Recent discovery of the vast shale oil field in Texas could yield 20 billion barrels. The fact that this is the largest assessment of unconventional oil ever discovered goes to show that there is still the potential to find billions more — even in areas that have produced billions of barrels of oil already.
READ MORE: "Land Rush in Permian Basin, Where Oil Is Stacked Like a Layer Cake" (NYTimes)
This means that there is a continuum of economic opportunity from $20 to $100 oil. The growing inventories and the surplus of drillable acreage have created the opportunity for capital providers to de-risked, high-return, high cash-flow portfolios. This allows operators to react to price signals promptly, bringing production on-stream or slowing down in response to commodity market conditions.
When you factor in that drilling, completion, and exploitation techniques have driven down the cost curve, investors now have the opportunity to earn outsized returns with relatively low risks by financing specific horizontal and vertical wells n proven plays, with success rates in well understood reservoirs approaching 100%.
Upwards of $2 trillion in development spending will be accommodated in major U.S. fields in the next decade — all of which can lead to opportunity.
READ MORE: "Drilling Productivity Report" (US Energy Information Administration)