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Week of June 25, 2012Volume 2, No. 25

Breakeven Price of Oil and Gas Plays
Plus HOT slides from Apache, Linn, Forestar, and Energy XXI




Breakeven : U.S. Oil Plays


June 22, 2012


Full Presentation




Breakeven : N.A. Gas Plays


June 17, 2012


Full Presentation


 With WTI oil prices experiencing a rapid descent to the current $80 per bbl level after reaching $110 as recently as February, the industry is dusting off the economic models with an eye towards breakeven prices for oil resource plays. In addition, models for gas plays are being further refined.  For reference, as of market close on June 27, 2012, near month (August) NYMEX closed at $80.21 per bbl with the 12-month strip closing at $82.04 per bbl.  Also, near month (July) NYMEX gas closed at $2.77 per MMbtu with the 12-month strip closing at $3.21 per MMbtu.

Slide above left, courtesy of Denbury and citing ISI Group research data dated June 15, reveals the WTI breakeven prices for a 15% after-tax ROR, excluding acreage costs, for popular U.S. oil plays.  This data shows Denbury's internal estimate for a large, Gulf Coast CO2 development project leads with a breakeven price of $50.  The Mississippi Lime play in Oklahoma is a co-leader at $50 and is followed by the Wattenburg at $51. Interestingly, the activity weighted average breakeven price of $75 per bbl is within striking price of the current 12-month oil strip price.

Slide above right, courtesy of one of Canada's largest midstream operators, Keyera, cites research from Canadian investment banking firm Peters & Co. Ltd.  The analysis shows breakeven analysis for 34 North American natural gas plays with additional detail regarding the impact of the liquids content. If you look to a breakeven price of US$3.00 per Mcf, only seven of 34 plays make the cut.  Two are in the United States (Eagle Ford liquids rich gas play and the Granite Wash play); five are in Canada (Glauconite horizontal, Cardium veritical, Cardium horizontal, Bluesky horizontal and Montney horizonal - Kaybob area).

More HOT slides and data below. 

In addition to the Breakeven analysis data above, PLS presents a sampling of hot slides from recent presentations.  On June 14, Apache hosted an Analyst Day and unveiled 15 Bboe potential (a 500% increase from 2011 proved reserves) from seven new plays.  Linn Energy provides the details of its $1.025 billion buy of a stake in Wyoming's Jonah field from BP.  Forestar hits the radar with its Credo Petroleum buy and Energy XXI updates on its successful oil-oriented efforts on the Gulf of Mexico shelf.

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    featured.slides from docFinder

    Slide Slide Slide Slide


    Target 15 BN boe


    June 14, 2012

    Linn Energy

    $1B Jonah Buy


    June 25, 2012

    Forestar + Credo 

    Combined 719K acres


    June 11, 2012


    Energy XXI 

    Oil fields on GoM shelf


    June 19, 2012

    Apache hosted an Analyst Day and New Ventures unveiled an impressive 15 Bboe of resources (8.8 Bboe discovered, 6.2 Bboe prospective). This is an amount 5X current booked reserves. The majority is in northern BC, Canada's Liard Basin (48 Tcf), where Apache believes to own the most prolific shale gas test in the world. Onshore in the US, Apache disclosed new positions in the Mississippi Lime extension (580,000 acres) and a Bakken extension (300,000 acres). In total, New Ventures has 3.8 MM acres.

    Linn Energy continues to grow by acquistions and announced a $1.025 billion buy in Jonah Field, Wyoming from BP. Resource potential of 1.2 Tcfe with 730 Bcfe (56% PDP, 73% gas) booked as proved. Low decline (~14%) production of 145 MMcfepd (55% operated, 100% hedged) with first 12 months EBITDA of $160 million. The deal gives Linn a strategic opearated entry into the Green River Basin. Another highlight of Linn is their 100% hedged position through 2016 - a higher level of cash protection than its peers.

    On June 4, Forestar announced a $145 million cash deal to buy Credo Petroleum. Forestar is publicly-traded with a dimensional land model strategy -- one that strives to deliver the greatest value from every acre owned. Businesses include oil and gas, real estate, water and forestry. The Credo acquisition doubles Forestar's production and reserves and creates scale and operatorship in strategic basins (Williston, DJ, Anadarko and Central Uplift). In the Bakken, Credo's 6,000 acres (WI of 8%) have a potential 400 drilling locations.


    At yet another recent Analyst Day,  Energy XXI highlights "Delivering the Next 5%" strategy.  EXXI owns five of the 11 largest oil fields on the GoM shelf and is the third largest GoM shelf oil producer (45,300 boepd).  Proved  reserves are 117 MMboe (70% oil, 70% PDP, 86% operated). Company owns the largest GoM shelf oil field - West Delta 30 with cumulative production of 730 MMboe (79% oil). A 5% increased recovery in OOIP in its top five reservoirs can double its reserves. EXXI is also exposed to 25 Tcfe through exploration.

    Full Presentation

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    featured.transactions from PLS global M&A database

    06/25/12Twin Butte acquires Avalon Exploration in share deal (Canada)$87 MM
    06/22/12Mitsui acquires UK North Sea fields from BP$280 MM
    06/22/12Cabot Oil & Gas strikes Pearsall acreage JV with Osaka Gas $250 MM
    06/21/12Linn Energy buys BP's stake in Jonah gas field, Wyoming$1,025 MM

    Source: PLS M&A Database