Why is bigger better in the Permian?

[Manfred Kruger + 40]

The Majors have one large advantage over their smaller competitors, lower cost of capital which is important in such a capital intensive industry

[Douglas Buckland + 6,308]

Perhaps somebody smarter than I can post the link here for discussion. I can't seem to do it off my phone....

[Ward Smith + 6,615]

35 minutes ago, Douglas Buckland said:

Has anyone read 'The Shale Boom is About to go Bust' by Nick Cunningham in todays 'Articles' on OilPrice.

An interesting perspective on the technology issues.

Lol i came in here to post the link but you beat me to it because I had to read through all the @ceo_energemsier copy and paste quotes. 

Here's the Link to the article

[Old-Ruffneck + 1,177]

40 minutes ago, Douglas Buckland said:

Has anyone read 'The Shale Boom is About to go Bust' by Nick Cunningham in todays 'Articles' on OilPrice.

An interesting perspective on the technology issues.

I find his writings biased to the extreme. Uses scare mongering and his facts are usually incorrect, doubtful he has ever been to the oil patch and get real factual opinions from more than the usual one expert he might quote. I consider him a keyboard artist. That story is so full of cow manure, proof is that Exxon and Valero wouldn't be spending billions of their own cash in West Texas. IMHO

[Douglas Buckland + 6,308]

Old- Ruffneck,

I think that the 'takeaway' point of the article is that regardless who the operator is, or who's money they are using, it all boils down to reservoir quality, rock properties and fluid dynamics. These are God-given and will not change in the foreseeable future.

The question then becomes, 'If the small to mid cap operators couldn't make a profit and are willing to sell out, why do the big players feel that they can turn it around?'

I am not trying to start a 'pissing contest' between the pro-LTO camp and the guys and gals that think the shale play is built on sand. I am simply asking questions.

[Old-Ruffneck + 1,177]

2 minutes ago, Douglas Buckland said:

Old- Ruffneck,

I think that the 'takeaway' point of the article is that regardless who the operator is, or who's money they are using, it all boils down to reservoir quality, rock properties and fluid dynamics. These are God-given and will not change in the foreseeable future.

The question then becomes, 'If the small to mid cap operators couldn't make a profit and are willing to sell out, why do the big players feel that they can turn it around?'

I am not trying to start a 'pissing contest' between the pro-LTO camp and the guys and gals that think the shale play is built on sand. I am simply asking questions.

I suggest going back 6 months and read all "Cunningham's" posts and just get an idea of his thinking. Draw your own thoughts and see why I have disgust for the writer. Fake News.

[ronwagn + 6,290]

3606 Caterpillar engine for fracking. 2,481 maximum horsepower. https://www.cat.com/en_US/products/new/power-systems/industrial/industrial-diesel-engines-lesser-regulated-non-regulated/18398231.html

Edited May 10, 2019 by ronwagn
addition

[ceo_energemsier + 1,818]

1 hour ago, Douglas Buckland said:

Old- Ruffneck,

I think that the 'takeaway' point of the article is that regardless who the operator is, or who's money they are using, it all boils down to reservoir quality, rock properties and fluid dynamics. These are God-given and will not change in the foreseeable future.

The question then becomes, 'If the small to mid cap operators couldn't make a profit and are willing to sell out, why do the big players feel that they can turn it around?'

I am not trying to start a 'pissing contest' between the pro-LTO camp and the guys and gals that think the shale play is built on sand. I am simply asking questions.

It is not a pissing contest.....

Either you are for it or against it. I could understand if someone lost their neck, their shirt, their house etc betting on shale not done right and now are totally turned off, or someone folks may just be the no crowd for whatever reason, because after a certain point of no , there is no reasoning left, as is the case with the anti-frackers or anti whatevers.

I have personally been involved in 3500+ shale wells directly as an investor, executive, company owner, equity investor , operator oversight and management etc across the Permian, Eagle Ford, Bakken , Mancos/Niobrara, Marcellus and I have lost $$$ on  a very low count of wells and that was in the early days of the shale start up.

And yes tech is the driving factor, no matter if tech was developed and or designed for other applications but modified for use in shale, which is also true for every industry. Not all techs are created for one particular use and it is interchangeable and also able to be modified, upgraded and overhauled.

 

[ceo_energemsier + 1,818]

3 hours ago, Douglas Buckland said:

Has anyone read 'The Shale Boom is About to go Bust' by Nick Cunningham in todays 'Articles' on OilPrice.

An interesting perspective on the technology issues.

Did you also read the headlines about " oil crash", "deep water is dead", "stripper wells shut down", "mom and pop oil companies closed" ?

[ceo_energemsier + 1,818]

1 hour ago, Douglas Buckland said:

Old- Ruffneck,

I think that the 'takeaway' point of the article is that regardless who the operator is, or who's money they are using, it all boils down to reservoir quality, rock properties and fluid dynamics. These are God-given and will not change in the foreseeable future.

The question then becomes, 'If the small to mid cap operators couldn't make a profit and are willing to sell out, why do the big players feel that they can turn it around?'

I am not trying to start a 'pissing contest' between the pro-LTO camp and the guys and gals that think the shale play is built on sand. I am simply asking questions.

I have answered several of your questions but you are unwilling to take the answer because you already have a NO answer

[Douglas Buckland + 6,308]

ceo_energesier,

 

The final sentence of my previous post was, "I am simply asking questions. ". This does not indicate a position for or against an issue, this is simply soliciting information.

You appear to be very thin skinned. Furthermore, although you "...have personally been involved in 3500+ shale wells directly as an investor, executive, company owner, equity investor , operator oversight and management etc across the Permian, Eagle Ford, Bakken , Mancos/Niobrara, Marcellus and I have lost $$$ on  a very low count of wells and that was in the early days of the shale start up. ", this in no way diminishes the contribution of others on this site.

As with all social media sites, you really do not know who is replying to your comments. It could be the CEO of a multinational operator trying to be anonymous or it could be somebody living in his mother's basement.

I respect your opinion and arguments, but I do not agree with them.

[ceo_energemsier + 1,818]

5 minutes ago, Douglas Buckland said:

ceo_energesier,

 

The final sentence of my previous post was, "I am simply asking questions. ". This does not indicate a position for or against an issue, this is simply soliciting information.

You appear to be very thin skinned. Furthermore, although you "...have personally been involved in 3500+ shale wells directly as an investor, executive, company owner, equity investor , operator oversight and management etc across the Permian, Eagle Ford, Bakken , Mancos/Niobrara, Marcellus and I have lost $$$ on  a very low count of wells and that was in the early days of the shale start up. ", this in no way diminishes the contribution of others on this site.

As with all social media sites, you really do not know who is replying to your comments. It could be the CEO of a multinational operator trying to be anonymous or it could be somebody living in his mother's basement.

I respect your opinion and arguments, but I do not agree with them.

I am not asking you to agree, you asked questions, I answered some of them , and you didnt like my answers? and so goes the barrel LOL

I am not trying to diminish anyone's contribution on here or anywhere else.

Seems like you and or others have a hangup with shale and tech for shale or tech from shale or all three or more.

It is like Apple, how it started what happened to it? and where it is now?

If someone's relative or friend died from a bad stent job, or chemo didnt work for their loved one, or the kidney or liver  transplant failed, then it would be fair to say all these medical developments and techs and procedures are bad failures? Fisker failed so all EV companies are failures? Tesla ?? there were hundreds of small computer companies back in the 70s/80s? how many survived today? so all computer companies are failures, and yet they were using more or less the same tech and tools?

I have seen hundreds of shale companies pop up and vanish like any other industry has their failures and successes.

Some drug companies that spend billions of $$$ on R&D fail on a few of their products in the pipeline, some fail completely but does it mean for example one company's specific anti cancer immunotherapy failed for sometime so they all have to fail> and all the other companies in the same line of r&d will fail too?

Cheers 🍾

[Old-Ruffneck + 1,177]

8 hours ago, Douglas Buckland said:

The question then becomes, 'If the small to mid cap operators couldn't make a profit and are willing to sell out, why do the big players feel that they can turn it around?'

Sorry I went to bed and didn't answer in timely manner. The difference between small to mid cap and the Oil Giants is about the same exception of funds available, technology and who has and can bore laterally further. It takes a lot of money and the small players can't afford to risk 20k+ as too many equations start to build into the money pit. It really boils down to money. Small guys can't keep borrowing on borrowed money. You can see new rig counts are dropping and oil is 62. It's too late for many of them, 2014 all over again and was predicted by several on this forum. @Tom Kirkmanis more eloquent with wording and can explain better as can @ceo_energemsier. 

I still stand by my statement that if you go back just 6 months and see the flip flopping of writer Cunningham, keep and open mind, one can see he is not very informed in the real oil business. He's just another Hack at a keyboard trying to scare money up. That is not journalism to use 1 so called "expert" to write a 5 paragraph Headline story. He'd be better suited to CNN Money.

[Tom Kirkman + 8,860]

If Brent would stay around $70 and WTI around $50, a heckuva lotta upcoming havoc could probably be avoided.  Just my oft-repeated opinion, your mileage may vary.

[Oil_Engineer + 86]

On 5/8/2019 at 1:14 AM, Rasmus Jorgensen said:

I think part of the answer is also cost of finance. 

Can't argue with that.  Majors have access to cheaper capital due to lower risk.  Good point.

[Oil_Engineer + 86]

2 hours ago, Tom Kirkman said:

If Brent would stay around $70 and WTI around $50, a heckuva lotta upcoming havoc could probably be avoided.  Just my oft-repeated opinion, your mileage may vary.

Why such a large gap?  I have seldom seen it go past $10.

[D Coyne + 305]

21 hours ago, Mike Shellman said:

Dennis, I've seen this 45 times, thanks. I am unclear what you mean by "Permian" debt and what the difference is say between it and other shale oil basin debt that folks like Pioneer, Devon, Anadarko, Whiting, QEP, etc. carried with them to the Permian from other basins. Are you just picking a debt number out of the air? How about equity, are you including that? As in lost shareholder equity, retained earnings, equipment, hedge losses, transportation volume commitments, default on drilling contracts, etc., the difference in estimated reserves v. actual reserves less all costs, tax deferments, etc., how does the shale oil industry pay all that back at $60 gross WH prices? Because that is what those prices are today. The EIA has never gotten oil prices right, not ever. 

Debt to exaggerated reserve assets are suspect now, what makes you think that will get better as reserve inventory is drilled off? What happens when impairments become necessary, more than they already are necessary? A ton of stuff should have already come off the books but for the saving graces of the SEC. Where do you think lenders would be if all LTO reserves had to be re-appraised? OXY just got sent to the junk pile because of its new debt to EBITDA ratios.  Loan covenants have restrictions on leverage and already ARE causing reduction in CAPEX, which in turn make your growth models NA. 

165% ROI's over 15 years, at best, are not sufficient to replace reserves and pay back debt/equity, not at anything below about $80. You are an economist, and oil analyst, get some of these "oil men" here to pardnor up with you and get in the shale biz. Its a piece of cake. With the right technology you'll make a fortune. 

Mike,

As I said I start with the assumption that we treat the Permian basin as one big tight oil project where the start date is Jan 2010 and debt is zero.  I assume the average well cost is $10 million in 2017$ for the entire life of the project.  So the debt comes out of the model based on these assumptions (note that from 2010 to 2015 well costs were likely lower than $10 million as less proppant and shorter laterals were the norm and I use actual well output data from shale profile to develop the well profiles from 2010 to 2017.  So the Permian debt is the negative cumulative net revenue accumulated from 2010 to 2018 when we run the economics with actual oil price data and the economic assumptions of the model ($10 million well cost, royalty+tax=33%, transport cost= $5/b, and LOE of $2.3/b plus $15000 per month fixed cost, no net revenue assumed from natural gas sales (which offsets the low LOE of this model), annual discount rate of 10% (nominal) and nominal annual interest rate of 7.5%.

You are correct that the EIA often does not get oil prices right, but in most cases they are optimistic about future output which results in a price forecast that is too low, the AEO reference scenario looks very reasonable to me, if anything it is likely to be too low at least through 2040.

Oil and natural gas is too risky an investment for me, Vanguard total stock market index works for me. 

[ceo_energemsier + 1,818]

Breaking NEWS!!!!

Rystad Energy ranks the cheapest sources of supply in the oil industry

 

Published by John Williams, Digital Assistant Editor
Oilfield Technology, Thursday, 09 May 2019 10:30

 

In a major turnaround, North American tight oil is emerging as the second cheapest source of new oil volumes globally, just shy of the Middle East onshore market.

That is the conclusion of Rystad Energy’s latest cost of supply curve update, ranking the world’s total recoverable liquid resources by their breakeven price.

“As the majors are struggling to replace conventional liquids, a wealthy source of additional resources is tight oil,” says Espen Erlingsen, head of upstream research at Rystad Energy.

Tight oil – such as onshore shale oil in the US – has witnessed an impressive turnaround over the last few years. In 2015, North American shale ranked as the second most expensive resource according to Rystad Energy’s global liquids cost curve, with an average breakeven price of US$68/bbl. The average Brent breakeven price for tight oil is now estimated at US$46/bbl, just four dollars behind the giant onshore fields in Saudi Arabia and other Middle Eastern countries.

“The North American tight oil industry has changed considerably since 2014, as it has proven to be a competitive supply source in a low price environment,” Erlingsen added. “While costs for tight oil have been reduced, the resource potential has grown considerably over the last four years.”

Rystad Energy, the independent energy research and consultancy headquartered in Norway, estimates that total recoverable resources from North American tight oil has more than tripled since 2014.

For oil companies struggling to replace conventional resources after years of disappointing exploration results, tight oil simultaneously offers a base for growth, increased flexibility, and attractive returns.

Whereas offshore normally needs 7–12 years to recover costs, tight oil typically requires only 2–4 years.

“Tight oil is a short cycle investment with a relatively brief lead time from the sanctioning of new wells to the start of production. This gives E&P companies the flexibility to adapt to market conditions and easily change activity levels,” Erlingsen remarked. “In the ever-changing oil price environment, this implies tight oil investment has less uncertainty compared to offshore.”

[ceo_energemsier + 1,818]

Permian Basin continues to be growth engine of USA onshore hydrocarbon production, says GlobalData

 

Published by Naomi Holliman, Digital Assistant
Oilfield Technology, Thursday, 09 May 2019 12:00

Abundant hydrocarbon reserves and the ability to drill longer laterals has made Permian Basin the most prolific shale play in the world, according to GlobalData, the data and analytics company.

GlobalData’s latest market analysis report, ‘Permian Basin Shale in the US, 2019 – Oil and Gas Shale Market Analysis and Outlook to 2023’, reveals that production of crude oil and natural gas has grown each year from 2013 to 2018 despite the oil and gas industry going through one of the worst downturns during that period.

The Permian Basin is one of the largest structurally developed basins in the US. Shale formations in the Permian Basin can range from 1 300 ft to 1 800 ft in thickness, making it one of the thickest deposits in the world.

GlobalData identifies companies such as Occidental Petroleum, Chevron Corporation, Pioneer Natural Resources, Concho Resources and EOG Resources as among the leading producers in the Permian Basin shale in 2018. The major hydrocarbon producing counties in the Permian Basin include Reeves, Midland, Lea, Loving and Eddy.

As in other unconventional shale plays, operators in the Permian Basin continue to drill longer laterals beyond 9 000 ft with some reaching as much as three miles. The general objective remains to increase the productivity of the new producing wells in a higher proportion with respect to the cost increase associated with these more complex wells.

The Permian has also seen a clear trend for larger scale operations of key operators that increase the surface of continuous acreage and allows for more recovery. This has also driven the M&A activity in the Permian with companies like Chevron, Diamondback Energy and Concho Resources looking to expand their Permian footprint to drive greater efficiency and lower production cost.

Adrian Lara, senior oil and gas analyst at GlobalData, comments: “Permian crude oil production increased by more than 1 million barrels per day (bpd) in 2018, and by early 2019 it has already surpassed the 4 million bpd mark. However, the story for natural gas production is somewhat different, largely because an increasing volume of associated gas has been flared due to limitations in the pipeline capacity. If the capacity constraints persist longer, it may force some operators to shut in their wells.”

The limitations to gas pipeline capacity that gave rise to flaring is estimated to ease during 2019–2020, with approximately 4 billion ft³ of pipeline capacity expected to be added during these two years, giving further lift to Permian production.

Lara concludes, “In spite of the infrastructure bottlenecks, Permian acreage remains highly attractive. Whenever possible, operators try to increase the surface of continuous acreage that would allow for larger scale developments and longer well laterals. This is in fact one of the key drivers behind the recent offers made by both Chevron and Occidental Petroleum to acquire Anadarko’s acreage. Whichever company ends up winning the deal will certainly establish a leading position among the top players in the play.”

[ceo_energemsier + 1,818]

Rystad Energy predicts over 1 million km of oil and gas wells to be drilled over next five years

 

Published by Nicholas Woodroof, Assistant Editor
Oilfield Technology, Monday, 29 April 2019 16:00

 

A study by Rystad Energy is forecasting that more than 1 million km of new oil and gas wells will be drilled over the next five years.

The collective depth of these wells is the equivalent of 25 times around the equator – or 2.5 times the distance to the moon.

As the global oil and gas industry gets back into high gear – thanks in no small part to higher commodity prices – demand for steel is set to increase. This is tied to the rising need for steel casing that is commonly used in oil and gas wells to prevent them from collapsing or getting damaged.

Drawing on its proprietary WellCube database, Rystad Energy forecasts that the number of onshore and offshore oil and gas wells drilled globally will increase to around 65 000 in 2019. Activity levels are then projected to remain around this level through 2023.

“North America will be in a league of its own thanks to the shale boom. Nearly six in ten new wells on the continent will be drilled in shale basins. These wells are typically longer than other supply segment wells. This helps explain why shale wells represent around 80% of the distance drilled in North America by 2023,” said Erik Reiso, Head of Consulting at Rystad Energy.

The study also reveals striking differences between the onshore and offshore markets for new wells.

“Whereas the top four offshore operators will add a quarter of new offshore wells going forward, the top ten in the onshore market only represent around one-third of new wells from 2019 to 2023, implying a much more diversified player landscape,” Reiso added.

[ceo_energemsier + 1,818]

Better Breakevens Elevate North American Tight Oil

Velda

Addison

Hart Energy

Fri, 05/10/2019 - 08:54

Companies involved in developing North American tight oil are using knowledge gained to improve costs and breakevens, transforming what were once among the world’s most expensive supply sources into one of the cheapest.

https://www.hartenergy.com/exclusives/better-breakevens-elevate-north-american-tight-oil-179832?mkt_tok

[ceo_energemsier + 1,818]

N. American Shale Oil Second Cheapest Oil Source

 

North American shale oil has become the second cheapest source of new oil volumes, according to research by Rystad Energy.

In its latest cost of supply curve update, the energy research firm found that tight oil – such as onshore shale oil in the U.S. – experienced a turnaround in recent years.

North American shale has gone from being ranked the second most expensive resource in 2015 to the second cheapest – following closely behind the Middle East onshore market at No.1.

“As the majors are struggling to replace conventional liquids, a wealthy source of additional resources is tight oil,” said Espen Erlingsen, head of upstream research at Rystad Energy.

The average Brent breakeven price for shale oil is $46 per barrel, just four dollars behind the massive onshore fields in Saudi Arabia and other Middle Eastern countries.

And Rystad estimates that total recoverable resources from North American shale oil have more than tripled since 2014.

“The North American tight oil industry has changed considerably since 2014, as it has proven to be a competitive supply source in a low-price environment,” Erlingsen said. “While costs for tight oil have been reduced, the resource potential has grown considerably over the last four years.”

Another benefit to shale oil is that it typically requires two to four years to recover costs, while offshore normally needs seven to 12 years.

“Tight oil is a short-cycle investment with a relatively brief lead time from the sanctioning of new wells to the start of production. This gives E&P companies the flexibility to adapt to market conditions and easily change activity levels,” Erlingsen said. “In the ever-changing oil price environment, this implies tight oil investment has less uncertainty compared to offshore.”

[ceo_energemsier + 1,818]

On 5/9/2019 at 1:43 AM, Douglas Buckland said:

You are missing my point. The shale players seem to take credit for techniques, practices and equipment which they neither invented or developed. What they have done is simply apply it to their specific sets of circumstance. This is routinely done in different geographic locations considering the various reservoir parameters.

I find it a bit shady for LTO operators to spout that 'technology' will solve their problems, in an effort to get funding, when they cannot point to a single 'technology' they have created.

There is nothing shady about using technology to improve issues and problems and contraints and make lives better and people having better standards of living. Does your toilet flush? you have hot and cold running water? If it wasnt for some form of technology that was claimed by the people who created that in one form or the other would your life be better off? or penicillin for that matter? or xrays and mri's"

perhaps the person who invented the ekg or the angiography tech and procedure lied or were shady to spout that technology will help saves lives? or get people healthy again?

[Ian Austin + 131]

19 hours ago, Douglas Buckland said:

ceo_energesier,

 

The final sentence of my previous post was, "I am simply asking questions. ". This does not indicate a position for or against an issue, this is simply soliciting information.

You appear to be very thin skinned. Furthermore, although you "...have personally been involved in 3500+ shale wells directly as an investor, executive, company owner, equity investor , operator oversight and management etc across the Permian, Eagle Ford, Bakken , Mancos/Niobrara, Marcellus and I have lost $$$ on  a very low count of wells and that was in the early days of the shale start up. ", this in no way diminishes the contribution of others on this site.

As with all social media sites, you really do not know who is replying to your comments. It could be the CEO of a multinational operator trying to be anonymous or it could be somebody living in his mother's basement.

I respect your opinion and arguments, but I do not agree with them.

I feel like prior to any commentary about the role of Tech and it’s influence on the future of oilfield development, somebody should have to either:

- state their experience in accomplishing something in the oilfield, using new technology, or

- or show they’ve accomplished something wrt bringing new tech to market 

Otherwise, you’re just somebody saying, or doing CNTL + V, CNTL +c 

[Tom Kirkman + 8,860]

10 hours ago, Oil_Engineer said:

Why such a large gap?  I have seldom seen it go past $10.

$50 WTI seems to be the trigger for increasing shale oil drilling.