September 1, 2021

Detailed Full-Cycle Costs of Tight Oil

Detailed full-cycle costs for Eagle Ford, Bakken, Permian, and DJ Niobrara by cost component (operating costs, royalties and production taxes, overhead, Finding and Development (F&D), producer return, and basis differential).

Since 2018, most of all oil wells drilled in US are horizontal wells with multi-stage fracking drilled in Tight Oil basins. Very limited number of wells are currently drilled in the conventional basins.

Full-cycle cost is sensitive to basis differential to WTI. Wide basis differential is usually associated with infrastructure constraints, which can be resolved within a few years as vested players (producers, marketers, and refiners) take long-term capacity commitments on new pipelines.

Capital and operating costs per unit of production are very consistent for different areas. Average operating cost ranges from US$9.10/Bbl to US$9.50/Bbl.

Full-Cycle Costs of Tight and Conventional Oil

Minimum full-cycle cost for Tight Oil wells is around US$36.40/Bbl (Permian Basin). Average full-cycle cost produced from Tight Oil wells drilled in 2018–Q1 2021 is US$50.80/Bbl.

Minimum full-cycle cost of conventional oil produced by vertical wells is around US$30/Bbl. This cost can be theoretically achieved in a limited number of wells drilled in the sweet spot of each basin. The average full-cycle cost produced from wells drilled after 2015 is US$72/Bbl and higher.

Well cost ranges from US$3M to US$5.3M for Tight Oil basins and from US$0.6M to US$1M for conventional basins.