Fortune article about Warwick Energy:
“In the Scoop and the Stack, we can break even $30 oil, and 20%-60% returns at between $40 and $50,” says Richard. Indeed, it’s the fast growth of such low-cost areas that’s counterbalancing the declines in expensive parts of areas such as the Bakken and Texas’s Eagle Ford, and igniting a resurgence in shale production. For example, the rig count for horizontal drilling in the Scoop and Stack has risen by 49% since July of 2014, when prices hovered around $90. It’s a similar story in the best portions of the Permian in Texas and New Mexico. In the Permian’s Midland and Delaware Basins—areas providing returns approaching those of the Scoop and Stack where Warwick is also an active buyer—17% more rigs are at work today than at the peak of 2014.How can offshore oil compete?? Seadrill has a big bond maturity coming up in September, and the bond is trading at 36 cents.
In April, U.S. shale production rose by an impressive 109,000 barrels per day over March. That bump lifted output to almost 5 million barrels, just 10% below the all-time high of 5.5 million. And if the trend continues, shale production could reach 6 million barrels by early 2018. Of course, that’s far from certain, especially given the recent slide in prices.
Still, Richard spotlights three trends that should keep U.S. shale thriving. First, the industry has become far more efficient. Producers have substantially lowered corporate overhead and obtained deep discounts on both new leases and rates paid to contractors who do everything from supply pipe to sinking the wells.
Second, low prices have produced a gusher of creativity. “Shale is really a play on oil patch ingenuity,” Richard says. “The downturn has been a boot camp for the industry.” Shale producers are relentlessly experimenting with new ways to extract more and more oil at lower cost. “They’re improving the use of sand and ceramics,” she says. “They’re designing different wells to fit different geologies more than ever before. And they’re finding ways to extend the length of the horizontal wells up to two miles to get more oil from the same well.”