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Fallout from Crude Price Crash Pt. 2

General discussions of the systemic, societal and civilisational effects of depletion.

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Re: Fallout from Crude Price Crash Pt. 2

Unread postby pstarr » Sun 31 Jul 2016, 20:39:16

ennui2 wrote:This is going in circles. Rockman already explained that the oil usage in extraction is far less than doomers claim it does. "cost" tends to manifest itself in other aspects of overhead besides the wellhead.

Don't drag RM into this. He is not on your side.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Sun 31 Jul 2016, 21:23:35

The fact that Central Banks are willing to buy ever-more financial assets doesn't change their underlying value. Paying a trillion dollars for a brick doesn't make the brick worth a trillion dollars...
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Sun 31 Jul 2016, 21:49:29

Now that the Onshore Shale "industry" has proven to be a gigantic fraud, the central banks play book has 1 chapter left, the resource that dwarfs all other resources combined, the...

Gas Hydrates

This is the Cornies Last Stand.

http://gurumavin.com/india-discovers-pr ... ay-bengal/
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Sun 31 Jul 2016, 22:00:06

RM is on the side of disguising insolvency with liquidity.

Thats all the oil industry worldwide is now. Exxon, Rosneft, Saudi Aramco, ...doesn't matter...they are all rapidly approaching insolvency or already swimming in it.

I'm sure the miraculous gas hydrates hype of yesteryear will get new life.

And the Econobabblers will ensure us that its all "economically recoverable".

Whether its Energetically Recoverable will be ruthlessly disregarded and scoffed at. A few more evil doers who try escaping to the real world will end up in graves
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby radon1 » Mon 01 Aug 2016, 06:07:08

pstarr wrote:
radon1 wrote:
You run an oil rig. Your diesel engine is powered by the crude you extract from the ground. All that drilling requires 1 barrel crude/day. You produce a 1 barrel per day. Guess what?


You won't be producing this oil, unless you are doing this for self-entertainment. So what? What are you trying to say?


You don't see how your predicament may reasonably be proposed for larger complex oil plays? Or oil regions?


No, I don't.

Your example has nothing to do with the real world. "You run an oil rig (!). Your diesel engine (!) is powered by the crude you extract from the ground. All that drilling (!)..."

You are left with one barrel a day in production for your entire economy, yet you have an oil rig, a diesel engine and do drilling. Where did these all come from? From cornu copiae? Potter's magic wand? Then it is in the domain of fairy tales, rather than modelling. And on top of it, you eat, wear clothes, probably have shelter and so on and so forth.

If you want to model an economy with "larger complex oil plays", then model an economy with "larger complex oil plays". If you want to model a "Robinzon" economy, then model a "Robinzon" one.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ennui2 » Mon 01 Aug 2016, 08:32:39

pstarr wrote:
ennui2 wrote:This is going in circles. Rockman already explained that the oil usage in extraction is far less than doomers claim it does. "cost" tends to manifest itself in other aspects of overhead besides the wellhead.

Don't drag RM into this. He is not on your side.


He's not an ETP believer, therefore he's on my side in this thread, that's for sure.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Mon 01 Aug 2016, 10:15:15

ennui2 wrote:
pstarr wrote:
ennui2 wrote:This is going in circles. Rockman already explained that the oil usage in extraction is far less than doomers claim it does. "cost" tends to manifest itself in other aspects of overhead besides the wellhead.

Don't drag RM into this. He is not on your side.


He's not an ETP believer, therefore he's on my side in this thread, that's for sure.


He believes in "I don't give a shit" (aka bankruptcy is just a technicality) just like you, ennui2.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Tue 02 Aug 2016, 13:45:22

This look like a pretty good review of the relatively new and EXISTING WELLS that are the basis of the recent production surge. How many new wells are drilled and what they'll add is a different question and will take time to answer. But this report does a good job of documenting how the existing surge will be rather short lived.

https://shaleprofile.com/index.php/2016 ... roduction/
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Mon 08 Aug 2016, 12:46:10

Revealed: Saudi Oger set to file for bankruptcy

Oger has been hit hard by a slowdown in the Saudi construction sector due to low oil prices and state spending cuts, and wage payments to thousands of its workers have been delayed for months, according to Saudi media and the workers themselves.

A Lebanese newspaper quoted unnamed sources as saying that talks between Hariri and the Saudi government were in their final stages.

More than 30,000 Saudi Oger workers have filed official complaints with the Labour Office over alleged non-payment of wages few days back.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Mon 08 Aug 2016, 12:49:04

ROCKMAN wrote:This look like a pretty good review of the relatively new and EXISTING WELLS that are the basis of the recent production surge. How many new wells are drilled and what they'll add is a different question and will take time to answer. But this report does a good job of documenting how the existing surge will be rather short lived.

https://shaleprofile.com/index.php/2016 ... roduction/


Yeah, that is an interesting resource. This a big difference in spud wells vs. first flow. Should we take that to mean that many wells have been drilled but not brought online?

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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Mon 08 Aug 2016, 23:02:38

Goner - "Should we take that to mean that many wells have been drilled but not brought online?" We do know that some number of shale wells continued to be drilled for a number of reasons as oil prices fell. The main reasons were commitment to long term drilling contracts, lease expirations and promises to share holderrs. Made sense: why spend capex on frac'ng wells with the combination of declining revenue, decling borrowing base and much lower (and fairly stable) oil prices? Thus the inventory of "DUC's" grew.

But here's the problem operators face TODAY: the combination of declinED revenue, declinED borrowing base and much lower (and fairly stable) oil prices. All very good reasons to NOT DRILL VERY MANY NEW WELLS. Why would a companies spend hundreds of $millions to drill NEW wells today if it's not currently economical to frac many existing wells? To save expiring leases? Companies have already lost hundreds of thousands. Leases that could be reacquired today for a small fraction of their original cost. In fact many leases could be taken for $0 if a drilling commitment was made. A very common deal made during previous busts.

What we are seeing is a drastic reduction in new wells being drilled as proven by the drastic reduction in the rig count. IOW if companies have a significant number of DUC's that could be frac'd for $4 or $5 million each and see an immediate cash flow why would they drill but not frac'd a new well for $5 or $6 million and see no cash flow today?

Companies were forced to suspend completing wells for the reasons mentioned above and converting them to DUC's. But today companies are not forced to keep drilling new wells that were planned. Obviously most of the wells currently being drilled are the remaining BEST prospects that are economically viable at current prices.

The DUC angle worked for the cornucopias for a while. But now after almost 2 years the remaining inventory of DUC's actually work against their optimism IMHO.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby AdamB » Tue 09 Aug 2016, 08:36:22

ROCKMAN wrote:This look like a pretty good review of the relatively new and EXISTING WELLS that are the basis of the recent production surge. How many new wells are drilled and what they'll add is a different question and will take time to answer. But this report does a good job of documenting how the existing surge will be rather short lived.

https://shaleprofile.com/index.php/2016 ... roduction/


Didn't see his assumption of price going forward driving development, nor calculations involving remaining drill sites. Did I miss them, or is this just another amateur hour blogger?

As you have said before Mr Rockman, what is your assumption of price, because without it, you don't drill more wells, therefore there is no new production. And without an assumption of drilling locations, you don't know how many wells you can drill, non-interfering or interfering. And without a representation of the stochastic nature of production related to local geology, you can't hope to get the density function of results correct either.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Wed 10 Aug 2016, 09:23:40

"...what is your assumption of price..." To a great degree the Rockman makes the same assumptions about future oil/NG prices almost all other companies make: they'll stay at current levels. IOW companies tend to not inflate future prices. Which isn't a problem when future prices increase but can be devastating if they decrease significantly. Consider the severe damage the lower revenues are inflicting today. And there's a tendency to lower projections when prices are declining: like when oil fell from $90 to $70 many companies might have used $55 to $60 in their economics. But probably no one used $30 to $40 at that point in time. Which is why drilling activity didn't drop as fast as it should have. Back to the same problem: lag time. Unlike oil future player oil companies can't change their actions from day to day.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Wed 10 Aug 2016, 11:00:08

oil companies = penny stocks

http://seekingalpha.com/article/3998302-pacific-drilling-joins-debt-restructuring-party

Pacific Drilling will already be the fifth US-exchange listed offshore drilling company to undergo a comprehensive debt restructuring following the footsteps of Hercules Offshore (OTCPK:HEROQ), Vantage Drilling (OTCPK:VTGDF), Paragon Offshore (OTCQX:PGNPQ) and Seadrill (NYSE:SDRL).

While Hercules Offshore - after having to file for bankruptcy a second time within 10 months - is now facing dissolution, Vantage Drilling has successfully restructured its debt by basically wiping out its former shareholders.

Paragon Offshore is still in the process of getting its recently revised reorganization plan approved in bankruptcy court but if successful, current shareholders will keep a respectable 53% of the equity.

Seadrill so far hasn't disclosed any details regarding the ongoing negotiations with its creditors but currently expects to present a solution until the end of the year. I already provided an outlook on potential outcomes in an article published earlier this year.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby ROCKMAN » Wed 10 Aug 2016, 11:22:21

Goner - Offshore drilling contractors are particularly vulnerable in busts. First, new rigs arerarer very expensive and even during good times an take 5+ years to recover just the initial costs. Second, because the new rigs are so expensive a contractor usually can't pay for one out of net cash flow and must borrow the bulk of the capex. And unlike the proved producing reserves of a bankrupted operator that might have significant value drilling rigs, both onshore and offshore, are often worth more being cut up and sold for scrap metal then what a healthier drilling contractor might be willing to pay.

This has essentially been the dynamic of the drilling contractors since the beginning of the petroleum age. And why you rarely see oil companies (including Big Oil) owning drilling rigs.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Wed 10 Aug 2016, 12:33:37

Rockman makes the same assumptions about future oil/NG prices almost all other companies make: they'll stay at current levels


Complete nonsense.

The colossal German Energiewende disaster obviously was timed on the basis of a much higher oil prediction that was absolutely fundamentally correct. So was all the oil companies planning. They can't all be wrong.

What happened?

The Oil Fiat King Currency decided to destroy all the worlds fiat currencies instead of allowing Peak Oil to manifest itself through higher oil prices. Any discussion of anything ERoEI related will be banned because it would reveal all the fiat currencies to be totally worthless.

The monetary system is now completely random and bogus. In Rockmans Bizarro World, this makes perfect sense. No matter what happens, everything makes perfect sense. Lets all go down to the asylum for wisdom. Hey, the oil companies are hiring people with severe dementia because it makes perfect sense.

REALITY: collapsing ERoEI is destroying the world and therefore the oil industry wants nothing to do with discussing ERoEI.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby rockdoc123 » Wed 10 Aug 2016, 12:57:24

Complete nonsense.

The colossal German Energiewende disaster obviously was timed on the basis of a much higher oil prediction that was absolutely fundamentally correct. So was all the oil companies planning. They can't all be wrong.


the only thing that is complete nonsense here is pretty much all of the rather incoherent ramblings you post.

Rockman is exactly correct. I have worked for numerous Oil and Gas companies over the years and spent a lot of time reviewing economic projections by other companies that are filed within their 51-101 or SEC reserves filings. In each and every case the forward projection is based on current price plus an adjustment made for inflation at the rate when the report was created. Indeed all of the third party reserve auditors are instructed to use this methodology for their economic projection for various reserve categories. The only time you will see anything different is when there is a known change that will happen in the future (eg. a legislated change in royalty rate or tax etc). Oil and Gas companies my be hoping for higher prices but their business models are based on a case that is "business as usual" and neither pessimistic nor optimistic for the time of creation.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby JimBof » Wed 10 Aug 2016, 15:46:50

Thanks for facts Rockdoc. that is why I come here. Lately it has been hard to find them amongst the horse product. Rockman also believes in facts.

rockdoc123 wrote:
Complete nonsense.

The colossal German Energiewende disaster obviously was timed on the basis of a much higher oil prediction that was absolutely fundamentally correct. So was all the oil companies planning. They can't all be wrong.


the only thing that is complete nonsense here is pretty much all of the rather incoherent ramblings you post.

Rockman is exactly correct. I have worked for numerous Oil and Gas companies over the years and spent a lot of time reviewing economic projections by other companies that are filed within their 51-101 or SEC reserves filings. In each and every case the forward projection is based on current price plus an adjustment made for inflation at the rate when the report was created. Indeed all of the third party reserve auditors are instructed to use this methodology for their economic projection for various reserve categories. The only time you will see anything different is when there is a known change that will happen in the future (eg. a legislated change in royalty rate or tax etc). Oil and Gas companies my be hoping for higher prices but their business models are based on a case that is "business as usual" and neither pessimistic nor optimistic for the time of creation.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby StarvingLion » Thu 11 Aug 2016, 12:29:48

rockdoc123 wrote:
Complete nonsense.

The colossal German Energiewende disaster obviously was timed on the basis of a much higher oil prediction that was absolutely fundamentally correct. So was all the oil companies planning. They can't all be wrong.


the only thing that is complete nonsense here is pretty much all of the rather incoherent ramblings you post.

Rockman is exactly correct. I have worked for numerous Oil and Gas companies over the years and spent a lot of time reviewing economic projections by other companies that are filed within their 51-101 or SEC reserves filings. In each and every case the forward projection is based on current price plus an adjustment made for inflation at the rate when the report was created. Indeed all of the third party reserve auditors are instructed to use this methodology for their economic projection for various reserve categories. The only time you will see anything different is when there is a known change that will happen in the future (eg. a legislated change in royalty rate or tax etc). Oil and Gas companies my be hoping for higher prices but their business models are based on a case that is "business as usual" and neither pessimistic nor optimistic for the time of creation.


None of the legitimate oil companies can survive without much higher oil prices because that is the real world of Peak Oil and collapsing ERoEI. The Shale Scam "powered" by Money Printing to prop up junk financial instruments is destroying the legitimate oil companies faster than Saudi Arabia.

The real price of oil is something like $300-400 a barrel and rising. Thats Peak Oil. Peak Oil "went away" by turning money into garbage. Destroying currencies isn't a strategy...its suicide.

The system either collapses via a sky rocketing price of oil or currency destruction. Both will happen. Either way it amounts to collapse.
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Re: Fallout from Crude Price Crash Pt. 2

Unread postby GoghGoner » Fri 16 Sep 2016, 08:33:51

New York investigating Exxon's accounting practices: WSJ

A more than 60 percent plunge in oil prices since mid-2014 has forced oil producers worldwide to write down the value of their assets.

In a note earlier this month, Jefferies estimated that a group of integrated oil companies had impaired assets worth $103 billion since the start of 2014. This is equivalent to 8 percent of their 2014 net assets.

The brokerage expects more asset impairments in the industry, noting that Exxon is the only major producer to not have written down any assets.
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