US shale wellhead costs have fallen by nearly 50pc from 2014 amid lower oilfield services expenses and improving efficiency.
Well-head costs, which does not include transportation and other expenses, fell to an average of $35/bl last year from about $63/bl in 2014, Bielenis Villanueva Triana, a senior analyst at oil and gas consultancy Rystad Energy said. The fall is even steeper when compared to the 2012 level of $74/bl.
The decline points to the success the industry has had in bringing costs down and its growing resilience in coping with a lower oil price environment. A host of US independent producers including Marathon Oil, Chesapeake and Hess who have detailed their 2017 investment and drilling plans so far, have all increased their capital expenditure (capex) guidance, some by double, even as oil prices hold near $50/bl, about half of where they were in 2014.
Well-head prices are set to inch higher this year, to average around $37/bl this year, as producers add back drilling rigs and services providers start charging more. But even at these prices the US shale industry remains one of the most competitive.
Of the total decline in costs, oilfield services have bore the bulk, at about 30pc. The remaining declines have come from efficiency improvements.
As drilling activities recover, oilfield services charges are expected to recover by some 18pc through to 2018 and by 14pc by 2020, which means prices will climb back up close to 80pc of what they were in 2014.
Partly as a result of declining costs and improving efficiency, the US shale oil industry saw a sharp step up in mergers and acquisitions.
The Permian saw deals worth $25.7bn, notable among them being EOG's $2.65bn purchase of privately held Yates and RSP Permian's acquisition of Silver Hill for $2.4bn. The Marcellus shale basin in Pennsylvania came in second, with $6.4bn of deals last year. Oklahoma's Scoop and Stack basins saw deals worth $4.6bn, followed by the Eagle Ford, also in Texas, at $2.9bn.
