Permian already crested the productivity bell curve - downward now to Tier 2 geological locations

[ceo_energemsier + 1,818]

2 hours ago, TXPower said:

Thanks for the response.  I was curious if the dollars and cents of using tanker trucks, 8,000 gallons at a time as you say, could be used and maintain any profitability.

I understand that ground has been broken and plans are on the table but pipelines take years to build.  I also understand that the railroads are loathe to increase purchases of bulk oil hauling rail cars for fear of another downturn in world economy and/or oil demand leaving them with lots of unused assets that won’t pay for themselves.

But, could tanker trucking from the Permian to the Texas Gulf Coast as you suggest, help with the bottleneck while maintaning profitability?

TXPower

it is more expensive to move crude by tanker trucks, but it is being done.

https://247wallst.com/energy-business/2018/05/21/crude-oil-pipeline-capacity-out-of-the-permian-basin-is-vanishing/

 

https://www.wsj.com/articles/hot-commodity-in-the-shale-boom-truckers-1528459200

 

 

[TXPower + 643]

1 hour ago, ceo_energemsier said:

it is more expensive to move crude by tanker trucks, but it is being done.

https://247wallst.com/energy-business/2018/05/21/crude-oil-pipeline-capacity-out-of-the-permian-basin-is-vanishing/

 

https://www.wsj.com/articles/hot-commodity-in-the-shale-boom-truckers-1528459200

 

 

That answers my question.

thanks,

TXPower

[ceo_energemsier + 1,818]

On 8/17/2018 at 12:41 AM, Marina Schwarz said:

"Everything you always wanted in a beer. And less." Seriously? That was a real, actual, factual slogan? Well, at least they are being kind of honest.

As for the Permian, the acreage rush is still ongoing, billions changing hands, which makes me wonder how things will look in five years.

Overpaying for acreage now and will book heavy losses later..... some mineral owners get very wealthy, it is the rinse and repeat situation,

Bakken, Eagle Ford , now Permian.....

[ceo_energemsier + 1,818]

Oh and I forgot to mention the Marcellus and Utica, Chesapeake was the head of the class in overpaying then booking losses @ the time

[Tom Kirkman + 8,860]

19 minutes ago, ceo_energemsier said:

Oh and I forgot to mention the Marcellus and Utica, Chesapeake was the head of the class in overpaying then booking losses @ the time

The current rush for overpaying looked likely to get caught out pretty darn soon.  Stupidity.  Buy high, then write off losses.  Stupidity.

The “Weakest” EIA Report In Years

Not only are crude oil prices close to multi-year highs, but the strength of the dollar and the relative weakness of a variety of currencies in the developing world, combine for a toxic brew to demand. 

[Billyjack + 58]

On 8/18/2018 at 4:25 PM, ceo_energemsier said:

https://www.usgs.gov/news/usgs-estimates-20-billion-barrels-oil-texas-wolfcamp-shale-formation

Yeah I reviewed that report and figured it was going to take 196,000 wells to produce the 20 billion barrels. At the time oil was $45/bbl. Assuming only $5 million per well that is roughly $1 trillion in drilling cost alone. Then consider royalty,lease bonus, operating expenses and taxes, then to produce this oil would only cost around $1.5 trillion to get $1 trillion in income.

[TomTom + 183]

15 hours ago, Tom Kirkman said:

The current rush for overpaying looked likely to get caught out pretty darn soon.  Stupidity.  Buy high, then write off losses.  Stupidity.

The “Weakest” EIA Report In Years

Not only are crude oil prices close to multi-year highs, but the strength of the dollar and the relative weakness of a variety of currencies in the developing world, combine for a toxic brew to demand. 

I think Tom K and Nick make a very good point here.   
The developing world is more fragile than many may expect..
Prices here in Mexico are rising fast because of the strong dollar and the next economic convulsion could cause fuel demand to start crumbling...

[MRH68 + 1]

On 8/16/2018 at 8:10 PM, Tom Kirkman said:

So many good observations in this article yesterday from Nick Cunningham. It's wonderful to see that some people understand what is actually going on in the U.S. Shale Oil industry.  The frantic hamster wheel of debt I keep mentioning sort of gets an oblique mention (see the "treadmill" remark).

Recommend you read the whole article, it's not long; here's a couple of notables:

The Productivity Problem In The Permian

But it’s also a reflection of the fact that drillers are being forced into less desirable locations with the field so crowded.

“We believe that the short-cycle nature of shale exploitation and the intensity of activity in the Permian means that production from Tier 1 geological locations (e.g., those with the best pay, the optimum pressure) is starting to move to Tier 2, which is unable to achieve the same rates of productivity,” Standard Chartered wrote in a note. 

... But there is a bit of treadmill aspect to drilling – you have to drill more to keep output flat. The sheer size of the Permian means that the drilling needs to continue at a high rate to maintain overall output. So, the unfolding slowdown in drilling, largely because of pipeline constraints, could threaten output levels.

... In other words, much of the industry’s frenzied effort these days is simply to keep production from falling. “The EIA put the number of completions in June at 434, i.e., 95% of completions were needed to combat declines, and net growth came from just 5% of completions,” Standard Chartered concluded.

Tom - I agree that the cash cycle (the hamster wheel) is very real. But if all of this movement is to Tier 2's what accounts for the record number of DUCs?

[Boat + 1,324]

On 8/16/2018 at 8:10 PM, Tom Kirkman said:

So many good observations in this article yesterday from Nick Cunningham. It's wonderful to see that some people understand what is actually going on in the U.S. Shale Oil industry.  The frantic hamster wheel of debt I keep mentioning sort of gets an oblique mention (see the "treadmill" remark).

Recommend you read the whole article, it's not long; here's a couple of notables:

The Productivity Problem In The Permian

But it’s also a reflection of the fact that drillers are being forced into less desirable locations with the field so crowded.

“We believe that the short-cycle nature of shale exploitation and the intensity of activity in the Permian means that production from Tier 1 geological locations (e.g., those with the best pay, the optimum pressure) is starting to move to Tier 2, which is unable to achieve the same rates of productivity,” Standard Chartered wrote in a note. 

... But there is a bit of treadmill aspect to drilling – you have to drill more to keep output flat. The sheer size of the Permian means that the drilling needs to continue at a high rate to maintain overall output. So, the unfolding slowdown in drilling, largely because of pipeline constraints, could threaten output levels.

... In other words, much of the industry’s frenzied effort these days is simply to keep production from falling. “The EIA put the number of completions in June at 434, i.e., 95% of completions were needed to combat declines, and net growth came from just 5% of completions,” Standard Chartered concluded.

Tom 

For a little perspective, in 2014  a wells production was around 222 barells per day. Currently around 552 after a drop. If we are in tier 2 wells, historically they are still awesome. In spite of the red queen. Lol

[ceo_energemsier + 1,818]

https://www.epmag.com/duc-abnormal-duc-counts-rise-permian-1712661#p=full

[Tom Kirkman + 8,860]

3 hours ago, MRH68 said:

Tom - I agree that the cash cycle (the hamster wheel) is very real. But if all of this movement is to Tier 2's what accounts for the record number of DUCs?

Perhaps a pipeline bottleneck?

[Tom Kirkman + 8,860]

2 hours ago, Boat said:

Tom 

For a little perspective, in 2014  a wells production was around 222 barells per day. Currently around 552 after a drop. If we are in tier 2 wells, historically they are still awesome. In spite of the red queen. Lol

But are they acually making a profit?

Up through the first half of 2018, the majority of the U.S. Shale Oil industry had still spent more than it earned.

[Jo Mack + 43]

I use 285 through the heart of NM TX Permian.  I'd say I generally see at least 100 crude oil trucks going into Pecos Tx. On another comment, Delaware, Bone Springs and Wofcamp are not shale, but tons of water.

[ceo_energemsier + 1,818]

OK, good to know you can define all the formations and reservoirs.......... shale and not shale... could you explain and enlighten the ill-informed, please? thanks. I would love to learn this that Bone Springs and Woflcamp are not shales... and what does tons of water mean? does it mean for every barrel of oil produced from these "non shale" formations , a ton of water is produced for each barrel of oil?

Thank you for you insight and clarification of this

 

[Billyjack + 58]

On 8/18/2018 at 4:25 PM, ceo_energemsier said:

https://www.usgs.gov/news/usgs-estimates-20-billion-barrels-oil-texas-wolfcamp-shale-formation

Regardless of what the USGS says, I've drilled and completed wells in all of these reservoirs. Not one of them is a shale. By the way using that study it would require 196,000 wells to make the 20 billion barrels which based upon current prices and costs would lose over half a trillion dollars. Like all government tripe the entire study is nonsense to those of us in the real world.

[ceo_energemsier + 1,818]

https://www.texansfornaturalgas.com/permian_basin_natural_gas_infrastructure?utm_campaign=sept_7_update&utm_medium=email&utm_source=northtexansfornaturalgas

 

https://www.doi.gov/pressreleases/they-said-it-couldnt-be-done-trump-admin-dominates-billion-dollar-oil-and-gas-sale

[Matthewlstern3 + 2]

You're seeing a lot of shut-ins because of the pipeline constraints. I'm a mineral owner in the midland basin! There have been great results in and around our acreage in the city. A majority of the wells in and around the city of Midland have yet to even come online, which hold a vast majority oil. A great example of that would be Permian Deep Rock's rig called "Waffle Iorn". Also, Pioneer Natural Resources as well. Don't know if any of you consider land in Midland Tier 1, but when you look at the early results, ton's of upside there.

https://www.shalexp.com/texas/midland-county/waffle-iron/781066

 

Edited September 11, 2018 by Matthewlstern3

[ceo_energemsier + 1,818]

Federal New Mexico Auction Values Dwarf Past Permian Deals

he first bid—for a parcel of 901.2 net acres in Eddy County, N.M., about 30 miles southeast of Carlsbad Caverns in the Permian Basin—started unceremoniously at $2 per acre.

Just under nine minutes later, a second bid sucked the air—or whatever equivalent fills the Internet—out of the online auction room: $30,000 per acre.

The parcel, on federal lands just across the border from Loving County, Texas, and near WPX Energy Inc.’s (NYSE: WPX) Stateline area in the Permian’s Delaware Basin, was part of 142 tracts in Eddy and Lea counties, N.M. offered by the Bureau of Land Management (BLM) on Sept. 5 and Sept. 6.

https://www.forbes.com/sites/davidblackmon/2018/09/10/the-rest-of-the-story-on-new-mexicos-record-permian-basin-lease-auction/#24cfdf8f786d

 

[TomTom + 183]

good story from David Blackmon, but it's clear that all these already over leveraged drillers will have a hard time when oil prices come down to even $50. 

 

[ceo_energemsier + 1,818]

https://www.chron.com/business/energy/article/Company-to-invest-nearly-300-million-in-West-13220265.php

[ceo_energemsier + 1,818]

3 hours ago, TomTom said:

good story from David Blackmon, but it's clear that all these already over leveraged drillers will have a hard time when oil prices come down to even $50. 

 

That is the problem, they over pay going in and when the quality of the rocks doesnt give the results because it is poor quality of geo formations and not the sweet spots and or the right mix of stacked plays and pay zones, they lose $$$ and go bankrupt , added to that the high decline rates. Shale gale is an extremely hi-tech poker game to say the least, you have to deploy the best, most cutting edge and constantly evolving and improving suite of technologies and synergistic technologies to get the best long term sustained and stabilized production at  reasonably lower acquisition, exploration, drilling, completion and drilling development costs

[TomTom + 183]

On 9/11/2018 at 2:28 PM, Matthewlstern3 said:

You're seeing a lot of shut-ins because of the pipeline constraints. I'm a mineral owner in the midland basin! There have been great results in and around our acreage in the city. A majority of the wells in and around the city of Midland have yet to even come online, which hold a vast majority oil. A great example of that would be Permian Deep Rock's rig called "Waffle Iorn". Also, Pioneer Natural Resources as well. Don't know if any of you consider land in Midland Tier 1, but when you look at the early results, ton's of upside there.

https://www.shalexp.com/texas/midland-county/waffle-iron/781066

 

Thanks for the first hand story Matthew - I'm sure there's still tons of upside in certain areas, but I'm sure you can agree that land prices are out of hand? 

[ceo_energemsier + 1,818]

25 minutes ago, TomTom said:

Thanks for the first hand story Matthew - I'm sure there's still tons of upside in certain areas, but I'm sure you can agree that land prices are out of hand? 

There are always upsides if there is good geological formations with good quality sub surface rocks. While pipelines are being built , oil is being moved by tanker trucks and tanker rail cars. Land prices are def. out of control, it will be the same crash and burn as happened in Marcellus back from 2007 onwards, in Bakken and Eagle Ford and in Utica and Niobrara.

[JC1 + 12]

New well oil production per rig is only a measure of drilling productivity if all your rigs are working (none idle due to some shortage) and if you frack all the wells you drill. Neither is happening right now so the statistic is meaningless.

During that huge productivity spike in 2016 you see the number of rigs dropping and the productivity rising. What you don't see is that they were actually fracking previous DUCs. No drilling rigs needed for that, but lots of new oil production. "Drilling productivity" goes up... But it's meaningless. 

Right now we're in the opposite situation. Lots of wells are being drilled that aren't fracked because companies don't want to produce oil they can't pipe out of the basin. So DUCs rise as "drilling productivity" drops. It doesn't mean you're seeing any large tier 2 effects. 

[SERWIN + 749]

They are setting up a ship by rail deal down there, probably within the next couple of months it should be up and going. I have driven truck out there and it would be insane to try and ship oil by truck, the infrastructure couldn't handle it....all those rail cars that were for so long actually being used for storage are being emptied out into better storage facilities and they will be free to ship from the basin to Cushing or anywhere else now...