Will We Ever See 100$+ OIL?

[Old-Ruffneck + 1,223]

12 hours ago, Gerry Maddoux said:

 In 2018, Pioneer spent $541 million more on capital expenditures than it made from cash from operations

Uhhhh, give me Pioneer's record of wells drilled but not completed (DUC) please. Dig a little deeper into how Pioneer hasn't made a buck in 8 years yet remain in the Permian drilling away. 

Anyone that says TAX just tells me what kind of person you are. Long discussions on Flaring and why its done. If you need a guide I will surely help you out, but I really dislike the word TAX in this forum. 

[Gerry Maddoux + 3,627]

"I didn't come back to sell the company," CEO Scott Sheffield said on the call, dismissing speculation that the company will seek potential buyers as it shrinks spending, sells assets and asks a third of its senior managers to retire.

Excerpt from the Wall Street Journal recently, about Mr. Sheffield taking over the reins of Pioneer energy again after retiring to a ranch near Santa Fe. Since I'm not very confrontational, and you seem to be, I agree completely with you: This sounds very optimistic--DUC's everywhere, money in the ground, just waiting to be lifted. And to be quite deliberate, you have no idea "what kind of person" I am. My hero George H.W. Bush uttered the immortal words, "No new taxes" during his presidential campaign, but then renigged and advocated for higher taxes because the circumstances changed. Not to disparage your person, but since you took a shot at me, you seem from your posts to be a great fan of $55 oil, because, you admitted, it would help your business. I may have landed on the wrong forum for ventilation of my thoughts, but you may have too, because it would seem obvious that this group is largely in favor of the viability of the shale oil revolution--now long in the tooth for a financial revolution as it is still largely losing money. My only points have been that: A) shale oil can't survive at these prices, except for Exxon, Chevron, Occidental and perhaps (a very big perhaps) Marathon and Pioneer, the best of show, and, B) the industry needs to put on an environmentally happy face, because the youth of America are largely opposed to fossil fuels, as are the Democrats. To once again point out the obvious, flaring billions of btu's of methane gas under waivers in order to feed light sweet crude into a bloated supply chain makes absolutely no sense and is the worst possible face to the hypercritical New Green Deal faction. For Pete's sake, take a jab, why don't you, but for a man who seems intent on having the rest of us drive around West Texas and Southeastern New Mexico (which I've done about as much as the next man), please be honest about the situation: Flaring natural gas should be reserved for wildcat wells and the earliest production of infill wells, not because the pipelines are full and some CEO whose salary and bonuses are tied to production growth wants to gorge on IP yields from another twenty ill-advised units coming online.

[Otis11 + 551]

On 7/22/2019 at 8:16 AM, Old-Ruffneck said:

I rest my case. I see a lot on this site wanting to ban flaring, but much smarter people than us haven't came up with a viable option. Thus, the flaring continues. Greenhouse gases? The Semi-trucks in the US put thousands times more pollutants than flares. Like I have said yet again, get to the area where flaring is going on and drive. You'll need 2 to 3 days as the area is almost size of Norway and Sweden. Not trying to disrespect anyone's opinion but is easy to preach and not know the difficulties getting NG flares stopped. Next September I will photo what I can so people can see. 

Hi Ruff_neck

Just chiming in quick - there are very economic ways to capture the associated gas, and field designs that lower the piping requirements and make those economic to get gas and NGLs back to the backbone pipelines... they just require planning. More planning and larger upfront investment than many are willing to make.

Some companies like Cimarex may capture their gas initially, but then flare anything that drops out in compression (an awful lot of NG and NGLs). Others make little to no attempt to capture even the original gas. Fortunately some (the big players, typically) put in the legwork up front to do it right and economically capture this resource- sure Exxon and Chevron (two that I classify as doing it right) still flare, but only during times of process upset (which admittedly happens more than the name would imply).

I'm not against flaring when necessary, per say, but I personally cringe when I see some of these facilities and how these operators are running - spewing pollution and wasting resources... (at least design the flares right people! There should not be soot spewing out of your flare stack!)

BTW - I'm right down the street from you in the permian (cover Delaware too, but live here) and work in Facility design and construction. I've analyzed facility design from most of the players of any significant size out here, at least at a surface level if I haven't seen in person or gotten full designs (which I have for many).

The thing that really hampers this is the checkerboard land positions... need contiguous positions to make these more complex facilities economical, but restrictions or fines (or any economic motivation to improve) would increase land swaps to make this a reality. (Not saying that's the best motivator, just a potential)

Still a lot I can learn from y'all more seasoned guys, dont get me wrong, just happen to have some insight here to contribute. 😉

[sylvia07 0]

With all the turmoil in the world anything is possible!

[Old-Ruffneck + 1,223]

6 hours ago, Otis11 said:

Just chiming in quick - there are very economic ways to capture the associated gas, and field designs that lower the piping requirements and make those economic to get gas and NGLs back to the backbone pipelines

Backbone pipelines are at max capacity, mostly filled with quality NG and adding in polluted crappy well NG is costly to separate. Given most shale wells NG and NGL first 6 months plus it makes sense to dump it. 

6 hours ago, Otis11 said:

I'm not against flaring when necessary, per say, but I personally cringe when I see some of these facilities and how these operators are running - spewing pollution and wasting resources...

Spewing pollution...…. if you can see smoke, that is a solid, wont stay in atmosphere. Methane will, but is part of the cycle of the well. Most flares are not permanent. Wasting resources, well it's a resource that will cost more capture than the product is worth, at least for now. If a frac well's longevity is few years max as some predict, the gas will be gone long before or in such small quantities not worth the infrastructure. Keep in mind well-head value of NG and then figure in cost to capture, clean and compress and if no pipelines available...…. 

[Old-Ruffneck + 1,223]

On 7/26/2019 at 11:47 AM, Gerry Maddoux said:

My only points have been that: A) shale oil can't survive at these prices, except for Exxon, Chevron, Occidental and perhaps (a very big perhaps) Marathon and Pioneer, the best of show, and

Totally disagree, at 55$ they are making money. Maybe not the amount some greedy investors would like but making some money. At 55$ it helps the economy as a whole. 

 

On 7/26/2019 at 11:47 AM, Gerry Maddoux said:

To once again point out the obvious, flaring billions of btu's of methane gas under waivers in order to feed light sweet crude into a bloated supply chain makes absolutely no sense and is the worst possible face to the hypercritical New Green Deal faction.

There is another thread yesterday elsewhere on this forum, Cactus is open and taking crude. Bloated in what sense? Everyday Americans filling their cars, buying any products get a benefit of less expensive crude. Everything I trucked, shipped by rail, and container ships. So I see things alittle different than you I suppose. 

[BenFranklin'sSpectacles + 762]

On 7/18/2019 at 4:33 PM, D Coyne said:

Ronwagn,

The World output of oil is likely to fall by 30 Mb/d by 2050 from peak output levels in 2026, that is the equivalent of 174 BCF/d or 63 TCF per year of natural gas to replace the lower C+C output.  Natural gas output was 372 BCF/d in 2018 for the World and the rate of growth from 2008 to 2018 was about 2.4% per year.  If we assume that rate of growth continues to 2050 and in addition all of the drop in oil output is replaced through conversion to NGVs then we would need 1167 BCF/fd of natural gas output in 2050.

When we also add in demand growth for C+C of about 800 kb/d per year the total cumulative natural gas output from 1965 to 2050 would be about 13,000 TCF, about half of the likely URR for World natural gas form shale gas and convention al gas and coal bed methane, for a high (or optimistic) estimate for these resources.  Natural gas is more plentiful than crude, but it is not unlimited.

Eventually we will need to move to other resources unless demand for oil and natural gas falls for some reason (better efficiency will help, but there are thermodynamic limits to increases in efficiency).  Natural gas may be a useful bridge, but something else will need to replace fossil fuel, coal is also more limited than some seem to believe.  See research by David Rutledge on coal.

 

On 7/18/2019 at 6:49 PM, ronwagn said:

Nice figures but I really don't believe that anyone really knows. You covered all the bases except methane hydrates and biogas which is ongoing and nearly limitless in potential. We can make seaweed and peat into biogas. Methane hydrates have more natural gas than all land based natural gas. I predict that natural gas and biogas will be plentiful and cheap until those alive today are all dead. Hopefully, by that time science will have come up with even better answers. Maybe wind and solar with storage will do it all before then. Maybe fission or something else. 

 

On 7/19/2019 at 9:11 AM, D Coyne said:

I do not share your optimism on methane hydrates, we could have working fusion reactors about the time that methane hydrate becomes economically viable, how much biogas is currently being utilized as an energy source?  Again until large amounts can be produced economically, it's just hopium imho.

We agree that nobody knows what the future will bring.

IIUC, y'all are discussing the need to replace oil with natural gas.  I think we need to check the assumptions behind the predicted 30MMbpd decline in oil consumption:

1)  Electrification
2)  Improved efficiency
3)  Recycling of petroleum products
4)  Switching to alternatives, including natural gas an hydrogen

1-3 don't require natural gas and will account for the bulk of oil demand destruction.  #4 might lead to some increased natural gas consumption in long haul markets, but certainly not 30MMbpd worth of it.  There's a legitimate question of whether hydrogen fuel cells will overtake natural gas for long-haul applications.  We shall see. 

[Otis11 + 551]

2 hours ago, Old-Ruffneck said:

Backbone pipelines are at max capacity, mostly filled with quality NG and adding in polluted crappy well NG is costly to separate. Given most shale wells NG and NGL first 6 months plus it makes sense to dump it. 

Spewing pollution...…. if you can see smoke, that is a solid, wont stay in atmosphere. Methane will, but is part of the cycle of the well. Most flares are not permanent. Wasting resources, well it's a resource that will cost more capture than the product is worth, at least for now. If a frac well's longevity is few years max as some predict, the gas will be gone long before or in such small quantities not worth the infrastructure. Keep in mind well-head value of NG and then figure in cost to capture, clean and compress and if no pipelines available...…. 

If that's the situation ruffneck, then why is it company based and not geography based? The Chevron and Exxon facilities are designed to capture large portions of the NG and NGLs economically. Other facilities (Cimarex and others) are designed to flare large portions or even all associated gas.

I've seen these two different facilities approaches hundreds of yards apart. Can you honestly say 100-200 yards makes the difference in whether it makes economic sense to capture vs flare these resources? (Given we run lines in up to 15 miles for this purpose, and economically I might add, I doubt this)

As far as the pollution- yes, large soot will fall back to earth, but if its emitting large soot it's also releasing large quantities of particulate matter, which definately lingers in the air and has major health impacts.

For note, some of the more responsible operators are lobbying for enforcement against flaring. Why would companies that have upstream operations lobby for additional enforcement if they themselves couldnt comply profitably?

I appreciate any insight you can provide on this! Thanks!

[Old-Ruffneck + 1,223]

2 hours ago, Otis11 said:

If that's the situation ruffneck, then why is it company based and not geography based? The Chevron and Exxon facilities are designed to capture large portions of the NG and NGLs economically. Other facilities (Cimarex and others) are designed to flare large portions or even all associated gas.

I've seen these two different facilities approaches hundreds of yards apart. Can you honestly say 100-200 yards makes the difference in whether it makes economic sense to capture vs flare these resources? (Given we run lines in up to 15 miles for this purpose, and economically I might add, I doubt this)

As far as the pollution- yes, large soot will fall back to earth, but if its emitting large soot it's also releasing large quantities of particulate matter, which definately lingers in the air and has major health impacts.

For note, some of the more responsible operators are lobbying for enforcement against flaring. Why would companies that have upstream operations lobby for additional enforcement if they themselves couldnt comply profitably?

I appreciate any insight you can provide on this! Thanks!

Almost all has been discussed in this and other threads. Please take the time to read the several guys posts in here for further pro-con flaring. 

[Otis11 + 551]

12 minutes ago, Old-Ruffneck said:

Almost all has been discussed in this and other threads. Please take the time to read the several guys posts in here for further pro-con flaring. 

I have read this entire thread and a number of other threads. The only reasons I can see are various wordings or combinations of:

1. It's not economical (however this argument struggles as some companies are doing it while others aren't, in the same geographical areas. I also know for a fact it is economical - and profitable - for the company I work for, in both Permian and Delaware basins)
2. Pipelines are already at max capacity (this argument struggles for the same reasons)
3. It would slow down development (I fail to see why this is the case for a properly designed facility. If this refers back to number 2, I have plenty of gas takeaway capacity in my fields, across both basins.)
4. Gas is low quality (again, would hold up if the distinction was geographically based, but it's not - it's operator based.)

I'm sure i'm forgetting some, but the case is the same for all of them.

As demonstrated above, each of the arguments/reasons I can find, fail to explain the reality being seen - some Operators are profitably capturing and monetizing this gas while facilities by other operators just a few hundred yards away are flaring it. The only conclusion I can reasonably draw given the information I have is that they flare it because they failed to adequately design their system to handle it, and they can't slow down to properly design a system because they must keep drilling to stay afloat with their high debt loads.

(Note, this is a different story for wildcat wells - no one is going to invest the required money for something unproven. These fields, however, are well proven across a large geographical area, so again, this is not the case here)

If a company cannot afford to operate responsibly, while others can, should those lower performing companies not be allowed to go out of business so that they and their acreage can be bought up by the higher performing peers and the resources better captured?

As I mentioned, I've read a number of related threads, but none hold up to scrutiny, and the same story is playing out in this thread yet again. So if I'm missing something, I'd honestly appreciate being pointed in the right direction or the error in my logic being pointed out, however I have not been able to find it and simply reading indefinitely on this forum has not shown to bear fruit.

 

BTW Old-Ruffneck, I'm not trying to pick an argument with you - while I both agree and disagree with you at times, you're obviously very experience in the field (and often your numbers match mine pretty well). I simply see you strongly on one side of this discussion and I don't follow the logic, so I'm trying to find what I'm missing here.

Thank you for your time.

[Old-Ruffneck + 1,223]

8 hours ago, Otis11 said:

The only conclusion I can reasonably draw given the information I have is that they flare it because they failed to adequately design their system to handle it, and they can't slow down to properly design a system because they must keep drilling to stay afloat with their high debt loads.

Your right, in some aspects in above sentence. One must remember that every well bore is different even if in same geophysical (parent/child) well. Orla to Pecos and 50 mile circle around this is a predominant flaring as is around Loving, NM. One can surmise well head pressure on the gas end whether it would be economical to capture as since most is low pressure. They know the well(s) gas and longevity and quality, and out of the thousands drilled, I personally don't have a problem with some flares. IE: you hope they (choose company) are being somewhat responsible. If the amount of gas in a said bore has enough pressure and quality and economically viable by all means they should capture. One shoe don't fit all feet. So I assume when I see flares I give the benefit of the doubt to operator. Every bore is different. I was on deep hole rig all around Orla area drilling for gas. Some wells were as high as 16k pressure. That was good gas that had liquids with it. Drip gas. The fracking wells much different, but drilling is drilling. They go to the shale zone 5k give or take and go horizontal. Totally different gas than at 18k feet.

So I understand what your saying, but your saying EXXon and Chevron capture all gas in wells they drill. I bet they aren't. Nobody wants to put skunk gas in a pipeline that has clean easy to refine gas. Maybe the government will make them in the future but for today it is a by-product of oil and if not worthy of capture, burn it.

https://oilprice.com/Energy/Gas-Prices/Natural-Gas-Glut-Is-Crushing-US-Drillers20905.html

Edited July 29, 2019 by Old-Ruffneck

[Rasmus Jorgensen + 1,169]

14 hours ago, Otis11 said:

If a company cannot afford to operate responsibly, while others can, should those lower performing companies not be allowed to go out of business so that they and their acreage can be bought up by the higher performing peers and the resources better captured?

 

9 hours ago, Old-Ruffneck said:

So I understand what your saying, but your saying EXXon and Chevron capture all gas in wells they drill. I bet they aren't. Nobody wants to put skunk gas in a pipeline that has clean easy to refine gas. Maybe the government will make them in the future but for today it is a by-product of oil and if not worthy of capture, burn it.

 

17 hours ago, Otis11 said:

I've seen these two different facilities approaches hundreds of yards apart. Can you honestly say 100-200 yards makes the difference in whether it makes economic sense to capture vs flare these resources? (Given we run lines in up to 15 miles for this purpose, and economically I might add, I doubt this)

I actually think this is really simple - it is about 

1) CAPEX - majors have easier access to finance, so it is easier for them to spend the extra CAPEX. Plus, spending a little extra time building the right profitable infrstructure is not a problem for them - there are no lenders or investors breating down their neck the same way as smaller companies would have. 

2) Culture - majors are used to spending a long time developing fields. The timelines they are seeing from start to first oil is short for them. And because of their existing cashflow they are not under the same pressure to rush production start.

[Sebastian Meana + 278]

Is problematic discussing the oil price without getting into geopolitics

Depends largely to what do you mean with 100$+ Oil? in the USA? the most overly-saturated oil & gas market in the planet? no... If for some reason the world oil price in average jumps over 100$ the first thing the US president will do is closing down oil exports again in order to maintain a 60-75$ price inside the country. Which brings me down to the other part, the USA is not Saudi Arabia or Canada, sure is the largest oil&gas producer in the planet, is oil independent, is going to be for at least 90 years before Tight oil runs out but isn't going to export it, 1° reason is because the US will likely wan't to make it's oil resources last, 2° reason is because the US will likely not wan't to deal with all the problems of being an oil exporting nation, for example tanker raids with pirates financed by other countries, which will become more normal in the future.

There's going to be a good chunk of countries that will dry their wells, for example Nigeria, at current rates  their oil reserves are going to dry out in 15 to 20 years, and it doesn't seem they have discovered a lot of it lately, the oil producers of the future are mostly countries that have been historically big producers in the past or are already big producers.

Conventional oil reserves are nearly empty or are emptying relatively fast, so yeah the only way is unconventional oil&gas, doesn't matter if is Tight oil, Shale oil, Methane Hydrates, Arctic deepwater oil, or whatever, but most of the countries with the tech and the expertise to do that are already big oil producers, like Russia or norway

Mix that with the fact there could be an Iran-Saudi war, and that Iran could close down the straight of hormuz, where over 1/3 of oil exports worldwide go through. Or look mexico that is stop being an oil exporter nation to just being an oil self-sufficient country. Or Sweden that has reasons to press norway to reduce their oil production in order to maintain long-term energy security for Scandinavia.

For me there are regions that will be oil exporting, oil self sufficient, and oil importers. They are not in a particular order, they are just examples, and i'm not saying those countries will be exporters and importers and energy independent doesn't matter what, but is more or less what would likely happen.

Oil exporters
-Russia and the ex-USSR
-Saudi Arabia
-Canada
-Iran
-Argentina
-Australia
-Algeria
-Libya
-Colombia
-Venezuela

Oil self-sufficient
-United states
-Mexico
-Malaysia
-Indonesia(maybe)
-Brazil(maybe, again)
-Egypt
-Turkey
-South Africa
-Scandinavia
-Pakistan

Oil importing
-Japan
-China
-India
-Korea
-Most of Africa
-Vietnam
-Thailand
-Burma
-Cambodia and Laos
-Most of Europe

[Otis11 + 551]

So to put a few numbers with my previous statement:

 

Permian Average: ~5% associated gas flared

SM Energy: 22.5%

BP: 15%

Endeavor: 15%

Exxon: 8% (They design their facilities well, but apparently they need to operate them better)

Chevron: 0.6% (This is what I was expecting based on my experience in facilities)

 

Delaware is obviously higher, but would expect a similar trend.

https://www.expressnews.com/business/eagle-ford-energy/article/Report-tags-Exxon-as-major-source-of-gas-flaring-14182490.php

[Sebastian Meana + 278]

17 hours ago, Otis11 said:

https://www.expressnews.com/business/eagle-ford-energy/article/Report-tags-Exxon-as-major-source-of-gas-flaring-14182490.php

Yeah i'm not surprised really, the US natural gas production will rise until is 1.2 or 1.3 trillion cubic meters per year, it rose over 100 billion cubic meter in 2018, one has to remember that a Tight Oil play produces 1KG of Gas for each KG of Oil.

[Gerry Maddoux + 3,627]

On 7/28/2019 at 7:10 AM, Old-Ruffneck said:

Totally disagree, at 55$ they are making money. Maybe not the amount some greedy investors would like but making some money. At 55$ it helps the economy as a whole. 

See the bloodbath out there today? At $55, shale drillers can't post a profit. And I don't really think it's just "some greedy investors" who are worried--it looks to me as if the whole house of cards is falling in. This didn't have to happen. The shale drillers could have done what logical people do who are running companies: If you're not making money, slow down. This is "Commodity 101," for gosh sakes! Never in my fairly long life have I seen a bunch of innovators, pioneers of a new process, become so overwhelmed by their own ability to produce themselves out of the market, but that's precisely what's happening. We have more or less free trade in this country, and strict laws against price-fixing, so I don't expect this. But this has turned into some sort of race to the bottom. The pathetic thing is that, lurking down there, are Exxon, Chevron, Occidental, just waiting. Whiting will soon be gone. So will most of the innovators of the Permian. I'm not sure what your problem is, as you otherwise seem to be a knowledgeable chap . . . at least about the types of natural gas liquids that co-traffic with shale oil . . . but on this point you are dead wrong: At $55, "they" (meaning shale drillers) are most definitely not making money, not even enough to stay afloat. Oh, if you happen to be in the sweet spot of the Permian, or even in the Bakken, you can make money for now. But once those sweet spots are gone, it's $60. 

[J.mo + 165]

1 hour ago, Gerry Maddoux said:

See the bloodbath out there today? At $55, shale drillers can't post a profit. And I don't really think it's just "some greedy investors" who are worried--it looks to me as if the whole house of cards is falling in. This didn't have to happen. The shale drillers could have done what logical people do who are running companies: If you're not making money, slow down. This is "Commodity 101," for gosh sakes! Never in my fairly long life have I seen a bunch of innovators, pioneers of a new process, become so overwhelmed by their own ability to produce themselves out of the market, but that's precisely what's happening. We have more or less free trade in this country, and strict laws against price-fixing, so I don't expect this. But this has turned into some sort of race to the bottom. The pathetic thing is that, lurking down there, are Exxon, Chevron, Occidental, just waiting. Whiting will soon be gone. So will most of the innovators of the Permian. I'm not sure what your problem is, as you otherwise seem to be a knowledgeable chap . . . at least about the types of natural gas liquids that co-traffic with shale oil . . . but on this point you are dead wrong: At $55, "they" (meaning shale drillers) are most definitely not making money, not even enough to stay afloat. Oh, if you happen to be in the sweet spot of the Permian, or even in the Bakken, you can make money for now. But once those sweet spots are gone, it's $60. 

I will say this for the 100th time. Producers are seeing the reality of what retailers have seen for decades. Upstream is no longer a wholly captivated market. Buyers have options, producers have overhead. 

Retail gasoline has been a race to the bottom for decades. Different needs of thousands of different independent operators. And consumers with choices to exploit such. 

Upstream has never truly been ran like a proper business. It's always been a fat cat way of life. 

If you understood the retail gasoline game, things would begin to click immediately for you. 

[Old-Ruffneck + 1,223]

2 hours ago, Gerry Maddoux said:

At $55, "they" (meaning shale drillers) are most definitely not making money, not even enough to stay afloat.

Those that are solvent and not borrowing are making money at 55$. Those that are borrowing till they can't no more are going bankrupt. It's the natural order of oil-field, been this way since the 20's, almost 100 years of drilling. 

[Gerry Maddoux + 3,627]

Absolutely correct.

The gist of my argument has been, "natural order" at what price. 

Right now, those who are in the absolute sweet spot are making money at $55.

The sweet spots aren't going to last long--the spacings are too dense and the stratigraphic traps are too porous. 

And then what?

Tier 2, 3. 

Maybe offshore will take up the slack.

Maybe onshore conventional drilling will. 

Or maybe the Saudis--the same people who supplied 15 of the 19 terrorists who took out the towers--will take over the market again. 

Tariffs? Fine by me. 25% on Saudi oil. I think that would do it.

But I'm fatigued by my light argument. Let's just drill, baby, drill, go broke the way this business always has. Flare as much as you want. Fill the pipes. 

There. You won. Everything's going to turn out fine.

If you're from Saudi Arabia.

 

[John Foote + 1,135]

17 hours ago, J.mo said:

Different needs of thousands of different independent operators. And consumers with choices to exploit such. 

This is an example where Adam Smith's capitalism works best, many buyers, many sellers. And hell yes, the margins get squeezed.

Big entities work like heck to avoid this.

[Ward Smith + 6,615]

For all those saying, "Just leave it in the ground", what about the leaseholders? I haven't seen the leases, but if it were MY land, I'd Never sign an open ended lease where the operator gets to "sit on it" until such time as the price improves or whatever. Perhaps a lot of this "drill baby drill" is because there's a contract sitting there saying, "Produce within one year or kiss your bonus payment AND this lease goodbye"!

[Gerry Maddoux + 3,627]

Good point but it only takes one well to hold a section--and that holds the lease as long as that single well is producing. After this last week, shale oil is going to be an existential process. Even so, always the best policy to drill a wildcat in each tract. Infill drilling and completion is hereafter going to be a tailored situation. Our greatest task right now is to reelect Trump and try mightily to hold on to the Senate, reclaim the House. Biden said in his speech the other night that he would ban fracking. He's an idiot, as that would immediately make the United States vulnerable. I'm no Trump fan but he seems far superior to those geniuses in the Democrat camp. All this said, the question of $100 oil is an open question. With the horrible problems in the Permian Basin regarding child wells wrecking the parent wells, and then canabilizing other child wells--especially in the Delaware where there is limestone and sandstone galore with inadequate traps--the big boys need to spread out and drill at a pace to push up the price of oil. 

 

[Old-Ruffneck + 1,223]

20 minutes ago, Gerry Maddoux said:

Good point but it only takes one well to hold a section--and that holds the lease as long as that single well is producing. After this last week, shale oil is going to be an existential process. Even so, always the best policy to drill a wildcat in each tract. Infill drilling and completion is hereafter going to be a tailored situation. Our greatest task right now is to reelect Trump and try mightily to hold on to the Senate, reclaim the House. Biden said in his speech the other night that he would ban fracking. He's an idiot, as that would immediately make the United States vulnerable. I'm no Trump fan but he seems far superior to those geniuses in the Democrat camp. All this said, the question of $100 oil is an open question. With the horrible problems in the Permian Basin regarding child wells wrecking the parent wells, and then canabilizing other child wells--especially in the Delaware where there is limestone and sandstone galore with inadequate traps--the big boys need to spread out and drill at a pace to push up the price of oil. 

 

I didn't realize you were a geologist. You seem to know so much of the underground strata can I ask nicely who you work for?? Drill and keep innovating and getting more outta the ground. Not just the USA but friendly nations that like gas to match most workers wages. 100$ oil will just reek havoc on the poor and middleclass. To me you sound like an investor that probably shouldn't be. IMHO

[Gerry Maddoux + 3,627]

On 8/3/2019 at 12:09 PM, Old-Ruffneck said:

I didn't realize you were a geologist. You seem to know so much of the underground strata can I ask nicely who you work for?? Drill and keep innovating and getting more outta the ground. Not just the USA but friendly nations that like gas to match most workers wages. 100$ oil will just reek havoc on the poor and middleclass. To me you sound like an investor that probably shouldn't be. IMHO

Vis a vis the following quote from an article on this very site: 

According to the Wall Street Journal and Wood Mackenzie, a basket of 7 shale drillers posted a combined $1.58 billion in negative cash flow in the first quarter, four times worse than the same period a year earlier. Here is a sampling of how the share prices of some oil companies fared on Thursday:

• Whiting Petroleum -38 percent
• Concho Resources -22 percent
• Pioneer Natural Resources -7.5 percent
• EOG Resources -5.5 percent
• Devon Energy -6.8 percent
• Continental Resources -7.8 percent
• Royal Dutch Shell -6.1 percent
• Chevron -2 percent
• SM Energy -9.0 percent

Investors are clearly souring on the sector. As Bloomberg notes, speculative positioning from traders fell to the lowest level since March 2013, a sign of “investor apathy” towards crude oil and energy stocks.

While shale E&Ps languish, the oil majors are not slowing down. Exxon said that its oil production rose by 7 percent, driven by the Permian. In fact, its production from the Permian rose 90 percent in the second quarter from a year earlier. Earnings dropped by 21 percent, however, and the company cited lower prices and poor downstream margins.

But the majors aggressive bet on U.S. shale is a sign of the times. Small and medium drillers are getting hammered and seeing their access to capital close off, which is forcing budget cutbacks and otherwise leading to steep selloffs in their share prices. The majors, on the other hand, are only in the early stages of a multi-year bet on shale. They can stomach losses on individual shale projects for years, scaling up while they earn profits elsewhere

 

***Increasingly, per your note about me, "an investor that probably shouldn't be" is spot on. Am I worried about the future of shale? Yes. Do I think Exxon and Chevron can make a profit in shale at $55 oil? No. As a shred of proof, please re-read excerpt from above: "Chevron's production from the Permian rose 90% but earnings dropped by 21%." Chevron's cost per acre of staking out a position in the Permian is one of the most efficient around. If they can't make a profit at these prices, then I sincerely doubt that Exxon can: it's not as well run and its cost per acre was very high.

Further, Chevron "cited lower prices and poor downstream margins," as the cause of its woes. My response: Same as always, nobody, not even the super-majors, can make a consistent profit in the shale field at $55 oil, except in the sweetest of the sweet spots, places where--yes, there are a few good stratigraphic traps in the porous Delaware--several layers of high-source reservoir rock are more or less contained by aberrant walls of less porous rock.

Let me be clear: I'm not greedy, I'm not needy, I'm no geologist, I don't work for a company, I don't necessarily want $100 oil. I do want something like $75 WTI, because that will allow prudent operators to make a profit for doing a very hard job of making America energy-independent, and it will also allow the super-majors to figure out the exact spacing for optimal exploitation of the riches that God has provided. Not only that but it will, even more importantly in my books, give them enough profit to stimulate research into ways to pry open the lid, discover how to extract not 15% but maybe 25% of the available oil without these ruinous, running-the-treadmill-just-to-keep-up depletion rates of 60-70% the first year--that's no way to live.

I have no ulterior motive, but like just about everyone else in this business I'm frustrated as all get-out; not only by these sub-profitable prices but by the blow-off spike that I see in the offing, probably about year 2022 (after the deep recession) unless things change. You're probably right: I likely shouldn't be an investor in this business any longer, it's a young man's game using OPM. Perhaps you've provided me a hard truth. 

 

[Old-Ruffneck + 1,223]

2 hours ago, Gerry Maddoux said:

According to the Wall Street Journal and Wood Mackenzie, a basket of 7 shale drillers posted a combined $1.58 billion in negative cash flow in the first quarter, four times worse than the same period a year earlier.

1,580,000 divided by 7 equals 225,714. Really chump change! WSJ know that some of that debt is from wells not completed? They can write a poor picture but in reality some ARE losing money, while some are making money. Before you said 100$ oil and now backing to 75$ WTI. Sounds to me your prudent price isn't to all investors likings. Price goes up, demand drop like a rock. Price at 100$ and you see more 'lectric vehicles mass produced. Since you've never worked in the oilfield I give you the benefit of ignorance on how from Searching for oil to cutting in the roads to spudding in and completion. A lot goes into the field and if the markets deem 55$, so be it. They're not losing money, just not making what some investors would like. The Greed factor.

Please explain to the group here why in the 1st year depletion is at a high rate.

Edited August 5, 2019 by Old-Ruffneck