By: Dan Murtaugh and Naureen S. Malik (Bloomberg)
(Bloomberg) -- A year after the bear market in crude began, oil companies have cut workers, are using fewer rigs and have less money to spend.
But they’re still pumping more oil.
BP Plc, Royal Dutch Shell Corp. and Hess Corp. are among the companies producing more crude than a year ago. In the U.S., shale explorers have focused on the most productive parts of their land, drilled faster and better wells there and negotiated lower prices from oilfield service companies. It’s helped keep total U.S. output about 1.6 percent higher than at this time last year, even as drilling rigs have fallen by 63 percent.
“A well that broke even at $60 18 months ago is now at $40,” said Harold York, a senior analyst for Wood Mackenzie Ltd. in Houston. “If drilling a well generates a return greater than the cost of capital, companies are going to do it. That’s the rationale behind producing in a low-price environment.”
High production all year has pushed U.S. inventories to the highest October level since 1930, helping keep prices deflated. West Texas Intermediate futures settled at $46.06 a barrel Thursday, down from a 2014 closing high of $107.26.