80's GOM Oil Fam: Mid-80's Oil Glut Part Deux?

[Houston Process Dude + 13]

I was a little young, but all my family worked in either production or downstream. In the early 80's, the price per bbl was trading around $35 per bbl or around $105 per bbl in today's dollars.  I do remember it wasn't a total shock and awe like the Russia-Saudi pissing match that lead to the 2020 collapse.  It was more of a slow bleed out and the GOM layoffs started in '85.  In '86 oil collapsed to below $10( low $20's in today dollars).  Many economists pointed to the Mid 80's oil glut that triggered the collapse of the former Soviet Union.  It seemed to take forever to recover.  The Mid 80's Oil Glut resulted in a mass exodus of Lafayette, LA based producers and O&G service companies based in Broussard to leave South Louisiana for Houston.  I point to that event to why Louisiana never fully recovered

[wrs + 893]

1 hour ago, Houston Process Dude said:

I was a little young, but all my family worked in either production or downstream. In the early 80's, the price per bbl was trading around $35 per bbl or around $105 per bbl in today's dollars.  I do remember it wasn't a total shock and awe like the Russia-Saudi pissing match that lead to the 2020 collapse.  It was more of a slow bleed out and the GOM layoffs started in '85.  In '86 oil collapsed to below $10( low $20's in today dollars).  Many economists pointed to the Mid 80's oil glut that triggered the collapse of the former Soviet Union.  It seemed to take forever to recover.  The Mid 80's Oil Glut resulted in a mass exodus of Lafayette, LA based producers and O&G service companies based in Broussard to leave South Louisiana for Houston.  I point to that event to why Louisiana never fully recovered

KSA doubled production from 84-86, 4mmbbl/day to 8mmbbl/day.  Most of the wells being drilled in Texas were not worth crap, worse than many shale wells today.  The Austin Chalk was a prime example of wells that could pay out in a couple of years at $40 but never could pay out at half that.

[Gerry Maddoux + 3,627]

8 minutes ago, wrs said:

The Austin Chalk was a prime example of wells that could pay out in a couple of years at $40 but never could pay out at half that.

Correct, but now we know there's a rich Buda Shale lay beneath the Austin Chalk, and in between, like a perfect ice cream sandwich, is the oil-soaked marl. That is pretty good stuff if anyone can ever figure out how to exploit it. 

[wrs + 893]

1 hour ago, Gerry Maddoux said:

Correct, but now we know there's a rich Buda Shale lay beneath the Austin Chalk, and in between, like a perfect ice cream sandwich, is the oil-soaked marl. That is pretty good stuff if anyone can ever figure out how to exploit it. 

We have had a couple of wells on our Brazos county properties.  The one in the Chalk was drilled in 1981 and produced until about 1988.  It made my mother $250,000 in 1984 after it paid out.  She owned half the tract and they failed to sign a lease with her.  UMI kicked in after the well paid out and she collected 50% of the revenue thereafter.  In 1984 that was $250,000 but it got hit by the windfall tax.  

We leased it again back in 2015 to Halcon for the Eagleford and it was never more than 400bbl/day with a fairly steep decline. We did really well on the bonus and royalty becasue once again, they failed to lease us in time.  They did lease us before it went into production but not until after the well was drilled.

More recently we also gave a lease just for the Chalk to someone else that wants to drill horizontally.  Not sure that one will happen.

[Gerry Maddoux + 3,627]

41 minutes ago, wrs said:

More recently we also gave a lease just for the Chalk to someone else that wants to drill horizontally.  Not sure that one will happen.

Likely depends on how oil-soaked the Buda shale is underneath. I'm sure you know that this is really three very different formations. Since gravity has had 400 million years to do its work, the Buda is really oil-soaked in some places where there are anticlines deep enough and dense enough to dam up the oil. 

[nsdp + 449]

12 hours ago, Houston Process Dude said:

I was a little young, but all my family worked in either production or downstream. In the early 80's, the price per bbl was trading around $35 per bbl or around $105 per bbl in today's dollars.  I do remember it wasn't a total shock and awe like the Russia-Saudi pissing match that lead to the 2020 collapse.  It was more of a slow bleed out and the GOM layoffs started in '85.  In '86 oil collapsed to below $10( low $20's in today dollars).  Many economists pointed to the Mid 80's oil glut that triggered the collapse of the former Soviet Union.  It seemed to take forever to recover.  The Mid 80's Oil Glut resulted in a mass exodus of Lafayette, LA based producers and O&G service companies based in Broussard to leave South Louisiana for Houston.  I point to that event to why Louisiana never fully recovered

Three things happened then . First British coal strike ended killing the market for #6 oil and that cut natural gas prices from $3.85 to below $2.mmbtu. Second,  Iraq and Iran started their war.  So Kuwait and SA started pumping oil to kill revenue for Iran.  Third , the same clowns in Venezuela that Trump wants back in power renationalized the oil industry there after selling concessions back to producers in 1976.  They started to flood the Caribbean with crude. . I was at Amoco working in  the Central South America Far East .CSAFE we called it.   The project(Maricibo) i worked on went to arbitration  so I had no work.  Amoco Oil bought 100,000 barrels a day from PDVSA at a discount to supply the Texas City expansion project and to get compensation for nationalization.

Edited April 9, 2020 by nsdp

[Geoff Guenther + 317]

19 hours ago, Houston Process Dude said:

The Mid 80's Oil Glut resulted in a mass exodus of Lafayette, LA based producers and O&G service companies based in Broussard to leave South Louisiana for Houston.  I point to that event to why Louisiana never fully recovered

We've watched a few situations now where jobs left people stranded in places they couldn't find work. We had the inner-city industrial jobs flee in the 70s, oil flee expensive areas in the 80s, coal collapse in the 2010s, and we could see oil collapse in some regions again.

While Houston/Dallas are somewhat insulated from oil collapses, Alberta, the Dakotas, and oil-dependant states don't have the wherewithall to diversify. The coal collapse left the Appalachian region with the same endemic problems as the inner cities, except instead of crack, they turned to meth and opioids.

Oil will not collapse across the US but it will in certain regions. As certain industries collapse here and there we need to look at regional transformation, including retraining, so we don't end up with lost generations.