Will New Oil Reserve Discovery Impact Crude Oil Prices?

Ned Piplovic

oil prices

Total S.A. (NYSE:TOT) announced on Jan. 31 that it discovered a significant oil reserve in the Gulf of Mexico in cooperation with the Chevron Corporation (NYSE:CVX).

The new reserve is Total’s largest discovery in the area. Kevin McLachlan, senior vice president of exploration at Total, said, “Ballymore is the largest discovery by Total in the prolific Gulf of Mexico and bolsters our new exploration strategy put in place since 2015”.

The Ballymore’s location is in the Mississippi Canyon area of the U.S. Gulf of Mexico and just a few miles from Chevron’s existing Blind Faith platform. The water depth at that location is approximately 6,500 feet with a total well depth of nearly 30,000 feet. The companies are currently drilling additional sidetrack wells to assess the oil reservoir more accurately, but initial estimates indicate almost 700 feet of net oil depth.

While Total took an active role in the exploration effort, the French company’s TOTAL E&P USA Inc. subsidiary holds a minority ownership position in the joint venture and Chevron’s subsidiary Chevron U.S.A. Inc. serves as the operator of the project and holds a 60% majority stake.

Oil production in the U.S. Gulf of Mexico currently accounts for approximately 1.7 million barrels per day – 17% of total U.S. oil production. Before the discovery of new reserves, the Gulf oil production was expected to add 100,000 barrels per day by 2019.

Merely adding new sources of oil supply could put downward pressure on oil prices, but the location of this discovery could have a double effect on oil prices going forward. Deep sea drilling is complex, demanding and costly. However, the break-even price for production in this site could be well below $50 per barrel.

Exclusive  Will the Bull Market Stand the Test of New Taxes?

While that cost might seem high, it is competitive with lower end of break-even costs for shale oil exploration. The cost of oil extraction for some shale oil sites might average close to $40 over the long term. However, most industry experts estimate extraction cost for fracking of horizontal oil wells to be closer to $60 per barrel and some wells are as much as 50% higher than that.

Chevron’s share price was 12.5% higher over the past 12 months and Total’s share price rose 14% over the same period. The price of oil rose 22% in the past year.





Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.


Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

previous article

H&M Hennes & Mauritz AB (ST:HM-B) saw its share price drop more than 10% during trading on Jan 31, amid investor concerns regarding the company’s plan to close more stores this year than any year in the past two decades. While most U.S. customers have become familiar with the H&M brand since 2000 when the company entered the U.S. market, the Swedish fashion retailer dates to 1947 and has been expanding significantly throughout mainland Europe since at least the 1970s. After open


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Profits Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • Intelligence Report
  • Bullseye Stock Trader

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

  • GameChangers
  • Value Authority
  • High Octane Trader
  • Triple-Digit Trader
  • 2-Day Trader
  • IPO Edge
  • Inner Circle

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Technical Traders Alert
  • Success Trading Group


Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor