RIG COUNT DROPS AGAIN ! Who cares when production continues to go up ! U.S. DAILY PRODUCTION RECORD 12.9 MILLION BARRELS/DAY WEEK ENDING NOV 22

[Jabbar + 465]

Also, Record Crude Oil EXPORTS 3.48 MILLION BARRELS DAY

Exports limited by lack of VLCC capable export terminals.  New terminals 18 to 24 months away 

 

Large drop in rig count but production continues up with new records.

Edited November 27, 2019 by Jabbar

[Gerry Maddoux + 3,627]

Well, that's about to change: DUC's can carry you only so far. 

Of course, Exxon is going to drill like crazy next year . . . providing the price of oil climbs above $60-65. Rumor has it that they had to borrow money to pay this last quarterly dividend. So they're nowhere near as flush as say Chevron. Occidental if anything is in tighter financial straits than Exxon, so they're going to have to practice fiscal restraint. 

The shale fields are getting in one hell of a jam. Exxon, Chevron and Occidental have gone all-in. They've all got to be careful.

The small driller/operator units are either selling or going bankrupt . . . except for the lucky few. 

Which leads me to think that global oil supply is going to get tight sometime next year or 2021, unless we have a recession. 

[Jabbar + 465]

On 11/27/2019 at 3:51 PM, Gerry Maddoux said:

Well, that's about to change: DUC's can carry you only so far. 

Of course, Exxon is going to drill like crazy next year . . . providing the price of oil climbs above $60-65. Rumor has it that they had to borrow money to pay this last quarterly dividend. So they're nowhere near as flush as say Chevron. Occidental if anything is in tighter financial straits than Exxon, so they're going to have to practice fiscal restraint. 

The shale fields are getting in one hell of a jam. Exxon, Chevron and Occidental have gone all-in. They've all got to be careful.

The small driller/operator units are either selling or going bankrupt . . . except for the lucky few. 

Which leads me to think that global oil supply is going to get tight sometime next year or 2021, unless we have a recession. 

DUCs

Gonna take couple years to draw down DUCs. Some companies like Harold Hamm's Continental getting by on DUCs.     

CASH FOR EXXON

Exxon has shorterm upfront startup  capital investment and cash needs for (1) Guyana (2) Mozambique (3) Papua New Guinea (4) Brazil (5) Permian . . . .  more important Exxon wants a war chest ready to scoop up bargain shale properties that will be available upon consolidation late 2020 - 2022.

Exxon also has shale acreage in Canadian Montney  and Argentina Vaca Muerta with potential. 

CONSOLIDATION COMING

(1) Hundreds of Billions of Shale Debt coming due 2021 thru 2022. (2) Increased production 2020 from Norway, Brazil, Guyana and U.S. Can't fight it.  Weak shale players on death row.

Oil supply tight in 2021 ? Oil prices always come back. Right ? Oil prices are cyclical. Right ? Electric vehicles will never take off.  Right ? 

The consolidation of Shale producers would be healthy for the oil industry. False hopes just prolongs the inevitable. Get it done.

OPEC DOES 180° U-TURN

Yesterday Russia ignored their OPEC+ production cut commitment  .  .  .  again.  So today OPEC+ did a complete 180° turn and now says they say can meet inventory goals by maintaining current cuts.  Too funny. Big joke.

Russia saw Saudi Arabia increased production back up to 10.3 million/day in November.  They say that's their quota.  Bull.  All of 2018 Saudis avg 10 million/day.  They ramped up to 10.6 in October / November 2018 after price crash. When OPEC calculated their production cut they used the 10.6 number as opposed to the fair number of 10 million as it's  base. Saudi quota should be 9.7 not 10.3.   Russia understands this. It is all talk and plays along. None in OPEC+ comply.  

Too much oil.

SHALE PRODUCERS and OPEC have one major thing in common.  

THEY BOTH THOUGHT OIL PRICES WOULD STAY ABOVE $100 BARREL FOREVER.

They both were wrong.  

TIGHT OIL SUPPLY 2021 ?

Now the false narrative "oil supply tight in 2021".  Pinning their hopes on this fantasy is going to disappoint. Strong shale producers have their buy lists ready.  They are not going to overpay.  

CONOCO PILOT WELLS 20% YIELD

FULL DRILLING PROGRAM 2021

 I did some research. Shale resources yield of 20% is NOT the norm.  Norm is 9% to 11%.  This plus refrac of all vintage 1 and vintage 2 wells will be yet another boost to U.S. productivity 2021 and beyond.

These programs will be incorporated by all surviving consolidators, not Just Conoco. 

Edited November 28, 2019 by Jabbar

[Rob Kramer + 696]

I went through EIA on duc and production by play recently. Jan-Feb was 8500 to 8600 duc +97  then it went -4  -40 now were at -225 and my math prediction is -275 next . From the now 7600. Now are all 7600 usable? Also production has been flat in Anadarko and lost 72 duc of 740 ... 10 month supply on 4th most productive per well area. What happens if its 100 duc next and it's now 6 months remaining.  They still need to get to 21' in order not to burn through all the ducs. Yes some areas have more duc and will still grow . But one area with heavy decline will sap alot of growth from another. Also I looked up rigs during the month ducs went positive to negative 840. And trent started at a duc loss of 1.4 duc per rig /month and is at 1.6 duc per rig /month . I don't think its square as there is varying fracking crew number.

https://www.eia.gov/petroleum/drilling/archive/2019/03/#tabs-summary-3

https://www.eia.gov/petroleum/drilling/#tabs-summary-3

https://www.aogr.com/web-exclusives/us-rig-count/2019

Edited November 28, 2019 by Rob Kramer
Numbers bit off and web links added

[Gerry Maddoux + 3,627]

11 hours ago, Jabbar said:

I did some research. Shale resources yield of 20% is NOT the norm.  Norm is 9% to 11%.

Not to be disrespectful, but could you share the date and location of said research? 

In the Bakken, the yield is fairly uniformly 20%. That's mostly where I have property. The Delaware is probably better. 

Do you seriously think the Canadian Montney and the Vaca Meurta are major players in the world market? Vaca Meurta is going to be exceptionally difficult to develop, given its location and corruption, and lack of infrastructure. Encana was Montney's biggest cheerleader. Here's the latest on them:

{For 2019, the Montney play will receive $350 million to $400 million, compared to $516 million in 2018. Encana has allocated $925 million to $975 million to the Permian Basin and $800 million to $850 million to the Anadarko Basin, Dunn noted.

“Speaking with the company…we learned that Encana’s macro view of the fragility of the regional market for natural gas, and condensate for that matter, in Western Canada has influenced management’s decision to put the brakes on driving growth out of the Montney in 2019, electing to maintain natural gas production levels near hedge-protected differential levels, and curbing their condensate growth ambitions,” he wrote.

“Encana sees the Anadarko Basin as a much more differential-resilient region in which to grow production.”}

(PS: Exxon spills more than $400 million before the first hour of drilling each day.)

 

[Jabbar + 465]

18 hours ago, Gerry Maddoux said:

Not to be disrespectful, but could you share the date and location of said research? 

  

Not disrespectful.  Interview with Chevron CEO, Occidental CEO, recent Conoco Investor Presentation.

Conoco just reported these outstanding results.  They are fine tuning the process 2020 on three pads in Eagleford and 0ne pad in the Delaware. They plan to implement company wide 2021. 

Quote

In the Bakken, the yield is fairly uniformly 20%. That's mostly where I have property. The Delaware is probably better. 

Not to be disrespectful can you name just ONE firm in the Bakken that wells yield 20% ? ? ? I would love to speak to them. 

Conoco has held back in the Delaware.  As Conoco stated they and others are only in the early stage of the learning curve in Delaware. Want to do it right.

Quote

Do you seriously think the Canadian Montney and the Vaca Meurta are major players in the world market? Vaca Meurta is going to be exceptionally difficult to develop, given its location and corruption, and lack of infrastructure. Encana was Montney's biggest cheerleader. Here's the latest on them:

Not now.  Read the word "potential". Actually the Vaca Meurta will be bigger than the Permian, that includes oil.  Not just natural gas. That's if the new socialist government doesn't screw it up.

Encana CEO (previous BP Gulf of Mexico manager that presided over New Horizon disaster) sold most all Montney assets and natural gas assets and bought Permian oil assets.  Smart move. Limited infrastructure in Canada shale

 

 

Quote

{For 2019, the Montney play will receive $350 million to $400 million, compared to $516 million in 2018. Encana has allocated $925 million to $975 million to the Permian Basin and $800 million to $850 million to the Anadarko Basin, Dunn noted.

“Speaking with the company…we learned that Encana’s macro view of the fragility of the regional market for natural gas, and condensate for that matter, in Western Canada has influenced management’s decision to put the brakes on driving growth out of the Montney in 2019, electing to maintain natural gas production levels near hedge-protected differential levels, and curbing their condensate growth ambitions,” he wrote.

 

Quote

“Encana sees the Anadarko Basin as a much more differential-resilient region in which to grow production.”}

(PS: Exxon spills more than $400 million before the first hour of drilling each day.)

 

Anadarko was hailed as the NEXT BIG SHALE PLAY IN 2018.

In your 2018  Encana quote  they discuss their plans for their Anadarko purchases. It turned out differently. 

Encana, like your buddy Harold paid up to get in on the next big thing.  In 2019 OK turned out to be a BIG DUD. 

The recent buyers ALL trying to sell and bail out of this MAJOR DISAPPOINTMENT. 

LET ME KNOW THE NAME OF THAT FIRM IN THE BAKKEN THAT WELLS NORM IS 20% YIELD.  Thanks in advance.

Edited November 29, 2019 by Jabbar

[Gerry Maddoux + 3,627]

This all seems theoretical for you. I've been doing this for a very long time. I'm depressed that oil prices are collapsing. 

Vaca? Some day maybe . . . if there's a future for oil and gas at all. It's looking glum.

Bakken? Marathon, Crescent Point, Whiting, Petro-Hunt. If you can get a real person on the phone you're a better man than I, and I actually have quite a bit of interest up there.

My "buddy Harold?" Not my buddy but smart guy. The Granite Wash is far from collapsing. Lots of it in western Oklahoma and Texas Panhandle. 

Look, you're a young guy and want to argue, I can tell. I really don't giver a damn, so argue with someone else.

[James Regan + 1,776]

These macro views on Shale are really quite interesting and are akin to a bowl of spaghetti, if anyone thinks they can put their finger on the pulse and tell us the future of this sandbox full of broken toys and spoiled children throwing fits then they are only kidding themselves. The LTO segment as a hole is flawed and unhealthy, certainly not a long term prospect. The big boys will be coming out to play again shortly..... 

Edited November 29, 2019 by James Regan

[Gerry Maddoux + 3,627]

Agree, but what I think is becoming obvious are a couple of things: 1) Russia has discovered a field that is likely larger than the Saudi fields, and Putin also controls Venezuela, which is huge. Putin would love to sell crude oil at $30. That'll ruin everyone here. 2) There is going to be no China deal as long as Mr. Trump is president, and they're buying most of their oil and gas from Russia and Saudi Arabia now. They're going to freeze us out.

The oil and gas prospects for the United States are glum, and getting glummer. In fact, I think the whole thing is collapsing. There is no way that the GOM offshore can compete with Russia. Guyana? I don't know. 

[Jabbar + 465]

3 hours ago, Gerry Maddoux said:

Agree, but what I think is becoming obvious are a couple of things: 1) Russia has discovered a field that is likely larger than the Saudi fields, and Putin also controls Venezuela, which is huge. Putin would love to sell crude oil at $30. That'll ruin everyone here. 2) There is going to be no China deal as long as Mr. Trump is president, and they're buying most of their oil and gas from Russia and Saudi Arabia now. They're going to freeze us out.

The oil and gas prospects for the United States are glum, and getting glummer. In fact, I think the whole thing is collapsing. There is no way that the GOM offshore can compete with Russia. Guyana? I don't know. 

Collapsing for investors. 

Agree no long-term contracts from China.  U.S. will sell to other markets. However, Asia (including China) wants all the Natural Gas Liquids (ex. ethane) the U.S. can ship.  No one can compete. Vaca Meurta could in the future if the new socialist government doesn't screw things up. 

Russia, South America, Africa are about to increase their influence on World Oil pricing.

Too much supply.

I believe this is why Saudi Arabia is "fed up with supporting non complying members" . Is this the end of OPEC ?

Writing is on the wall. The market is starting to realize there is TOO MUCH OIL.  The producers are starting to realize they will get higher price for their oil today than they can a year from now .  .  .  and so on. 

U.S. can compete on lifting costs with reduced operation costs and increase to 20% yield.  BUT THEIR TRANSPORTATION COSTS PUT THEM AT A DISADVANTAGE.

With only one VLCC capable export terminals ( The Loop) it currently takes 10 days to load a VLCC carrier in Gulf of Mexico from present oil export terminals. Shipping cost matter. They are going up every month.  Enterprise Products originally said planned VLCC Offshore export terminals in operation Jan 2022.  Think that has been revised out a bit. Their terminal will accommodate 2 VLCC ships and load one every 24 hours.

Chinese are starting to use "Trigger Pricing" to purchase oil.  Only a matter of time before it becomes industry standard.  "Trigger Pricing" along with world oil glut will change the industry.

Edited November 29, 2019 by Jabbar

[Jabbar + 465]

On 11/29/2019 at 12:02 PM, Gerry Maddoux said:

Bakken? Marathon, Crescent Point, Whiting, Petro-Hunt. If you can get a real person on the phone you're a better man than I, and I actually have quite a bit of interest up there.

Don't want to argue. Just stating the facts:

1. Those firms said they are getting 20% yield ? You heard or read that ? Anyone can list the leading companies in Bakken. No claims of 20%

2. Done my research can't find anyone on Bakken stating their norm is 20%

3. Conoco, Occidental and Chevron have recently stated best yield acquired 9% to 11%.  That's a fact.

4. New tech such as taking cores and analyzing down to microscopic level to determine optimum propant, spacing, etc.  Five different technologies used. Conoco also noted that regulating the flow controls pressure and also increases yield.

5. I have heard some in Bakken also piloting similar tech as Conoco. They may be getting similar results. But just in pilot projects, not yet the norm. Nothing close. 

 

Doubling the yield per well greatly decrease costs to production per well , thus increase cashflow. 

Going to be interesting couple of years in the industry.

 

 

 

Edited December 5, 2019 by Jabbar

[footeab@yahoo.com + 2,192]

On 11/27/2019 at 12:51 PM, Gerry Maddoux said:

Rumor has it that they had to borrow money to pay this last quarterly dividend.

How to commit business suicide 101 for dummies.... 🏆

[Tomasz + 1,608]

If you are interested in Russia oil future and breakeven price for Russia please read for example this article

https://www.kommersant.ru/doc/4171441

You can find plenty of these in runet or even in english more professional net about russian state and economy.

After oil price clash Russia simply made tax collection radically more efficient. 

If you heard something about bancrupcy of russian state I must inform you it had a very big shadow economy that simply did not pay any taxes.

Now after 5 years of oil price crash its under tax so thats why after quiet tax revolution russian breakeven oil price is no longer over 100 but about 40 $ per barrel . In meantime Russia didnt raise any taxes it just made tax collection much more universal and efficient than in the past.

For example even in 2014 the professions really didnt pay any taxes or social benefits for the previous 25 years now starting from 1 of January 2020 they will pay 4 % profit tax. 

Shadow economy is about 1/3 of whole so when you force them to pay taxes you can get a lot of money quite easily.

You can also read its made online. Thats also why you have a big pressure for digitalization of russian state. Because online you really cant take a bribe and corruption is still a big problem in Russia.

 

Edited December 1, 2019 by Tomasz

[Rhino + 7]

Tomasz.  Good points. The 40 bep seems low but depends on the tax rate. Isn’t the govt still taking an effective 60-70 percent royalty on conventional resources? That was the number a few years ago. So as an operator you have to make money at effectively $16-25 oil.  And then the quasi-govt pipeline companies have their own take.  It works if you have a big field with lots of production because you need a high throughput to spreadout your fixed investment.  But tough to get a 20 % return IMHO.  So the price at which you can make a decent return on total investment is much higher

Of course it’s good for Putin and the govt because they make all the money.  I think  Putin will push for more production and lower prices to break shale.  Everybody is aware that there is 100 bil + of shale debt due in the next 2 years.  Keeping prices low will mean that more operators will fail and less attractive to refinance.  If you have a longer reserves then you can still win.  It also makes it harder for solar and wind to compete. And if he breaks OPEC (which I think is a joke anyway), that is an extra bonus.

[Rhino + 7]

On 11/28/2019 at 6:26 AM, Rob Kramer said:

I went through EIA on duc and production by play recently. Jan-Feb was 8500 to 8600 duc +97  then it went -4  -40 now were at -225 and my math prediction is -275 next . From the now 7600. Now are all 7600 usable? Also production has been flat in Anadarko and lost 72 duc of 740 ... 10 month supply on 4th most productive per well area. What happens if its 100 duc next and it's now 6 months remaining.  They still need to get to 21' in order not to burn through all the ducs. Yes some areas have more duc and will still grow . But one area with heavy decline will sap alot of growth from another. Also I looked up rigs during the month ducs went positive to negative 840. And trent started at a duc loss of 1.4 duc per rig /month and is at 1.6 duc per rig /month . I don't think its square as there is varying fracking crew number.

https://www.eia.gov/petroleum/drilling/archive/2019/03/#tabs-summary-3

https://www.eia.gov/petroleum/drilling/#tabs-summary-3

https://www.aogr.com/web-exclusives/us-rig-count/2019

Thanks for putting this together.  That’s a 1000 ducs decrease in a year. A rig could complete a lot more ducs per year than full D&C. That could keep production up or flat for a few years even with a decreasing rig count.  And you wouldn’t necessarily need as many frac spreads although the number of fracs would stay flat to increasing.  Guess this means oil price will be low for a while even if not all the ducs are in good areas or useable. 

just for argument sake, if we stopped drilling all together and only drilled ducs, anybody know how long production would stay up before it declined? Can’t be more than a year or 2 at most.  

[Rob Kramer + 696]

My math at 1.6 duc per rig shows a further increase of 1070 on the 225 so rounded to 1300duc drop per month with no drilling so about 5 months . 

We know this wont happen tho. If you chart the rigs at the 14'/15' price meltdown I think I saw oil rigs fall from nearly 2000 to 200 (from memory) so rigs can keep dropping before production is effected. And current rigs are faster (apparently) 

Does anyone who actually drills know if all wells are usable? Is there a error ratio? For every x holes a mistake is made and that well is no good or pressure info ect. that deems a well worse than another and when fracking it would be used later? ... or is it literally a hole in a rock once fracked oil comes out if it's there. 

[El Nikko + 2,145]

3 hours ago, Rob Kramer said:

My math at 1.6 duc per rig shows a further increase of 1070 on the 225 so rounded to 1300duc drop per month with no drilling so about 5 months . 

We know this wont happen tho. If you chart the rigs at the 14'/15' price meltdown I think I saw oil rigs fall from nearly 2000 to 200 (from memory) so rigs can keep dropping before production is effected. And current rigs are faster (apparently) 

Does anyone who actually drills know if all wells are usable? Is there a error ratio? For every x holes a mistake is made and that well is no good or pressure info ect. that deems a well worse than another and when fracking it would be used later? ... or is it literally a hole in a rock once fracked oil comes out if it's there. 

It depends on the geologists and people involved in geosteering the well (as well as the directional driller and quality of LWD tools), there are poor people out there that pretty make things up and then there are people with a huge amount of experience which pays off by placing more (or ideally all) of the well 'in zone'. In zone is usually a narrow band designated as the target which has one or two dolomite beds which frac better as they're more brittle or at least propagate fractures better than a formation that is more plastic.

I should probably write something about geosteering and formation evaluation one of these days

[Rob Kramer + 696]

So theres no drilling indicators to tell you if your in the zone before fracking it sounds like ?

[El Nikko + 2,145]

9 hours ago, Rob Kramer said:

So theres no drilling indicators to tell you if your in the zone before fracking it sounds like ?

Most wells drilled in shale formations are steered with LWD (Logging while drilling) gamma ray and some using resistivity measurements. These measurements can tell you if you are in zone.

[wrs + 893]

Both my operators added several new wells this year and are not leaving any of what they drilled as DUCs.  However, there is another limitation that isn't getting mention, water disposal.  XTO now has 12 wells on only one half of my section and they cannot produce all of them at full production because they don't have enough water takeaway.  They have 12,000 bbl/day water takeaway capacity in two different pipelines to two different disposal facilities.  So that amounts to about 4kbbl/day oil production which is what they have maintained since they brought on the four newest wells in July.  Those wells all produced 1000bbl/day oil and another 100 mmcf gas which is 1600 BOE/day per well.

So clearly they can't run all the wells all the time and they don't.  They report the whole section as a single lease and so do not break out per well production to the RRC.  I see it in the royalty checks.  I know the indpenedent operator has his own water disposal facility and I assume he will be able to operate his newest three wells at full capacity but I won't know until later this month when he posts production to the RRC.  

So what I think the source of the increasing production might be is operators that have been able to either put more into pipelines or dispose of more water and can increase their output from existing wells that have been throttled.  I say this based on my experience with what XTO has done.  I would assume the independents are producing flat out but maybe not if they also have infrastructure limitations.  So rig count may not be a good indicator of production not simply because of DUCs but because existing wells are not being produced to full capacity.