This isn’t the first time the energy sector has been forced to tighten their belts. Through 1987 to 1997, companies suffered through an extended period of lower prices and responded by cutting costs, which ensured “earnings grew strongly,” according to Bernstein research.
“While the efficiency gains succeeded in bringing down costs, even some of the best shale companies are in the red at this point. Evercore ISI told The Houston Chronicle that the average breakeven cost for North American shale used to be $65 per barrel. Efficiency gains brought that threshold down to $50 per barrel. That is an impressive achievement over the course of just 12 to 18 months, but it is still higher than current prices,” adds OilPrice.com.
West Texas Intermediate futures would need to gain more than 25% from current levels to reach $50 per barrel.
SPDR S&P Oil & Gas Exploration & Production ETF