AQUA BOOK 2016 - Page 7

Among all major shale formations in the U.S., the Eagle Ford shale is currently most cost efficient, according to Rystad Energy. This means that oil production from that play has the lowest average break-even price. Just a few years ago when this South Texas shale region was still in its early development stage, most estimates for its break-even prices were over $60 per barrel. Falling breakeven prices over time were the outcomes of reductions in well costs together with increases in output per well. The advent of pad drilling has helped lower production costs by increasing the wells to be drilled by each rig, reaching 13 to 20 today in the Eagle Ford play. Eagle Ford Break-Even Price 60 20 0 2011 2012 2013 2014 Source: Rystad Energy. SHUT-DOWN POINT . . . U.S. oil producer would halt production when the crude oil price falls below $15 per barrel. As Texas shale oil production continued to raise the world’s oil supply without corresponding increases in demand, market prices began to take a nosedive in late 2014. In January 2016, oil prices plummeted to less than $30 per barrel, which was well below the break-even pric \