With crude at $75 a barrel, the price Goldman Sachs Group Inc. says will be the average in the first three months of next year, 19 U.S. shale regions—including Louisiana’s Tuscaloosa Marine Shale—are no longer profitable, according to data compiled by Bloomberg New Energy Finance.
Those areas, which also include parts of the Eaglebine and Eagle Ford shales in east and south Texas, pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations. That compares with the 1.03 million-barrel gain in daily national output over the past year, government figures show.
The expansion of U.S. oil supply to more than 9 million barrels a day is contributing to a global glut, driving down prices by as much as 32% since June. The data compiled by BNEF, which take into account the costs of drilling, royalties and transportation, show that certain shale patches fail to make money at the current price. Companies such as SandRidge Energy Inc. and Goodrich Petroleum Corp. have said they expect to pump more oil for less money so they can withstand the rout.
“Everybody is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that is just smoke,” says Daniel Dicker, president of MercBloc Wealth Management Solutions with 25 years’ experience trading crude on the New York Mercantile Exchange. “The shale revolution doesn’t work at $80, period.”
West Texas Intermediate crude, the U.S. benchmark, fell to a four-year low of $73.25 a barrel on Nov. 14, down from $107.73 on June 20. Goldman Sachs cut its first-quarter forecast to $75 a barrel on Oct. 27 from a previous forecast of $90.
Drillers in the Tuscaloosa Marine Shale of Louisiana and Mississippi break even at $79.52 a barrel because they have to bore more than 2 miles deep into rock, according to data compiled by BNEF. Read the full story.
