News

A new report from energy consultancy Wood Mackenzie finds that U.S. shale producers have become more adept at staying profitable, even with current low commodity prices. By cutting costs throughout development and improving production efficiency, the cost of production for U.S. operators fell by up to 40 percent over the past two years.

As EID previously reported, despite the market decline, fracking has become increasingly efficient since 2007. According to U.S. Energy Information Administration (EIA) data released in February, the amount of oil produced per well has increased over the past decade, particularly over the past two years. This allowed production to stay relatively level in 2015, even as rig numbers declined from the prior year’s record highs.

Additionally, with more oil produced from each well, the breakeven price of a barrel of oil – the price at which producers can still cover the cost of production – has fallen substantially since 2014. As the Wood Mackenzie report notes,

“Global breakeven costs have fallen by US$19/bbl [per barrel] to the current weighted average of US$51/bbl since the peak in 2014 and by US$8/bbl over the past 12 months”

Several factors contribute to this drop in breakeven price. As the report points out, about 40 percent of the cost savings has come from improved rates from companies that service operators by providing eq...