OIL & GAS
OVERVIEW
Participants in the Oil & Gas industry are facing a plethora of challenges from all angles, ranging from rising alternative energy penetration to hurricanes in the Gulf. In this highly dynamic market place, upstream, midstream and downstream competitors are finding innovative ways to compete in this challenging environment. Much like the Oil & Gas end-users in the chemical industry, we are seeing specialized competitors outperform their generalist peers. These refined product and service offerings are driving economically viable options for suppliers below the $30/barrel price point. DPO&Co has supported Oil & Gas explorers and refiners in identifying profitable product and service offerings, refocusing innovation efforts towards these profitable offerings and analyzing asset portfolios to determine economic viability.
CASE EXAMPLE
4-week diligence: Built zero-based model to estimate economic feasibility for drilling a new North Dakota oil & gas well and assessed impact of declining shale gas prices on the U.S. fertilizer market
Situation
- Client was considering entering land lease contract in the Bakken basin and wanted independent view of economic feasibility and potential downstream applications of extracts and application
- Client was also considering exploration in the Eagle Ford, Marcellus and Sanish fields and was seeking benchmarking perspective of break-even analysis (ranged from $56-$61/bbl at the time)
- Client had investment hypothesis regarding NG that they wanted validated or refuted
Approach
- Conducted public desk research using 122 data sources across fields, benchmarking break-even commodity prices on oil only and Barrel Equivalent natural gas and natural gas liquid wellheads
- Created model that assessed:
- Initial production rate
- Annual decline rates
- Drilling and completion costs
- Acreage leasing costs
- Estimated Ultimate Recovery (EUR)
- Opex
- Royalties
- Forecasted production rates and variable sensitivities on 10-year time horizon
- Evaluated landed cash costs for ammonia, phosphate, sulfur and DAP throughout the U.S.
Impact and Results
- Presented independent view of best, worst and most-likely case break-even commodity prices for Bakken wellhead
- Determined it was unlikely that it would become economically practical to produce fertilizer in the U.S., even with declining shale gas costs
- Client avoided costly investment during volatile commodity market