Shale Oil will it self destruct?

[Ward Smith + 6,615]

3 hours ago, Mike Shellman said:

The short investment cycle nature of shale oil has fundamentally changed the world oil order and investment in exploration, offshore and on, around the world has been severely set back. I believe the US shale phenomena is the root cause of that. As iron rusts away, and qualified personal leave the worldwide industry because of job instability and retirement, that will have bad, long term ramifications. When US shale oil fizzles out the world is going to be woefully unprepared and prices will spike, likely, causing bad economic problems. 

This. 

If you're familiar with Ray Dalio's books, he talks about paradigm shifts and what they mean. We're in one now in this industry and it isn't going away anytime soon. You're not wrong that shale has thrown one big mighty monkey wrench into the machine, but it's the reality whether we like it or not. If certain people from a certain political party get elected to power, we as an industry can count on additional monkey wrenches. The same people who wear masks and complain about global warming are going to Really be complaining when the brown stinky stuff hits the fan and there's no more cheap energy, plastics and fertilizer. Life will get very harsh indeed then, and while I don't expect to be around, I'm worried about my grandchildren. 

[wrs + 893]

On 7/16/2019 at 8:13 AM, Mike Shellman said:

 

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 ? 

 

You ever checked the profiles of people?  If you did you might find my name.  

On 7/16/2019 at 8:48 AM, 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. 

I see here you called me an idiot while claiming I called you an asshole.  I did call you a communist because you said America has no business exporting shale oil to the rest of the world.  However, I am an American and I am not opposed to my oil being exported.  It was just correct for the govt to lift the ridiculous ban on exports that was 40 years old IMO.  

 

I have done a search over the last six months on the term asshole and it shows up in none of my posts.  Here are the results. 

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[Falcon + 222]

18 hours ago, Mike Shellman said:

Yeah, they're kicking ass alrighty.

Quick ! (and no researching on the internet before you answer), lets say you want to learn something about the well you've just written a check for, which end of the rig do you go to find out...to the right or to the left. No cheating now...

Mike

10K filing is a required Security Exchange Commission a Federal Agency.  It is  legal document.  If you lie you will most likely go to jail.  The Officers of the Company must personally sign off.

WITH NEW TECH RETURN ON $50 BBL OIL WENT UPFROM 15% TO 55% .  

What is it you do not understand ?  I will explain it to you.

[Falcon + 222]

3 hours ago, D Coyne said:

I wonder if the "improved" returns had anything to do with changes in the tax laws.  When we look at the Bakken as a whole, output has been pretty flat for the past 7 months or so, lower oil prices is likely to lead to lower output in the Bakken and perhaps flat output in the Permian basin or perhaps a slight increase in the Permian Basin, but at a lower rate (300 kb/d annual increase rather than 1000 kb/d), depends on oil price and how much it goes up or down.

You make numbers up.  

 

[James Regan + 1,776]

On 7/15/2019 at 8:22 AM, Douglas Buckland said:

How do you 'explore as needed'? Do you think that exploration, in and of itself, yields reserves? Exploring is just what it says, you are looking for something with no guarantee that you will find it.

You then extrapolate your previous misconception and say, "Thus, reserves are continually being replenished." 

Most exploration is performed by seismic studies. You really can not determine a meaningful 'reserves' number unless you then drill the prospect and test it.

Exploration drilling, generally speaking, has been on hold globally due to the price of oil and the volatility of the price since the present slump took hold.

Seismic studies and exploration drilling are expensive with the risk of not findind any reserves which are volumetrically and financially feasible in today's market.

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!

@Douglas Buckland It’s quite ironic the use of the word Exploration in the oilfield, most “Exploration “ these days should actually be called ”Appraising”, gone are the days of WildCatting.

They pretty much have a good idea these days what’s down there by as you said Survey work etc but any reservoir has to be drilled logged and tested to prove flow rates, quality and volumes.

However would be good to go back to wildcatting , dusters and tight holes.

[James Regan + 1,776]

Donald doesn’t seem to have any rhyme or reason to his economics, at one point he wants cheap gas at the pump and supports US Shale or US Oil in general, then his next breath he tweets a tweet that puts WTI into free fall, does this guy have an agenda on US oil or does he just want to please everyone by talking BS constantly?

[Falcon + 222]

19 hours ago, Mike Shellman said:

Yeah, they're kicking ass alrighty.

Quick ! (and no researching on the internet before you answer), lets say you want to learn something about the well you've just written a check for, which end of the rig do you go to find out...to the right or to the left. No cheating now...

Mike

Look up the meaning of 'Ludite"

One can't be afraid of technology.  Embrace it.  

There is no going back.  

Serious question. I recently read that many of the larger independents and majors are now hanging on to their stripper wells .  Have you seen that ?

[Falcon + 222]

6 hours ago, Rasmus Jorgensen said:

This is where I disagree a little. Again, coming from offshore shale seems to me as having potential of driving down costs through standardisation and building systemic knowledge, much more than offshore. I don't believe in this innovation hype, but I believe in the slow and steady grind driving down production costs, with a caveat for geological challenges.

 

Whilst I don't really disagree I would like to offer you this perspective - maybe the foundation for new export success is being laid? There are shale deposit in other parts of the world too. If American companies build up enough knowledge and equipment and oilprice rises sufficiently this can be exported. Just a thought. 

Yes, other parts of the world.  

Every knows of Argentine Vaca Muerta 

Some in the know say it could be more productive than Permian. Lots of logistics problems. Availability of enough water and sand, pipelines, etc.

Like all shale there is a learning curve before can fully exploit.

An huge shale opportunity and little talked about is Libya. All in addition to their conventional. Est over 100 Billion BBL.

Little Bahrain who had nearly ZERO oil now has est 80 Billion BBL in shallow offshore.  They are negotiating with US Service companies to develop.

 

[James Regan + 1,776]

1 hour ago, Falcon said:

Yes, other parts of the world.  

Every knows of Argentine Vaca Muerta 

Some in the know say it could be more productive than Permian. Lots of logistics problems. Availability of enough water and sand, pipelines, etc.

Like all shale there is a learning curve before can fully exploit.

An huge shale opportunity and little talked about is Libya. All in addition to their conventional. Est over 100 Billion BBL.

Little Bahrain who had nearly ZERO oil now has est 80 Billion BBL in shallow offshore.  They are negotiating with US Service companies to develop.

 

Apart from the mountains does this sound familiar?

https://oilprice.com/Energy/Coal/Why-Chinas-Shale-Boom-Is-Struggling.html

[Rasmus Jorgensen + 1,169]

5 minutes ago, James Regan said:

Apart from the mountains does this sound familiar?

https://oilprice.com/Energy/Coal/Why-Chinas-Shale-Boom-Is-Struggling.html

https://www.worldoil.com/news/2019/3/11/uk-shale-gas-potential-seen-as-good-as-the-best-in-the-us

[James Regan + 1,776]

1 hour ago, Falcon said:

Mike

Look up the meaning of 'Ludite"

One can't be afraid of technology.  Embrace it.  

There is no going back.  

Serious question. I recently read that many of the larger independents and majors are now hanging on to their stripper wells .  Have you seen that ?

@Falcon The way Mr Musk is talking we will be at the point where AI may not see us as fit to coexist with them, them being Robots not Roberts “very scary”

https://www.vice.com/amp/en_uk/article/7xgnxd/elon-musk-announces-plan-to-merge-human-brains-with-ai

[Falcon + 222]

18 hours ago, James Regan said:

Apart from the mountains does this sound familiar?

https://oilprice.com/Energy/Coal/Why-Chinas-Shale-Boom-Is-Struggling.html

China's shale in their western hills land is (1) very deep (15K to 24K ft deep) (2) lacks adequate water supply (3) most important . . . The folding of the geography has broken the reserves into small pockets , unlike. The US shale plays , with the one US exception the Chainman shale in Nevada where once thought to be the greatest shale basin of all but difficult to locate and lyft. 

Edited July 18, 2019 by Falcon

[Toranaga + 49]

Shale may be a Tragedy of the Commons. A group of individuals (individual firms) pursuing their individual self-interest result in disaster for the group including each individual.  The cause seems to be extremely low interest rates, which means finance sector looking for ANY rate of return over 1%, which means lending to these marginal producers.  

[footeab@yahoo.com + 2,187]

7 hours ago, James Regan said:

Donald doesn’t seem to have any rhyme or reason to his economics, at one point he wants cheap gas at the pump and supports US Shale or US Oil in general, then his next breath he tweets a tweet that puts WTI into free fall, does this guy have an agenda on US oil or does he just want to please everyone by talking BS constantly?

Why do you think oil price is so important to call upon any presidents time other than as a political move?  IF it is not a political driving factor, the President of any party will not give a damn.  What president gives a damn about the price of wheat?  None.  Oil is only relevant when you are importing vast quantities. 

I believe our current president just blathers about things when news is slow or needs a distraction.

[footeab@yahoo.com + 2,187]

1 minute ago, Toranaga said:

Shale may be a Tragedy of the Commons. A group of individuals (individual firms) pursuing their individual self-interest result in disaster for the group including each individual.  The cause seems to be extremely low interest rates, which means finance sector looking for ANY rate of return over 1%, which means lending to these marginal producers.  

That and about 2 Trillion in foreign money pouring into the USA during the financial crisis looking for a "safe"  😎resting spot.  The oil patch was at the right time in history to benefit. 

[wrs + 893]

11 hours ago, Toranaga said:

Shale may be a Tragedy of the Commons. A group of individuals (individual firms) pursuing their individual self-interest result in disaster for the group including each individual.  The cause seems to be extremely low interest rates, which means finance sector looking for ANY rate of return over 1%, which means lending to these marginal producers.  

This is also why housing is unaffordable even with low interest rate loans and why the stock market is so over priced as well.  That is the fault of the Federal Reserve for bailing out bankers.  There is supposed to be a cost of money but savers are not paid for the cost of money, instead they are forced to "invest" so they have to find something that pays a decent return.

This is not all on the shale producers as some would have us believe.  Shale producers are following the market signals to a degree but overproducing is stupid and I am wondering in my own case why the hell XTO drilled four more wells on top of the 8 it has producing on my section already. 

The independent on the other hand is has only drilled two wells in five years on our Culberson section and is now adding four more.  That seems to me a more reasonable pace of production.

On a side note, what is everyone expecting the Fed to do next week?  LOWER INTEREST RATES.................

Edited July 18, 2019 by wrs

[Old-Ruffneck + 1,223]

21 minutes ago, wrs said:

This is not all on the shale producers as some would have us believe.  Shale producers are following the market signals to a degree but overproducing is stupid and I am wondering in my own case why the hell XTO drilled four more wells on top of the 8 it has producing on my section already. 

Depending where in Culberson your at, north side towards Orla certainly been drilled to hell and back. We were punching holes there in the late 70's. Still remember a Santa Fe drilling rig on 2.5.80 catching file and meltdown. Bad gas kick and doghouse heater...…. pooof. But back to your question, the Geologist must have seen something to invest running 4 more holes @ 10m a pop? Hopefully they don't overdrill and cause lower production on the other wells....

[wrs + 893]

21 minutes ago, Old-Ruffneck said:

Depending where in Culberson your at, north side towards Orla certainly been drilled to hell and back. We were punching holes there in the late 70's. Still remember a Santa Fe drilling rig on 2.5.80 catching file and meltdown. Bad gas kick and doghouse heater...…. pooof. But back to your question, the Geologist must have seen something to invest running 4 more holes @ 10m a pop? Hopefully they don't overdrill and cause lower production on the other wells....

The Orla section is on 652 only 1 mile east from 652 and 285, the Culberson section is 12 miles due west and 2 miles south of 652.  There was never any drilling in the Delaware on the Culberson section but there are still two strippers on the Orla section which at one point had about 10 in the Delaware.  XOM drilled a dry hole into Cherry Canyon back in 1987 and tossed the top lease to some other outfit but held the deep rights.

The Culberson wells are pretty good and the geologist has always liked that section according to my independent.  He claims there are 110 million barrels under that one section.  I think we have one of the oldest Wolfcamp A wells out there.  It's first production was 5 years ago yesterday and through April it has produced 358k bbl of oil.  In May it produced 2779 bbl with peak production in Sep 2014 of 18,500 bbl.  Here is the chart I made of it's production from the RRC data I downloaded.  I estimate it's good for another 5 years and 60k more barrels which are all free cash-flow by now.  I think this is the point at which shale wells are going to produce a lot of profit for their owners, it's still making 82 bbl /day.  How does that compare to all those shallow wells that were drilled out there in the 70s and 80s?

 

Edited July 18, 2019 by wrs

[DanilKa + 443]

18 hours ago, Falcon said:

Little Bahrain who had nearly ZERO oil now has est 80 Billion BBL in shallow offshore.  They are negotiating with US Service companies to develop.

You seriously believe everything you read? 

[Old-Ruffneck + 1,223]

13 minutes ago, wrs said:

The Orla section is on 652 only 1 mile east from 652 and 285, the Culberson section is 12 miles due west and 2 miles south of 652.  There was never any drilling in the Delaware on the Culberson section but there are still two strippers on the Orla section which at one point had about 10 in the Delaware.  XOM drilled a dry hole into Cherry Canyon back in 1987 and tossed the top lease to some other outfit but held the deep rights.

The Culberson wells are pretty good and the geologist has always liked that section according to my independent.  He claims there are 110 million barrels under that one section.  I think we have one of the oldest Wolfcamp A wells out there.  It's first production was 5 years ago yesterday and through April it has produced 358k bbl of oil.  In May it produced 2779 bbl with an peak production in Sep 2014 of 18,500 bbl.  Here is the chart I made of it's production from the RRC data I downloaded.  I estimate it's good for another 5 years and 60k more barrels which are all free cash-flow by now.  I think this is the point at which shale wells are going to produce a lot of profit for their owners, it's still making 82 bbl /day.  How does that compare to all those shallow wells that were drilled out there in the 70s and 80s?

So from east side well, go due north 10-12 miles, Red Lake was in site, we drilled vertical well for gas, depth eludes me but thinking 16k. 2 months on each hole. Back then Ramsey gas plant was even thought of. One well drilled well before we were there was holding 15,500psi and pusher said no drop in pressure in the 3 years he was running his rounds. Then we moved up towards Loving and drilled. Tom Brown drilling out of Odessa. 3 good years I had with them. From Loving over to Jal, then to Andrews, Tx. 

Interesting as we drilled deeper then the Hz bores and as derrickman, I never really saw any oil. Must have punched right thru. Shale zones vary but not many feet in depth. 

[wrs + 893]

3 minutes ago, Old-Ruffneck said:

So from east side well, go due north 10-12 miles, Red Lake was in site, we drilled vertical well for gas, depth eludes me but thinking 16k. 2 months on each hole. Back then Ramsey gas plant was even thought of. One well drilled well before we were there was holding 15,500psi and pusher said no drop in pressure in the 3 years he was running his rounds. Then we moved up towards Loving and drilled. Tom Brown drilling out of Odessa. 3 good years I had with them. From Loving over to Jal, then to Andrews, Tx. 

Interesting as we drilled deeper then the Hz bores and as derrickman, I never really saw any oil. Must have punched right thru. Shale zones vary but not many feet in depth. 

OK, you were "deep gas"  that is what destroyed Continental Illinois and sowed the seeds of the S&L crisis.  It was blamed on a bank in Oklahoma City called Penn Square that was selling loans on deep gas wells upstream to Pacific Seafirst and Continental Illinois.  Over a billion dollars was sold upstream to those banks who had to be bailed out in 1984 IIRCC because most were dry holes at 25,000 feet.

[DanilKa + 443]

17 hours ago, James Regan said:

Apart from the mountains does this sound familiar?

https://oilprice.com/Energy/Coal/Why-Chinas-Shale-Boom-Is-Struggling.html

Article is quite shallow and doesn’t do justice to what is happening in shale gas development in China. Challenges are many, chief one is tectonic regime. Unlike relaxed US, Sichuan is in strike-slip to thrust fault, meaning hydraulic fractures are likely to turn or initiate horizontal which has no benefit to productivity. 

They trying their best, just not blessed with same quality resource as US or Saudi. 

[Rasmus Jorgensen + 1,169]

@DanilKa

What is your take on shale in Mexico? I know PEMEX will be main road block, but do you have an idea of quality of the resource and access to water etc? 

[esgeo + 54]

1 hour ago, wrs said:

Shale producers are following the market signals to a degree but overproducing is stupid and I am wondering in my own case why the hell XTO drilled four more wells on top of the 8 it has producing on my section already. 

The independent on the other hand is has only drilled two wells in five years on our Culberson section and is now adding four more.  That seems to me a more reasonable pace of production.

One of the major engineering challenges in shale is controlling how and where frac's grow. If you have produced a well for a while, there is a pressure drawdown around that wellbore (i.e. the parent). If you drill and complete a new (child) wellbore nearby, the frac will tend to grow towards the zone of pressure drawdown- thereby creating more drainage network in already exploited reservoir. This can introduce your new frac water to your already producing well while at the same time poorly stimulating the rock you were actually targeting. Here is a conference paper addressing the issue. 

https://www.researchgate.net/publication/322351412_Protection_Refrac_Analysis_of_Pore_Pressure_and_Stress_Change_Due_to_Refracturing_of_Legacy_Wells

The dots show fracs (microseismic events)- you can see they are disproportionately migrating towards the legacy (parent) well.

Pad development (multiple wells drilled, then completed together) allows you to build pressure in the reservoir with the frac fluids before flowback, and thus does the opposite because with each successive well frac'ed, the zone of less pressure (and direction the frac grows is away from the well you have just frac'ed. The fact that fracs are really expensive- typically 50% or more of the well cost, so it makes no sense to frac in a way that is just going to stimulate already depleted reservoir.  XTO doesn't necessarily do things cheaply, but they do operate logically. The cost benefit of risk in oil price vs risk from parent child must tip the needle towards pad development in your area.

[Falcon + 222]

57 minutes ago, DanilKa said:

You seriously believe everything you read? 

No not everything.

I don't believe anything you write. 

Baker Hughes did the reservoir estimates.  Have you heard of them ?