Some oil companies are turning back to old, conventionally drilled wells instead of larger, more expensive frack wells for the promise of a better profit margin as the price of oil sits below $50 a barrel, The Wall Street Journal reports.
One frack well costs between $6 and $8 million. With land, labor and infrastructure costs rising, making a profit off fracking has become harder to do, even with the massive increase in production frack wells have over conventional wells.
Therefore, small and mid-sized companies are dedicating more resources to identifying old frack wells with previously unreachable areas of oil to tap with help from newer technology. Small companies can turn a profit doing this even of oil were to hit $10 a barrel in some cases, according to WSJ.
“For a company looking to generate a return on capital the opportunity is tremendous,” Wood MacKenzie analyst Robert Clark told WSJ. “But it can’t move the production needle for a bigger company.”
Conventional drilling’s promise of quick money won’t last forever, though. Unconventional oil drilling, like fracking in shale and sandstone, will overtake the more limited approach to oil excavation, according to a July report from Wood MacKenzie.
The top five unconventional oil drilling companies will make serious profit in three years when the price of Brent crude oil increases to $66 a barrel, the report predicts.
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