Though some are quick to assume that the recent drop in crude oil prices indicate the demise of the North American shale revolution, a recent analysis by FMI indicates otherwise.
In company’s fourth quarter Oil and Gas Advisor, Scott C. Duncan, vice president of investment banking with FMI Capital Advisors, writes that shale gas development is increasingly profitable and becoming more resilient to pricing headwinds thanks in part to the technological advancements made by U.S. oil and gas producers.
In June 2012 when WTI oil prices averaged $82.30 per barrel for the month, the last time the WTI price fell to the low $80 range, exploration and production companies in the Bakken shale play were averaging 281 barrels per day (bpd) per rig. Due to increased drilling efficiencies a producer today could expect 524 bpd per rig.
Thanks to these increased efficiencies and technological advancements, Duncan’s report states that, assuming equal costs, a producer would earn $42,968 per rig each day at the aforementioned $82 WTI price compared to $23,126 in 2012.
Prior to joining FMI, Duncan managed construction materials acquisitions and divestments for Lafarge SA’s business development group in the United States. Prior to Lafarge, he worked on the equity research team at BMO Capital Markets, assisting with research coverage of oil and gas exploration and production companies.
Also in this issue of the Oil and Gas Advisor, FMI looks at the United States and Canadian mergers and acquisition activity of energy-focused contractors and engineers. The report includes the purchase of Laney Directional Drilling Co. by Falcon Investment Advisors; Maxim Partners LLC and Pacer Corp. by MasTec Inc.
Looking at 2015 and beyond, FMI predicts that as the oil and gas industry continues to blossom on both sides of the border that cross-border merger and acquisitions will continue.
Two feature articles on construction risk management and margin growth round out the report. To download a copy of the fourth quarter Oil and Gas Advisor, or to sign up for a free subscription to future reports, visit fminet.com/resources.