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

[ronwagn + 6,290]

48 minutes ago, Old-Ruffneck said:

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??

So, you think the oil majors will fail with their plans? 

[Old-Ruffneck + 1,246]

3 minutes ago, ronwagn said:

So, you think the oil majors will fail with their plans? 

I know Chevron is already drilling the West Permian to an extent, haven't looked to see how many rigs in operation. If they started on the leases they hold with Zero Mineral rights I perceive 15 to 25 break-even as that area is sweet for the style of drilling they are doing. Go up into Eddy county NM and different story. Double + Break-even. As @Mike Shellmanexplained its not just punching a block of holes and laterals out 15k to 20k and the money starts flowing in. Too much is misunderstood about the process of drilling wells and completing them off. Sure 10mill to drill, but then ya have testing completion, and don't forget we truck the wastewater to an injection site. Everything costs. But from the borrowers perspective, he'll tell the lenders that we are down to 15-20 Break-even and they're buying into it. Well, I think thrice borrowing on old credit is about done and even the Exxon and Chevron aren't willing to risk their cap-ex on such foolishness. The ez drilling, 25 day per holes, I can foresee. But not much left there. Instead of quality sands to frac with they now using crushed caliche, mostly powder. Not a rocket scientist here but that plugs holes, no flow rates worth a crap. So even @Tom Kirkmanunderstands the basic fundamentals that this is not sustainable more that 5 years out. I was an avid advocate 10 years ago, but the practices now of drilling too close and loss of production is easy to see. I roughnecked from 78 to 86 and most drilling was Lea County, NM over to Andrews, TX down to Ft. Stockton in proven fields. I only worked on a couple Parker rigs south of Ft. Stockton that was gas wells. In my 8 yrs I was fortunate to make some money and gain a whole lot of experience. 

So to answer you question, yes I think if they stay and try to sustain for any length of time they will say oooops we made a clerical error and is going to cost a slight bit more. At this point I wouldn't put my hard earned dollars as an investment on the drilling side. Completion and service. 

[Dan Warnick + 6,100]

12 hours 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. 

Small town girls are the BEST!  I grew up in the same area, one town over as you will recall, and I thought I knew what a clear, non-light-polluted sky looked like until I visited Vancouver Island.  That was incredible.

Rodent 2020 🐭

Edited March 15, 2019 by Dan Warnick

[JoMack + 549]

Exxon can't lift a barrel for $15 bucks.  Exxon and XTO are called Majors and large Independents due to their size.  Like the government, they have so many hands in the pie, it takes 15 engineers to decide how to move the lateral.  It's nonsense.

[CookieMonster + 1]

 

On 3/14/2019 at 7:12 AM, Tom Kirkman said:

First red flag ! !

Accounting deceptions ahoy ! !

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

Beware...

When part of your business is in gas to liquids and those are used for a multitude of high margin products BOE and BBL or do not matter

[CookieMonster + 1]

On 3/14/2019 at 6:50 AM, pinto said:

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

And what are these energy efficient and renewable sources often using to build them.  I am sure Tesla (like Ford) uses organic polymers, but what about wind mills - they can use light weight durable plastics or aluminum.  

Hydrogen cell membranes?
Polymer based batteries?

And who invests in this research?

[William Edwards + 708]

On 3/14/2019 at 7:06 AM, 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.

The world has not recognized the fact yet, Tom, but the OPEC meltdown has already begun. So far the Saudi Oil minister has duped the trading world into believing that he unilaterally cut production to boost prices. The fact is that not enough customers showed up to buy his crude for him to meet his already reduced expectations. So he actually reduced production more than he planned, not because he wanted to, but because he had too. When the dummies in the trading world click into this fact (albeit slowly), they will head for the exits. The fact is that US production is pushing its way into the market like a bulldozer. And it will not be denied because the IMO dictated that 2-5 million barrels a day of sour crude WILL be replaced within a year. So read the tea leaves and plan accordingly.

Exxon apparently has read the signals accurately and are prepared to prosper accordingly. And if they can actually perform at $15/B you can forget, forever, crude prices above $40/B.

[Dan Warnick + 6,100]

9 minutes ago, William Edwards said:

The world has not recognized the fact yet, Tom, but the OPEC meltdown has already begun. So far the Saudi Oil minister has duped the trading world into believing that he unilaterally cut production to boost prices. The fact is that not enough customers showed up to buy his crude for him to meet his already reduced expectations. So he actually reduced production more than he planned, not because he wanted to, but because he had too. When the dummies in the trading world click into this fact (albeit slowly), they will head for the exits. The fact is that US production is pushing its way into the market like a bulldozer. And it will not be denied because the IMO dictated that 2-5 million barrels a day of sour crude WILL be replaced within a year. So read the tea leaves and plan accordingly.

Exxon apparently has read the signals accurately and are prepared to prosper accordingly. And if they can actually perform at $15/B you can forget, forever, crude prices above $40/B.

You've been away a while, William.  How's things?

[William Edwards + 708]

10 minutes ago, Dan Warnick said:

You've been away a while, William.  How's things?

I am fine, thanks, Dan. The Oilprice computer doesn't treat me in a friendly fashion, so I do not get prodded to participate. However, sometimes something significant persuades me to comment. I see that you keep the ball rolling, however. Good for you! 

[ronwagn + 6,290]

13 hours ago, Dan Warnick said:

Small town girls are the BEST!  I grew up in the same area, one town over as you will recall, and I thought I knew what a clear, non-light-polluted sky looked like until I visited Vancouver Island.  That was incredible.

Rodent 2020 🐭

Everyone should seek out that experience. There are actual light free preserves to do it in. https://www.fodors.com/news/outdoors/10-best-stargazing-sites-in-the-us

I have been to Vancouver City three times and doing all of Vancouver Island is on my bucket list. 

Edited March 16, 2019 by ronwagn

[GuyM + 7]

And the 6.5 billion they paid the Bass family is not counted in land acquisition costs? $15 a barrel BE is pure BS. If they drilled verticals in the shallower formations and got decent production, they may have a lower BE. But, that’s almost gone, so they will have to drill much deeper horizontals and $15 a barrel is so much BS, it’s disgusting.

Edited March 16, 2019 by GuyM

[wrs + 893]

Let's make it clear about these operating costs, when you challenge  a lease on paying quantities, interest is NOT a production cost.  You people that continue to yap about debt do not understand how this works at all.  Stripper operators take out mortgages against the value of the minerals that they hold the lease for and as long as they continue to produce in paying quantities which doesn't mean what it seems, they hold the lease.  Any capital expense isn't counted against the cost of producing the oil.  Repairs are counted, labor is counted, transportation and handling are counted, disposal costs for water are counted, electricity is counted, insurance is counted, there is some overhead that is counted and ad-valorem taxes as well as royalties are counted.  These are operating costs.  The debt was used to acquire capital and the capital can be amortized so you folks need to quit whining about debt as part of cash flow. They are liabilities against the collateral of the minerals in the ground.

Even with all those things counted we did an analysis of our stripper operators and their costs were about $20/bbl.  They were losing money in 2016 but played some games to allocate income from 2017 backwards.  They claimed because part of the oil was pumped in 2016 but they sold it in 2017 that they had the right to assume that the production in 2016, even though it wasn't sold because it wasn't enough to sell, should be imputed as income.  We didn't bother to challenge it.  There are many games that are played to create this number and it's mostly a bogus number.  Nevertheless, stripper operators probably have the lowest costs out there.  I don't see XTO doing $15 but again, they can game that number in many ways.

[Outlaw Jackie + 78]

$15/Bbl.?  Don't make me laugh...   The only reason they are still alive down there are the OPEC ministers adhering to their quotas.  In the absence of some technological innovations with produced water handling, the only way they will see $15/Bbl BE is to squeeze service providers.  

[Enthalpic + 1,496]

I'm fairly sure the major oilsand operators are already doing it that cheap, if not cheaper.

https://web.tmxmoney.com/article.php?newsid=5740611559135547&qm_symbol=HSE

"operating costs of $13.75 per boe; $11.09 per barrel for thermal bitumen projects" and I think that is in CND not USD.

 

Edited March 16, 2019 by Enthalpic

[wrs + 893]

2 hours ago, Enthalpic said:

I'm fairly sure the major oilsand operators are already doing it that cheap, if not cheaper.

https://web.tmxmoney.com/article.php?newsid=5740611559135547&qm_symbol=HSE

"operating costs of $13.75 per boe; $11.09 per barrel for thermal bitumen projects" and I think that is in CND not USD.

 

In my post I am only referring to BO, not BOE.  It's obviously going to be lower using BOE.

[Enthalpic + 1,496]

On 3/15/2019 at 6:51 PM, ronwagn said:

I have been to Vancouver City three times and doing all of Vancouver Island is on my bucket list. 

 

The island is much better than the city.

You can stand upright under that tree stump!