A handful of shale patches in [Texas], which would be the world’s sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In the Eagle Ford’s DeWitt County, which produced more than 100,000 barrels a day in November, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year.
“It may be harder to kill many U.S. E&Ps than analysts originally thought,” Bloomberg Intelligence analyst William Foiles said in the presentation.
They say the Saudis have maybe three years left of money to subsidize their country. They were hoping to bankrupt the frackers first, but if this is true, they are doomed to failure. Imagine the chaos in the middle east if the central Sunni power runs out of money and breaks apart from within.
There's further bad news for the Ticks:
Many in the industry that have seen their margins erased are nevertheless still busy pursuing a forward-looking strategy: drilling but not yet fracking wells. This approach essentially lines up projects to bring online the minute prices rise high enough to justify them. This so-called “fracklog” is a widespread phenomenon, and it’s growing. For Saudi Arabia and the rest of the world’s petrostates, that’s a terrifying prospect, because it means what if and when we see the global glut erased and prices start trending back upwards, these new American supplies will flood the market and bring those prices right back down again.
Maybe this strategy of bankrupting the American frackers has backfired. Instead of going belly up, they have adapted, and created a break even at a point that is well below the price the Saudis (and the Russians and the Iranians, heck, all the bad actors) can survive. Adding insult to injury, the good guys have created a back load of oil and gas that will certainly keep the price down. Bye, bye OPEC! All due to the unfettered innovation and pluck of the free market loving Americans.