Seemingly, the industry is adapting well to the change in the commodity price environment. However, a word of caution is in order.
The breakeven price is highly sensitive to the discount rate and "cost overburdens" included in the calculation.
A case can be made that a higher discount rate should be used in the current environment as capital is scarce and more expensive. Cost overburdens per well have also increased as activity contracted.
The above example illustrates that while it may appear that well economics have improved dramatically relative to a year ago, the comparison is not always "apples to apples":
Officials from Range Resources Corp.(NYSE:RRC) say that two recently drilled natural gas wells in Washington County help demonstrate that the company is sitting atop of the best part of southwestern Pennsylvania's shale fields.
The wells, one tapping the Marcellus and the other tapping the Utica, each posted what the company believes are record initial production rates.
The company announced at the end of 2014 that the Utica well, the Claysville Sportsman's Club No. 1, posted a 24-hour initial production rate of 59 million cubic feet. The well has since yielded 1.2 billion cubic feet of gas.
"Albeit early, the well is meeting all our original expectations," said Range COORay Walker.
On Tuesday, the company revealed that it had sunk another monster well into the Marcellus. That well has posted a record initial production rate 43.4 million cubic feet of gas, according to Range.
"We believe we've captured a large position with stacked pay potential in the best rock in the basin," said Walker.
As for the Utica well, Range is planning to bring another on the same pad into sales this summer. It also has plans to drill a third there.
We expect the Utica will be different from the early years of our Marcellus play in that it can be drilled in a true development mode right from the beginning," Walker said.
He said they'll drill from existing Marcellus Shale pads and make use of existing infrastructure.
"Essentially we can drill the wells like a very efficient manufacturing process," he said.
Executives said they'll look to incorporate the Utica into a drilling program as early as next year, if market conditions and well economics support it.
"Aluminum Corp. of China has turned to a local politician, who has been out of industry for more than a decade, to head up the nation’s biggest producer, naming the mayor of Chengdu as its chairman.
Ge Honglin replaces Xiong Weiping, 58, whose five-year tenure as head of the state-run company known as Chinalco ends with a top executive embroiled in a graft probe and the company’s listed unit, Chalco, posting a first-half loss of 4.12 billion yuan ($673 million) due to lower aluminum prices."
- The vice chairman of Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, is being investigated for graft as China intensifies its corruption crackdown.
Sun Zhaoxue, also general manager of parent company Aluminum Corp. of China, is being probed for “serious violations of discipline and law,” the Chinese Communist Party’s Central Commission for Discipline Inspection said in a one-line statement late yesterday, using a phrase that signals a corruption probe. Sun returned to the company in October from his role as president at China National Gold Group Corp., the country’s biggest gold producer by output.