Cost Components

Updated December 2017

This figure presents the gas-cost categories used in this assessment:

  • Producer Return – Calculated rate of return (15%) before income tax.
  • Finding & Development (F&D) – Capital costs divided by the EUR.
  • G&A – All general and administrative overhead expenditures.
  • Royalties & Production Taxes – Taxes for government and royalties for freehold owners and others.
  • Operating Cost – Lifting and field processing costs.
  • Basis Differential – Differential between the gas price in the producing basin and Henry Hub; used to compare gas costs from different basins.
   Download File    Download Data    Read More ...

2016 New Gas Supply Cost and Break-Even Gas Price by Play – Company Data

Updated December 2017

This figure compares the average full-cycle cost of the 23 assessed gas plays with results sorted from low to high break-even gas price (black bars), referenced to Henry Hub. As a benchmark, Solomon presents the average 2016 Henry Hub gas price to allow a quick comparison of gas costs with price. Gas-condensate plays have the lowest break-even gas prices, remaining economic with a Henry Hub gas price of 2.00 USD/Mcf.

   Download File    Download Data    Read More ...

2016 New Gas Supply Cost and Break-Even Gas Price by Play – Solomon Assessment

Updated December 2017

This figure presents the full-cycle cost components and break-even gas prices (white horizontal bars) for the assessed plays based on Solomon’s analysis of Estimated Ultimate Recoveries (EURs). Solomon has developed production models based on a representative sample of recent gas wells and has derived EURs for each play assessed. The Solomon gas cost models correlate quite well with producer average data for most basins and plays; however, the Anadarko, Bluesky-Glauconite, and Montney British Columbia (BC) South Wet plays have higher F&D costs due to Solomon’s assessment of lower EURs.

   Download File    Download Data    Read More ...

2016 Play Ranking

Updated December 2017

This figure provides a play ranking, using the remaining gas resource potential and Solomon’s average 2016 break-even gas price for key plays. The area of the bubble is based on the production added in 2015. As a benchmark, Solomon presents its forecasted 2025 Henry Hub gas price to allow a quick comparison of available resource with the expected longer-term natural gas price.

Observations on the play ranking include the following:

  • Gas condensate plays have the lowest break-even gas price due to the significant condensate revenue, which is based on the price of oil.
  • NGL-rich gas and gas-condensate plays tend to have smaller remaining gas resources because these gas types exist in a narrow range of geothermal temperatures.
  • Dry gas is stable across a wider temperature range, which consequently results in the largest resources.
  • Drilling still occurs in higher-cost plays—in sweet spots that are less expensive—and anticipated future costs may be expected to fall as drilling and completion effectiveness improves.
   Download File    Download Data    Read More ...

US Full-Cycle Cost Changes, USD/Mcf

Updated December 2017

This figure compares the full-cycle play cost of various gas basins and plays across the US. The full-cycle play cost continued to fall in 2016 for virtually all plays. Only plays with high condensate yields were profitable in 2016. The most significant drop in full-cycle play cost occurred in Eagle Ford, where producers focused on the high-productivity sweet spots of the play. A significant drop in the East Texas/North Louisiana full-cycle play cost is associated with the growth of well initial productivity (IP) in the Haynesville, a result of technology enhancements as well as a focus on sweet-spot drilling. Arkoma, and particularly the Woodford and Fayetteville plays, have become mature, which has led to a higher full-cycle play cost.

   Download File    Download Data    Read More ...

Western Canadian Full-Cycle Cost Changes, USD/Mcf

Updated December 2017

This figure compares the full-cycle play cost of various gas plays in Western Canada. Observations of the full-cycle play cost changes include the following:

  • The full-cycle play cost and break-even gas price continued to fall in 2016 for all plays.
  • Montney Alberta condensate and Duvernay plays have a zero break-even gas price due to significant liquids uplift.
  • The Montney full-cycle play cost and break-even gas price is on average lower than for the Marcellus. Montney and Marcellus will remain the fastest-growing plays in North America.
  • The break-even gas price and full-cycle play cost in the Bluesky-Glauconite, Wilrich, and Notikewan-Falher are compatible with the Montney break-even gas price and full-cycle play, which will lead to further development of these plays over the next several years.
   Download File    Download Data    Read More ...

2016 Break-Even Henry Hub Gas Price

Updated December 2017

This figure shows the break-even gas price supply curves (based on company data) for North American gas basins using the results from the last three Economic Ranking Assessments. The supply curve is based on the amount of production added on an annualized basis, by basin or play. Observations of the break-even gas price supply curves include:

  • While break-even gas prices have continued to decline, most new gas supply added early in 2016 was uneconomic with the 2016 Henry Hub gas price.
  • Overall, break-even gas prices have fallen as drilling has shifted from higher-cost conventional plays to low-cost high-NGL-yield resource plays and as oil and gas prices have fallen.
   Download File    Download Data    Read More ...

Utica Gas Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This chart shows Utica Gas Resource and 2016 Break-Even Gas Price Distribution. Development has been constrained by a lack of adequate infrastructure and take-away capacity, leading to large gas basis differentials and deteriorating drilling economics. With significant new pipeline capacity coming on-stream in the 2017–2018 period, basis differentials will decrease, driving the gas-condensate break-even gas price to the lowest of North American gas plays. The map on the right illustrates the hydrocarbon distribution in the Utica play ranging from dry gas (blue) to the southeast and gas condensate (red) to the northwest. The top left chart illustrates Solomon’s assessment of the break-even gas price for the remaining Utica gas-condensate, rich-gas, and wet-gas resource, estimated from the supply cost analysis of this play. The bottom left chart presents Solomon’s assessment of the break-even gas price for the remaining Utica dry-gas resource.

   Download File    Download Data    Read More ...

Marcellus Gas Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This figure shows Marcellus Gas Resource and 2016 Break-Even Gas Price Distribution. As with Utica, Marcellus gas production growth has been constrained by a lack of adequate infrastructure and take-away capacity for gas and NGL, leading to an increased gas basis differential and deteriorating drilling economics. The map on the right illustrates the hydrocarbon distribution in the Marcellus play ranging from dry gas (blue) to the southeast and northeast and gas condensate (red) to the west. The figure also identifies the two core areas—northeast Pennsylvania (dry gas), and southwest Pennsylvania and West Virginia NGL-rich and dry gas.

The top left chart illustrates Solomon’s assessment of the break-even gas price of the remaining Marcellus Southwest gas-condensate, rich-gas, and wet-gas resource, estimated from the supply cost analysis of this play.

The bottom left chart illustrates the break-even gas price of the remaining Marcellus Southwest and Northeast dry-gas resource. The condensate and NGL-rich gas resource is quite extensive, though with a moderate break-even gas price. The Marcellus and Utica dry-gas plays have extensive resources that become economical at gas prices greater than 3 USD/Mcf.

   Download File    Download Data    Read More ...

Eagle Ford Gas Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This figure shows Eagle Ford Gas Resource and 2016 Break-Even Gas Price Distribution. The Eagle Ford shale-oil and gas play has developed rapidly, with production surpassing that of the Bakken. This analysis is of the high-condensate-yield gas in the center of the play, which greatly improves producer economics. With the low break-even gas price, drilling for gas-condensate will increase as oil and gas prices recover.

The map on the right illustrates the hydrocarbon distribution in the Eagle Ford play ranging from dry gas (blue) to the southeast, to oil in the northwest.

The top left chart illustrates Solomon’s assessment of the break-even gas price for the remaining Eagle Ford gas-condensate, rich-gas, wet-gas, and dry-gas resource, estimated from the supply cost analysis of this play. The gas-condensate resource is quite extensive, with a low break-even gas price.

   Download File    Download Data    Read More ...

Haynesville Gas Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This chart shows Haynesville Gas Resource and 2016 Break-Even Gas Price Distribution. Production in the Haynesville over-pressured dry gas play has declined over the last several years as drilling has shifted to liquids-rich plays. With typical well IPs, it is one of the lowest-cost dry-gas plays in North America. The Bossier shale has potential in the core of the Haynesville play.

The map on the right illustrates Solomon’s assessment of natural gas resource geographic distribution using initial well productivities in the Haynesville play in East Texas–North Louisiana and the Lower Bossier play.

The top left chart illustrates Solomon’s assessment of the break-even gas price of the remaining Haynesville dry-gas resource, estimated from the supply cost analysis of this play. The gas resource is quite extensive, with a moderate break-even gas price.

   Download File    Download Data    Read More ...

Duvernay Gas Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This chart shows Duvernay Gas Resource and 2016 Break-Even Gas Price Distribution. Producers in the Duvernay have focused on developing the northern part of the condensate-rich sweet-gas play, which has one of the lowest break-even gas prices in North America. Currently, development is limited to the narrow condensate window in the north core area. Here, wells have both high production rates and high condensate yields.

Evaluation of the southern portion of the Duvernay play has lagged the north, due in part to the ongoing infrastructure development and the more exploration-oriented context of this area. Drilling costs have been reduced significantly, with efficiencies and technology enhancements in drilling and completion techniques.

The map on the right illustrates the hydrocarbon distribution in the Duvernay play ranging from dry gas (blue) to the southwest and oil (olive green) to the northeast. The figure also identifies the developing north Duvernay gas-condensate core area.

The top left chart illustrates Solomon’s assessment of the break-even gas price of the remaining Duvernay gas-condensate, rich-gas, wet-gas, and dry-gas resource, estimated from the supply cost analysis of this play.

   Download File    Download Data    Read More ...

Alberta Montney Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

This figure shows Alberta Montney Resource and 2016 Break-Even Gas Price Distribution. In contrast to the previously discussed shale-gas plays, the Montney is a tight-gas play with lateral facies variations of fine-grained sedimentary rocks. This may lead to areas of non-commercial or low gas-rate production. The gas ranges from sweet to 6% H2S. Currently, drilling is focused on the condensate- and NGL-rich portions of Alberta and of BC southwest of Fort St. John. In the northern BC area of the play, most drilling has been in anticipation of west coast LNG development.

The map on the right illustrates the hydrocarbon distribution in the Montney play ranging from dry gas (blue) to the southwest and oil (olive green) to the northeast. The figure also identifies the three core areas—BC North, BC South, and Alberta—which are further subdivided based on the hydrocarbon type.

The top left chart illustrates Solomon’s assessment of the break-even gas price of the remaining Alberta Montney gas-condensate-rich wet- and dry-gas resource, estimated from the supply cost analysis of this play.

   Download File    Download Data    Read More ...

BC Montney Resource and 2016 Break-Even Gas Price Distribution

Updated December 2017

The charts on the left illustrate the break-even gas price of the remaining BC South and North Montney gas resource. The map on the right illustrates the hydrocarbon distribution in the Montney play, ranging from dry gas (blue) to the southwest and oil (olive green) to the northeast. The figure also identifies the three core areas—BC North, BC South, and Alberta—which are further subdivided based on the hydrocarbon type.

   Download File    Download Data    Read More ...

Utica Shale Condensate Cost Components

Updated December 2017

This figure summarizes the full-cycle costs and break-even gas prices for 2016 drilling programs, previous studies, and Solomon’s assessment for the Utica gas-condensate play.

   Download File    Download Data    Read More ...

Utica Rich Gas Cost Components

Updated December 2017

This figure summarizes the costs and prices for the Utica NGL-rich gas play.

   Download File    Download Data    Read More ...

Utica Dry Gas Cost Components

Updated December 2017

This figure summarizes the costs and prices for the Utica lean-dry gas play.

   Download File    Download Data    Read More ...

Northeast Marcellus Dry-Gas Cost Components

Updated December 2017

This figure summarizes the full-cycle costs and break-even gas prices for 2016 drilling programs, previous studies (in 2009, the basis differential for the Marcellus was positive (i.e., Marcellus gas price was higher than Henry Hub); this gives a break-even gas price that is lower than the full-cycle cost), and Solomon’s assessment for the northeast dry-gas Marcellus play.

   Download File    Download Data    Read More ...

Southwest Marcellus Wet-Gas Cost Components

Updated December 2017

This figure shows the costs and prices for the southwest rich-gas Marcellus play.

   Download File    Download Data    Read More ...

Southwest Marcellus Dry-Gas Cost Components

Updated December 2017

This figure presents the costs and prices for the southwest dry-gas Marcellus play.

   Download File    Download Data    Read More ...

Eagle Ford Gas Condensate Cost Components

Updated December 2017

This figure summarizes the full-cycle costs and break-even gas prices for 2016 drilling programs, previous assessments, and Solomon’s assessment for the gas-condensate Eagle Ford play.

   Download File    Download Data    Read More ...

Haynesville Gas Cost Components

Updated December 2017

This figure summarizes the full-cycle costs and break-even gas prices for 2016 drilling programs, previous studies, and Solomon’s assessment for this play.

   Download File    Download Data    Read More ...

Duvernay Gas Cost Components

Updated December 2017

The figure summarizes the full-cycle costs and break-even gas prices for 2016 drilling programs, previous studies, and Solomon’s assessment for the north Duvernay gas-condensate play.

   Download File    Download Data    Read More ...