Exxon Aims For $15-a-Barrel Costs In Giant Permian Operation

Exxon Mobil Corp. plans to reduce the cost of pumping oil in the Permian to about $15 a barrel, a level only seen in the giant oil fields of the Middle East. The scale of Exxon’s drilling means that it can spread its costs over such a big operation that the basin will become competitive with almost anywhere in the world, Staale Gjervik, president of XTO Energy, the supermajor’s shale division, said in an interview. Development, operating and land acquisition costs will be “in and around $15 a barrel,” he said on the sidelines of the CERAWeek Conference by IHS Markit in Houston. “The way we are approaching it is very unique compared to most, if not really everybody out there, as far as the scale.” The shale revolution has made the Permian into the world’s largest shale field, with production topping 4 million barrels a day, almost as much as Iraq, OPEC’s second-biggest member. But the rapid growth has often meant that producers burn cash flow to reinvest in the expansion, prompting investors to call on them to focus more on returns in 2019. Exxon plans to deploy 55 rigs in the Permian this year, by far the most of any driller, as it aims to increase output in the region fivefold to about 1 million barrels a day by 2024. Its strategy also includes building its own takeaway infrastructure from separation tanks to pipelines, and it’s even joining a giant conduit project to make sure its oil doesn’t get stuck in bottlenecks that have depressed prices in West Texas.

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Why create efficient renewable energy when you can release crude oil into the environment...

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Exxon plans to ramp capital spending in the next two years. The company forecasts substantial earnings and cash flow increases with a major catch of needing $60/bbl oil. 

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ExxonMobil expects earnings to jump 140% by 2025

"Exxon plans to produce 1 million barrels of oil equivalent a day in the Permian as soon as 2024 - way up from a 2025 projection of 600,000 barrels just a year ago."

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I will be enormously impressed if Exxon can actually pull this off.  Not joking here.

If Exxon can really and truly get *actual costs* down to $15 break even in the Permian, it truly would be a game changer, and I could finally stop bitching and moaning about the U.S. Shale Oil hamster wheel of debt.

But we will have to wait and see what actually happens.  I remain sceptical, but I would be very happy to be proved wrong.  If Exxon can get $15 break evens in Shale Oil, then OPEC will likely have a meltdown.

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6 minutes ago, 50 shades of black said:

Exxon plans to produce 1 million barrels of oil equivalent a day in the Permian as soon as 2024 - way up from a 2025 projection of 600,000 barrels just a year ago."

First red flag ! !

Accounting deceptions ahoy ! !

BOE (Barrels of Oil Equivalent) are NOT Barrels of Oil.

Beware...

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43 minutes ago, Tom Kirkman said:

I will be enormously impressed if Exxon can actually pull this off.  Not joking here.

If Exxon can really and truly get *actual costs* down to $15 break even in the Permian, it truly would be a game changer, and I could finally stop bitching and moaning about the U.S. Shale Oil hamster wheel of debt.

But we will have to wait and see what actually happens.  I remain sceptical, but I would be very happy to be proved wrong.  If Exxon can get $15 break evens in Shale Oil, then OPEC will likely have a meltdown.

When I was down there in West Texas last 2 months, parts were BE @15.00 to 20.00. But unless they get only and all the sweet spots and cube drill them, I am still skeptical of maintaining a BE that low. I seriously don't think there is a lot left of the ez pickins' ya know. Exxon and Chevron are the ones to watch down there in the next 180 days. I wouldn't bet further out than that. A flick of a switch and all goes to hell in the oil patch. @Mike Shellmanprobably be the best to give accurate updates. I am sure there is 40bb but how easy drilling and extracting I am leery of. So my guess is still 25+ BE and likely slightly higher as time goes on. 2025? LMAO on that far out prediction. Nothing in certain in oil field terms that far out. Look at what last 2 months have wrought. Hmmmmmm. A head scratcher? Not really, just a breather and the bux are slowing down.

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1 hour ago, pinto said:

Why create efficient renewable energy when you can release crude oil into the environment...

The real question is, why not? Money talks, B.S. walks. Efficient and Renewable Energy don't belong in the same sentence as of yet. Maybe 10 years or so but do a cost break down of all the renewables from inception to end product and you'll see that if not government subsidized, still a terrible investment unless you want to have capital loss on the sheets.

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" Exxon Mobil Corp. plans to reduce the cost of pumping oil in the Permian to about $15 a barrel, "

 

Plans to - - so does that mean the technology is available NOW -- if it is, what's taking so long to implement, -- "plans to" In how many years and would oil even be relevant at that time 

I use a Very very ROUGH calculation to determine the price of future automotive gas, and using my calc's at $15 barrel, and using existing spread to Brent my calc for the cost of automotive gas would be $1.07 per gal (not adjusted for inflation ) - who needs renewables

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4 hours ago, Tom Kirkman said:

First red flag ! !

Accounting deceptions ahoy ! !

BOE (Barrels of Oil Equivalent) are NOT Barrels of Oil.

Beware...

Actually grateful. That means they plan on not flaring the gas, and condensate capture. I want my night sky back when I go camping in West Texas. I miss the Milky Way.

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1 minute ago, John Foote said:

Actually grateful. That means they plan on not flaring the gas, and condensate capture. I want my night sky back when I go camping in West Texas. I miss the Milky Way.

You mean you don't like flares so big and frequent that the clouds glow red after a storm?

Seriously - the flaring is out of control. Capture it and sell (though we need more pipelines to avoid the negative spot market we saw a while ago...).

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1 hour ago, JJCar said:

 

Operators that employ the latest technology (and can afford the latest technology) can hit this number.  Over 1100 shale drilling/fracing patents filed in last 2 years.  Some (Chevron) are producing oil low $20s today.  Closed mined people are in denial still thinking like its 2012.  

Chevron CEO said they are only recovering 9% to 10% of shale oil and gas (up fro 3% to 5%in 2013) .  I saw report that will increase to over 30% in three to four years.  

$15 bbls cost.  No problem. 

This.

 

Though I disagree on the 30% EOR in 3-4 years - I think 15% would be great! And get you all the way to your pricing goals... If someone can produce for $30/bbl now, and goes from 9% to 15%, that drops cost/bbl to $15. This isnt quite true because you still have royalties that are a per-barrel cost, but facilities (even as expensive as they are) an negligible in total cost if done correctly. So unless drilling and completions costs jump significantly to achieve this, $20 is perfectly reasonable right there. Take all the other steps they mention to avoid bottlenecks and such, $15 seems ambitious, but reasonable.

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5 hours ago, Tom Kirkman said:

I will be enormously impressed if Exxon can actually pull this off.  Not joking here.

If Exxon can really and truly get *actual costs* down to $15 break even in the Permian, it truly would be a game changer, and I could finally stop bitching and moaning about the U.S. Shale Oil hamster wheel of debt.

But we will have to wait and see what actually happens.  I remain sceptical, but I would be very happy to be proved wrong.  If Exxon can get $15 break evens in Shale Oil, then OPEC will likely have a meltdown.

it sounds to me like a move away from shale and back to conventional.

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3 hours ago, John Foote said:

Actually grateful. That means they plan on not flaring the gas, and condensate capture. I want my night sky back when I go camping in West Texas. I miss the Milky Way.

South of Ft. Stockton no flares!! at present. 

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@Old-Ruffneck your a hand, I know you won't mind much if I disagree with you. That's the oilfield, right? Break even price is a worthless metric that has so many different meanings its ridiculous. Some BE numbers include annual rates of return on CAPEX, others don't and all BE calculations leave out tons of costs and/or can be diluted by the BOE, gas at 6:1 dribble Tom mentions. BE just sounds good and that is why the shale oil industry loves it. It implies that everything over the BE number is profit. We all know by now, I hope, unless your living on the moon, that the shale oil industry is not profitable and choking on debt. That too is the oilfield; some things work, others things don't. The shale oil thing keeps on going like the little Energy rabbit because it is borrowing more money to drill those wells and/or deferring old debt from wells that were drilled 5,6,8 years ago. 

The XOM claim is dumb. Its wells, the ones I've seen, or NO better than other wells drilled by independents. Its costs would have to come down 40% to ALL other costs in both basins for the same sort of wells. It can't be done. If all of its acreage averaged 3/16th royalty burdens those deductions, plus severance taxes, alone, is $11.50 per BO. It produces 327K BWPD from HZ wells in the Permian Basin and produces 123K BOPD (shaleprofile.com). If it can handle all that water for $2/bbl. (which it can't), water costs alone are pushing $5 per incremental BO. Then there are enormous lift costs associated with ESP lift, interest expense on its $36B of debt, and G&A costs.

Exxon's $15 BE claim is ridiculous. Statements like that will serve to create mistrust among shareholders, however many it has left, will help keep oil prices low and volatile and otherwise create the illusion that America is covered up with cheap shale oil, as long as Exxon is charge. If one believes that crap then it needs to run out and buy XOM stock, now.

Keep a bind on it.

Mike 

 

 

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10 hours ago, pinto said:

Why create efficient renewable energy when you can release crude oil into the environment...

Renewables have to be price competitive like any other product. ICE cars will be around a long time and they are just one factor. Natural gas is the best choice for trucking, ships, railroads, etc but first, the price of oil must go up or governments must demand tighter controls on pollution. Los Angeles is doing that right now and I expect a disaster unless they back off. Watch them. They just canceled plans to build new natural gas plants. I predict a reversal of Mayor Garcetti's order.

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10 hours ago, Tom Kirkman said:

First red flag ! !

Accounting deceptions ahoy ! !

BOE (Barrels of Oil Equivalent) are NOT Barrels of Oil.

Beware...

Well, they will be providing a much needed way to stop wasting our natural gas and related liquids. That is my biggest gripe.

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9 hours ago, Old-Ruffneck said:

When I was down there in West Texas last 2 months, parts were BE @15.00 to 20.00. But unless they get only and all the sweet spots and cube drill them, I am still skeptical of maintaining a BE that low. I seriously don't think there is a lot left of the ez pickins' ya know. Exxon and Chevron are the ones to watch down there in the next 180 days. I wouldn't bet further out than that. A flick of a switch and all goes to hell in the oil patch. @Mike Shellmanprobably be the best to give accurate updates. I am sure there is 40bb but how easy drilling and extracting I am leery of. So my guess is still 25+ BE and likely slightly higher as time goes on. 2025? LMAO on that far out prediction. Nothing in certain in oil field terms that far out. Look at what last 2 months have wrought. Hmmmmmm. A head scratcher? Not really, just a breather and the bux are slowing down.

They do have to keep luring investors. 

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9 hours ago, Old-Ruffneck said:

The real question is, why not? Money talks, B.S. walks. Efficient and Renewable Energy don't belong in the same sentence as of yet. Maybe 10 years or so but do a cost break down of all the renewables from inception to end product and you'll see that if not government subsidized, still a terrible investment unless you want to have capital loss on the sheets.

The governments will not care if they can keep raising energy prices without opposition. Californians just voted to not cancel a 25 cent gasoline tax!

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3 minutes ago, ronwagn said:

They do have to keep luring investors. 

Buyer beware at this point. I am thinking soon another 2014. The dominoes will fall

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5 hours ago, John Foote said:

Actually grateful. That means they plan on not flaring the gas, and condensate capture. I want my night sky back when I go camping in West Texas. I miss the Milky Way.

Not a deception, just showing best practices. 

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6 minutes ago, Old-Ruffneck said:

Buyer beware at this point. I am thinking soon another 2014. The dominoes will fall

We have to reelect Trump and it will be OK but we have to cut Defense and other spending while getting more bang for our buck. 

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6 minutes ago, ronwagn said:

Not a deception, just showing best practices. 

I had to go a couple of miles out of Tucumcari to show my wife what a dark night sky looks like. She never believed me about what she was missing. She was a small town girl but lived close to two small cities, Springfield and Decatur IL. 

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3 minutes ago, ronwagn said:

We have to reelect Trump and it will be OK but we have to cut Defense and other spending while getting more bang for our buck. 

Biggest issue is loans on loans, triplicated. If you or I were to do this, we would be locked up. Seems the oilpatch has a get outta jail card for free. "But we must increase production" and the poor investors are the ones left hanging. That's why I say buyer beware. This game is about played out. When I came back home to Illinois last week, the rigs were already diminishing. I have a feeling it's going to increase soon, no matter what Exxon or Chevron say. The mood down there is changing and you can tell by amount of RV's leaving. I could be wrong, my timetable guesstimate is less than 6 months. There is plenty of completion work yet and pipelines and infrastructure. But drilling will halt rapidly. Or maybe they will find more suckers to loan em money??

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9 minutes ago, ronwagn said:

I had to go a couple of miles out of Tucumcari to show my wife what a dark night sky looks like. She never believed me about what she was missing. She was a small town girl but lived close to two small cities, Springfield and Decatur IL. 

just north of Peoria here.

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