Shale productivity and operating costs…

Some interesting data from the Dallas Federal Reserve Dallas Federal Reserve:

Dallas Fed Q2.png

I get the survey methodology isn’t perfect, but it’s a good indication. The trend on cost is interesting, down on 2016 but up on 2017 as cost pressures rise despite productivity improvements.

Look at the required operating costs:

Dallas Fed Q1.png

A slight rise since last year but comfortably below the spot price. The US has shown that financing costs are important, but ultimately given a downturn these producers will find capital provided they can produce above the marginal operating cost per barrel.

Cost pressures are on the rise as capacity constraints become clear. But this is an industry operating comfortably within in its cost and profitability constraints at current price levels.

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