Shale Oil Fiasco

[AcK + 50]

On 12/13/2019 at 12:29 AM, PE Scott said:

However, those larger companies have figured out how to produce consistent-ish results with small changes in frac design so that the reservoir team can space wells closer with greater confidence and thereby achieve a greater overall recovery from the reservoir. That's one of the reasons I think the big boys will have an advantage in the Permian.

 

I dont care A, B or C - but great listening to you.

A quick question - so who is right, A or B.

In your opinion, can the recovery factor go from sub-10% (really 4-5%) to 20+% with the tech improvements you have mentioned?

[AcK + 50]

On 12/14/2019 at 4:59 AM, Rob Kramer said:

So far middle of the road I've seen ME, PE and JJJ. We've seen a few pro shale closer to your view and a few anti shale (ish) to me there not 100% against shale just against overdrilling/unprofitable drilling from what I've read. Is that not balance? It's not everyone all out against shale. 

Thanks for the numbers. I like to see where I stand against other views. As jjj said I'd agree if theres a spike shale will return. And more efficient/knowledgable of true break even. 

Even tho your saying there prepared for 30$ I dont think prices will get there. I dont want to over simplify how prices work but when opec+ controls 33% of the production their word means alot . Also world production decline is never advertised only the new fields starting. It's a entire view that shapes prices too long to fit but if I had to bet it would be above global profitability as that's where the supply is from . Too low oil comes offline too high too much . I dont think global production costs are below 50$ wti. 

A technical correction...

OPEC controls 35% of global liquids supply (including NGLs, not in figure below). OPEC+ controls 50+% of global liquid supply. Yet I am surprised how easily people dismiss OPEC, and then get it wrong (most recently this month)...

[Douglas Buckland + 6,308]

23 hours ago, James Gautreau said:

I have heard that several times now. Anecdotes about how all my friends are home now looking for work and there is none. The truck drivers-gone due to pipelines. The frack crews-gone because sweet spots exhausted. Drillers-gone because sweet spots exhausted. The capitol infusions will return, but only at a much higher price. 

Of course, by the time these illustrious capital infusions arrive, there will be no experienced drilling managers, drilling superintendents, drilling supervisors, roughnecks, roustabouts, driling engineers, mud engineers, mud loggers, logging hands, etc... around to put that capital to use.

The ‘Big Crew Change’ is continuing as we speak.

Can we train up new hands or entice college kids to select Petroleum Engineering, Geology or Geophysics as degree choices? Perhaps, but in that period between your capital infusion going to work and training up experienced personnel, you’d better expect some ‘lack of performance’ issues, some safety issues and last, but not least, some well control incidents.

[Mike Shellman + 548]

On 12/27/2019 at 12:23 PM, Gerry Maddoux said:

I'm not trying to answer for Mike,

 

 

 

Edited January 1, 2020 by Mike Shellman

[AcK + 50]

On 12/15/2019 at 5:18 AM, James Gautreau said:

 

Man when Trump kicks ass, he really hits you in your calves or maybe the back of your thighs.

This is way old and you are way wrong. 2019 trade deficit with China going to be lower than even 2017!

PS: No fan of The Duck - but credit where it is due - he got China right (by the balls)!

https://www.census.gov/foreign-trade/balance/c5700.html

Edited December 28, 2019 by AcK
Missed the link

[Gerry Maddoux + 3,627]

20 minutes ago, Douglas Buckland said:

Of course, by the time these illustrious capital infusions arrive, there will be no experienced drilling managers, drilling superintendents, drilling supervisors, roughnecks, roustabouts, driling engineers, mud engineers, mud loggers, logging hands, etc... around to put that capital to use.

The ‘Big Crew Change’ is continuing as we speak.

Can we train up new hands or entice college kids to select Petroleum Engineering, Geology or Geophysics as degree choices? Perhaps, but in that period between your capital infusion going to work and training up experienced personnel, you’d better expect some ‘lack of performance’ issues, some safety issues and last, but not least, some well control incidents.

Douglas, as usual, you hit the nail on the head. 

Big crew change, indeed. 

Man, when a hard-working guy gets a pink slip from Schlumberger, he almost never goes back . . . even when called on the phone.

And that's what's happening right now, in real time, no longer any guessing about it. 

The entire EIA analysis and prediction schematic is built around shale being able to lay down and start up. Very, very flawed.

[J.R. Ewing + 19]

1 hour ago, James Gautreau said:

The heart of the discussion over the Permian peaking or not has to do with whether you think a field that has produced 20 billion barrels of conventional oil could possess 46 billion more. That's it in a nutshell. I for one do not believe it. But I am the doubting type. I don't believe nuclear weapons exist. I tell people is it reasonable to think that a basketball sized hunk of uranium or plutonium or whatever they say is capable of destroying an entire city. Does that seem reasonable? It's like a snowflake causing an avalanche. I don't believe we landed on the moon. I believe we sent a ship that passed over the moon, took some pictures, but people going there, landing, and returning. Sorry. They didn't do it then, they can't do it now, and won't be able to do it for another 100 years at least. See how much trouble Bezos, Musk, and Branson are having? See how silent they have been of late? Reusable rockets can't be done. Rockets only have about 1-2 % useful payload, and if you beef up the areas that you need to make the rocket reusable you have no payload- a huge bottle rocket, in other words. The only chance they have is to do like the airlines do and not let the rocket cool off. That's the only way, and that is impossible at this point because so many of the systems need refurbishment after every flight. The space shuttle engines had to be rebuilt every flight. Every flight! That is hardly reusable, but that is what many people believe. It's not true. Space is incredibly hard. There are many on this site that believe the Permian does indeed have 46 billion barrels. I don't. 

James picked the wrong week to stop sniffing glue

[Old-Ruffneck + 1,177]

1 hour ago, James Gautreau said:

There are many on this site that believe the Permian does indeed have 46 billion barrels. I don't.

James,

One might get out a map of Texas/SE New Mexico and go by square miles of the Permian alone consider proven reserves from USGS which I don't always agree with but in this case it's not hard to see. Take a drive to where it began (Yates Field), simple little town and ask any old time person with history of being there how much has been pumped till today. Close to 2.5bbl. And they have in last few years drilled a lot of new wells as tech has helped em. You can also google Yates field and or Iraan, TX. Take one road from west of there and a pit stop has dino tracks, not sorta eroding but visible. Cool mesa's polluted with windmills by the thousands and solar farms that are section sized. Can actually satellite view all this. 

And yes I do believe a basketball sized uranium can wipe out a city, footage from Nagasaki/Hiroshima shows it clearly. We as a nation have done more since WW2 than any nation. Capitalism rules!!!

[Old-Ruffneck + 1,177]

56 minutes ago, Douglas Buckland said:

Can we train up new hands or entice college kids to select Petroleum Engineering, Geology or Geophysics as degree choices?

Can you pass that good herb and quit hoarding it??? Manual Labor is demeaning for the millennials. Beneath them. My son without a keyboard would be lost in that scenario. The schools have gotten away from all the basics. Don't even teach basic history. Too Sad 😞

[Rob Kramer + 696]

46 minutes ago, AcK said:

A technical correction...

OPEC controls 35% of global liquids supply (including NGLs, not in figure below). OPEC+ controls 50+% of global liquid supply. Yet I am surprised how easily people dismiss OPEC, and then get it wrong (most recently this month)...

We forget we (north america / canada + usa) live in abundance so here competion is what sets price ( 17%? Of global production )

Globally countries need to co-operate because they dont have the level of abundance we do in all resources. 

So put different : if a strip mall has 5 stores and 1 has a half off sale the store will just sell out , make little profit and the other 4 stores continue business as usual. I dont agree with the greed of opec or trying to damage others economies in the past but I do agree with withholding your own labour or goods at a loss. But you get greed here too and guys who will overproduce to hope to catch the next boom but make the next bust through debt and competition instead of patients.  Think if shale was 50% slower oil would have stayed high(er) the entire time debt serviced, layoffs avoided , investors rewarded, reserves left for future, ect. The only thing I can see as a con would be higher fuel prices so higher inflation and less jobs added in bulk as things would be more efficient.  

[James Gautreau + 86]

It's amazing to me what people believe. I think it goes back to the Santa Claus story and the Easter Bunny story. "Surely if America put a man on the moon we can... fill in the blank." "We need a Manhattan Project for energy." The fact is you believe it because you saw it on TV and the government said it was true and most importantly it made you feel good to be an American. Who here among us has seen a nuclear explosion? When I was a kid we were supposed to be going on lunar vacations by now and the fact is we've never even been back. It's so ludicrous, but different people have different timers. Some people didn't believe these things happened the second they saw them. Some 10 years later. Some 50 years later. Some people will still be clinging to it 100 years after it happened. It's like the Spirit of St Louis flew across the Atlantic and nobody did it again for... fill in the blank, now 50 years, but still counting. They said Hiroshima and Nagasaki might be uninhabitable for hundreds of years. They were rebuilding in a week. They say the Permian has 46 billion, I say it has 10-12 billion barrels of unconventional oil. We've gotten 6 out, we may get another 3 or 4. 

Edited December 28, 2019 by James Gautreau

[Old-Ruffneck + 1,177]

10 minutes ago, James Gautreau said:

It's amazing to me what people believe. I think it goes back to the Santa Claus story and the Easter Bunny story.

So your saying in essence that if a tree falls in the forest with no-one around, did it make any noise? I guess this is my summation:

https://www.discogs.com/Joe-Walsh-You-Cant-Argue-With-A-Sick-Mind/release/1614879

[James Gautreau + 86]

You know when you travel internationally everybody knows JFK was a coup de etat. Everyone. Everyone knows LBJ did it. Only Americans still cling to the Oswald story; it's like a Linus blanket. For to not believe it, means America in the form we knew it ceased to exist 11/22/63. Same thing with Apollo. If it isn't true we live in a Banana Republic where are leaders tell us fairy tales and we believe them.

[Gerry Maddoux + 3,627]

8 minutes ago, James Gautreau said:

hey say the Permian has 46 billion, I say it has 10-12 billion barrels of unconventional oil. We've gotten 6 out, we may get another 3 or 4. 

James, I would encourage you to visit the Permian, especially the Delaware Basin. It is a world unto itself. Start with Roswell: I imagine Fred Yates would talk with you, he's a very open guy. If you can't find him, there are a hundred others who would. Drive around to Hobbs, Carlsbad. Be careful: there are a lot of trucks on those narrow little highways. 

This is a vast area that has been totally taken over by serious people working very hard. In truth, they don't give a damn about what the pudknockers on this site say, positive or negative. Some of the companies down there that we've never heard of are making more in a month than I ever made in my work career. 

In a nutshell, the Delaware is minting money, providing thousands of jobs, and right now--in current time--preventing the country you and I live in from being totally energy-dependent upon a bunch of countries that don't care for us, one of which flew airplanes into the World Trade Center. It is one thing to disparage the concept of drilling in shale, and just how silly that seems, but it is quite another to disparage the fact that these people, this industry, this crazy notion, have made us energy-independent in a very dangerous era in our nation's history. 

It's totally true: we have run through the shale basins roughshod, some worse than others. Great quantities of money have been lost and made. What was done yesterday is in the past. To deny that machine learning is changing the world of shale drilling is to deny that robots are taking over assembly lines. It just . . . is! 

The working thesis: cut a million/well out of drilling and completion costs, eliminate the "likely unprofitable" child infills from the drilling pad, you've saved several million per pad. Data acquisition and AI will do that. Heck, it's already doing that. If you can make a contact in the Permian--OldRuffneck can help you--and actually go visit a site, you will come out of there with a new, possibly more realistic mindset about what's happening. I don't mean to say that shale is ever going to be wildly profitable--not like a big offshore--just that during a profound lag in the other bits of the American energy supply, people actually went to work in the shale basin and did something pretty damn extraordinary. 

[wrs + 893]

3 hours ago, James Gautreau said:

The heart of the discussion over the Permian peaking or not has to do with whether you think a field that has produced 20 billion barrels of conventional oil could possess 46 billion more. That's it in a nutshell. I for one do not believe it. But I am the doubting type. I don't believe nuclear weapons exist. I tell people is it reasonable to think that a basketball sized hunk of uranium or plutonium or whatever they say is capable of destroying an entire city. Does that seem reasonable? It's like a snowflake causing an avalanche. I don't believe we landed on the moon. I believe we sent a ship that passed over the moon, took some pictures, but people going there, landing, and returning. Sorry. They didn't do it then, they can't do it now, and won't be able to do it for another 100 years at least. See how much trouble Bezos, Musk, and Branson are having? See how silent they have been of late? Reusable rockets can't be done. Rockets only have about 1-2 % useful payload, and if you beef up the areas that you need to make the rocket reusable you have no payload- a huge bottle rocket, in other words. The only chance they have is to do like the airlines do and not let the rocket cool off. That's the only way, and that is impossible at this point because so many of the systems need refurbishment after every flight. The space shuttle engines had to be rebuilt every flight. Every flight! That is hardly reusable, but that is what many people believe. It's not true. Space is incredibly hard. There are many on this site that believe the Permian does indeed have 46 billion barrels. I don't. 

OK well the fields are not the same.  The Permian is a huge basin and it contains many fields and many different formations which occur at different depths in the same big basin.  For example, I have wells in the wolfcamp formation in both Reeves and Culberson counties but they are at different depths in the two counties.  The Wolfcamp falls off or gets deeper from west to east so in Culberson the top of the Wolfcamp is found from 7900 to 9100 feet, that is called Wolfcamp A and it's probably about 250-300 feet in thickness. In Culberson County where my Wolfcamp wells are, the field is called Ford-West Wolfcamp.  From one side of my Culberson section to the other, the top of the Wolfcamp was found at 9000 on the west and 9150 on the east.

 

In Reeves county the top of the Wolfcamp is deeper still, it's found from 10,000 feet to 12,300 feet.  So Wolfcamp A wells in Reeves will be deeper than in Culberson county.  Seems like it would be a little cheaper to drill a Wolfcamp well in Culberson than Reeves on that basis.  The field though is different.  In Reeves, my Wolfcamp wells are in the Phantom Wolfcamp field.  This is because fields are defined by depth and not by formation, at least that is my understanding of how it works with th RRC.  I could be off in that understanding.  Anyway, the older conventional wells were mostly in the Delware formation or at the deepest, Cherry Canyon.  So it's not the same field or formation and most certainly not the same geology.

 

I think you might be misunderstanding how the oil is deposited and why fracking is needed to extract the shale oil vs the conventional oil.  Of course maybe I am telling you things you know and are coming at it from some other angle.  The oil in the Delaware formation is deposited in sands which have high permeability and maybe not as porous as the shale which has low permability but apparently high porosity due to the volumes that are extracted through fracking.  

Edited December 28, 2019 by wrs

[D Coyne + 305]

3 hours ago, James Gautreau said:

The heart of the discussion over the Permian peaking or not has to do with whether you think a field that has produced 20 billion barrels of conventional oil could possess 46 billion more. That's it in a nutshell. I for one do not believe it. But I am the doubting type. I don't believe nuclear weapons exist. I tell people is it reasonable to think that a basketball sized hunk of uranium or plutonium or whatever they say is capable of destroying an entire city. Does that seem reasonable? It's like a snowflake causing an avalanche. I don't believe we landed on the moon. I believe we sent a ship that passed over the moon, took some pictures, but people going there, landing, and returning. Sorry. They didn't do it then, they can't do it now, and won't be able to do it for another 100 years at least. See how much trouble Bezos, Musk, and Branson are having? See how silent they have been of late? Reusable rockets can't be done. Rockets only have about 1-2 % useful payload, and if you beef up the areas that you need to make the rocket reusable you have no payload- a huge bottle rocket, in other words. The only chance they have is to do like the airlines do and not let the rocket cool off. That's the only way, and that is impossible at this point because so many of the systems need refurbishment after every flight. The space shuttle engines had to be rebuilt every flight. Every flight! That is hardly reusable, but that is what many people believe. It's not true. Space is incredibly hard. There are many on this site that believe the Permian does indeed have 46 billion barrels. I don't. 

James,

The USGS mean TRR estimate for the Midland and Delaware Wolfcamp formation, the Spraberry and Bonespring formations is about 75 Gb.  The F95 TRR estimate  is about 44 Gb, meaning there is about a 95 percent probability that the TRR is 43 Gb or more.  With reasonable economic assumptions and a reasonable oil price scenario (maximum oil price of $90/bo in 2018 US$ reached in 2027 with oil price holding steady until 2050 and then declining to $40/bo in 2070) a URR of 60 Gb for the Permian basin is reasonable, for a low oil price scenario the URR would fall to about 35 Gb for a scenario using the mean TRR.  For the $90/bo oil price scenario and the F95 TRR the URR might be about 35 Gb.  

Your alternative views shed some light on your theories. 

[James Gautreau + 86]

"I want to wish everyone a beautifewel..." Donald Trump

https://www.youtube.com/watch?v=3d3qvmJEfFE

Yet another brain fart to ponder.

[James Gautreau + 86]

27 minutes ago, wrs said:

OK well the fields are not the same.  The Permian is a huge basin and it contains many fields and many different formations which occur at different depths in the same big basin.  For example, I have wells in the wolfcamp formation in both Reeves and Culberson counties but they are at different depths in the two counties.  The Wolfcamp falls off or gets deeper from west to east so in Culberson the top of the Wolfcamp is found from 7900 to 9100 feet, that is called Wolfcamp A and it's probably about 250-300 feet in thickness. In Culberson County where my Wolfcamp wells are, the field is called Ford-West Wolfcamp.  From one side of my Culberson section to the other, the top of the Wolfcamp was found at 9000 on the west and 9150 on the east.

 

In Reeves county the top of the Wolfcamp is deeper still, it's found from 10,000 feet to 12,300 feet.  So Wolfcamp A wells in Reeves will be deeper than in Culberson county.  Seems like it would be a little cheaper to drill a Wolfcamp well in Culberson than Reeves on that basis.  The field though is different.  In Reeves, my Wolfcamp wells are in the Phantom Wolfcamp field.  This is because fields are defined by depth and not by formation, at least that is my understanding of how it works with th RRC.  I could be off in that understanding.  Anyway, the older conventional wells were mostly in the Delware formation or at the deepest, Cherry Canyon.  So it's not the same field or formation and most certainly not the same geology.

 

I think you might be misunderstanding how the oil is deposited and why fracking is needed to extract the shale oil vs the conventional oil.  Of course maybe I am telling you things you know and are coming at it from some other angle.  The oil in the Delaware formation is deposited in sands which have high permeability and maybe not as porous as the shale which has low permability but apparently high porosity due to the volumes that are extracted through fracking.  

Thank you for posting this. This is good stuff.

[Jabbar + 465]

4 hours ago, AcK said:

Very interesting interview - very short so nothing discussed in detail.

Most discussion around what they have done in Eagle Ford - yet in the beginning of the interview itself the Bloomberg presenter notes EF is a late stage growth asset (few years left) - why, if your recovery rates have gone from sub-10% to 20%?

Backif you go to Conoco website , then to their investor day conference November presentation.  Fast forward to the " lower 48" section.  Conoco has large number of prime acreage in the EF.  Conoco like many of the Majors was late to the shale production.  They took their time to "do it correctly".  While many early EF shale producers just recklessly drilled the hell out of EF.  Conoco did not. 

Conoco has 10.4 Million acres on lower 48.  Most of it in shale. 

Permian is king .   .   .   but lot of life left in EF and Bakken.  Also, I think Powder River Basin also has potential. Ko

 

[Papillon + 485]

2 hours ago, Old-Ruffneck said:

We as a nation have done more since WW2 than any nation. Capitalism rules!!!

In terms of what sir?

[D Coyne + 305]

3 hours ago, Mike Shellman said:

Feel free, sir. I have not been able to locate what planet Dennis lives on, perhaps you can. It makes perfect sense (just not to me) that folks would borrow billions of dollars to put pipe in the ground and build export terminals to service the shale industry, itself totally dependent on borrowed money to drill more unprofitable wells. That theory has worked quite well for everyone upstream for nearly a decade now: https://www.bloomberg.com/opinion/articles/2019-12-27/shale-s-2010s-a-boom-for-oil-a-bust-for-stock-prices

I am dying to hear the answer about increasing RR in shale oil from 4% to 20% of OOIP. That'll be interesting. I hope it includes economics. 

I sound cynical but good grief, some of the things said here are ridiculous. Nobody would be be saying that stuff if they actually had working interest in this shale crap and writing checks out of their personal account to participate in it. It's amazing what that can do to a fella's lofty idealism. Rising GOR in all shale basins, particularly the Permian IS a big deal in more ways than one:  https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/122719-feature-surging-gas-production-to-bring-low-prices-back-to-permian Be my guest if you wish to get in the US LNG biz:  

 

 

Hi Mike,

At $50/bo none of it make much sense.  Am I wrong about pipelines being built?  I agree LNG may not be profitable, but I imagine the natural gas can be used somewhere.  I also agree it would be better if tight oil producers did not expand output so rapidly as they are just shooting themselves in the foot.

I had asked earlier for a guess at extra revenue for NGL, wrs has suggested 25%, you said no too high, how about 20%?

If we look at Texas onshore Natural Gas Processed at NGL plants in 2018 the average 1000 CF of natural gas produced 0.097 barrels of NGL, if we assume 3 million BTU per barrel for NGL and a price of $5/ million BTU for NGL, we get $1.46/MCF for the NGL in an average 1000 cubic feet of natural gas produced onshore in Texas.  This seems too high, but based on this quick check (I used EIA data) it would seem the premium suggested by wrs is conservative.  At $2/MCF of natural gas at waha, he is proposing $0.5/ MCF for the NGL in an average MCF of natural gas, about a third of the average 1000 cubic feet of gas processes onshore in Texas in 2018.

Perhaps you can explain where I am wrong.

Wouldn't you expect selling the gas would be more profitable than venting or flaring?  It would on my planet, in most cases unless the price was negative.  I am guessing once the pipes are built the pipeline operator will want to fill those pipes, but again on my planet. 

 

Are you suggesting it is a mistake to build natural gas pipelines to move the natural gas out of West Texas?

Note that I am not a huge fan of the LNG idea especially at low LNG prices, but I imagine there is a use for the natural gas in the US, Mexico, or Canada.

 

Edited December 28, 2019 by D Coyne

[ceo_energemsier + 1,818]

U.S. Oil and Natural Gas Wells by Production Rate

 

https://www.eia.gov/petroleum/wells/

 

https://www.eia.gov/petroleum/wells/pdf/full_report.pdf

 

 

[AcK + 50]

19 hours ago, Gerry Maddoux said:

Sounds about right. Canada used to be the largest supplier to the US. I don't follow that sort of thing; probably should.

Still is...

https://www.eia.gov/dnav/pet/pet_move_neti_a_EP00_IMN_mbblpd_m.htm

[J.R. Ewing + 19]

21 minutes ago, Papillon said:

In terms of what sir?

We've been busy...

cured polio

did not have a Great Leap Forward

invented the Internet

Game of Thrones

killed a lot of commies

The Sopranos

convenience stores

[ceo_energemsier + 1,818]

On 12/26/2019 at 11:37 AM, James Gautreau said:

The decline rates of the last couple of years have reached the point of no return. 2018 will loose 3 mbpd of the 3.8 that was brought on. 2019 will be even worse and faster too. So some time at the end of this year or the first few months of 2020, large draws will be common and the perception that  we have entered a period of scarcity will emerge.

https://srsroccoreport.com/the-u-s-shale-industry-hit-a-brick-wall-in-2019/

James, you forget to include one of the major factors in crude draw down is the increased refinery run rates, almost 94%!!!!

The crude just doesnt go from the production fields to the refineries directly. Increased refinery run rates will add to the crude draw downs.