I understand that. He said no one will make any money below $50/b.
That is erroneous as capital is scaled back at lower crude prices and profit remains for the operator on existing production.
A bit dated, but graph 11 shows the differentials across US basins which average between $10/b to $20/b
https://incorrys.com/videos/NorthAmericanOilCost-October2024.pdf
When in demand costs rise (it's the old supply and demand thing). During any boom, rig rates and all services can cost double what they do when drilling is in the doldrums. I'm sure your analysts have it all figured out over the long haul, but the problem is, when the landmen are getting lease agreements signed, to get control of acreage is expensive. At the beginning of the Bakken boom (2000), when we were drilling in what would become Elm Coulee Field in Richland County, Montana, lease costs on acreage were as low as 25 cents an acre with a 12 1/2 percent royalty. When the word got out, and the concept had been proven (2008), prime lease acreage in North Dakota was leasing at $5,000 an acre, with a 20% royalty.
Not all of those wells produced, to the surprise of many. We were still defining the extent of the play, and what could be drilled when it cost $10 million just to drill the well (because rig rates, services, tubular goods (casing), even the pile of valves that go on a wellhead were all at a premium, as was trucking). To entice people into going to work in a cyclical industry, pay was not only top dollar, but allowances or housing (my town doubled in size in 7 years) were included, per diem rates at maximum, and all sorts of incentives were tacked on, just to get people to train to do the work. When the boom settled down, (consider 'walking rigs', multiwell pads, MWD and downhole tool reliability and efficiency all became commonplace), the 13,500 ft. vertical well that took 120 days to drill from spud to TD was now replaced with 21,000 ft. wells (10,000 down, 10,000 ft. of lateral, and the curve to get there) drilled in 10 days or less.
Either way, as all that was being developed, there was considerable expense involved, and some things did not work so well. Those that did were quickly adopted, but that immediately pushed the old kelly rigs into obsolescence, those without the pumps to run a mud motor at 4500 PSI of standpipe pressure for days were pushed to the side while those which could were at a premium. It was a great time to be in the industry, and a lot of changes happened.
Add in the Biden years, where a $50K pickup went up to $90K and every aspect of the industry became more expensive. Those costs haven't dropped much. They are written into every producing well, along with frac and completion costs, the costs of production equipment (which has borne the burden of moving target regulation over flaring gas, and the costs of emplacing feeder pipelines, building gas plants and oil processing facilities, and that development continues.
For an operator (oil company) to state they need $XX per barrel to be profitable isn't nonsense, it's just running the numbers on an industry where tomorrow's product price is always a gamble, and the costs of production tend to increase as the well ages, with additional production water to dispose of and changing gas/oil ratios requiring constant agility in production methods and rates to maximize profits.
If your guys are including legacy production from the 1980s or 1990s, for instance, before the boom reset rates everywhere (those housing prices are not going back down, not on the new units anyway, so the costs of personnel to keep things running won't drop much, either), then the numbers will not fully reflect the cost of new wells, because it averages in legacy production. That production is increasingly expensive to maintain over time, not a fixed cost, and includes the expense of downhole tool changes and failures, and maintaining equipment and locations in the face of intangibles, not the least of which is the weather itself.
Keep in mind, this isn't a charity, no matter how patriotic we may all be. There has to be something in it for the shareholders, or there won't be any CAPEX for the next round. It's like you have a store, you built it, you pay the help, but you can't stock the shelves again. You can only sell what you have. No doubt there is a built in 'cushion' in that minimum, but that's what funds the future, and keeps the company viable. It isn't just the $10 million in the ground for the last well, it's the $10 million (or more?) for the next one that has to be factored in.
