Which producers will shut in first?

[BLA + 1,666]

7 hours ago, BLA said:

mining

 

2 hours ago, El Nikko said:

It almost feels like there was a 'long march' through the institutions

CDC is a joke.  They insisted they develop the test kits.  They screwed up.  The kits didn't work.  Other test kits went out early but sans the reagent .  .  .  .   which is produced in . .  . you guessed it China.  

Many of the CDC workers are "retired in place" biding time until they get their very generous Federal pension benefits.

Novartis Pharma is charged with producing the hydroxychloroquine for the U.S. .  They were interviewed yesterday.  Despite continued successful trials by numerous U.S. doctors that all say it is a game changer the Novartis executive said we need more data.  

When asked when the HCQ mfg will ramp she stated, "We hope by the end of April"   

Translation: Maybe in May.  Probably by June. That's if they can source the precursor materials.  This could have been over by May if the U.S. could source the HCQ.  The testing excuse is just that  .  .  .   just an excuse. 

Nothing you can do. 

Edited April 2, 2020 by BLA

[BLA + 1,666]

7 hours ago, Douglas Buckland said:

 

“By the way I am not 16 !  I'll be 18 August 29th.”

Well, that explains alot.....

Doug 

I'm sorry for having an honest debate on the state of the industry.  I realize opinions that don't agree with yours are unwelcomed.

This forum has turned into a venue to commiserate about the changes to the industry. 

You can lament your predicaments and yearn for the "Good 'ol Days". Let's go back and read our Old Oil Pro articles. They will help us feel better.  I choose to look forward to what could be.

I agree the government should not be bailing out Oil majors, Wallstreet firms and Cruise Lines.  Most of them play games with offshore incorporating and transfer pricing to avoid paying any U.S. income tax.  

But bailing out over leveraged shale players that should have been out of business years ago with $billions is also wrong and a waste of taxpayer's money. Excuse me if I'm not crying for Saudi Arabia or U.S. shale producers that sold a bbl of oil for $90 to $100 and we're naive enough to think it would last forever. 

The once major independent  Bakken shale producer Whiting's stock was $90 a few years back.  As of yesterday it's worthless.  The Note holders told them no more credit.  They are just the first.

This was all going to happen anyway.  The Covid just exposed it early. 

Sometimes the truth hurts.  Things change.  

Edited April 2, 2020 by BLA

[U_P + 22]

28 minutes ago, BLA said:

Doug 

I'm sorry for having an honest debate on the state of the industry.  I realize opinions that don't agree with yours are unwelcomed.

This forum has turned into a venue to commiserate about the changes to the industry. 

You can lament your predicaments and yearn for the "Good 'ol Days". Let's go back and read our Old Oil Pro articles. They will help us feel better.  I choose to look forward to what could be.

I agree the government should not be bailing out Oil majors, Wallstreet firms and Cruise Lines.  Most of them play games with offshore incorporating and transfer pricing to avoid paying any U.S. income tax.  

But bailing out over leveraged shale players that should have been out of business years ago with $billions is also wrong and a waste of taxpayer's money. Excuse me if I'm not crying for Saudi Arabia or U.S. shale producers that sold a bbl of oil for $90 to $100 and we're naive enough to think it would last forever. 

The once major independent  Bakken shale producer Whiting's stock was $90 a few years back.  As of yesterday it's worthless.  The Note holders told them no more credit.  They are just the first.

This was all going to happen anyway.  The Covid just exposed it early. 

Sometimes the truth hurts.  Things change.  

OilPro forum had nothing to do with "feel good" emotions, there were heated debates about highly tecnhical and complex industry issues, where, for your knowledge, many discussions among serious commenters were of the tune of "robust projects must be profitable with an oil scenario of 20$ flat..."

I have never known "good old days" so refrain from talking about things you may know little about.

What are you sources of information? Mainstream publications? What if I told you that current capex revisions within large oil corporations are far deeper than anything announced to the market so far? And that we are already preparing for scenario where the most critical issue is not the low price or low demand but absence of reliable oilfield services supply chains and civil unrest in a few large producing countries/ NOCs tecnical defaults?

This is a free forum anybody can write whatever they feel like, I am certaintly not pulling my hair out when there are things posted that insiders know to be not true... so relax.

 

Edited April 2, 2020 by U_P

[BLA + 1,666]

15 minutes ago, U_P said:

OilPro forum had nothing to do with "feel good" emotions, there were heated debates about highly tecnhical and complex industry issues, where, for your knowledge, many discussions among serious commenters were of the tune of "robust projects must be profitable with an oil scenario of 20$ flat..."

I have never known "good old days" so refrain from talking about things you may know little about.

What are you sources of information? Mainstream publications? What if I told you that current capex revisions within large oil corporations are far deeper than anything announced to the market so far? And that we are already preparing for scenario where the most critical issue is not the low price or low demand but absence of reliable oilfield services supply chains and civil unrest in a few large producing countries/ NOCs tecnical defaults?

This is a free forum anybody can write whatever they feel like, I am certaintly not pulling my hair out when there are things posted that insiders know to be not true... so relax.

 

I'm very relaxed

I never said Oil Pro was about feel good emotions.  Pointed out that Oil Price site was targeting investment.  Different from Oil Pro.  

Agree anybody can write what they want.  That's my point.  Much critisism is launched at those (like me) that gives their opinion that is counter to the "regulars" .  I can take it.  Can they ? 

Capex cuts by majors in shake basins are over 50%.  Smart move.  Save your powder to live another day.  Saudis want U.S. to cut.  They are.  The "market" is working.  Shale production will drop at least 20% .  It will just take some time to filter down to daily production. 

No need to be defensive.

Relax. 

Chill.

Edited April 2, 2020 by BLA

[Rasmus Jorgensen + 1,169]

3 hours ago, Douglas Buckland said:

Okay Ras, I generally agree with no bailouts, but the present situation is unprecedented in recent history. If the economy is going to recover, some assistance is required.

It is true that this situation is more or less unprecedentet. However, we also came from a peak. It is frigthening to me how many businesses small and large that need help after a few weeks of downturn. 

[U_P + 22]

5 minutes ago, BLA said:

I'm very relaxed

I never said Oil Pro was about feel good emotions.  Pointed out that Oil Price site was targeting investment.  Different from Oil Pro.  

Agree anybody can write what they want.  That's my point.  Much critisism is launched at those (like me) that gives their opinion that is counter to the "regulars" .  I can take it.  Can they ? 

Relax. 

Thank you for the clarification. Unfortunately this site is no more about "investment" than my late granda was about space travel 😂, its rather about entertainment for the uninformad

[Douglas Buckland + 6,308]

38 minutes ago, BLA said:

Doug 

I'm sorry for having an honest debate on the state of the industry.  I realize opinions that don't agree with yours are unwelcomed.

This forum has turned into a venue to commiserate about the changes to the industry. 

You can lament your predicaments and yearn for the "Good 'ol Days". Let's go back and read our Old Oil Pro articles. They will help us feel better.  I choose to look forward to what could be.

I agree the government should not be bailing out Oil majors, Wallstreet firms and Cruise Lines.  Most of them play games with offshore incorporating and transfer pricing to avoid paying any U.S. income tax.  

But bailing out over leveraged shale players that should have been out of business years ago with $billions is also wrong and a waste of taxpayer's money. Excuse me if I'm not crying for Saudi Arabia or U.S. shale producers that sold a bbl of oil for $90 to $100 and we're naive enough to think it would last forever. 

The once major independent  Bakken shale producer Whiting's stock was $90 a few years back.  As of yesterday it's worthless.  The Note holders told them no more credit.  They are just the first.

This was all going to happen anyway.  The Covid just exposed it early. 

Sometimes the truth hurts.  Things change.  

Well BLA, the first thing that I would say is that you should never apologize for expressing your opinion in the forum of honest debate. Secondly, whether I agree with your opinion or not does not mean that it is unwelcome. Even IF I did not welcome your opinion, I am not the only guy contributing on this forum. Keep in mind that opinions are like a**holes, everybody has at least one and it usually stinks.

You are correct, I liked the ‘good old days’, they were fun, full of adventure and placed the oilfield in the position that it was in prior to this price war - that is both the conventional AND the unconventional fields.

I have been in the field for 36 years now, and I have seen several slumps in my time due to a variety of causes. In my OPINION (see comment re opinions above), this present, persistent slump was due largely to too much oil on the market, and as far as the shale oil industry goes, largely self inflicted.

You say you choose to look forward to what could be. Fair enough, but right now it looks bleak, regardless off your age and point of view from that perspective.

The shale oil operators never seemed to understand that they do not operate in a vacuum, perhaps after this Covid19 pandemic is knocked in the head, the demand destruction is healed and the Russians and the Saudis finish their pissing contest, the US shale industry will still be alive and viable, but not if they don’t learn some valuable lessons from the experience.

I wanted one more interesting contract before calling it quits, but at my age I don’t see that happening now - so yes I am a little annoyed.

I wish you luck looking forward.

[Douglas Buckland + 6,308]

23 minutes ago, Rasmus Jorgensen said:

It is true that this situation is more or less unprecedentet. However, we also came from a peak. It is frigthening to me how many businesses small and large that need help after a few weeks of downturn. 

A ‘peak’ five years ago! We’ve been in the duldrums ever since.

[Jan van Eck + 7,558]

1 hour ago, BLA said:

Doug 

I'm sorry for having an honest debate on the state of the industry.  I realize opinions that don't agree with yours are unwelcomed.

This forum has turned into a venue to commiserate about the changes to the industry. 

Well now, you are on a thread that I started, and you can voice your opinions and debate or discuss the ideas with me directly if you choose.  I am not one to "commiserate on the change to the industry."  I am a finance guy.  I have never stepped onto some oil rig, never worked there, and only know about the extraction end from my discussions with those that have. 

So, let's get back to the finance end: who are the producers that are going to shut in first?  that ws the question I posed.  I have my own ideas about that, and everyb ody is invited to chirp in.  It is my view that the creditors to the various individual producers are not likely to pull the plug because if they do, then they will have their assets dissolve right in front of their eyes.  So you get the situation where the debt is not serviced but the creditors do nothing about it.  What are you going to do with a well that gets you five bucks?  And you think you can do it better than the guys out there doing the extracting now? 

I remember a discussion that Donald Trump had with his bankers, wh were upset that his comapnies were not paying their notes.  they were threatening to take over some buildings.  He had a meeting with them, and stated bluntly: "Whatmakes you think you can run these buildings better than I can?"   And then the bankers sitting around that table all shut up.  And they continued paying him a salary of $25,000 a month to remain in charge of the buildings. 

See, that is financial reality.  The creditors have to hang in there or their investment is history.  Unless there is a tax advantage to taking a tax loss carry-forward, nobody has an incentive to shut the enterprise down.  So you will continue to see pumping, and discharge into the market, of unprofitable oil  And that is the financial reality. 

Will there be buyers of producer Debt - in the form of their Notes?  But of course, that is what markets do.  The only issue is the amount of the discount.  There is that scene in the movie about Wall Street and Lehman Bros. where management makes the decision to liquidate their mortgage-backed securities bonds, and the traders are on the phone to others in competing companies, and the trader says, "My loss, your gain."  He offered the MBS at 96, a discount of 4%.  The counterparty not visible replied, "How about 93?"  The  Lehman trader replied, "Done!"  

In another scene, two traders were observing the aftermath of the sale by a third of a massive MBS, that traded at 85.  One softly whistled, "Wow, that is a $177 million write-down on the security!"   They were taken aback at the carnage on the trading floor.  Realistic?  You bet. If you want out, you take your lumps.  

An outfit like General Electric went from a peak of around $60 a share for the equity stock down to around $6.50 today.  That is a hit of 94%.  thank you very much, Jack welch and jeffrey Inmelt.  These idiots managed to totally wreck a fabulous manufacturing franchise.  It is the shareholder that now have a choice:  put up with it, work with no dividends, or sell out to someone else looking for some future fabulous doubling to $12 and a doubling of their speculative cash.  Hey, could happen.  Not very likely, but it "could."  Again, tht is what markets do. 

Who is going to get shut down in the oil industry, first?  That is the question I posed.  It is not the guy with tons of debt overhang and debt covenants that are in the toilet.  No chance, pulling his plug destroys the investor cash, as you have just seen with Whiting.  Getting three cents on the dollar is lousy economics.  Management should never have filed that Chapter 11, the bond holders would have taken a bath if the company had gone into an involuntary liquidation.  

But OK, now let's look at it on the nation-state scale.  Who goes under first?  My guess is that it is Canada. Inside the USA, it will be the producers that rely on trucking or rail to get the product out, so that is Wyoming and Utah.   the market knows this, and prices their crude accordingly.  If you look at the prices of various sourced crude, the ones at the lowest sales price are the disadvantaged producers, and they will fold first.  I don't see producers such as Venezuela getting back up any time soon, so those guys are in the deepest toilet, a complete shambles. Nigeria?  Big problems, and that country is headed for massive unrest, basically a perpetual internal state of war. The others?  I invite readers to chime in. 

Edited April 2, 2020 by Jan van Eck

[Old-Ruffneck + 1,177]

26 minutes ago, U_P said:

Thank you for the clarification. Unfortunately this site is no more about "investment" than my late granda was about space travel 😂, its rather about entertainment for the uninformad

I've refrained from conjecture in this thread as too many "emotions" from some that don't actually and never have worked in the "patch" and some that actually are a part of...…. Everyone is allowed to express opinions but this thread has gotten way outta whack. KSA has the gun amongst other ME countries with lift prices below 7$ US dollar. The new wave of Hydraulic Fracturing is the knife. Costs are still 30$ and above mostly, so ya don't take a knife to a gunfight.!!! It's that simple. Too many billions in debt and will not recover nor should we bail 'em out, they knew the risks. This scenario has played out over and over since the the late 20's. TRRC was put in place to regulate and help all, and when OPEC formed the TRRC was no longer in control of the worlds oil market. 

Please keep comments civil and on point. Y'all aint a bunch of old hags at the washmat!! 

[Jan van Eck + 7,558]

20 minutes ago, Douglas Buckland said:

Keep in mind that opinions are like a**holes, everybody has at least one and it usually stinks.

Well, Douglas, no one is going to dispute that you have this pithy way of expressing things!

[Douglas Buckland + 6,308]

1 minute ago, Jan van Eck said:

Well, Douglas, no one is going to dispute that you have this pithy way of expressing things!

I just feel that a good descriptive phrase is worth a thousand words Jan...😂

How are you keeping these days?

[Jan van Eck + 7,558]

1 minute ago, Douglas Buckland said:

I just feel that a good descriptive phrase is worth a thousand words Jan...😂

How are you keeping these days?

Awful.  One financial hit after another.  The bleeding out there just never ends. 

Not to worry,  I am planning to set up new manufacturing plants, that rapture with doing it in China has come off the bloom.  The guys that set up their production lines there are now taking the hit. Remember that the decisions to run to China (and shut down US plants, and some 50,000 mfg plants got shut down after Nixon opened up China) were made by those MBA guys frresh out of college, who had this collective bright idea that cheap Chinese labor would be a huge boon to their employers, so fire the American workers and move the plant oversea.  Well, that works for a while but now is in the scuppers.  What amazes me is that those MBA kids do not get fired for that nonsense. 

It is my view that the greatest capital the USA has is the older workers, the guys in their 60's and 70's that have been running machines and lathes and horizontal mills for decades and have this huge accumulated store of knowledge.  Those are the guys you want to target in your hiring campaigns, they are worth gold.  The flunkies out of some college that say those guys are worn out and too expensive so hire some kids instead just have no clue.  Hire the old guys, pay them whatever it takes, drown them in money, and watch yourself get seriously rich.  

[U_P + 22]

21 minutes ago, Old-Ruffneck said:

I've refrained from conjecture in this thread as too many "emotions" from some that don't actually and never have worked in the "patch" and some that actually are a part of...…. Everyone is allowed to express opinions but this thread has gotten way outta whack. KSA has the gun amongst other ME countries with lift prices below 7$ US dollar. The new wave of Hydraulic Fracturing is the knife. Costs are still 30$ and above mostly, so ya don't take a knife to a gunfight.!!! It's that simple. Too many billions in debt and will not recover nor should we bail 'em out, they knew the risks. This scenario has played out over and over since the the late 20's. TRRC was put in place to regulate and help all, and when OPEC formed the TRRC was no longer in control of the worlds oil market. 

Please keep comments civil and on point. Y'all aint a bunch of old hags at the washmat!! 

Did you find my comment not civil? Yes it was a bit humorous but no more. How has the thread gotten out of whack? 

[Rasmus Jorgensen + 1,169]

44 minutes ago, Douglas Buckland said:

A ‘peak’ five years ago! We’ve been in the duldrums ever since.

I meant the general market, not the oil industry. Sorry if I was unclear. 

[BLA + 1,666]

51 minutes ago, Douglas Buckland said:

Well BLA, the first thing that I would say is that you should never apologize for expressing your opinion in the forum of honest debate. Secondly, whether I agree with your opinion or not does not mean that it is unwelcome. Even IF I did not welcome your opinion, I am not the only guy contributing on this forum. Keep in mind that opinions are like a**holes, everybody has at least one and it usually stinks.

You are correct, I liked the ‘good old days’, they were fun, full of adventure and placed the oilfield in the position that it was in prior to this price war - that is both the conventional AND the unconventional fields.

I have been in the field for 36 years now, and I have seen several slumps in my time due to a variety of causes. In my OPINION (see comment re opinions above), this present, persistent slump was due largely to too much oil on the market, and as far as the shale oil industry goes, largely self inflicted.

You say you choose to look forward to what could be. Fair enough, but right now it looks bleak, regardless off your age and point of view from that perspective.

The shale oil operators never seemed to understand that they do not operate in a vacuum, perhaps after this Covid19 pandemic is knocked in the head, the demand destruction is healed and the Russians and the Saudis finish their pissing contest, the US shale industry will still be alive and viable, but not if they don’t learn some valuable lessons from the experience.

I wanted one more interesting contract before calling it quits, but at my age I don’t see that happening now - so yes I am a little annoyed.

I wish you luck looking forward.

That's fair.

So attack the opinion not the person or start name calling.

Emotions can run high when serious money is at risk or lost.  I'll try to be mindful of that. 

Edited April 2, 2020 by BLA

[Old-Ruffneck + 1,177]

5 minutes ago, U_P said:

Did you find my comment not civil? Yes it was a bit humorous but no more. How has the thread gotten out of whack? 

6 pages and maybe 1/4th dealing with the topic:

Which producers will shut in first?

[U_P + 22]

1 minute ago, Old-Ruffneck said:

6 pages and maybe 1/4th dealing with the topic:

Which producers will shut in first?

OK you are right, I though you were referring to the general tone of the discussion.

From what I know Nigeria, Brazil, Canada are shutting down partially, depending on storage the rest of Latin America and ss Africa will follow suit, as would some Central Asian Plants

[wrs + 893]

Back on topic, yes, those with the least storage capacity will shut in first.  The negative pipeline prices for oil will also cause shut ins.  That's why I initiated the conversation with my independent.  To let him know we were in favor of shutting in if he decided it was worth doing.  On our XTO lease they can shut in for 60 days so they may do it, I don't know because we can't talk to them easily.  They have cut production from over 100kbbl/mo to 75kbbl in Feb so I expect further declines in March.  They are a big company with much more ability to absorb the loss.  They also supply XOM refineries but once that storage fills up they would be better off shutting in.

Edited April 2, 2020 by wrs

[Jan van Eck + 7,558]

This is not on-topic but since all you fellows are up and about, I thought I would share this:

Last night at a hospital in New York - Manhattan up on around 76th Street, the hospital had 1,000 deaths in one day. 

Anyone who thinks that the coronavirus COVID-19 is not a pandemic threat is kidding themselves.  This is seriously nasty.

[Douglas Buckland + 6,308]

1 hour ago, Rasmus Jorgensen said:

I meant the general market, not the oil industry. Sorry if I was unclear. 

My fault...focused on oil.

[wrs + 893]

On the who blinked first front, oil just moved up 25% on the CNBC announcement that Trump has gotten Putin and MBS to agree to 10-15mmbbl/day prodution  cuts.  No doubt they are just as backed up as the US and also don't want to give away their oil to the Chinese either.

 

https://www.cnbc.com/2020/04/02/trump-tells-cnbc-he-spoke-to-putin-mbs-and-expects-saudis-russia-to-announce-10-million-barrel-cut.html

Edited April 2, 2020 by wrs

[Gerry Maddoux + 3,627]

4 hours ago, BLA said:

CDC is a joke.  They insisted they develop the test kits.  They screwed up.  The kits didn't work.  Other test kits went out early but sans the reagent .  .  .  .   which is produced in . .  . you guessed it China.  

The CDC stands between you and disaster, day after day. It was not their fault that test reagents were made in China--those were outsourced just like 95% of all the drugs we Americans take (made in China and India). The reason for this was corporate greed. The CDC has been hobbled for some time--politically--with budget cuts and furloughing of top-notch people who used to sit around planning and thinking about the next big Big. The CDC had been warning about coronaviruses for some time. They're playing catch-up now. 

American medicine has become more and more commercialized over the last four decades. It had gotten to the point where the insured were over-tested and over-treated, the uninsured untested and untreated . . . until they presented to some ER in extremis. The system had gotten so monetized that a huge segment of the income of any hospital went into administrators' pockets. Hip, knee and shoulder replacement had become mundane first considerations. There are plenty of heart mills. Medical device companies had gotten by with paying kickbacks to doctors for trying their new products, some of whom injured people. The very people who have bellowed the loudest whenever national health care was brought up were the ones who thought they had a concierge doctor in their hip pocket to help them personally through any crisis. Well, so much for that. 

In short, it is the American health care system that has suffered from rot--not the CDC. Yes, there are plenty of bureaucrats in it and yes they dropped the ball, but they are so little the true face of the problem that your comment would be laughable in ordinary times.

Look, I'm not out to pick on you. Generally, you make sense in what you write. You sound young to me, still awaiting the vicissitudes of older age, not yet aware that disappointment and satisfaction can ride together. And that's all right; I like most young people and find their thoughts refreshing. But my strong advice is to measure your thoughts, weigh your words, think before you type it out. To say that the CDC is a joke is to say that oil production is a joke--it reduces the impact and is blatantly false. Segments of the world get messed up all the time. It's the CDC's time to take a hit, but we need them for the next big Big. Just as we all hope the shale cowboys will learn something from their swagger and poor business plan, we can only hope that the CDC learns a lesson here, and that the administration that decided to cut their budget and numbers realizes what a shitty idea it was. 

In these trying times, there's plenty of blame to go around. And not all of it rests with the CDC. Or with shale.

Edited April 2, 2020 by Gerry Maddoux

[Ward Smith + 6,615]

4 hours ago, U_P said:

What are you sources of information? Mainstream publications?

This is rich, coming from Mr. Popular mechanics

[U_P + 22]

 

13 minutes ago, Ward Smith said:

This is rich, coming from Mr. Popular mechanics

Mr Smith,

The news of the tainted oil from SPR came from informal confersations a while back with collegues in the refining business of my company who told me they discussed whether to participate to future sales of the crude released from SPR but were warned by their french contractors who heard horror stories from Total people (who apparently were also very interested in the material). I have no way to doubl check my sources, but no people involved would have any reasons to lie, especially when there has been so much oil to go around the past few years and no terriible competition for any particular load of crude...

So yeah Popular Mechanics is my secret source of info!

 

Edited April 2, 2020 by U_P