West Texas Intermediate (WTI) crude prices dipped into the low $60 per barrel range following President Donald Trump’s sweeping tariffs announced on 2 April. While the subsequent 9 April move to pause the new levies at 10% for most countries for the next 90 days helped WTI prices recoup some losses, the market remains extremely volatile. This price level is well above the fundamental upstream breakevens for most US shale players, especially those in the Permian. However, Rystad Energy finds that additional corporate items, including higher hurdle rates, dividend payments and debt service costs, means that the “all-in” corporate cash flow breakeven for many US oil players is closer to $62.50 WTI. If the recent price downturn is sustained, these price levels could threaten US oil production growth this year, as operators may be forced to cut back activity to maintain investor payouts.
Sentiment was already fragile following the late March release of the first quarter Dallas Federal Reserve Survey, which found oil and gas executives to be worried about the impact of President Trump’s trade policies. Fresh off of 2025 budgeting, US shale oil players issued guidance indicating another year of modest growth. Nearly all of the US Lower 48 oil growth this year is pegged to come from the Permian Basin. While Permian breakevens are the most commercial in the shale patch, exploration and production (E&P) companies have promised high dividends. At the same time, an uneven distribution of the best remaining acreage means that some of this growth may be at risk if lower prices are sustained.
In the figure below, we estimate the “all-in” corporate cash flow WTI breakeven for a new well in the US oil. E&P executives look beyond these metrics when making investment decisions. ‘Shale 4.0’ has given rise to higher hurdle rates applied to new activity, meaning the historic 10% discount rates have now given way to a much higher returns threshold. We see an 18% discount rate as more realistic for this exercise, which adds another $4.50 per barrel. We find that public players paid $9.30 per barrel of produced oil in dividends in 2024. With some of these dividends variable, we believe that $8.50 per barrel is a realistic figure this year. Lastly, with debt levels rising in recent quarters as operators expand their portfolios through acquisitions, debt service costs rose in 2024. During the year, companies paid $2.92 in interest payments per barrel of net oil production. Added all together, we find that the estimated ‘all-in’ corporate cash flow WTI breakeven is closer to $62.50 for new activity in 2025.
