Old Oil Is New Again; Companies say conventional wells can be profitable, no fracking required

 

From California's Central Valley to the Native American lands of Oklahoma, more small- and mid-sized oil firms--many backed by private equity--are forgoing expensive shale drilling projects and opting for old-school wells instead.

As crude prices languish under $50 a barrel, and with increasing costs for land, labor and infrastructure, some shale fracking operations are starting to look expensive. That has some investors turning to conventional drilling to make a profit.

Tapping shale involves fracking, drilling horizontal wells that extend for more than a mile, then using a highly pressurized mixture of water and chemicals to break open underground rock layers. The process has attracted billions of dollars in capital because it can unleash huge volumes of oil, but at today's prices most producers are losing money on every barrel they pump.

Some oil companies are choosing instead to apply newer technology and methods to vertical wells in century-old American oil fields, betting they can wring out faster and safer returns. The trick, they say, is finding the special locations where stranded oil can be profitably extracted from conventional wells, which are cheaper. They tend to cost less than $1 million, compared to between $6 million and $8 million for an average shale well.

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