U.S. Shale Output may Start Dropping Next Year

[ceo_energemsier + 1,818]

Battle Of The Giants In Shale Heartland

Chevron and ExxonMobil plan to significantly ramp up production in the US shale heartland as the oil behemoths are seeking to go from shale to scale in the Permian.

An in-depth report by Rystad Energy’s shale team examines which operator holds the best potential in the prolific basin spanning parts of Texas and New Mexico. Here are five takeaways:

Drilling activity
ExxonMobil will have to drill about twice as many new wells as Chevron to reach the communicated production goal. The explanation relates in part to the difference in base production. As of 2018, Chevron’s unconventional output in the Permian was 75% higher than ExxonMobil’s, and the latter company will therefore have to accelerate drilling activity in order to close the gap and even exceed Chevron’s supply by 2025. Chevron also exhibits superior average land quality and well productivity, which explains the remaining part of the gap in wells needed to deliver on long-term production guidance.

Rig programs
Chevron does not currently aim to ramp-up drilling in the Permian. The operator believes the current program is already optimized with respect to well fundamentals and midstream infrastructure. ExxonMobil, on the other hand, is convinced that a large scale ramp-up of its Permian drilling campaign is exactly what it needs in order to achieve capital efficiency and generate billions of dollars in cash flow from the region by 2023.

Acreage
Both supermajors are well positioned to become the leaders in the Permian for years to come. Chevron’s legacy land accounts for 1.7 million acres across the Permian Delaware and Permian Midland basins. ExxonMobil currently owns 1.6 million acres in the Permian, but this also includes a significant portion that is attributable to conventional targets in the Central Platform. Chevron has larger upside potential in the Delaware, while ExxonMobil holds more drilling locations in the Midland Basin. Moreover, Chevron’s inventory is expected to deliver an average of five wells per section in Delaware and about six wells per section in Midland, while ExxonMobil will be able to place seven and eight wells per section in each basin, respectively, according to our assessment.

Well economics
Driven by exceptional well productivity, Chevron is able to achieve exceptionally low costs for each barrel of oil equivalent (boe) produced in both the Texas and New Mexico parts of the Delaware Basin, standing at below $5 per boe, as measured in so-called two-stream estimated ultimate recovery (EUR). ExxonMobil’s cost comes at a slightly higher level of about $6.30 per boe, which is still considerably below the average of between $8 and $9 per boe.

Scale
In the Delaware Basin, which is less developed than the Midland, Chevron is the indisputable leader in terms of average pad size as of 2018, and this applies to both the Texas and New Mexico sides of the basin. ExxonMobil comes immediately after Chevron on the New Mexico side of the state border, with 3.3 wells per pad last year. In the Midland Basin, meanwhile, Chevron clocks in at about four wells per pad, and thus ranks again among the industry leaders.

“Undoubtedly, Chevron and ExxonMobil are the two companies that will maintain the long-term leadership in the Permian in terms of total volumes produced. Driven by extensive inventory of wells and upside potential, these players are set to increase collective output to over 2.5 million barrels of oil equivalent per day by 2030, leaving all well-established shale producers behind,” says Artem Abramov, Head of Shale Research at Rystad Energy.

He added:

“While Chevron is currently leading in terms of well productivity, economics and total Permian output, ExxonMobil is expected to continue to close the gap in the years to come. Higher investments coupled with potential well performance improvements are likely to give an edge to ExxonMobil from 2020 to 2030. On the other hand, a larger acreage position with considerable upside potential provides Chevron with an opportunity to continue to grow post 2030.”
Source: Rystad Energy

[ceo_energemsier + 1,818]

U.S. natural gas plant liquid production continues to hit record highs

Since 2012, when horizontal drilling and hydraulic fracturing techniques became more common, U.S. production of natural gas plant liquids (NGPL) has significantly increased, averaging 4.3 million barrels per day (b/d) in 2018, up from 2.5 million b/d in 2012. Nearly three-quarters of U.S. NGPL production is concentrated within six producing regions.

The Permian, Eagle Ford, and Appalachian regions made up more than half of all U.S. NGPL production in 2017. An additional one-quarter of NGPL production was located in three other regions—the Anadarko Basin in western Oklahoma and Texas; the Bakken play in North Dakota and eastern Montana; and the Green River, Piceance, Uinta, and Paradox Basins in the Western Rockies region of Utah, Wyoming, and Colorado.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

NGPL production has generally increased across all regions since 2012 as production of natural gas has grown. The largest increase has been in the Northern Appalachian region, where production increased from 43 thousand b/d in 2012 to 512 thousand b/d in 2017. NGPL production has doubled in both the Permian Basin in western Texas and southeastern New Mexico and the Eagle Ford play in southern Texas from 2012 to 2017. NGPL production in the Bakken play more than tripled.

Source: U.S. Energy Information Administration, Annual Report of the Origin of Natural Gas Liquids Production and Annual Report of Domestic Oil and Gas Reserves

Natural gas requires processing before entering interstate natural gas pipelines. The raw, or wet, natural gas includes methane—the primary component of delivered natural gas—as well as NGPLs such as ethane, propane, normal butane, isobutane, and natural gasoline. Once impurities such as water, hydrogen sulfide, and carbon dioxide are removed from the wet natural gas, the mixed NGPLs are transported for further processing at fractionation plants that separate the NGPLs into distinct commodities.

In most production regions, NGPLs must be shipped by pipeline to fractionation centers, such as Mont Belvieu, Texas, and Conway, Kansas, both of which act as storage, distribution, and pricing hubs for NGPLs. Northern Appalachia is one of the few areas that fractionate NGPLs in the same region where they are produced. In December 2018, the U.S. Department of Energy published a report highlighting the development potential for a new ethane hub in the Appalachian region.

NGPLs typically sell at higher values than methane on a heat-content basis because they are priced against crude oil-derived fuels. The yield of these liquid products can vary depending on the constitution of the raw natural gas, the technology used to extract NGPLs at processing plants, and the NGPL market prices and demand, especially for ethane. The domestic and international markets for individual NGPL products have grown with the growing U.S. NGPL production, as these liquids are used for feedstock in manufacturing plastics and resins.

Source: U.S. Energy Information Administration, Annual Report of the Origin of Natural Gas Liquids Production and Annual Report of Domestic Oil and Gas Reserves

In 2017, the U.S. volume-weighted average yield of NGPLs from raw natural gas was 84 barrels per million cubic feet (b/MMcf) of processed natural gas. The Bakken generates the highest NGPL yield, or richest natural gas, with an average of 143 b/MMcf. Raw natural gas from the Permian and Eagle Ford yields 95 b/MMcf and 107 b/MMcf, respectively. At 31 b/MMcf, the Western Rockies raw natural gas has the lowest NGPL yield. Producers will generally prioritize production from richer formations to maximize NGPL yields unless they lack the infrastructure to process wet gas and transport the liquids to market.
Source: EIA

[GuyM + 7]

2 hours ago, ceo_energemsier said:

Battle Of The Giants In Shale Heartland

Chevron and ExxonMobil plan to significantly ramp up production in the US shale heartland as the oil behemoths are seeking to go from shale to scale in the Permian.

An in-depth report by Rystad Energy’s shale team examines which operator holds the best potential in the prolific basin spanning parts of Texas and New Mexico. Here are five takeaways:

Drilling activity
ExxonMobil will have to drill about twice as many new wells as Chevron to reach the communicated production goal. The explanation relates in part to the difference in base production. As of 2018, Chevron’s unconventional output in the Permian was 75% higher than ExxonMobil’s, and the latter company will therefore have to accelerate drilling activity in order to close the gap and even exceed Chevron’s supply by 2025. Chevron also exhibits superior average land quality and well productivity, which explains the remaining part of the gap in wells needed to deliver on long-term production guidance.

Rig programs
Chevron does not currently aim to ramp-up drilling in the Permian. The operator believes the current program is already optimized with respect to well fundamentals and midstream infrastructure. ExxonMobil, on the other hand, is convinced that a large scale ramp-up of its Permian drilling campaign is exactly what it needs in order to achieve capital efficiency and generate billions of dollars in cash flow from the region by 2023.

Acreage
Both supermajors are well positioned to become the leaders in the Permian for years to come. Chevron’s legacy land accounts for 1.7 million acres across the Permian Delaware and Permian Midland basins. ExxonMobil currently owns 1.6 million acres in the Permian, but this also includes a significant portion that is attributable to conventional targets in the Central Platform. Chevron has larger upside potential in the Delaware, while ExxonMobil holds more drilling locations in the Midland Basin. Moreover, Chevron’s inventory is expected to deliver an average of five wells per section in Delaware and about six wells per section in Midland, while ExxonMobil will be able to place seven and eight wells per section in each basin, respectively, according to our assessment.

Well economics
Driven by exceptional well productivity, Chevron is able to achieve exceptionally low costs for each barrel of oil equivalent (boe) produced in both the Texas and New Mexico parts of the Delaware Basin, standing at below $5 per boe, as measured in so-called two-stream estimated ultimate recovery (EUR). ExxonMobil’s cost comes at a slightly higher level of about $6.30 per boe, which is still considerably below the average of between $8 and $9 per boe.

Scale
In the Delaware Basin, which is less developed than the Midland, Chevron is the indisputable leader in terms of average pad size as of 2018, and this applies to both the Texas and New Mexico sides of the basin. ExxonMobil comes immediately after Chevron on the New Mexico side of the state border, with 3.3 wells per pad last year. In the Midland Basin, meanwhile, Chevron clocks in at about four wells per pad, and thus ranks again among the industry leaders.

“Undoubtedly, Chevron and ExxonMobil are the two companies that will maintain the long-term leadership in the Permian in terms of total volumes produced. Driven by extensive inventory of wells and upside potential, these players are set to increase collective output to over 2.5 million barrels of oil equivalent per day by 2030, leaving all well-established shale producers behind,” says Artem Abramov, Head of Shale Research at Rystad Energy.

He added:

 “While Chevron is currently leading in terms of well productivity, economics and total Permian output, ExxonMobil is expected to continue to close the gap in the years to come. Higher investments coupled with potential well performance improvements are likely to give an edge to ExxonMobil from 2020 to 2030. On the other hand, a larger acreage position with considerable upside potential provides Chevron with an opportunity to continue to grow post 2030.”
Source: Rystad Energy

 

[GuyM + 7]

 “While Chevron is currently leading in terms of well productivity, economics and total Permian output, ExxonMobil is expected to continue to close the gap in the years to come. Higher investments coupled with potential well performance improvements are likely to give an edge to ExxonMobil from 2020 to 2030. On the other hand, a larger acreage position with considerable upside potential provides Chevron with an opportunity to continue to grow post 2030.”

Rystad is worse than EIA on looking at current plans and just multiplying. I’m sure they are not going to increase production to near 2.5 million barrels more, unless the refining capacity is close to that amount. Current projections by Exxon, as I remember, were to increase production by 600k by 2023. Recent improvements in the works to refining capacity are about equal that. Chevron has some recent refinery acquisition that they are working on, but I think is longer term in setting up. So, they are not pursuing rapid increases, yet. 

Edited March 24, 2019 by GuyM

[ceo_energemsier + 1,818]

Oil Dorado: Guyana set for its own Klondike ‘black gold’ rush?

Written by John Mair in Georgetown, Guyana - 18/03/2019 6:00 am

 

It is in South America yet they speak English. Culturally and in cricket terms they are West Indian. Guyana was the setting for Sir Walter Raleigh’s mystical city of gold: El Dorado.

Today the reality is that billions of barrels of quality crude has been discovered offshore. ExxonMobil has declared five and a half billion barrels in their Stabroek block alone.

Others are just starting exploration. Some expect there to be up to 13 billion barrels below the seabed.First oil is due later this year and by 2025 Guyana will be in full flow.

One startling statistic: There will be a barrel of oil per day per head of the 750,000 population. The nation’s GDP will double. How that oil wealth is distributed is the big question facing a nation in the midst of political chaos.

The government lost a vote of confidence last December. Elections, according to the constitution, should be held by March 21. No sign. David Granger’s  government is running down the clock. The earliest people here expect is September or  more likely December 2019, one full year after the loss of confidence in the National Assembly.

Meanwhile the  discoveries continue. The Liza development, which will be the first to deliver, is a joint enterprise between Exxonmobil, China National Oil Corporation and Hess Corporation. It is 120 miles off the coast of Guyana.

To date 12 wells have come up positive for oil out of just fourteen drilled, a success rate of 82%, four times the industry average worldwide. Liza One alone is expected to yield in excess of one billion barrels. Just last month Exxonmobil announced another two discoveries in their field. Others exploring other fields are being coy. Eco Atlantic thinks it will discover nearly four billion barrels in its patch. This was confirmed to this writer by one of their partners in the venture. Other franchises and fields are currently being touted; the process is held up by the political stasis in Guyana.

Parliament is not sitting and will not until the Opposition PPP agrees and that depends on President Granger, who is currently in Cuba receiving chemotherapy for his leukaemia, naming an election date.Granger controls the allocation of blocks personally. The government does have an energy department, but that is headed by Dr Mark Bynoe, who is inexperienced when it comes to oil. He has little autonomy and a tiny staff. Advertisements are currently appearing in the Guyanese press for more professionals. It looks like it will be some time before the energy department gets some energy behind it.

Meanwhile exploration of the new “Oil Dorado” continues apace. The oil men and women are coming to town to seek part of the action. This week past Barney Crockett, the Lord Provost of Aberdeen, was here to sign twinning agreements with Georgetown and develop links with the private sector. Trade and oilmen will follow.

Guyana has set up a Sovereign Wealth Fund which it calls the Natural Resources Fund. That too is but an embryo within the Finance Ministry. The Petroleum Commission set up to regulate also looks to be still an idea rather that reality.What is real is the potential profits. The world oil price is currently around $60 per barrel. The break even price for the Liza discovery is said to be below $40 per barrel.

Guyana’s oil will not only be easy to find it will also be very profitable.In 2012, the United States Geological Survey estimated that that there was 13.6bn barrels of oil and 32 trillion cubic feet of natural gas yet to be discovered in the Guyana-Suriname basin.

Some nine decades ago, in 1932, the British Guyana Daily Chronicle was very prescient. “Every Man, Woman and Child in British Guyana Must Become Oil-Minded”, it declared.

In 2019 the Guyanese are learning that lesson at long last.

John Mair is Guyanese born. He lives in the UK but visits Guyana regularly. He has worked as a TV producer for the BBC and Channel Four. In recent years he has edited 30 books. The latest, Oil Dorado? Guyana’s Oil was published in Guyana on March 13 and will be published in the UK on March 28.

[ceo_energemsier + 1,818]

https://ssl.toyota.com/mirai/index.html

[Rasmus Jorgensen + 1,169]

On 3/24/2019 at 1:30 AM, DanilKa said:

How would cost of capital would be different for the major? I not even sure they have to explain where money are going

A 10 - 15 billion FPSO project takes a lot longer to develop and a lot more upfront cost. That takes longer to recover. Exxon started spending money in Guyana 10 - 11 years ago. Once the first FPSO is producing they will produce 120k bbls a day. They have a fantastic royalty / tax deal and low lift costs, yes. But it will take them a long time recover the upfront invesment. 

I am not saying Shale could compete with Guyana. It can't and shouldn't. But there are other marginal developments....... compared to these Shales short-cycle is super attractive. 

[ceo_energemsier + 1,818]

https://finance.yahoo.com/news/even-45-billion-t-keep-230013715.html

 

https://finance.yahoo.com/news/china-apos-big-oil-aims-015604214.html

 

https://finance.yahoo.com/news/u-buyers-venezuelan-oil-sub-shell-bp-offshore-052023150--sector.html

[ceo_energemsier + 1,818]

Re. other posts China and US trade and Us energy exports, China will be a long term large volume/value buyer/importer of US energy products once the trade issues are settled.

________________________________________________________________________________________

China will buy more US goods, top official says ahead of latest trade war talks

in World Economy News 26/03/2019

 

China will work to boost imports and achieve a more even balance of trade with the United States, a top Chinese official said on Sunday, just days ahead of the latest round of talks aimed at bringing an end to the two countries’ punishing tariff war.

Speaking at the China Development Forum in Beijing, Vice-Premier and Politburo Standing Committee member Han Zheng told a gathering of foreign business representatives and former government officials from the US and other countries that his government was committed to levelling the playing field.

“We do not aim to … [increase the] trade surplus and sincerely want to increase imports to achieve trade balance,” he said.

Han said also that China would improve market access, including shortening the “negative list” of industries in which foreign investment is limited or prohibited, and ban the practice of forcing foreign firms to transfer proprietary technology to joint venture partners.

“As the next step, we will continue to shorten the negative list for foreign investors and allow sole proprietorship of foreign businesses in more sectors,” he said.

China would also speed up the opening up of more sectors, including telecommunications, education and health care, he said.

“We will continue to strengthen intellectual property protection, prohibit forced technology transfers, and build a penalty and compensation system [for infringement cases],” added Han.

The pledges come as Chinese Vice-Premier Liu He, the country’s top trade negotiator, prepares to welcome US trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin to Beijing for the latest round of trade talks, which get under way on Thursday.

Liu and his team will later travel to Washington for a second phase of the talks, starting on April 3, the White House said earlier.

US President Donald Trump has made reducing the trade gap with China one of the priorities of the negotiations and Beijing is reported to have promised to buy larger quantities of US agricultural and energy products to help achieve that goal.

The trade gap for goods bought and sold by the US and China in 2018 rose 11.6 per cent from the previous year to a record US$419 billion.
Source: South China Morning Post

[ceo_energemsier + 1,818]

https://finance.yahoo.com/news/flood-u-oil-exports-coming-040102063.html

[Wombat + 1,028]

On ‎3‎/‎13‎/‎2019 at 12:36 AM, JJCar said:

OPEC (aka Saudi Arabia) can cut production and exports all day long.  Over the coming months and into 2020 and beyond  new Permian pipelines and export terminals will unleash the US oil on the world market.  

Ten or fifteen years ago if Iran threatened to close the Straights oil would jump $20.  Now the oil traders just yawn. 

The only way Saudi Arabia could get prices up to their Budget Breakeven of $85 is to start a war in the Mideast.  

I disagree that SA need to start another war to get $85 oil. I agree they can cut production and exports all day long, and think they will use this method to get to $85. Lucky for America, u don't want to unleash ur oil into an already over-supplied market? Better to actually make some money from shale rather than constantly losing it? Here in Australia, Govt yet 2c any revenue from LNG producers due to very low price. Last two mining booms funded income tax cuts but LNG boom yet to pay off.

[Wombat + 1,028]

On ‎3‎/‎13‎/‎2019 at 9:31 AM, Old-Ruffneck said:

Funny Farm me thinks hehehe

I really don't put a lot of attention to 2 year out forecasts as no reliable by any stretch. Please consider 6 months at most as the industry is still suckering the financials out of money and as long as someone is handing out the cash, they'll keep rolling. In all honesty I thought the lenders would've been calling in the notes. I do think some politics is in play now for sure to keep up production. How do you keep the Steeeeep decline from happening? You can't, you just drill more holes to keep the production up. @Tom Kirkman, we used to call it funny money. Today they call it investment!!

I reckon that WTI at $40 makes shale drilling "funny money", but WTI at $70 it becomes investment indeed! I think it needs to be kept in mind that global oil demand grew approx. 1.6mb/d in 2018, but global oil production rose a whopping 4mb/day, only 40% of which occurred in US! This year, inventories should start to fall significantly as demand outstrips supply, perhaps as early as June.

[Wombat + 1,028]

1 hour ago, JJCar said:

The US is a FREE MARKET CAPITALIST Economy. 

Very efficient (and fair)

(some) OIL companies have reduced break even to $20/bbl.  The second wave of shale era has begun.  US shale companies that survive the consolidation will be very profitable $50 bbl oil, pay good dividend and fund capital expenditures.

It's a natural law of Free Market Economies.  

Saudi's will make great profits with $3 to $4 cost oil.  Just not what the want.  US drivers won't pay for any more of King Salman's solid gold escalators for his 747 personal jet.

 

I don't think $50 is a fair price. I agree with Tom Kirkman that a sustainable price is about $65. That is still dirt cheap compared to costs of things such as housing and health care. I don't think it is fair to have "trillion dollar" tech companies that don't make anything special whilst it near impossible for an investor to make money from the largest and most useful industry on the planet?

[Wombat + 1,028]

3 minutes ago, JJCar said:

You THINK $65 is fair.

Let the Free Market Law of "Supply and Demand".  You really want the government to regulate prices .

Free Market economics made the US economy the envy of the world.  

You must be a Jimmy Carter fan . Price regulation is wrong.  It doesn't work.

Subsidising Fracking companies with fiat money at near-zero rates is not free market economics. It is called "currency war" and everyone involved in it and it is the younger generations that will have to pay the bill.

[D Coyne + 305]

JJCar,

Listen to oilmen like Mr. Shellman.  The breakeven oil price for the average Permian tight oil well that started producing in 2017 is about $65/b at the refinery gate and about $60/b at the well head.  The claim of $20/b breakeven is only true for the top 5% of wells in terms of productivity.  Don't believe the hype in investor presentations, read the fine print which says in effect, the stuff in large print is mostly lies and only a fool would believe it. 

[Old-Ruffneck + 1,177]

12 hours ago, Wombat said:

I reckon that WTI at $40 makes shale drilling "funny money", but WTI at $70 it becomes investment indeed! I think it needs to be kept in mind that global oil demand grew approx. 1.6mb/d in 2018, but global oil production rose a whopping 4mb/day, only 40% of which occurred in US! This year, inventories should start to fall significantly as demand outstrips supply, perhaps as early as June.

Was referring to the Savings and Loan scandal of the 80's. Loaning money on top of loans. Not a good practice. 40 dollar WTI is good for the consumer but not so good for the Oil companies. 70 dollar WTI is about 20 too high. A fair price  is 50 to 55. Keeps the economy churning at steady pace. 

[Old-Ruffneck + 1,177]

10 hours ago, Wombat said:

I don't think $50 is a fair price. I agree with Tom Kirkman that a sustainable price is about $65. That is still dirt cheap compared to costs of things such as housing and health care. I don't think it is fair to have "trillion dollar" tech companies that don't make anything special whilst it near impossible for an investor to make money from the largest and most useful industry on the planet?

Spoken like a true Liberal Leftist. If you or any of your family designed a new operating system and made trillions I would say Great!!! This is America, where dreams can be fulfilled. 50 to 55 WTI is a fair price and the oil companies are making good money. Some wells might be alittle tight some older wells making excellent returns. Averaging them all out (talking all producing wells from late 30's on) the price of 50 to 55 is good for America. Get greedy and watch the economy quickly slow. It's been shown time and again.

[Douglas Buckland + 6,308]

On 3/18/2019 at 10:22 PM, butasha said:

I am more of a lurker than a poster on numerous forums that I frequent. With that said I feel the need to point out that as a land owner here in the US the minerals below my property belong to me and my family are do not yours to conserve. 

If you want to conserve the oil and gas below my property then buy my minerals at a negotiable price and conserve all that you want. Until then I will quite happily invest the royalty payments that we receive and provide for future generations of my family. 

In the US, ownership of the surface rights (the land) does not automatically give you ownership of the mineral rights below. In fact, this is usually the exception and not the rule.

Furthermore, in the US, mineral rights below a surface plot can be sold not only by specific mineral, but by specific depth as well.

[ceo_energemsier + 1,818]

https://www.eia.gov/todayinenergy/detail.php?id=38832

[ceo_energemsier + 1,818]

https://www.reuters.com/article/us-carlyle-group-oil-exports/carlyle-takes-step-forward-on-1-billion-u-s-oil-export-project-idUSKCN1R92SY

[ceo_energemsier + 1,818]

https://www.eia.gov/todayinenergy/detail.php?id=38852

[Douglas Buckland + 6,308]

10 hours ago, JJCar said:

A "Rig Count" data point 

I've  listened to three recent Shale company earnings conference calls.  All three said they were decreasing Rig Count  . . .  BUT the Shale companies we're also would be increasing production 8% to 15%. 

This second save of Shale Oil is seeing measurable uptick in new efficiency.  

There are many variables.  It's not a question of IF Shale production increases , rather by how much.  

Plus, Gulf of Mexico is experiencing a resurgence of growth.  

As for international supply . . .within 5 to 6 years South America will join US,. Russia and OPEC in the 10 Million bbls / day club. ( Brazil, Argentina,. Guyana,. Venezuela, Columbia)

Decreasing rig count (I assume a decrease in the number of wells being drilled) coupled with outrageous decline curves and no readily apparent technological advances (if you disagree, name some) all work against a production increase in the near future - regardless what the shale operators may claim to get funding.

Just because the claim something, does not make it fact.

[Old-Ruffneck + 1,177]

17 hours ago, ceo_energemsier said:

https://www.eia.gov/todayinenergy/detail.php?id=38852

While I appreciate the ''charts and graphs'' the EIA is the last source I would trust for a 30 years into the future guessing game as to how the oil industry is going to be. We can look back to the 80's and early 90's and I can still hear the forecasts of oil depletion in the Permian. EIA is sorta like the NWS, if the rock is wet, its raining, if its swinging, its windy etc.....can't forecast 3 days in advance with all the billions in computer tech and try to tell me 10 days out it's going to rain or snow … We should learn from hindsight. Quit falling for fake forecasts of even 5 years projected. I don't believe the amount of money and resources from WT to the Gulf (billions) of dollars for the shale plays to all dry up in just a few short years. Then again, I could be wrong!! @TomKirkman has his own theories so lets hear what he thinks.

Edited March 30, 2019 by Old-Ruffneck
spelling

[Old-Ruffneck + 1,177]

18 hours ago, JJCar said:

A "Rig Count" data point 

I've  listened to three recent Shale company earnings conference calls.  All three said they were decreasing Rig Count  . . .  BUT the Shale companies we're also would be increasing production 8% to 15%. 

This second save of Shale Oil is seeing measurable uptick in new efficiency.  

There are many variables.  It's not a question of IF Shale production increases , rather by how much.  

Plus, Gulf of Mexico is experiencing a resurgence of growth.  

As for international supply . . .within 5 to 6 years South America will join US,. Russia and OPEC in the 10 Million bbls / day club. ( Brazil, Argentina,. Guyana,. Venezuela, Columbia)

I am with you on the Western Hemisphere increasing as long as Maduro gets ousted. Guyana is already doing well offshore with the help of Exxon. Where once oil was ontouchable and nonexistent is now bearing fruit. Even Pemex is trying to get its act together and start being a lot more productive. There is enough oil in South American, Central America up through West Texas to put a serious hurt on The Unfriendly nations in the Middle East. Re-working our refineries is a small challenge to take on some of the many types of oils out there. But we Americans are the Greatest at achieving oil stability now. We now are a player, not just consumer.

[AcK + 50]

4 hours ago, JJCar said:

US production went from 11.8 mm bbl/d the end Dec to record 12.1 end of Feb. That's up 300,000 bbls/day first 2 months of 2019. 

The doubting Thomases and ludites will never believe.  That's , it's just my opinion.  Contact me on a year.  We'll see who's correct.

As the consolidation takes hold IN MY OPINION you will dropping rig count and increase production. 

About 6 years ago the industry large service companies dominated shale drilling. Then a lot of there workers said, " WOW , I can do that for 1/3 the cost and make twice the money" A lot of these guys started their own drilling company bought a few rigs maybe up to 10 or12 rigs. 

They did cookie cutter drilling  and  . . . .  . . . "that's good enough" drilling. Easy money.

They didn't keep up with the latest drill equipment technology,. latest frac fluents and property, didn't design advanced completion plans, don't map reservoirs with 3D tech and don't use advanced data analytics.  That's why their break even is $50 +.

The brokers bought the oil at a discount FOB at the wellhead. Trucked it, put it on a unit train or pipeline anfd shipped to US refinery. 

Now the Big Oil comes into market and does all of that new technology.  The set up industrial type operations with their own rigs, own team of oil engineers and geologists, own storage and sometimes building their own pipelines. For example Chevron has their own set of 20 rigs that won't change.  Exxon plans to drill with set of 55 rigs.  

Realize that as production increases from here a larger percentage of the increase will be exported.  New ballgame. Increase supply will decrease prices, tighten spreads.  The easy money evaporates for indies. Traders, Small operator's.  The party is over.  

Big Oil will eliminate the brokers .  They have increased their logistics, marketing exporting capabilities. 

The independent will not be able to keep up.  Some large indendents like Occidental that use all the advancements that I mentioned, had pipeline capacity and own storage in 2018 bought oil from other producers in Permian at huge discount and made a fortune selling on the Gulf.  

It used to be a "sellers market" . . . . . It will become a "buyer's market"

Remember before shale gas . . . US  bought Qatar gas for $14 mm/but.  Now it's $2.78.

This is just the start.  Ever increasing tech along with increasing exports changes the game . It's not just small and midsize firms.  Some large shale producers can't keep up.  The indies can survive at $60 WTI .  Maybe for longer if lock in prices with hedges. (Banks say they are not seeing hedging at proper level, many indies are foregoing hedging because they need the extra few bucks per barrel it cost to hedge.) Many are blindly having faith in OPEC, believing the will keep prices up.  Good luck. 

Three new pipelines, millions more bbls exported and increasing world supply can't be stopped.     OPEC, independents and investors that are in denial will have to face reality in about a year when this consolidation becomes evident.

 Worldwide supply growing faster than demand.  Free Markets will prevail.

. . . . . . .   at least that's my opinion.

Good Luck, Let's compare notes in a year.

 

Dude JJCar,

Apologies but I do get the feeling you give precedence to your political views more than technical aspects of drilling and oil production.

The Feb-19 data you are quoting is prelim ie subject to revisions. The most reliable dataset for us crude oil production was released yesterday by eia - jan-19 shows a decline over dec-18. Link below...

https://www.eia.gov/petroleum/production/

Second, the production profile of a shale oil well has a sharp decline curve, irrespective of who drills. So with high tech there is modest improvement possible (third year production at 20pc of first year, better than 15pc) but as Tom keeps repeating his hamster wheel thesis, there is no doubt you will have to keep rig count high/keep drilling more wells just to keep output from falling. The consistent decline in oil rigs does indicate moderating growth.

Sorry but seem to living in the post-truth world, being so much enamored with US energy independence and oil majors (although I have nothing against either - have actually invested in the latter).