BTU Analytics estimates breakeven prices and tabulates remaining inventory for major shale basins in our E&P Positioning Report and BTU Oil & Gas View. Previously, this data was published quarterly due to lags in state production data and delivered via PDF. The BTU View platform’s dynamic data delivery allows for users to customize their analysis, which has opened the door to accommodating monthly data updates that are independent from the quarterly E&P Positioning Report. Given the market volatility observed in 2020, the need for leading-edge economics to evaluate producers’ recent well results has grown. BTU Analytics has increased the frequency of updates to the breakeven data of the BTU Oil & Gas View to provide better visibility for wells recently turned to sale.
BTU Analytics’ first monthly breakeven data update, which will publish to BTU View on December 17th, 2020, includes additional production history for wells already included in the October quarterly update along with new wells that were not previously available. The previous quarterly update did not include any wells turned to sale in 3Q ’20 because there was not enough reported production data to calculate breakeven estimates. The December update contains over 600 new wells with first production dates in 3Q ’20, including 492 wells in liquids plays, shown below.
The charts above highlight changes in the median breakeven in liquids-focused basins grouped by first production quarter. Leading-edge economics in the December update for 3Q ’20 wells generally indicates slightly higher breakeven prices than wells that came online in 2Q ’20 after controlling for commodity price volatility. These early estimates for 3Q ’20 wells show the median well in most basins is not breaking even or only just at the threshold at current pricing. The December update shows improvements in median 2Q ‘20 SCOOP and Western Eagle Ford wells to sub-$60/bbl levels from well over $60/bbl in October, but the median 2Q ’20 Bakken breakeven estimate rose from $40.74/bbl in October to $45.90/bbl in December. What is causing these changes? Did 2Q ’20 SCOOP and Western Eagle Ford wells become more productive since October? How much of the variance in median breakeven estimates between the updates is due to changes in the sample size?
Changes in the sample size impact recently turned to sale well groupings most significantly due to state production reporting lags, which is highlighted by the growth in 2Q ’20 wells between the October and December updates. Additionally, production from newly turned in line wells does not always peak immediately in the first month and decline thereafter. Real production data is messy compared to type curves, so breakeven estimates for any given well become more accurate as additional production data becomes available. Both sample size and production history will affect the median breakeven by basin over time, but BTU View allows for users to view the breakeven data from the basin level all the way down to individual wells. By pushing updates to breakeven estimates more frequently, leading-edge economics are kept available while increasing the accuracy of breakeven estimates for older wells using additional production history.
BTU Analytics strives to provide our clients with accurate data in a timely manner, which is why we have increased our breakeven estimate publication frequency. Leading-edge economics, while imperfect, provide an early indication of recent well performance, allowing our clients to see data closer to real-time to make actionable decisions. Request more information about a trial of BTU Oil & Gas View Economics data to learn about our breakeven and inventory analysis.