Is $60/Bbl WTI still considered a break even for Shale Oil

[Tom Kirkman + 8,860]

14 hours ago, Jan van Eck said:

Nobody  does that here, unless you are deliberately taking the posture of a troll.  If you have a logical and/or factual "argument" or position to take that is contrary to mine, I invite you to post it.  There, consider that a (friendly) invitation. 

^ this.  Well said, Jan.

[David Jones + 84]

1 hour ago, Tom Kirkman said:

^ this.  Well said, Jan.

Jan van Eck does not dispute the issue of anthropogenic climate change so if you are using this element of his post as if he wrote it in a way to indicate that he doesn't believe that the issue is serious then what you are doing is misrepresenting his words.

I would also argue that I have already posted some quite clear and logical points on this forum but I keep seeing people come up with arguments that include for instance the implication that a full range of 0%-100% CO2 atmospheric concentration should somehow be considered when looking at the percent increase we are seeing currently. Since 0.5% is defined as unsafe and something like 1%-3% is deadly, why would anyone indicate that the potential for 0.08% would be nothing to worry about on a planet wide scale by 2100 if they understood the issue even remotely? Planetary atmospheric concentration of a certain gas is like being in a hermetically sealed room, there's no place on this planet to escape it and enclosed areas have considerably higher levels of CO2 compared to the atmospheric average.

Edited May 31, 2019 by David Jones

[Tom Kirkman + 8,860]

27 minutes ago, David Jones said:

Jan van Eck does not dispute the issue of anthropogenic climate change so if you are using this element of his post as if he wrote it in a way to indicate that he doesn't believe that the issue is serious then what you are doing is misrepresenting his words.

You are implying that I am twisting Jan's words by quoting him.

 

[Tom Kirkman + 8,860]

15 hours ago, David Jones said:

I don't know what kind of investments you have made but I hope you are not making these with the same mathematical and "logical" principles you seem to have applied when you assessed AGW, assuming you even took the time and didn't just read the presidential twitter feed for your info on the matter. I consider this to be an energy website and yes, I am going to address the rampant misinformation and bad logic that is prevalent when it comes to this issue because it is very relevant to the oil industry as a whole and also because I follow the industry due to their industrial capacity and experience which would actually be of benefit to the transition if they decided to apply themselves. I'm not carrying anything for anyone other then everyone in general and If I didn't constantly find daft and illogical as well as inaccurate arguments which are often based on misunderstanding of basic concepts when it comes to arguments against the validity of the issue, I'd be on your side screaming bloody murder for all the pressure we're under right now (which btw would not be the case if action had been taken earlier). However, I've not seen a single piece of information to convince me that AGW is a non-issue, in fact it's the opposite and since it is directly related to fossil fuels this issue has a place on this forum unless we've come to the point that you feel people should be banned from the discussion because the majority can't stomach a logical and factual argument?

@David Jones what is your agenda on this Oil Price forum? 

I generally view AGW as a non-issue.  Actually, I poke fun at climate panic hysteria, the 12 years till the world ends nonsense.

Injecting AGW into a great thread about the break even price of shale oil is disingenous, when you seem to have a pattern of similar thread derails of injecting AGW into threads here.

[David Jones + 84]

2 hours ago, Tom Kirkman said:

@David Jones what is your agenda on this Oil Price forum? 

I generally view AGW as a non-issue.  Actually, I poke fun at climate panic hysteria, the 12 years till the world ends nonsense.

Injecting AGW into a great thread about the break even price of shale oil is disingenous, when you seem to have a pattern of similar thread derails of injecting AGW into threads here.

But is it really disingenuous to inject an issue that will in fact be very relevant to the price of oil in the coming decades? If you prefer to poke fun at it by all means do so but even your comment about the "12 years till the world ends" is simply a misunderstanding of the way such complex systems work (and basically took what seems to have been a joke made in passing as an actual declaration that everyone will perish with certainty in 12 years, a misrepresentation of what someone said so maybe you cant recognize it when you do this any longer).

I'm by no means a genius and have never maintained to be one but it really doesn't take a genius to realise that you can't transition global infrastructure within a few years once the issue becomes obvious even to those that like to poke fun at it today. So are we going to have a critical situation in 12 years in terms of damages? Unlikely but will a resultant feet dragging up to that point basically solidify a certain amount of warming and associated damages that expose us to major risks? Most definitely. How will the broader population react when they realize just how extensively they have been bamboozled by the fossil fuel industry? My guess is not very positively.

So, will break even capabilities and yield issues create a problematic situation at the price that people are willing to pay to get a barrel of oil in a decade or two and those that are dependent on it in a world that is likely to be feeling the real results of their inaction? Very likely. I'll be very surprised if the oil industry can get the price that they really need for a healthy industry beyond 2030. Will shale really manage to get their breakeven prices considerably below their current point (assuming it's 60 on average which they can't even get right now) by then when the main way they can maintain output is through rampant drilling? Maybe for the larger companies but everyone else is likely to be toast beyond that point. So it's quite relevant to recognize the issue otherwise I am going to bet on a major collapse within the fossil fuel industry sometime during the late 30s early 40s. Maybe that doesn't concern you but is it worth discussing on an oil industry forum? I think it is.

Edited May 31, 2019 by David Jones

[Mike Shellman + 548]

@ceo_energemsier 

Where do you suppose the Federal Reserve Board gets its data other than shale oil companies themselves? It admits to surveys submitted to the LTO industry; read its disclosures. The FRB also relies on SEC filings, which logically are the only means of getting to the real truth. Analyses on the internet from people who don't know which end of a workover rig to walk to are all primarily, speculation. Elsewhere you have suggested that I put too much faith in SEC filings. That's a remarkable statement. I don't think for one second the US shale oil industry lies to the Securities and Exchange Commission, do you?

Rystad's biggest clients are shale oil and shale gas producers and the EIA and IEA. It sells good news. I don't rely much on any of its data; its recent press release regarding poor LTO cash flow was used numerous times on this forum. I'd ask what your point is but I don't care. Nobody, by the way, I repeat NOBODY, that has ever had working interest in a mineral lease, directly or indirectly, would want to challenge the legal ramifications of the term, held by production (HBP). Good luck with that, especially in Texas.

81% of all oil and natural gas wells in America are "stripper" wells. Every shale oil well in America will eventually become a stripper well providing they do not reach economic limits before they decline to 15 BOPD. 43% of all of America's oil production comes from conventional sources, a great deal of which is stripper well production. Google it.

In 2005, long before the shale oil phenomena began, the Texas legislature passed a bill to reduce the State's production tax on oil (4.6%) and gas (7%) for marginal stripper wells by 25%. To qualify for the reduction the price of oil would have had to have fallen to $30 or less for 90 straight days. That never happened; the stripper well industry in Texas received no "break" on production taxes and no "debt" was placed on Texans by virtue of this bill. The $3 per BO Fed tax credit kicked in at $18 per BO. That never happened either. 

All non integrated oil companies in America that produce less than 1,000 BOPD are entitled to Federal depletion allowance of 15% of gross taxable income. Royalty owners, are entitled to the same depletion allowance deduction. Otherwise, I have no idea what you mean by additional "incentives." Stripper well operators pay the same taxes, same permit fees, have all the same costs and are subject to the same regulations as any other operator in Texas, including EOG, etc. Except for flaring, it seems. Stripper well operators pay Federal  income taxes. For the record, the shale oil industry has never paid Federal income tax because its never had taxable income in its existence. The Federal tax deferments and tax carry forwards on shale oil SEC filings are stunning; it won't have to pay Federal income tax for the next 25 years. Go to EOG's latest K filing for confirmation.

The National Stripper Well Association suggests there is 650,000 BOPD of production in the US that comes from wells that make <4 BOPD. Like small farmers those wells tend to be operated by families. All of that production is old and for the most part, paid for. Its operating expenses are less than $30 and is actually quite profitable. Some knowledge of the declining number of stripper wells, conventional production decline rates in American and the vertical rig count the past 10 years would imply that not a lot of money is being "borrowed" by the stripper well industry; what bank or junk bond artist would loan money to a stripper well operator wanting to drill another 15 BOPD stripper well? We work from net cash flow, by choice and by circumstance. Unlike the US LTO industry, any debt the stripper well industry has is personally guaranteed by the families that borrowed that money. Try this to look for stripper well bankruptcies: www.haynesboone.com/publications/energy-bankruptcy-monitors-and-surveys  The shale oil phenomena and ensuing price volatility its   caused has led to a great deal of stress all over the US oil and natural gas industry, including the GOM. For the record, it is virtually impossible to walk away from an unplugged well in Texas now. If it happens it is the oil industry in Texas that pays for it, not the people of Texas. 

If you need to rail on the stripper well industry to make me look bad, or to make the US shale oil phenomena look better, at least get your facts straight. 

 

 

[ceo_energemsier + 1,818]

Top oil exporter Saudi Arabia is expected to raise prices for all crude grades it sells to Asia in July for a third straight month after Middle East crude benchmarks jumped, trade sources said on Thursday.

The producer is likely to increase the official selling price (OSP) for flagship Arab Light crude by up to $1 a barrel to the highest since January 2014, a Reuters survey of four sources at refineries showed.

U.S. sanctions on Venezuela and Iran and a Russian oil crisis have tightened sour crude supplies in Asia, pushing spot Middle East and Russian crude premiums to multi-year highs.

Strong demand for prompt supplies this month caused the backwardation in the price spread between first- and third-month Middle East benchmark Dubai to widen by about $1.20 a barrel. Backwardation refers to a market where prompt prices are higher than later prices.

The extent of Saudi Arabian price hikes depends on whether the country takes into account weaker margins for naphtha and fuel oil, the sources said, as those would lead to smaller price gains for grades such as Arab Extra Light and Arab Heavy that have a higher yield of such products.

The market structure “is very bullish but refining margins do not support that”, one of the sources said. All sources declined to be identified as they are not authorized to speak to media.

Refiners in Singapore, South Korea and Thailand have planned to reduce output after profit-margins slumped to their lowest for the season since 2003.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

Saudi Aramco officials as a matter of policy do not comment on the kingdom’s monthly OSPs.

[Jan van Eck + 7,558]

5 hours ago, Tom Kirkman said:

You are implying that I am twisting Jan's words by quoting him.

 

You are not  (twisting my words by quoting me).  Further, I can confidently say that that is not your style  (twisting another's words). 

Now, that commentary flowed from Mr. Jones' comment about me: Quote "Jan van Eck does not dispute the issue of anthropogenic climate change..."    There seems to be some misunderstanding here.  While the surface climate of the planet seems to be shifting slightly, I see no specific evidence, other than the staggeringly massive consumption of oil, gas, and coal, that would push anyone to conclude that shift was the direct result of what people are doing (burning the stuff).  Is that burning adding entropy into the surface?  Undeniably yes.  Is the amount added being compensated by other factors?  Probably.  Is the "man-made" component sufficiently large to generate substantial concern?  It does not look that way, simply because the percentages are not large enough.  At least, not yet.  Is there a solution that would dispose of the uncertainty?  But of course.  That solution is two-fold:  attack desertification, and go to nuclear power.  Can you go to solar power?  Yes you can, but then avoid the use of "panels," the more prudent approach is reflective plates directed towards a focal point and high heat generation, to phase change a fluid and craft steam.   See the photo below of a generating plant incorporated directly into an office building (and excellent use of reflectors and focusing panels). 

I remain much more cautious about "cause and effect" than I seem to be painted as.  Cheers.

 

[Ward Smith + 6,615]

9 hours ago, David Jones said:

I'll tell you what, seal a room hermetically and raise the concentration to 1% of CO2, stay there for a few days. 1% is kind of small no? Shouldn't be an issue. Heck, I'd say even 0.5% will do the job of making the effects of CO2 apparent to you. It's also as if you don't understand that applying more heat results in evaporation and that this is being done on a global scale but hey, I don't separate my posts into neat little snippets so I must be wrong. Go ahead, do what I said above since I am so wrong all the time, it must be a pleasant experience right?

Did you hurt your back moving those goalposts? You've neatly avoided answering a single point I made. Meanwhile look into submarines and the ISS space station to find that those CO2 concentrations are more than 10 times higher than our 400 ppm.

Game. Set. Match. 

[Jan van Eck + 7,558]

3 hours ago, David Jones said:

it really doesn't take a genius to realise that you can't transition global infrastructure within a few years once the issue becomes obvious

Not really, David.  Remember that in around 1961, with a lot less technology than is available at hand today, President Kennedy announced that the USA would put a man on the moon that decade.  It was a breath-taking announcement.  And in fact the USA did gear up and did put a man on the moon  (several men, indeed).  One of them was a fraternity brother of mine.  And that was done with onlyu a trifling of computer power than is off-the-shelf today. 

Looking at your dire predictions of massive impact of man's activity in the immediate future, can man collectively completely negate that effect, assuming it becomes apparent that societies should?  But of course.  People, and particularly the USA, are quite clever and able to build countervailing structures and systems.  If you take as given that the production of CO2 is a hazard, then remembering that CO2 is absorbed by plant material, the responsive action would be to restore large forests such as the Amazon, and for that matter the US Midwest, by planting trees and grasses. How realistic is that?  Very.  Planting a billion trees would make a huge impact on global CO2. 

Recognizing that the immediate effect of CO2 increases (assuming again that you are worried about it) is a nice increase in growth of biomass, and you can see that by noting tree-ring spacing, rehabilitating wild forests by active forest management goes a long way.  Forests are in gigantic conflicts, with the trees engaging in combat with each other.  You don't see it because it is so slow-motion.  But the older trees are hitting out at the younger ones by their big shade canopies.  If workmen were sent in into forests to increase the footprint spacing to an optimum point, which I recall is at least ten feet and might be 20 feet between trees, then the saplings underneath on the forest floor will rapidly grow and again you would be sequestering a lot of CO2 in the new growth.  Plus you cut back on fuel load and that mitigates heavy forest fire losses. You have this world-wide surplus labor pool, putting that to work removing undergrowth and increasing tree spacing, and planting new trees on previous old clear-cuts, makes a big dent in that CO2 profile that seems to be of such concern. 

Can countries do that?  Of course they can.  For example, the ancient forests of France and Germany are all cut down.  Yet Europe has this massive influx of millions, with limited skills.  This type of forest restoration and management work is easily done by unskilled labor.  They are being paid stipends anyway for being idle.  Why not put them to work building forests?  In ten years, you would double Europe's forests.  Would you get to a point where forests are absorbing more CO2 than man outputs by burning?  If you controlled forest fires as well as planting, the answer would be yes. 

And you have the same situation with desertification.  I contend that desertification is a much bigger problem than increases in CO2.  Building a diversion river from the Congo and Nile highlands downwards into the Sahel and Sahara is much more of an impact in forest restoration than worrying about cutting CO2 from autos in the West.  Land is cheap (or free), labor is very cheap, the water is there in those massive rivers, and digging a massive ditch is a technology well known to the Americans, the French, British, Germans, and Chinese, all of whom have the internal management and equipment capability to do that.  No need to line the project, as the whole idea is to promote water seepage into the water table (and raise the height of the table along the route).  Basically you are building a river, and riverbeds are not lined, so that factor can be dispensed with.  Moving water into the deserts will have a huge impact, everywhere, and Man can do that, the skill sets are out there, and it can be done quite rapidly - if society wants to. 

In sum, you really can transition global infrastructure rapidly.  Look at how the USA did that with the Panama Canal a century ago. Massive, and fast.  Cheers.

[Ward Smith + 6,615]

3 hours ago, Mike Shellman said:

@ceo_energemsier 

Where do you suppose the Federal Reserve Board gets its data other than shale oil companies themselves? It admits to surveys submitted to the LTO industry; read its disclosures. The FRB also relies on SEC filings, which logically are the only means of getting to the real truth. Analyses on the internet from people who don't know which end of a workover rig to walk to are all primarily, speculation. Elsewhere you have suggested that I put too much faith in SEC filings. That's a remarkable statement. I don't think for one second the US shale oil industry lies to the Securities and Exchange Commission, do you?

Rystad's biggest clients are shale oil and shale gas producers and the EIA and IEA. It sells good news. I don't rely much on any of its data; its recent press release regarding poor LTO cash flow was used numerous times on this forum. I'd ask what your point is but I don't care. Nobody, by the way, I repeat NOBODY, that has ever had working interest in a mineral lease, directly or indirectly, would want to challenge the legal ramifications of the term, held by production (HBP). Good luck with that, especially in Texas.

81% of all oil and natural gas wells in America are "stripper" wells. Every shale oil well in America will eventually become a stripper well providing they do not reach economic limits before they decline to 15 BOPD. 43% of all of America's oil production comes from conventional sources, a great deal of which is stripper well production. Google it.

In 2005, long before the shale oil phenomena began, the Texas legislature passed a bill to reduce the State's production tax on oil (4.6%) and gas (7%) for marginal stripper wells by 25%. To qualify for the reduction the price of oil would have had to have fallen to $30 or less for 90 straight days. That never happened; the stripper well industry in Texas received no "break" on production taxes and no "debt" was placed on Texans by virtue of this bill. The $3 per BO Fed tax credit kicked in at $18 per BO. That never happened either. 

All non integrated oil companies in America that produce less than 1,000 BOPD are entitled to Federal depletion allowance of 15% of gross taxable income. Royalty owners, are entitled to the same depletion allowance deduction. Otherwise, I have no idea what you mean by additional "incentives." Stripper well operators pay the same taxes, same permit fees, have all the same costs and are subject to the same regulations as any other operator in Texas, including EOG, etc. Except for flaring, it seems. Stripper well operators pay Federal  income taxes. For the record, the shale oil industry has never paid Federal income tax because its never had taxable income in its existence. The Federal tax deferments and tax carry forwards on shale oil SEC filings are stunning; it won't have to pay Federal income tax for the next 25 years. Go to EOG's latest K filing for confirmation.

The National Stripper Well Association suggests there is 650,000 BOPD of production in the US that comes from wells that make <4 BOPD. Like small farmers those wells tend to be operated by families. All of that production is old and for the most part, paid for. Its operating expenses are less than $30 and is actually quite profitable. Some knowledge of the declining number of stripper wells, conventional production decline rates in American and the vertical rig count the past 10 years would imply that not a lot of money is being "borrowed" by the stripper well industry; what bank or junk bond artist would loan money to a stripper well operator wanting to drill another 15 BOPD stripper well? We work from net cash flow, by choice and by circumstance. Unlike the US LTO industry, any debt the stripper well industry has is personally guaranteed by the families that borrowed that money. Try this to look for stripper well bankruptcies: www.haynesboone.com/publications/energy-bankruptcy-monitors-and-surveys  The shale oil phenomena and ensuing price volatility its   caused has led to a great deal of stress all over the US oil and natural gas industry, including the GOM. For the record, it is virtually impossible to walk away from an unplugged well in Texas now. If it happens it is the oil industry in Texas that pays for it, not the people of Texas. 

If you need to rail on the stripper well industry to make me look bad, or to make the US shale oil phenomena look better, at least get your facts straight. 

Mike, it saddens me that you are at odds with other oilmen here. Yes, shale has thrown a huge monkey wrench into the industry, but like all disruptions, this one has created a number of opportunities. You (correctly in my opinion) look askance at the tremendous depletion curve in LTO and say, "Something's not right here". You're probably accustomed to the industry standard 7% per year. Shale's 70% doesn't look good on anyone's radar. Absent EOR techniques, your stripper wells should get 30% of the OOIP versus the LTO  rate of 7%. Pretty dismal. 

Let's dig deeper. Taking a standard Bakken well, one mile down and one mile out, the cost to drill in 2010 was $12,000,000 plus another $5 million to frack it. On average those wells produced 1000 bbls per day for the first year. So there's about $18 million if the oil sold for $50/bbl. Slightly profitable but the second year it drops to about 300 bbls per day. 90 bbls per day the third year and then they might well abandon it. A shame really, because that's right in Your sweet spot. Perhaps as a clever stripper well operator, you should be cutting deals to take over these "depleted" wells? I also wonder whether the severe depletion curve continues or do most of these (spoiled) operators just give up and stop analyzing? 

My understanding is today they go down one mile and out two, but the cost is only $9 million for that, and the multi stage superior fracking job only costs $3 million. They now average 1500 bbls/day the first year. Why not 2000 you ask? Good question and I'm not sure the industry has figured that out yet. But my opinion is a lot can go wrong over 18,000 feet of well. 

[DaveS + 1]

On 5/23/2019 at 8:43 AM, James Regan said:

Seen a lot of articles which on their own flip flop through the text and certainly contradict a previous article just the word “could” in an article drains my attention.

What is the current actual break even price for Shale on average, given that some plays do cost more than others??

 

In the last quarter 90% of LTO companies were cash flow negative.  Since conventional wells have lower break even points, that means that there were pretty significant cash flow deficits occurring  from the shale fields while oil was in the 60s.

[D Coyne + 305]

On 5/30/2019 at 6:07 AM, Wastral said:

We have found more new oil via horizontal drilling/Fracking/3d seismic than we have pumped from them to begin with.... That has happened in nearly 100% of every field in the USA.  Why would this not be true around the world?  .... Including in OPEC nations?  More expensive?  Seems that way, but not by much.  Some certainly is more expensive. 

And then there is NG.... We have found many many many many many many more times NG with FRACKING etc than we have ever used before and dwarfs anything we knew of previously, so.... no, world will not run out of energy anytime in next several hundred years even if 100% of humanity used as much energy as the most power hungry nations and this is not counting the absolute gigantic mind blowing NGL/NG resources in the permafrost or Methane Hydrates. 

Wastral,

Methane hydrates will likely be too expensive, but my focus is oil which is the most convenient source of fossil fuel energy for land transport.  Potentially natural gas could be used instead, but that would entail quite a bit of infrastructure and distance between fuel stops would not be great, relative to liquid fuel.  Not a lot of oil being discovered and consumption is about 30 Gb per year, of the 3100 Gb likely to be extracted in total (URR), nearly half of this has already been extracted (1365 Gb).  Lets say the peak is around the halfway point or 1550 Gb of cumulative C+C output.  We have 185 Gb before reaching 50% so 185/30=6.17 years, so a peak in 2025, but only if oil prices rise because lower prices won't allow much of the tight oil to be produced profitably.  If oil prices remain at $70/b or lower in 2017$ (Brent crude price) about 30 Gb less tight oil can be extracted profitably, pushing the peak to 2024.  The technology utilized by the US is used throughout the World, that reserve growth has already occurred, in fact I include reserve growth in my estimate for URR.

Don't believe the hype.

[Mike Shellman + 548]

3 hours ago, Ward Smith said:

Mike, it saddens me that you are at odds with other oilmen here. Yes, shale has thrown a huge monkey wrench into the industry, but like all disruptions, this one has created a number of opportunities. You (correctly in my opinion) look askance at the tremendous depletion curve in LTO and say, "Something's not right here". You're probably accustomed to the industry standard 7% per year. Shale's 70% doesn't look good on anyone's radar. Absent EOR techniques, your stripper wells should get 30% of the OOIP versus the LTO  rate of 7%. Pretty dismal. 

Let's dig deeper. Taking a standard Bakken well, one mile down and one mile out, the cost to drill in 2010 was $12,000,000 plus another $5 million to frack it. On average those wells produced 1000 bbls per day for the first year. So there's about $18 million if the oil sold for $50/bbl. Slightly profitable but the second year it drops to about 300 bbls per day. 90 bbls per day the third year and then they might well abandon it. A shame really, because that's right in Your sweet spot. Perhaps as a clever stripper well operator, you should be cutting deals to take over these "depleted" wells? I also wonder whether the severe depletion curve continues or do most of these (spoiled) operators just give up and stop analyzing? 

My understanding is today they go down one mile and out two, but the cost is only $9 million for that, and the multi stage superior fracking job only costs $3 million. They now average 1500 bbls/day the first year. Why not 2000 you ask? Good question and I'm not sure the industry has figured that out yet. But my opinion is a lot can go wrong over 18,000 feet of well. 

Thank you, Mr. Smith; there is, however, no need to feel saddened. I am unclear what your definition of "oilmen"  actually is. I think there are several people here who want us to believe they are oilmen, but aren't. It's very easy to tell, really. If you think I am an "anomaly" because I don't buy into the shale oil bunk, you are wrong.  

The percentage of Bakken wells that have produced 365K BO the first year of life is less than 2% of all wells drilled since 2009; those that might produce 547K BO the first year of production is practically nil. There are a number of good sources for production data, like Drillinginfo, IHS or shaleprofile.com. What you read on the internet is very different than reality. Actual EUR for most Bakken wells will struggle to make 410K BO over their entire life. From that $50 per barrel number you've mentioned you have ignored royalty burdens, taxes, G&A costs, interest expense (the Bakken, like Continental at $6bn of LTD, is loaded with debt) and incremental lift costs to get the stuff out of the ground. The actual net back price per BO in the Bakken is about $17.You decide how many barrels it then takes to pay back a $9MM well, how many wells in the Bakken have, or will produce that.   

My interest and criticism of shale oil economics and the dismal financial state of the US shale oil industry circumvents looking for ways to make a buck from it all. I don't need to do that. My concern is directed at sustainability of that faction of  the industry, whether it can make good on its promises, and if so, how much will that cost the American taxpayer. It's fascinating to me how few people get that. The shale oil phenomena is no threat to me. I do care about my country's hydrocarbon future. Kids and grandkids will do that to you. 

Try this on for size, its real data, not hype: https://shaleprofile.com/2019/05/20/north-dakota-update-through-march-2019/  Thanks again. 

Edited May 31, 2019 by Mike Shellman

[ronwagn + 6,290]

2 hours ago, DaveS said:

In the last quarter 90% of LTO companies were cash flow negative.  Since conventional wells have lower break even points, that means that there were pretty significant cash flow deficits occurring  from the shale fields while oil was in the 60s.

Why does the oil industry have such a magical draw on so many entrepreneurs? It seems like a moth to a flame. Maybe it is all the natural gas flares. In most industries, you look at how others are doing before you decide to get into the competition. There are some hidden factors here methinks.

[ronwagn + 6,290]

1 hour ago, D Coyne said:

Wastral,

Methane hydrates will likely be too expensive, but my focus is oil which is the most convenient source of fossil fuel energy for land transport.  Potentially natural gas could be used instead, but that would entail quite a bit of infrastructure and distance between fuel stops would not be great, relative to liquid fuel.  Not a lot of oil being discovered and consumption is about 30 Gb per year, of the 3100 Gb likely to be extracted in total (URR), nearly half of this has already been extracted (1365 Gb).  Lets say the peak is around the halfway point or 1550 Gb of cumulative C+C output.  We have 185 Gb before reaching 50% so 185/30=6.17 years, so a peak in 2025, but only if oil prices rise because lower prices won't allow much of the tight oil to be produced profitably.  If oil prices remain at $70/b or lower in 2017$ (Brent crude price) about 30 Gb less tight oil can be extracted profitably, pushing the peak to 2024.  The technology utilized by the US is used throughout the World, that reserve growth has already occurred, in fact I include reserve growth in my estimate for URR.

Don't believe the hype.

Natural gas tanks now allow comparable gas mileage to diesel. They cut the price of fuel by about a third. If desired the truck can be dual fuel CNG or LNG plus diesel as desired. The infrastructure is there except in the few least populated states. CNG is the logical choice because, in America, CNG is everywhere. Low pressure ANG tanks (adsorbed natural gas) allow filling with a low pressure natural gas pump and household pipe. Quick fill equipment is also available. America is way behind many other countries in adopting this superior technology. 

Edited May 31, 2019 by ronwagn
error

[Jan van Eck + 7,558]

9 minutes ago, ronwagn said:

Why does the oil industry have such a magical draw on so many entrepreneurs? It seems like a moth to a flame. Maybe it is all the natural gas flares. In most industries, you look at how others are doing before you decide to get into the competition. There are some hidden factors here methinks.

I suspect the hidden factors are the accelerated depreciation and tax credit benefits, which might well tip the scale for development of otherwise unprofitable wells.  Nothing like the tax man to hand you taxpayer cash to make a fellow smile. ☺️

[Ward Smith + 6,615]

Just now, Jan van Eck said:

I suspect the hidden factors are the accelerated depreciation and tax credit benefits, which might well tip the scale for development of otherwise unprofitable wells.  Nothing like the tax man to hand you taxpayer cash to make a fellow smile. ☺️

Can't agree less about what I've bolded in your quote. If you got mugged on a street corner and the mugger allows you to keep your watch, do you believe he Gave it to you? After all, before the mugging it was Your watch. Multiple businesses including real estate get nifty tax breaks and credits, but there are zero useful idiots proclaiming they're "subsidized". Not so in fossil fuels, and it's a bald faced lie. Being allowed to expense an expense isn't a "gift" from the government. It's just less thievery.  

[Jan van Eck + 7,558]

1 minute ago, Ward Smith said:

Being allowed to expense an expense isn't a "gift" from the government. It's just less thievery.  

Well, I am not about to get into some brawl over taxation.  The reality is that the govt, via their tax credits and accelerated depreciation and depletion allowances, creates a favorable environment for the development of wells that otherwise would be unprofitable from the get-go.  Whose cash is that, that funds the tax credits?  Not the drillers'. It comes from the general revenues, thus is effectively taken from other taxpayers. You can argue that it is morally unjustified, that it is thievery, that the IRS is engaged in thievery, but hey, that is the system in play right now.  I am not responsible for that, and I have zero ability to alter that, given that I am not an American. All I do here is observe the current system.  It is what it is.  Cheers. 

[D Coyne + 305]

12 minutes ago, ronwagn said:

Natural gas tanks now allow comparable gas mileage to diesel. They cut the price of fuel by about a third. If desired the truck can be dual fuel CNG or LNG plus diesel as desired. The infrastructure is there except in the few least populated states. CNG is the logical choice because, in America, CNG is everywhere. Low pressure ANG tanks (adsorbed natural gas) allow filling with a low pressure natural gas pump and household pipe. Quick fill equipment is also available. America is way behind many other countries in adopting this superior technology. 

Perhaps,

I have never seen personal vehicles being filled with natural gas, perhaps this is used in some fleets of commercial vehicles.

Do you have any data?  How much natural gas was consumed by land transport vehicles in 2018?  You seem to be gung ho on this, any data to back up your assertions?

[James Regan + 1,776]

42 minutes ago, D Coyne said:

Perhaps,

I have never seen personal vehicles being filled with natural gas, perhaps this is used in some fleets of commercial vehicles.

Do you have any data?  How much natural gas was consumed by land transport vehicles in 2018?  You seem to be gung ho on this, any data to back up your assertions?

Er I Do!

In Brasil it’s very common Petrol stations offer Petrol, Deisel, GNV, álcool. The GNV (Gas Natural Vehicular) it’s filled from the motor or adapter on the Petrol cap, the tank sits in the boot or Trunk ( if your from across the pond) you fill up and off you pop. A little bit of unleaded in the tank for reserve and extra lubrification. 

Quite common really no big deal just another excellent carbon based fuel to efficiently power the human race fwd.

http://www.ngvjournal.com/category/s1-news/c5-products/

Edited May 31, 2019 by James Regan
Picture

[ceo_energemsier + 1,818]

Permian-Cushing Pipeline Open Season Extended

Magellan Midstream Partners, L.P. (MMP) and Navigator Energy Services reported Friday that they have extended the open season for their proposed Voyager Pipeline System, which would ship crude oil from Cushing, Okla., and Midland, Texas, to Houston.

As currently proposed, the Voyager project calls for building 20-inch-diameter pipelines from MMP’s Cushing and Midland terminals to its terminal in Frost, Texas, and constructing a 24-inch-diameter pipeline from Frost to MMP’s terminal in East Houston. From East Houston, multiple crude oil grades – sourced from Bakken, Rockies, Mid-Continent and Permian producers – shipped via Voyager could reach area refineries and crude export facilities, MMP notes in a written statement .

At Cushing, Voyager would receive shipments from MMP’s Saddlehorn and Navigator’s Glass Mountain pipelines, MMP stated. In the Permian, the Voyager project might entail repurposing existing MMP pipeline and rights-of-way and/or building new pipeline, the company added. The most recent open season document states the Voyager system would likely carry up to six light crude and condensate grades.

Friday’s announcement marks the third open season extension for the proposal, which MMP and Navigator first announced on Nov. 5, 2018. The initial binding open season was set to expire on Jan. 31, 2019, but the companies extended it to March 29. On March 29, they extended it to May 31. MMP and Navigator stated that they are now seeking binding commitments from prospective Voyager shippers until 12 p.m. Central time on Aug. 30, 2019.

According to MMP, Voyager would boast an initial capacity of 400,000 barrels per day but could be expanded as needed. Pending sufficient customer commitments and the receipt of necessary permits and approvals, MMP and Navigator anticipate that Voyager would be operational in early 2021.

[James Regan + 1,776]

Just to add a little humor to this interesting debate

[Ward Smith + 6,615]

1 hour ago, Jan van Eck said:

Well, I am not about to get into some brawl over taxation.  The reality is that the govt, via their tax credits and accelerated depreciation and depletion allowances, creates a favorable environment for the development of wells that otherwise would be unprofitable from the get-go.  Whose cash is that, that funds the tax credits?  Not the drillers'. It comes from the general revenues, thus is effectively taken from other taxpayers. You can argue that it is morally unjustified, that it is thievery, that the IRS is engaged in thievery, but hey, that is the system in play right now.  I am not responsible for that, and I have zero ability to alter that, given that I am not an American. All I do here is observe the current system.  It is what it is.  Cheers. 

Jan you're generally focused on intelligent discourse here, so I'll chalk up your misinformation to being a foreign person, even though it seems you've been here quite a while, unless you were gone quite a bit since college. Inculcated as you were in the European mindset, perhaps you truly believe all your money belongs to the govt. 

No "cash" funds fossil fuel credits. I refer you back to my analogy. If I EARN $100 the government isn't immediately Entitled to it, and if I protect some of my income from the govt that doesn't mean someone else "paid" for it. Amazon is a wildly successful company with an almost $1 trillion market cap. They pay NO FEDERAL TAXES. Why? Because they lost so damn much for so many years they've got enormous loss carryforwards. Yet we're not seeing headlines about taxpayers subsidizing high tech. 

I'd recommend This article to edumacate yourself on this topic. 

[Ward Smith + 6,615]

57 minutes ago, James Regan said:

Er I Do!

In Brasil it’s very common Petrol stations offer Petrol, Deisel, GNV, álcool. The GNV (Gas Natural Vehicular) it’s filled from the motor or adapter on the Petrol cap, the tank sits in the boot or Trunk ( if your from across the pond) you fill up and off you pop. A little bit of unleaded in the tank for reserve and extra lubrification. 

Quite common really no big deal just another excellent carbon based fuel to efficiently power the human race fwd.

http://www.ngvjournal.com/category/s1-news/c5-products/

Other than the golf clubs no longer fitting in the trunk, there is the further loss in mileage on a BTU basis versus diesel. NREL study