Marina Schwarz

Costly Crowded Permian?

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I was surprised to see the Permian referred to as "costly and crowded" by Reuters in this story. Wasn't it the cheapest place to pump oil anywhere ever? Okay, I'm exaggerating but the message does seem to be that the Permian is very cheap. Or used to be until the low-cost deposits started to run out, which I saw somewhere recently but I forgot where.

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The biggest reason for the Permian being expensive is the prices of acreages on fire.

Very few companies can succeed and be profitable when you have paying billions walking into the door and not know what is the range of costs and quality of rocks you have under those acreages

Posted 32 minutes ago



I see a lot of people putting down shale and the value of shale resources, yet the production keeps on going up month to month year over year. Yes there are debt issues, decline issues, pricing issues. I also take exception to statements made by CEO's and execs of shale companies such as " our breakeven is 2$/bbl". I think it was Pioneer exec who made that statement. I could be wrong but that was a couple of years ago. That was an "ENRON-esque" statement made by using "ENRON-esque" accounting playbook.

The fundamentals to a successful shale company operation lie in the facts that, using the best geotechnical suite of technologies to find the highest quality rocks, not paying "high prices" per acre (10,000$-100,000$/ acres) and not leasing land that doesnt provide high quality rocks under the surface, the key word is leasing STRATEGICALLY , keep costs down using every bit of technology and business procedure, management, operations controls; having a funding source and base that keeps debt down while having the freedom to operate and produce a sustainable long term production profile, keeping up with production declines (one of the best way to do is drill and complete in spots that have the highest and best accumulations of hydrocarbons and those spots keep "sourcing" "replacing" produced hydrocarbons, basically in excellent, best, better, good drainage spots). We will have boom and bust cycles , only the fittest survive.

We have seen hundreds of companies formed during the boom cycle of shale and hundreds go bust because they had the wrong business model and outlook and they thought they would hit a gusher or two and that will be their golden moment. I have heard a lot of people over the years and still keep on hearing from people, "oh my lease or my minerals" are x miles from  X company's well that came in @ 3000bpd .

Lot of things change under the surface in X miles in any direction. You can hit a gusher that is sustainable and produces 3,000bpd over a long time frame with low decline rates, you can hit a gusher that can have an IP of 8,000bpd for 120 days and declines after that down to 500bpd and keeps declining. You can hit a dry well. All these can be within 100ft of each other.

The technology to unlock the secrets of the quality of the rocks is key, right GEOLOGY and the right suite of technologies to where to drill and how to drill and complete!

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