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Lower 48 cost outlook: what is the market telling us about 2020?

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19 December 2019

Lower 48 cost outlook: what is the market telling us about 2020?

Report summary

E&Ps across the Lower 48 benefited from a deflationary period over the past year. Costs fell for several important categories such as pressure pumping and rig day rates by double-digit percentages. However, the operating environment is considerably different from twelve months ago. Operators doubled down on capital discipline and scaled back activity with a roughly 25% drop in rig counts. Equipment is also aging, being cannibalized and OFS firms continue to cut headcount. The battle between E&Ps hunting for further cost improvement and OFS companies needing to claw back margins is setting up an interesting dynamic in the service sector. So, the key question is whether we should expect further deflation, or will the cost environment change in 2020?

Table of contents

  • Executive Summary
    • Scott, how have costs generally trended recently?
    • Which cost categories fell across all basins?
    • Are there basin-specific components worth paying closer attention to?
    • Which of the recent cost reductions are likely to stick around for 2020?
    • What could force costs higher next year?
    • What will be the impact of higher costs?

Tables and charts

This report includes 3 images and tables including:

  • D&C well cost changes from 2018 to 2020 for Permian
  • Average water costs by component by region
  • Difference between northern white and in-basin sand costs by region

What's included

This report contains:

  • Document

    Lower 48 cost outlook: what is the market telling us about 2020?

    PDF 796.17 KB