(Reuters) - New efficient drilling practices may drive breakeven rates in the best areas of the Bakken shale oil play as low as $58 per barrel, Wood Mackenzie said on Tuesday, far lower than the traditional $70 per barrel figure frequently touted by analysts.
The fast adoption of multi-well pad drilling, or the ability to drill several wells from one location, should reduce the average cost per well to $7.5 million on average in 2014, allowing companies to make more off each barrel of oil, Wood Mackenzie analyst Jonathan Garret said.
"The major driver of (well cost) reduction has to do with the number of wells drilled from pads," Garret said. "You're now drilling 3, 4, 12, even 16 wells from a single pad."
This year, more than 90 percent of wells drilled in the Bakken will be drilled from multi-well pads, Garret said. Multi-well pad drilling is more efficient by reducing the amount of time it takes to drill each well as well as the equipment used.
Bakken breakeven prices are closely watched by the industry because, while the development of the massive shale play has outpaced forecasts in recent years, a lack of pipeline infrastructure has kept Bakken oil prices relatively low.
The fear is Bakken's production growth, a force driving the U.S. oil renaissance, will slow once local oil prices reach the breakeven level. North Dakota is home to the largest part of the play but it also stretches into Montana and over the border to Canada.
A Wood Mackenzie report issued on Monday estimated breakeven costs based on sub-plays. Breakeven rates in the Sanish basin, one of the best areas of the play, are expected to average $58 per barrel, while breakeven costs in the Nesson anticline are forecast to be $61 per barrel.
Companies are expected to spend more than $15 billion on drilling and completion in the Bakken and Three Forks formations in 2014, according to the report, a figure that could mean as many as 2,000 new wells in the region.
Continental Resources remains the largest player there with
over 1.2 million acres. In 2013, the company reported its average costs per well were about $8 million and is targeting costs of $7.5 million this year, which supports Wood Mackenzie's projections.
Smaller players are getting in on the cost benefits as well.
Oasis Petroleum, which has about half a million acres in the Bakken, holds acreage along two typically less fruitful areas, the Williams county perimeter and sub-play 13, a new play just across the Montana border, which Wood Mackenzie called the 'Montana Frontier'.
Oasis reported seeing results in these regions that are on par with the best parts of the Bakken.
(Reporting by Elizabeth Dilts; editing by Sabina Zawadzki and Andrew Hay)