Tom Kirkman + 8,860 December 29, 2018 36 minutes ago, Bmenhorn1 said: Shale wells in the Permian generate ~50% returns at $50 oil. I would be interested to see documentation on this. Because I would tend to guesstimate it may be closer to ~50% returns at $80 oil, once all of the hidden costs and legacy debts are factored in. So just curious where you got that ~50% @ $50 from, or how you arrived at that conclusion. Genuinely interested in this. Quote Share this post Link to post Share on other sites
Illurion + 894 IG December 29, 2018 (edited) 17 hours ago, AlexF said: Hi Illrion, When you mention that your portfolio must be growing, is it to increase mitigation ? If not why is that ? Regards Interesting question. Essentially YES... A more elaborate answer goes something like this: ................................ Lets take a simple indirect lending Credit Card portfolio. First of all, you must understand that THE ECONOMY IS CYCLICAL. It goes up and down pretty much on regular cycles of about 7 years. Up-cycles usually last 7 years, and down-cycles last 2 years. In up-cycles, the portfolio usually makes money, and in down-cycles, the portfolio loses money. In the old days, the Bank intended to keep this portfolio for the long haul, so they set aside a percentage of profit in an up-cycle to make up for what they are going to lose in the down-cycle. That is the way things were for decades. Classical American Banking model. Interest Rates set an a reasonable amount that is enough to make a "AVERAGE" profit with a "STEADY / AVERAGE" QUARTERLY DIVIDEND for stockholders.. Then the late 80's hit, and CEO's and Boards of Directors were replaced by a NEW group who WANTED MAXIMUM PROFITS ALL THE TIME.... These new guys ARE ANIMALS, and save nothing... THEY BLOW (usually on themselves) ALL THE MONEY THEY MAKE IN UP-CYCLES, AND THEY DUMP, AND SELL OFF THE PORTFOLIOS (and often the employees who service them ) IN A DOWN-CYCLE. You must also understand that NOWADAYS Banks ROUTINELY SELL-OFF PORTIONS, AND SOMETIMES THEIR ENTIRE CREDIT CARD PORTFOLIOS TO OTHER BANKS. The Bank will always start this new portfolio at the beginning of an UP-CYCLE. At the beginning, when creating the portfolio, the Bank decides up front how much money they will allow the portfolio to reach before a DECISION POINT is reached. The DECISION POINT is when the Bank decides to shed their portfolio. From historical data, they know how long it will take for a portfolio to reach a certain VOLUME. So they choose a VOLUME that they can reach in 6 years, so that they can sell the portfolio in the 6th year, at a HIGH MARK, before the next down-cycle begins. So there is an expected DECISION POINT to be reached in 6 years. Problems occur when a down-cycle hits early, before the 6 year DECISION POINT. The bank then sets a basic set of rules for the portfolio. These rules take into account whether the Bank wants this portfolio to be ongoing, or positional. For such a portfolio, the bank would essentially sets THREE CRITERIA in advance. Only THREE. (1) (example) They set the maximum portfolio balance to be no more than 17 billion dollars. (2) (example) They want the portfolio to make a minimum of 11% quarterly. (3) (example) They set that at no time do they ever want the "charge-off delinquency rate to exceed 3%." So, with that set. They start issuing cards, and the volume of the portfolio grows. As it grows, they watch to make sure their three criteria are not exceeded. It is easy to keep criteria #2 on schedule, they just manipulate interest rates on a quarterly basis as necessary. When they reach the maximum dollar volume listed in criteria #1, often the Bank will sell off the portfolio for discounted amount, write off the discount differential on their taxes, often start all over again with a new portfolio at the next up-cycle. No big deal. IT IS CRITERIA #3 THAT WILL CAUSE A PREMATURE DECISION POINT. This usually means that they hit an early down-cycle. In down-cycles, people DO NOT OPEN AS MANY ACCOUNTS, SO THE DOLLAR VOLUME OF THE PORTFOLIO STALLS. Simultaneously, IN DOWN CYCLES, MORE PEOPLE GO PAST DUE, AND FAIL TO PAY THE CREDIT CARDS, AND CHARGE-OFFS INCREASE DRAMATICALLY. (example) A 12 billion dollar portfolio with a charge-off delinquency totaling $360 million is 3%. Acceptable. (example) In the next quarter, the economy enters a down-cycle, the portfolio growth stalls, and remains at 12 billion. Same 360 million in charge-offs so they have the same delinquency of 3%. Worrisome. (example) BUT, the next quarter, , even though they are no longer opening any new accounts, some cardholders are paying as agreed, and the PORTFOLIO VOLUME DROPS TO 11 BILLION WITH THE SAME 360 MILLION DELINQUENCY CHARGE-OFF, WHICH IS NOW 3.27%..... NOT GOOD. (example) BY THE 3RD QUARTER, THE CHARGE-OFF DELINQUENCY INCREASES TO $450 MILLION, ON A 10 BILLION DOLLAR PORTFOLIO VOLUME, WHICH RAISES THE CHARGE-OFF DELINQUENCY RATE TO 4.5%... VERY BAD.. So the bank has a problem, to reduce the charge-off rate back down to 3%, they have to either reduce their charge-offs, or INCREASE THE VOLUME OF THE PORTFOLIO. . Often the Banks are unable to do either, so they dump the portfolio early, take their loss, and move on. .............................. The Banks handle different types of portfolios differently, ie: Car Loan portfolios, Commercial Loan portfolios, Mortgage portfolios. etc. Each type of portfolio is setup in a different matrix. But all of them are VOLUME DRIVEN. VOLUME IS EVERYTHING... If the volume stalls, the other criterion start getting skewed. Anyway, that is a simple explanation that doesn't take into account other factors, but is pretty much the story. ............................... What started this. The point that i made in my earlier post that you are referring to, was that i felt that the OPEC Members probably have a similar criteria / matrix that governs what they set their production volume at. I stated that WHEN OPEC IS IN CONTROL OF THE MARKET, THEY CAN MAKE LOTS OF MONEY, EVEN WHEN THEIR PRODUCTION FALLS, AS THEY MANIPULATE THE OTHER FACTORS AS A MONOPOLY... My point was that now that OPEC IS NOT IN CONTROL OF THE MARKET, AND THAT THEY ARE NO LONGER A MONOPOLY, THAT IF THEIR PRODUCTION FALLS, THEY LOSE A LOT OF MONEY, AND ARE HURT. I tried to make this as coherent as possible. So if i confuse anyone, i am sorry. Am getting old. Edited December 29, 2018 by Illurion 1 2 Quote Share this post Link to post Share on other sites
Illurion + 894 IG December 29, 2018 2 hours ago, Tomasz said: So some of you want to target Russia with sanctions and demand russian cooperation in oil prices at the some time. And probably you want some OPEC countries to come to terms with the fact that US can unilaterally put sanctions on Iran and demand from other OPEC countries to supplement missing barrels so the they may one day expect sanctions on them without no reason. If it is a cartel it should be all for one and one for all. It of course will not be this situation but oil crisis in the 70s show there is a least some solidarity within this countries. I know USA is exceptional nation but this is schizophrenic. Apart from the fact you put sanctions on China, Russia, Iran, Turkey, Pakistan and probably some more countries so you put sanctions on half of emerging big markets in the world. A price for that will be forced dedollarization of world economy and imho it wont end nice for America in a future. Because natural defence to US sanctions is dedollarization of economy which you can for example see in russian-chinese relations. I think we can also see iranian oil sold in some other currencies and it will be slowly a snowball effect in countries under sanctions and number of these countries is growing. In a situation of current 1.4 trillion $ deficit and big trade deficit in looming cold war with China which has something like 3 trillons of US bonds it looks rather dangerous for US economy. It is true that we are all in troubled waters because of bad decisions made in the past. But the alternative of doing nothing is even worse. America wants its jobs and money back, and is doing what it feels is necessary to get it back. The USA is the largest market. De-dollarization attempts come and go, but will never be successful as long as the USA stays the largest market. 1 1 Quote Share this post Link to post Share on other sites
Illurion + 894 IG December 29, 2018 9 hours ago, J S said: oil goes up. There is a reason charts rhyme with farts! I hope oil doesn't go up, but i like the way you think, and your sense of humor. 1 Quote Share this post Link to post Share on other sites
BillyBob + 5 AT December 30, 2018 https://mobile.reuters.com/article/amp/idUSL3N1YO55I 1 Quote Share this post Link to post Share on other sites
BillyBob + 5 AT December 30, 2018 In 3 pages of commentary and speculation, not anyone is speaking to how US Shale operators are already reacting to the $20 swing in the 4th qtr. That is X factor in where this price will go in 2019. There is always an over reaction one way or the other by operators. Its all about the balance sheet and not production in 2019. 1 Quote Share this post Link to post Share on other sites
BillyBob + 5 AT December 30, 2018 (edited) Most published and talked about “breakeven” prices are typically based soley on what is economical to drill & complete. As you mentioned, does not include roi, lease payments, royalty payments etc...... Edited December 30, 2018 by BillyBob 2 1 Quote Share this post Link to post Share on other sites
Tom Kirkman + 8,860 December 30, 2018 56 minutes ago, BillyBob said: Most published and talked about “breakeven” prices are typically based soley on what is economical to drill & complete. As you mentioned, does not include roi, lease payments, royalty payments etc...... ^ this. Spot on. 1 1 Quote Share this post Link to post Share on other sites
TXPower + 643 TP December 31, 2018 4 hours ago, BillyBob said: In 3 pages of commentary and speculation, not anyone is speaking to how US Shale operators are already reacting to the $20 swing in the 4th qtr. That is X factor in where this price will go in 2019. There is always an over reaction one way or the other by operators. Its all about the balance sheet and not production in 2019. From my point of interest in the Permian, transportation of frac sand, the well operators have reacted. The last 6 weeks have been bad. Holidays, end of the year and cashed budgets notwithstanding, we’ll see what the new year brings. I’m not overly optimistic. Maybe the price slide has stopped though..... https://twitter.com/aeberman12/status/1079412908013092865?s=12 1 1 Quote Share this post Link to post Share on other sites
Antoinetta III + 1 AS January 2, 2019 Hi, I'm Antoinetta. Been following oil issues since the old Oil Drum days. Still like to drop in from time to time and see how its all playing out. Antponetta III 1 Quote Share this post Link to post Share on other sites
Tom Kirkman + 8,860 January 3, 2019 1 hour ago, Antoinetta III said: Hi, I'm Antoinetta. Been following oil issues since the old Oil Drum days. Still like to drop in from time to time and see how its all playing out. Antponetta III Welcome to the Oil Price forum, Antoinetta. Oil Drum was thankfully archived; tons of info there. Oilpro however was wiped clean off the internet with a vengence by Rigzone. Quote Share this post Link to post Share on other sites
Tom Kirkman + 8,860 January 3, 2019 1 hour ago, mthebold said: Why was it wiped off the internet though? Legal drama. Rigzone wants all traces of Oilpro gone off the internet. Too bad, because there was a huge amount of technical data compiled on Oilpro. Here are some of the back story, from my perspective. I was not Oilpro staff, just a volunteer moderator (like I am here as a volunteer moderator on Oil Price forum) And a link to my explanation on LinkedIn: Irony. The company that owns Rigzone is accused of basically doing the same thing that it accused the founder of Oilpro of doing - swiping member data from a competing oil & gas website. Quote Share this post Link to post Share on other sites
Curtis Stewart + 32 CS January 3, 2019 When the $$ spigots in NYC are turned down or off we will quickly see who is really making money. All those new frac team workers who are wondering what that bump just under their hard hat adjusters is will soon find it is the toggle that your employer installed and will be switched to "OFF". You may return to your former lives as the oil industry no longer needs you. Thank you for your services. Return your PPE laundered, folded and personal H2S monitor. Your final check will be deposited next Friday The pre-packaged bankruptcy lawyers will be rubbing their hands. All the new rubes to fleece. All that free investor money to absorb. The company managers get ready for the golden handshake as the companies stiff their vendors and employees. Hey, it's just business. You fools really believed it was different this time? I was hoping this would last another two years, but it isn't. Oh well. Maybe I can still catch the next run. After all its wash, rinse and repeat. 2 3 Quote Share this post Link to post Share on other sites
Outlaw Jackie + 78 pj January 3, 2019 Hey Curtis, They have you labeled as a 'newbie' - me too! Glad to see your comments... Paul Jackson 1 Quote Share this post Link to post Share on other sites
Old-Ruffneck + 1,177 er January 4, 2019 https://oilprice.com/Energy/Oil-Prices/Why-2019-Could-Start-With-An-Oil-Rally.html# Nick, please make up my mind lol https://oilprice.com/Energy/Energy-General/Bloodbath-In-Oil-Gas-Stocks-Could-Continue.html In two days your pro energy prices then today ya write this. When as a writer for this site for some time, how can anyone take you seriously? The fundamentals in news as of 8pm is Saudi might cut even more to boost prices. And folks wonder why the market is so jittery. If the Saudis decide to a 1mbd + non opec 400,000 mbp cut.. that is 200k more than couple weeks ago talks. Long term if no-one cheats possible rise, slowly. Quote Share this post Link to post Share on other sites
Tom Kirkman + 8,860 January 4, 2019 10 hours ago, Outlaw Jackie said: Hey Curtis, They have you labeled as a 'newbie' - me too! Glad to see your comments... Paul Jackson Heh heh, nice to see both of you kicking around here Quote Share this post Link to post Share on other sites
JoMack + 547 JM January 4, 2019 It takes about $50.00 to lift a bbl and more if its a Major. Saudi can lift a bbl at $8.00. The oil industry pays, not only what was commented on here, but extra personnel to manage the regulatory issues, and paperwork, field personnel, federal and state taxes, royalties, transportation, operations, equipment, upkeep on roads and pads, insurance ($$$$$$), and more. It is unfortunate that when prices stay lower than the $50.00 a bbl and is not going to rise, the first to go is the jobs. Usually, landmen and field personnel. Quote Share this post Link to post Share on other sites
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