Shale Oil will it self destruct?

[DanilKa + 443]

4 hours ago, JR EWING said:

over the last year the big guys are buying up acreage and this will lead to controlled extraction. And the reason for that is that the share holders wont allow their main business support something that is draining the profits. Hence the move into Permian by the likes of Exxon and Chevron.

Majors are entering shale because of low (geological) risk reserves, IMO. Not like they can easily find oil elsewhere, especially while cutting on FnD. It would look like they are at the end of the road if Reserves Replacement Ratio is shortening from year to year. 

[DanilKa + 443]

9 hours ago, Douglas Buckland said:

Finally, I would like to know what fracking has to do with reserves? Does fracking somehow increase the original oil in place? When do you assume fracking started? The hydraulic fracturing process and technology has been utilized for at least the past 50 years!

Doug, while it has nothing to do with reserves, one cannot produce  from nano- to micro-Darcy rock unless it is fractured many times over to create huge contact area with the wellbore. Biggest unknown and area of potential gain is recovery factor. It’s typically under 10% of OOIP. There attempts at EUR but lateral and vertical sweep efficiency sucks; getting oil out of tiny pores also isn’t easy. Most current methods are huff n’ puff. 

[Mike Shellman + 548]

17 hours ago, DanilKa said:

No argument from me, @Mike Shellman. I agree with pretty much all what you saying, with exception of US shouldn't export (they pretty much had to - due to grade mismatch between production and refining capabilities). I'm also not in US hence care a bit less about its energy security and being a libertarian - let'm dig deeper and pay the piper. Pardon my cynicism...

Good point on reserves definition; economics isn't part of it.

Thanks, Daniel; I am in the US, Texas anyway, and the largest C+C consumer in the world has got no business exporting light tight oil at steep discounts to Brent. The net revenue from those exports does not even cover interest costs on shale oil debt. That's the beauty of the short cycle nature of shale oil; limit its production growth commensurate with world oil price markets and refinery capability. It stays in America, for our kids and prices go up and stabilize. Or, build more refineries. Its dumb to give it away now to have to pay 3 times more to get it back later. 

[JR EWING + 123]

11 hours ago, James said:

So basically shale fills the gap? Sorry but I don’t see that happening, shales condition is worsening as the months go on and it’s best days are over with. 

that's not what I said, I said that Exxon and Chevron are preparing for the gap as the gap will cause a price increase. And they want to be in a position to exploit the gap quickly and with shale they can do that. They didn't buy into the acreage to make a loss like the rest of the shalers, they bought into it so that's its at their disposal on short notice. The gap is coming as I said earlier due to under investment in conventional oil developments

[Douglas Buckland + 6,308]

5 hours ago, DanilKa said:

Doug, while it has nothing to do with reserves, one cannot produce  from nano- to micro-Darcy rock unless it is fractured many times over to create huge contact area with the wellbore. Biggest unknown and area of potential gain is recovery factor. It’s typically under 10% of OOIP. There attempts at EUR but lateral and vertical sweep efficiency sucks; getting oil out of tiny pores also isn’t easy. Most current methods are huff n’ puff. 

All true, but the original discussion led one to believe that 'exploration', in an of itself, created reserves, it doesn't! It tells you where there 'may' be economical reserves, but you'll need to spend a whack of loot before you can confirm the reserve and include it in your portfolio.

[Ward Smith + 6,615]

15 hours ago, Douglas Buckland said:

Finally, I would like to know what fracking has to do with reserves? Does fracking somehow increase the original oil in place? When do you assume fracking started? The hydraulic fracturing process and technology has been utilized for at least the past 50 years!

I believe it's fair to say fracking today, with "dissolving balls" and multi stage frack jobs  utilizing thousands of horsepower and billions of gallons of water and proppant has little to do with 50 years ago. It's also fair to say that drilling miles down, then drilling laterals miles out from the same well bore couldn't even pass the laugh test 50 years ago, let alone logging while drilling to stay in a target zone less than 15 feet thick. All routine today. 

So yes, fracking, thanks primarily to George Mitchell, is nothing whatsoever like it was 50 years ago, and has made billions of bbls show up as economically recoverable that weren't even on the radar 50 years ago. It is a whole new paradigm.

I've spoken at some length with the chief scientist of a major player in this domain. I've pointedly asked him about many of the arguments you and others have made about the non economics of fracking. His response? "We're not idiots". The depletion curve is steep, but the first year almost always pays off both the well AND the bank (time value of money) and every bbl after that is gravy. I'd assumed they'd abandon wells after they got to "stripper" levels, but they don't and once they get down into the teens, they stay there for years, not declining nearly as precipitously as the first year. At that point, they're in the @Mike Shellman league of operation, making (some) essentially free money with no further investment. 

[Douglas Buckland + 6,308]

First, can you explain to me what 'dissolving balls' are? If this is proppent you sure as heck do not want them to dissolve - it is there to hold the fracture open.

Look up Massive Hydraulic Fracturing, this was being done decades ago in Texas. The core fracking technology was available long before the Shale Miracle arrived on the scene.

Drilling 'miles' down (two miles is less than 11,000 feet!) then turning the well horizontal was being perfected at least as far back as 1984. I was designing fishbone horizontal laterals in Denmark 20 years ago. Needless to say, you wouldn't drill them if you couldn't log and evaluate them.

Absolutely none of this 'new' shale technology is new! It has likely been 'tweeked' to fit their specific requirement, but they definitely didn't pioneer or perfect it!

I have never made a comment regarding the economics of fracking, I leave that to guys like Mike who actually deal with the financial side of things on a daily basis.

What I am is a 60 year old drilling engineer/drilling superintendent/drilling manager who has spent the past 35 years drilling internationally. You can speak to any scientist you want to, they have their place in the scheme of things. But it is the drilling team on location and the engineers and drilling management team in the office which have to make any scientific design work and get it in the ground.

Believe me when I tell you that this 'new' technology was in play long before the shale oil industry was spawned.

I hope all that free money with no further investment covers the eventual 'plug & abandonment' of the thousands of LTO wells, or else, once again, the American taxpayer will be on the hook for billions to sort it out.

[Ward Smith + 6,615]

46 minutes ago, Douglas Buckland said:

First, can you explain to me what 'dissolving balls' are? If this is proppent you sure as heck do not want them to dissolve - it is there to hold the fracture open.

Here ya go, surprised you hadn't heard of it. I admit I'm more on the science side and haven't been on a rig since the 80's. Dissolving balls

 

[Douglas Buckland + 6,308]

18 minutes ago, Ward Smith said:

Here ya go, surprised you hadn't heard of it. I admit I'm more on the science side and haven't been on a rig since the 80's. Dissolving balls

 

Can't zoom in to read it on my handphone. Will try later on my laptop.

Since I am strictly on the drilling side of things, I wouldn't have seen these...

[Douglas Buckland + 6,308]

27 minutes ago, Ward Smith said:

Here ya go, surprised you hadn't heard of it. I admit I'm more on the science side and haven't been on a rig since the 80's. Dissolving balls

 

Just read it. Interesting and would be usable in any application involving a tool with a sliding sleeve. In drilling operations, time is money and you'd have to take a hard look at how long it took the balls to dissolve. I imagine the fluid in the hole at the time would be an important consideration.

Thanks for the link.

[Falcon + 222]

On 7/15/2019 at 3:53 PM, D Coyne said:

The EIA's AEO 2019 has tight oil output from 2000 to 2050 at 121 Gb.  That estimate is about 13 Gb more than the USGS mean TRR estimate, it is far from conservative, it is wildly optimistic, especially after 2023, up to that point it looks pretty reasonable.

The EIA estimate for economically recoverable resources is about 36 Gb too high from 2023 to 2050.

OK, Whatever . . . . 

Statistics and white lies .

ALL I KNOW IS  .  .  .  .  .  .

2.47 MILLION BARRELS A DAY OF PERMIAN TO EXPORT TERMINALS  PIPELINE CAPACITY COMING ONLINE NEXT 9 MONTHS. 

OIL PRICES GOING DOWN.

That's what traders need to know.

Facts don't matter to some.

Do you also want the government to make Amazon stop selling products so cheap so all retail can retail can survive.  How dare Amazon use technology to their advantage.  And free shipping to boot ! How dare they !  

You can save the oil industry and the world. Good luck.

 

Edited July 16, 2019 by Falcon

[Douglas Buckland + 6,308]

18 minutes ago, Falcon said:

OK, Whatever . . . . 

Statistics and white lies .

ALL I KNOW IS  .  .  .  .  .  .

2.47 MILLION BARRELS A DAY OF PERMIAN TO EXPORT TERMINALS  PIPELINE CAPACITY COMING ONLINE NEXT 9 MONTHS. 

OIL PRICES GOING DOWN.

That's what us traders need to know.  

You can save the oil industry and the world. Good luck.

 

You traders and your fanciful numbers and rationale is a big part of the problem the rest of the oilfield now finds itself.

Tell me OB1, how are lower prices going to contribute to the Shale Oil Miracle when they are unprofitable at the present price? Money is already getting tight for the shale players so I can't see lower prices giving them any hope.

This shale oil fiasco will only last until they either go 'tits up' due to finances or it is no longer a viable political tool.

[Falcon + 222]

11 hours ago, Douglas Buckland said:

You traders and your fanciful numbers and rationale is a big part of the problem the rest of the oilfield now finds itself.

Tell me OB1, how are lower prices going to contribute to the Shale Oil Miracle when they are unprofitable at the present price? Money is already getting tight for the shale players so I can't see lower prices giving them any hope.

This shale oil fiasco will only last until they either go 'tits up' due to finances or it is no longer a viable political tool.

Douglas

I didn't invent Market Economies,  Free Enterprise, Laws of Supply & Demand, Capitalism and Open Competition. 

I just play by the rules.  

If you want to make up your own rules fine.

PS : Did you know that the Permian has seen an INCREASE of 40 to 50 NEW producers over last 6 months (private firms)

How could that be ? 

Well, these firms have sound business models. They are not like all the other stary eyed small and private firms that while making great money in 2010 thru 2014, thought oil would trade at $100+ forever reinvested all their cash, loaded up on inexpensive debt and contracted for absurd royalty payouts to land owners. 

Unfortunately , shale firms that went public are stuck .  Shareholders have and will be hurt.  Nothing I or you can do will change that. 

A decent size merger was announced yesterday.  The target was at its lowest share price ever. After announcement aquirer's stock dropped 15% ! Why ?  Because things have changed.  

The Oil Majors want to add strategic properties.  But not at todays prices. They know.  

If you think some US shale producers have problems .  . .  .  .  . How about Saudi Arabia and the other OPEC Cartel members.  These countries dependent on oil price will be in a fight for survival 2021.

Question.  Do you also want the government to make Amazon stop selling products so cheap ? They are putting some retail out of business.  How dare they use technology for their business.

 

Edited July 16, 2019 by Falcon

[Douglas Buckland + 6,308]

Dream on.....

[Mike Shellman + 548]

8 hours ago, Ward Smith said:

I believe it's fair to say fracking today, with "dissolving balls" and multi stage frack jobs  utilizing thousands of horsepower and billions of gallons of water and proppant has little to do with 50 years ago. It's also fair to say that drilling miles down, then drilling laterals miles out from the same well bore couldn't even pass the laugh test 50 years ago, let alone logging while drilling to stay in a target zone less than 15 feet thick. All routine today. 

So yes, fracking, thanks primarily to George Mitchell, is nothing whatsoever like it was 50 years ago, and has made billions of bbls show up as economically recoverable that weren't even on the radar 50 years ago. It is a whole new paradigm.

I've spoken at some length with the chief scientist of a major player in this domain. I've pointedly asked him about many of the arguments you and others have made about the non economics of fracking. His response? "We're not idiots". The depletion curve is steep, but the first year almost always pays off both the well AND the bank (time value of money) and every bbl after that is gravy. I'd assumed they'd abandon wells after they got to "stripper" levels, but they don't and once they get down into the teens, they stay there for years, not declining nearly as precipitously as the first year. At that point, they're in the @Mike Shellman league of operation, making (some) essentially free money with no further investment. 

You haven't a clue what my "league" of operations entails. Over 50 years I've drilled HZ wells, done large frac's, deep, shallow, and drill new wells every year; there is nothing about the money that I make that is 'free,' nor requires 'further investment.'  That's stupid.

As was your buddy's comments; they are idiots. They don't risk their own money, they use other people's money and almost all of them are deeply in debt, can't keep their credit cards in their purse and are set to drive the price down, again, into the 40's with fiscally irresponsible over production.

I am stunned how dumb people are about cheerleading for this stinking shale stuff; none, I repeat none, of the hoopla said about it can be substantiated with facts. 99% of those guys are still, after a decade, losing money hand over fist. Some of you cheerleaders seem to thing the shale industry can lie to the Securities and Exchange Commission like they lie to investors. Realized production data filed with regulatory agencies clearly, clearly shows that <10% of shale oil wells currently being drilled pay out D,C & L costs in less than 3 years. https://oilprice.com/Energy/Energy-General/Shale-Investors-Fear-Bloodbath-As-Earnings-Season-Kicks-Off.html

Dissolvable frac balls were used in vertical stage frac'ing 50 years ago in Luling Field and Pine Island Field in north LA. Like dissolvable frac plugs, sliding sleeves and other tinker toys, none of that stuff has helped the American shale industry become more profitable.  

https://www.oilystuffblog.com/single-post/2019/07/15/Cartoon-Of-the-Week

 

 

[DanilKa + 443]

6 hours ago, Douglas Buckland said:

Look up Massive Hydraulic Fracturing, this was being done decades ago in Texas. The core fracking technology was available long before the Shale Miracle arrived on the scene.

I can confirm, water fracs were practiced in 60th by Dowell. 7-8M lb fracs were done in vertical wells in 80th. Not much of a revolutionary new tech in shales; as a matter of fact it’s hardly possible to sell NT to shale operators. Mostly copying what’s popular. 

Still, incremental improvements do  change things and credit should be given for that. 

On economics, come across George Carlin video: “they don’t have negative cash flow problem - they are f..ng broke!” https://youtu.be/o25I2fzFGoY

[Falcon + 222]

44 minutes ago, Mike Shellman said:

You haven't a clue what my "league" of operations entails. Over 50 years I've drilled HZ wells, done large frac's, deep, shallow, and drill new wells every year; there is nothing about the money that I make that is 'free,' nor requires 'further investment.'  That's stupid.

As was your buddy's comments; they are idiots. They don't risk their own money, they use other people's money and almost all of them are deeply in debt, can't keep their credit cards in their purse and are set to drive the price down, again, into the 40's with fiscally irresponsible over production.

I am stunned how dumb people are about cheerleading for this stinking shale stuff; none, I repeat none, of the hoopla said about it can be substantiated with facts. 99% of those guys are still, after a decade, losing money hand over fist. Some of you cheerleaders seem to thing the shale industry can lie to the Securities and Exchange Commission like they lie to investors. Realized production data filed with regulatory agencies clearly, clearly shows that <10% of shale oil wells currently being drilled pay out D,C & L costs in less than 3 years. https://oilprice.com/Energy/Energy-General/Shale-Investors-Fear-Bloodbath-As-Earnings-Season-Kicks-Off.html

Dissolvable frac balls were used in vertical stage frac'ing 50 years ago in Luling Field and Pine Island Field in north LA. Like dissolvable frac plugs, sliding sleeves and other tinker toys, none of that stuff has helped the American shale industry become more profitable.  

https://www.oilystuffblog.com/single-post/2019/07/15/Cartoon-Of-the-Week

 

 

"  . . . . . . . . .  , none of that stuff has helped American shale industry become more profitable"

Really ?  Read Hess Corp 10K SEC filing for 2018 year.

In 2018 Hess implemented new reservoir imaging, drilling technology / methods and new completion technology.  For older wells (2017) Hess  had a return of 15% on $50 oil.  Now with 2018 wells using new technology Hess has a return of 55% on $50 oil on the same Bakken properties ALMOST  4X RETURN.  YES, the same property in the Bakken.

Let me ask you.  Should the government tell Amazon to stop selling products so cheap so all the retailers can pay their shareholders ? ? ?

Edited July 16, 2019 by Falcon

[wrs + 893]

Mike's posts just ooze jealousy and envy.  The guy that drills my section in Culberson county is an independent who has been in the oil business for 40 years.  He is a billionaire due to his success in drilling PROFITABLE shale wells but since Mike can't understand how it's done, he doesn't believe it's possible.  That is called arrogance but mostly it's ignorance.

This guy also drilled a lot of shallow wells out in the Permian over the years but he did figure out shale and was able to make it work without going broke. Admittedly it's not easy being independent but he has done it, primarily because he is vertically integrated but he is making money.  So when Mike makes blanket statements regarding the absolute stupidity of shale operators, understand it's because he doesn't understand.

Edited July 16, 2019 by wrs

[Mike Shellman + 548]

22 minutes ago, Falcon said:

Really ?  Read Hess Corp 10K SEC filing for 2018 year.

I have. Its performance in the Bakken is abysmal. It has worldwide operations including a portion of new discoveries in Guyana and has been dumping assets elsewhere. Perhaps that is what is confusing to you. Hess is actually No.1 on the negative cash flow hit parade.

As to the comparison to Amazon.com, I don't understand your logic at all; it is not in the oil business, it is in the retail sales business. Profit almost always dictates the success or failure of business in America. Profit, or the lack thereof, is working in this case as well, be it slowly because of low interest monetary stimulus, and most of the shale oil industry is failing, sadly.   

1 minute ago, wrs said:

Mike's posts just ooze jealousy and envy. 

Equally stupid. Shale oil is no threat to me and I can likely buy and sell you on credit, pardnor.

Some small independent operators that sold participation in Wolfcamp, or Bone Springs deals in the Delaware to industry partners, and stayed out of debt, with low land acquisition costs and very low G&A costs,  might be eeking out decent returns on CAPEX. They do not not represent the shale oil industry as a whole and that, I believe, is the debate...how sustainable is the American shale oil industry, not how much free royalty you make.

You keep calling me names, to whom shall I address that? What is your name, or must you insult me anonymously ? 

 

[wrs + 893]

7 minutes ago, Mike Shellman said:

Some small independent operators that sold participation in Wolfcamp, or Bone Springs deals in the Delaware to industry partners, and stayed out of debt, with low land acquisition costs and very low G&A costs,  might be eeking out decent returns on CAPEX. They do not not represent the shale oil industry as a whole and that, I believe, is the debate...how sustainable is the American shale oil industry, not how much free royalty you make.

You keep calling me names, to whom shall I address that? What is your name, or must you insult me anonymously ? 

 

Cite the name I called you, I only characterized your posts properly.  

Edited July 16, 2019 by wrs

[Falcon + 222]

6 minutes ago, Mike Shellman said:

I have. Its performance in the Bakken is abysmal. It has worldwide operations including a portion of new discoveries in Guyana and has been dumping assets elsewhere. Perhaps that is what is confusing to you. Hess is actually No.1 on the negative cash flow hit parade.

As to the comparison to Amazon.com, I don't understand your logic at all; it is not in the oil business, it is in the retail sales business. Profit almost always dictates the success or failure of business in America. Profit, or the lack thereof, is working in this case as well, be it slowly because of low interest monetary stimulus, and most of the shale oil industry is failing, sadly.   

Equally stupid. Shale oil is no threat to me and I can likely buy and sell you on credit, pardnor.

Some small independent operators that sold participation in Wolfcamp, or Bone Springs deals in the Delaware to industry partners, and stayed out of debt, with low land acquisition costs and very low G&A costs,  might be eeking out decent returns on CAPEX. They do not not represent the shale oil industry as a whole and that, I believe, is the debate...how sustainable is the American shale oil industry, not how much free royalty you make.

You keep calling me names, to whom shall I address that? What is your name, or must you insult me anonymously ? 

 

Calling you names ? Where ?

[Mike Shellman + 548]

15 minutes ago, Falcon said:

Calling you names ? Where ?

This idiot has called me asshole, a communist and today, ignorant. Every couple of weeks someone pings me on oilprice.com and I respond; generally because I am asked. I render an opinion. A couple of you guys don't like what I have to say, so I get attacked, mostly because I am "lowly" stripper well operator and don't understand big time shale oil economics. Phfttttt; I've had working interest in shale oil wells.  If you have data, real data, not a bunch of self-promoting links, or hypotheticals, lets rock. Sho' me the money and I be the biggest shale oil fan in America. Promise. Because that is what this debate is about, its about how long the US shale oil industry can be sustainable on credit/debt, without making profit. Otherwise, if I am so wrong, what are you guys afraid of? Ignore me. 

[Douglas Buckland + 6,308]

Mike, go grab a coffee, common sense ain't so common anymore and these jokers are just baiting you...

 

[Falcon + 222]

2 minutes ago, Mike Shellman said:

This idiot has called me asshole, a communist and today, ignorant. Every couple of weeks someone pings me on oilprice.com and I respond; generally because I am asked. I render an opinion. A couple of you guys don't like what I have to say, so I get attacked, mostly because I am "lowly" stripper well operator and don't understand big time shale oil economics. Phfttttt; I've had working interest in shale oil wells.  If you have data, real data, not a bunch of self-promoting links, or hypotheticals, lets rock. Sho' me the money and I be the biggest shale oil fan in America. Promise. Because that is what this debate is about, its about how long the US shale oil industry can be sustainable on credit/debt, without making profit. Otherwise, if I am so wrong, what are you guys afraid of? Ignore me. 

All opinions should be welcomed.  

I thought you were saying I called you names. 

 

[wrs + 893]

12 minutes ago, Mike Shellman said:

This idiot has called me asshole, a communist and today, ignorant.  

Ignorance is a state of not knowing, it's not a name, it's an adjective.  Your blanket claims are ignorant.  Obviously you recognized your error and made a caveat in your previous post so I must have struck a nerve but now who is calling names?

https://www.merriam-webster.com/dictionary/ignorant

ignorant

 adjective

ig·no·rant | \ ˈig-n(ə-)rənt  \

Definition of ignorant

 

1a: destitute of knowledge or educationan ignorant societyalso : lacking knowledge or comprehension of the thing specifiedparents ignorant of modern mathematics

b: resulting from or showing lack of knowledge or intelligenceignorant errors

2: UNAWARE, UNINFORMED