Article from OGFJ -
Drilling costs have fallen with discounts being offered by rig operators and suppliers. The problem with the charts presented by Wall Street analysts is the assumptions underlying the figures which are rarely included. I have seen one chart which assumed that royalties and overrides in Eagle Ford and Permian were a maximum of 20%. In response to reservoir engineer/analyst questioning claim that Permian well make money at $40, a large Wall Street firm said that they do not include any overhead. I doubt they included acquisition costs. Same firm believes that the largest oil companies have "economies of scale" that allow them to drill and operate at far lower costs which is not my experience. So charts are being based on no salaries, office rent and expenses, etc. Same reservoir analyst said that oil companies are not profitable for new horizontal wells unless prices rise to closer to $65.