Breaking Even Is Breaking Bad

Just a reminder, breaking even is not the goal. The goal is to drill good wells that make LOTS of money in order to drill more wells from net cash flow and not have to keep borrowing money, which the shale oil sector is still doing, borrowing money.

Permian Basin Debt

Rystad says breakeven prices on a full cycle, total "public company" basis, including the cost of paying dividends, interest on debt, all general and administrative costs to stay in business, etc., etc. for U.S. shale is $62.50 WTI, at the well head.

Analysts that think the shale oil sector is going to go crazy again and we'll set another production record when prices reach $72.50 are nuts.

How is $10 a barrel going to help the Permian pay back its debt? It does not have anywhere close to 17,800,000,000 of proven, producing reserves from existing wells.

And regarding shale oil "resilience,"

Click to read

"This shift in strategy underscores the challenges faced by the shale oil industry in the current economic climate, where external factors such as tariffs and fluctuating oil prices play a crucial role in shaping the industry's future. The report highlights that the tariffs have increased the costs of drilling and completing new wells by 4.01% to 6%. This financial burden, coupled with the decline in oil prices, has made it difficult for companies to maintain profitability."

Imagine a business model so fragile that a 10% decrease in product prices, and/or a 4-6% increase in drilling and completion costs sends 30 rigs to the barn in 90 days and reduces the number of shale oil completions by 50%? Does that sound like a sector in the United States oil industry that is going to dominate the rest of the world? Or reduce the price of gasoline here in America by half with a drill baby, drill plan?

The Energy Inaccuracy Administration started 2025 by saying the U.S would grow shale oil by 400,000 BO this year. Then 60 days ago it slashed that to 200,000 BOPD. If by 4Q2025 we have indeed drilled 50% fewer shale oil wells in America, which seems probable, U.S. production will be down 200,000 BOPD, at least, and dropping like a rock in 2026.

All of this breakeven stuff, declining rig counts, fewer completions, poor economics that will never be sufficient to pay back debt and pay plugging and decommissioning costs, worrying about remaining drilling locations... is a function of depletion. All oil plays decline, then deplete, including shale oil and shale gas. Blaming one particular faction of depletion, like product prices, or costs, or regulatory constraints is based on nothing more than speculation.