (Eagle Ford reservoir). The paper will then address the impact of the capital expenditure cuts on production and the US shale sector, and the final section draws some of the main lessons from the current price fall.”