US cost inflation: the comeback
After three years of sharp declines, costs are rising again on higher drilling activity in America's tight oil patch
Since late 2014, North American shale producers have witnessed a significant decrease in wellhead breakeven prices. The main shale oil plays in the US saw a 20% year-on-year decline in 2015 and a further 29% fall in 2016. While a reduction in unit prices has been the main driver in lower breakevens, efficiency improvements and acreage high grading have also played their part. Rystad Energy research indicates that unit price and lease-operating expense (LOE) trends have contributed to about 57% of the reduction in breakeven prices, while acreage high grading and efficiency gains contributed to 18% and 25%, respectively. While unit prices, LOE and acreage high grading are all cyclical componen
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