When it comes to falling crude oil prices, the break-even point is becoming more and more critical to many oil and gas producers.
But what is the break-even point? $60? $65? Or even higher? It depends where the oil and gas exploration is taking place, as pointed out in a recent article by CBC.
There is a difference in the U.S. and Canada.
“Over the last week, the price of oil has fallen below the cost of profitably pulling oil out of the ground in the U.S. According to a survey of oil companies by the Federal Reserve Bank of Dallas, this break-even point is around $65 US per barrel in Texas. The market price for West Texas Intermediate, a widely used benchmark, currently hovers at around $59 US.
Meanwhile, in Canada, conventional mid-sized oil producers often have a break-even price in the $50 US to $55 US per barrel range. Oilsands companies can withstand much lower prices.
On Thursday, the country’s largest oil and natural gas producer, Canadian Natural Resources, said it could still cover maintenance capital and dividends to shareholders in the per-barrel range of the low- to mid-$40s.”
As CBC pointed out in the midst of its oil price article, Canadian oil and gas companies can withstand WTI prices in the range of $40 and still have enough cash flow to maintain production.