U.S. benchmark crude closed at $78.68 on Nov. 5, down over 25% since June 2014. 

During Hess Corp.’s recent third-quarter conference call, CFO John Rielly estimated that every $1 drop in crude prices would affect the company’s fourth-quarter net income by around $8 million. 

 While several other oil and gas companies have downplayed the effects of low oil prices, most are reviewing budgets and planned activity for 2015 in anticipation of sustained prices in the low $80s or less.

But the current drop in oil prices doesn’t appear to be having much of an effect on the majors’ deepwater investment. In late October, Hess announced it would spend $1.5 billion to develop the Stampede field in the deepwater Gulf of Mexico 115 miles south of Fourchon, La. A two-rig drilling program is planned with the first rig commencing operations in the fourth quarter of 2015. First production is expected in 2018.

More questionable is the fate of deepwater operations run by smaller independents. Given the high costs of deepwater development, many of these smaller operators are highly leveraged and extremely vulnerable to sustained low oil prices. If prices remain low, look for a round of acquisitions as larger operators acquire distressed smaller operators with high-grade leases. Pending and potential deepwater developments not currently funded or begun are at risk in the short term. 

The overarching factor in the scenario above is shale production. The U.S. market is deluged with shale production, to the point that some energy pundits predict a day of reckoning when U.S. production exceeds refinery demand. 

The answer is an oil and gas export program to shed production that exceeds internal demand.