Oil Shale News: Breakeven and Oil Majors

Here's a couple articles I came across about shale:

OilPrice (Dec 17) reports about a drop in breakeven costs for US shale:

Pressured by plunging oil prices and the need to adjust to the lower oil demand, U.S. oil producers have slashed costs and managed to bring down their average breakeven costs by nearly 20 percent to $45 a barrel on average, Bloomberg’s research service, BloombergNEF (BNEF), said on Thursday. 

According to BloombergNEF’s estimates, U.S. oil producers have cut their average breakeven costs from an average of $56.50 per barrel last year to $45 a barrel now. Some of the most prolific areas in the U.S. shale patch, such as the core of the Permian and Eagle Ford basins, have even seen breakeven costs dropping to an average of $36.50 per barrel now, from $44 a barrel last year.

I wonder how sustainable the lower breakeven is. Back in June 2019, I wrote a blog post about water and sand being constraints on the shale industry. How much of the drop in the breakeven is driven by a greater supply of water and sand? I should note in that post that the breakeven in the Permian was around $49 per barrel. This would be in the 2019 timeframe. The Bloomberg quote above has the Permian in 2019 at $44 a barrel. 

Should US shale drilling make a comeback after the COVID-19 pandemic, it will be interesting to keep track of the breakeven.  

Dallas News (Sep 20) has an opinion piece up about how the shale revolution has changed the geopolitical dynamics. 

The shale revolution “affords Washington,” observed Thomas Donilon, national security advisor to President Barack Obama, “a stronger hand in pursuing and implementing its international security goals.”

Secretary of State Mike Pompeo would subsequently put it differently: that the shale revolution has provided the United States with a flexibility in international affairs that it had not had for decades.

. . . While the independents have scaled back, the majors have stepped up. ConocoPhillips, once a very international company, has shifted back to emphasize North America onshore. Two of the largest majors, Exxon Mobil and Chevron, have both partly pivoted back to North America, directing significant investment to the Permian in order to make it a growing part of their global portfolios . . . When it was all added up, the growth in U.S. output seemed destined to slow to a much smaller annual increase, far less than the hectic pace registered in preceding years.

I can't say there is a lot that I disagree here with this opinion piece and am highlights two arguments that I really agree with. That last part seems to somewhat align with my long held belief that US shale producers should follow oil prices up versus forcing prices down via over-supply. With oil majors now a significant shale players, there is more incentive to emphasize profits overs supply.