How much lower will tight oil costs fall this year? Report

Insight 14 May 2020

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Report summary

Almost as soon as prices collapsed, tight oil players went to work, pushing costs lower. Comments during this current round of earnings are proving many have successfully secured valuable concessions from service providers. The OFS sector was woefully oversupplied, to begin with, but cratering demand means E&Ps have even more leverage. Prices for big-ticket components are falling once again. We are tracking specific OFS prices, and it doesn’t look like we’ve hit bottom yet. So how long will deflationary pressure remain? Like many E&Ps, numerous service providers entered this downturn with poor financial health. There are long-term risks and implications for the OFS sector associated with today’s falling costs. But for the time being, E&Ps stand to benefit. How much of an impact is this latest round of cost reductions having on tight oil economics?

Executive summary
- Starting from the bottom
- The scale of additional OFS price cuts
- Are new well costs low enough to make a difference?
- Where costs go from here