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TMS only one of 19 shale plays now unprofitable

Oil prices have dropped so low that 19 shale plays in the U.S. are no longer profitable. On that list are popular plays such as the Eaglebine, the Tuscaloosa Marine Shale (TMS), various Permian formations, and even parts of the Eagle Ford play.

Crude prices have hit $75 per barrel, and Goldman Sachs Group Inc. estimates this price is here to say for another four months. According to Isaac Arnsdorf for Bloomberg, Goldman Sachs slashed its price forecast for the first quarter from $90 per barrel to $74 per barrel when West Texas Intermediate crude, the benchmark crude oil for the U.S., hit $73.25 per barrel last week. And it’s going to hit companies harder than they’re letting on.

“Everybody is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that is just smoke,” said Daniel Dicker, president of MercBloc Wealth Management Solutions with 25 years’ experience trading crude on the New York Mercantile Exchange. “The shale revolution doesn’t work at $80, period.”

Each shale play is different, of course, and varying conditions and depths result in different costs for drilling and production. The break-even point is dependent on these expenses. For the TMS in Louisiana and Mississippi, the biggest factor is the already-minimal levels of production. The TMS is largely unexplored, and companies developing the shale have yet to discover any major payzones.

Halcón announced last week that it was putting a pause on development in the TMS. Goodrich Petroleum, which puts about 80 percent of its capital budget into the TMS, has yet to announce efforts to ease up on the play. Goodrich President Robert C. Turnham Jr. said earlier this month that break-even analyses can often fail to factor in longevity of the project, indicating that the company is looking at the long-term.

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