Energy Insights
Exploring 2025 WTI Breakevens
Our view: As our Global Oil Strategist, Brian Leisen argues in Expedition Log—Pick Your Battles, OPEC non-compliance and non-OPEC production growth have put the global oil market in an oversupplied state and contributed to soft pricing conditions. By our yardstick, the average WTI price in 2025 required to cover estimated total capital expenditures and base dividends across our global coverage group sits at about $60—with one-half our coverage in the $50s. The reengineered model many energy producers have embraced revolves around enhanced financial resiliency (via net debt reduction) and shareholder return optionality (with an accent on flexible buybacks), building a bigger moat around base dividends. Still, as Exhibit 1 illustrates, some producers would be wise to undertake proactive steps today to drive down their breakevens.
A $60 average—but many producers in the $50s. By our analysis, the average WTI price in 2025 required to cover estimated total capital expenditures and base dividends across our global coverage group sits at about $60. This average is a touch higher than we originally envisioned, but as Exhibit 1 illustrates, more than one-half our coverage falls below $60 with many companies in the $50s. We have also incorporated gas-weighted companies in this analysis for completeness, while noting that results can be distorted on relative pricing ratios, combined with the exclusion of hedging.
Reengineered financial resiliency. As we argued in By the Numbers and Life at $50, balance sheets across our global coverage group have deleveraged substantially since the pandemic and producers are well equipped to ride out inevitable commodity price cycles. Accordingly, while flexible share buybacks would temporarily compress should oil prices soften, common share dividends appear relatively well insulated for most producers.
If WTI pulls back substantially, capital and WTI breakevens will likely follow. Our 2025 analysis leaves capital investment and operating costs unchanged, but in reality, we would expect energy producers (especially on the smaller end of the spectrum) to respond rapidly to oil price softness by trimming their growth investment to partially insulate shareholder returns and limit net debt growth. That would suggest that WTI breakevens would come in lower than our figures.
Energy Best Ideas. Despite choppy oil markets, we continue to favour upstream oil-weighted producers that possess the ingredients framed above. Please see our RBC Global Energy Best Ideas list, published October 1, for a rundown of our top picks within our global coverage group. Our favourite producers globally include Shell in Europe, Chord Energy in the US, and Canadian Natural Resources, Suncor Energy, ARC Resources and Tourmaline in Canada