There’s been a lot of debate regarding the future of oil prices (see March 19 post for one example), and everyone has their own theory about how long the low prices will last.
The lowest is Middle East production at US$27 per barrel. Heavy oil is about $47, Offshore Russia is $50, North American shale is $65, etc. Add another $20 per barrel (approximately) for administration costs, and discounts to the WTI oil price that many North American producers receive, and it’s easy to figure out that companies need to get at least US$100 per barrel to justify drilling—or have a chance of delivering a decent ROI.
In TAG Oil’s case, our production costs is under US$25 per barrel, even less than the lowest on this graph. We also receive premium Brent pricing, placing us in the top industry tier of production netbacks. So our ROI stays much healthier than most in times of low oil prices.