Producers since 2010 have invested $150 billion in the Texas Permian Basin, which holds as much as $5 trillion in oil and gas reserves
What happens in the Permian if crude prices fall below $80 a barrel? Some producers say they’ll shut in up to half their wells, Bloomberg said.
“Marshall Adkins of Raymond James & Associates Inc. forecast crude is heading down to $70 a barrel next year, a price that would slow drilling in the most expensive U.S. shale formation.,” Bloomberg said.
“Pioneer Natural Resources Co. (PXD) estimated the remaining yield at the equivalent of 50 billion barrels, more than any field on Earth except Saudi Arabia’s Ghawar. The varied geology, though, makes it more costly to explore and develop,” according to Bloomberg.
If oil drops to $80 a barrel, wells in some parts of the Permian beneath Texas and New Mexico will become money-losers, Tim Rezvan of Sterne Agee & Leach Inc. in New York told Bloomberg.
The break even point in the Cline Shale and the Northern Mississippian Lime areas of the Permian is $96 a barrel.
Break even is $78 a barrel in the Texas Eagle Ford Shale formation, $84 in the Bakken of North Dakota.
West Texas Intermediate prices fell 4.7 percent in October, settling last week at a 4-month low of $95.95 a barrel.
Brent crude prices are averaging $108.58 for the year but some analysts expect a drop all the way to $70-to-$80 per barrel.