- Base decline rate (i.e., the amount that production would fall one year out if no new wells were completed) for L48 natural gas and oil is 25% and 20%, respectively, based on production data from more than one million wells.
- At year-end 2011, Marcellus, Haynesville, Barnett and Fayetteville accounted for ~60% of new monthly gas production additions in the L48. Bakken, Eagle Ford and Permian accounted for ~60% of all new oil production additions.
- ITG Investment Research calculated break-even NYMEX prices for over 24,000 individual wells in the L48 using over 140 different type curves. ITG estimates the Marcellus is the lowest-cost gas play with a weighted average break-even price of $3.81/Million cubic feet (Mcf).
- The current horizontal rig-weighted supply cost for gas plays averages $4.35/Mcf, while the figure for oil and liquids-rich plays averages ~$2.94/Mcf, or $74 per barrel (bbl).
- Based on rig assumptions, ITG's model shows L48 natural gas production will fall slightly through 2013 and then grow again, but at a much slower rate than that of the last few years. ITG estimates the average break-even production cost of incremental new gas was ~$4.30/Mcf in 2011 and calculates this figure has now declined to ~$3.70/Mcf. The drop reflects a greater percentage of rigs in liquids-rich plays plus a greater percentage of dry gas coming from the low-cost Marcellus.
- ITG forecasts total L48 onshore oil production will reach 10 million bbl per day by 2025, up from the current rate of about six million bbl per day. Bakken, Eagle Ford and Permian are the three main growth drivers, each expected to contribute over 1.5MM bbl per day in 2025 and each having current weighted average break-evens of ~$65 per bbl for West Texas Intermediate crude. We expect L48 monthly oil production additions to increase to over 300,000 bbl per day each month by 2015, up from current addition levels of over 200,000 bbl per day each month and the 2009 rate of 100,000 bbl per day each month.
- If the additional processing capacity build-out continues in the L48 and liquids-rich plays are processed to full capacity, ITG estimates natural gas liquids production (excluding C5+ products) could grow to 3.2MM bbl per day by 2020 and ~3.5MM bbl per day by 2025.
ITG Investment Research: U.S. Energy Reserves More Than Double Official Estimates
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
More than 30 investing pros with skin in the game give you actionable insight and investment ideas.