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Shale Oil is now profitable at $20 barrel

Discuss research and forecasts regarding hydrocarbon depletion.

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Re: Shale Oil is now profitable at $20 barrel

Unread postby AdamB » Tue 23 May 2017, 17:45:16

ROCKMAN wrote:SRS - "But, I now see that you are living in the past.". So you buy the story being pitched in that link??? Be careful how you answer: everyone here will rate you based on your next few words. LOL.


That horse is already outta the barn Rock. When people use references of known advocates, you already know the fix is in. And peakers, they almost always use references to advocates, not the scientific/analyst folk who's job it is to critically and objectively get it as right as they can.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Tue 23 May 2017, 18:19:02

Maybe after the the upcoming recessions caused by the dramatic rise (sarcasm) by the Fed....will give them a valid reason for...
Once you are faced with a continuously shrinking economy, just holding interest rates at zero is not sufficient to forestall financial collapse. The interest rates must go negative.
: energy (oil and gas) companies in the US have accumulated a fantastic pile of debt. All of this money was sunk into developing marginal and very expensive
resources such as shale oil and deep offshore. Since then, energy prices have fallen, making all of these investments unprofitable and dramatically reducing revenue. As a result, energy companies in the US are a few months away from having to spend their entire revenue on interest payments. The solution, of course, is to allow them to roll over their debt at zero percent, and if you want them to ever start drilling again (their production has been falling by around 10% annualized) then please make that interest rate negative.
The unintended consequence of negative interest rates is that they destroy money. This is true in an entirely trivial sense: if you deposit x dollars at -ρ% annual, then a year later you will only have x(1-ρ) dollars because xρ dollars has been destroyed. (In case you prefer to count on your fingers and toes, if you deposit $10 at -10% annual, then a year later you will only have $9 because $1 has been destroyed.) But what I mean is something slightly more profound: negative interest rates erode the very concept of money.

http://cluborlov.blogspot.com/2016/06/t ... .html#more

Negative interest rates are an excellent idea—and perhaps the only way to keep the financial game going a bit longer—but, given these unintended consequences, they are also a terrible idea. The bankers know that. They want to preserve their cult’s status, and constantly talk about raising interest rates. But they haven’t yet, because they also know that just a small increase will result in trillions of dollars of losses, triggering widespread business failures and ushering in the Greatest Great Depression Ever. This is not a problem for them to solve; this is a predicament. They will delay and pray, and make pronouncements loaded with keywords designed to please the high-frequency trading algorithms that are in charge of artificially levitating the “free market” with judiciously timed injections of “free money.” But in the end all they can do is act brave, wait for a distraction and then… run for the exits!

Ohh, at least the Stock Market is up, along with Real Estate. What possibly could go wrong now?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby onlooker » Tue 23 May 2017, 18:26:38

Yes Midnight, the powers that be are totally improvising to allow key industries to continue and remain viable. It is now so clear. Smoke and Mirrors at insane levels. The question really is when will the rest of the world forsake the US and the West? And what will the US do when that happens?
“When the last tree is cut down, the last fish eaten and the last stream poisoned, you will realize that you cannot eat money.”
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Re: Shale Oil is now profitable at $20 barrel

Unread postby AdamB » Tue 23 May 2017, 22:02:09

onlooker wrote:Yes Midnight, the powers that be are totally improvising to allow key industries to continue and remain viable.


According to peak oil dogma, the geologic certainty of peak wasn't something that could be offset or mitigated by fiat currency and strange financial manipulations. Any reason why you think those now work?

onlooker wrote: It is now so clear. Smoke and Mirrors at insane levels. The question really is when will the rest of the world forsake the US and the West? And what will the US do when that happens?


Well, we beat back peak oil pretty handily with drill baby drill, maybe next time Elon and American exceptionalism will be enough?
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Re: Shale Oil is now profitable at $20 barrel

Unread postby asg70 » Tue 23 May 2017, 22:17:09

Midnight Oil wrote:just holding interest rates at zero is not sufficient to forestall financial collapse.


Meanwhile...back in the real world we actually live in...

https://www.nytimes.com/2017/03/15/busi ... ellen.html
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Wed 24 May 2017, 00:48:57

And my I ask...what has occurred? After creating a massive asset bubble and promising to raise rates many times over, to keep ANY credibility...
Now BACK to the real world..

2016 Corporate Bankruptcy Recap: Bankruptcies Up 25%; 41% Were Oil & Gas/Energy Sector-Related
Jan. 10, 2017 11:15 AM
Summary
Public bankruptcies rose more than 25% in 2016.
25% of 2016's public bankruptcies had assets greater than $1 billion.
41% of 2016's public bankruptcies are energy related.
18% of 2016's public bankruptcies were prepackaged

What until you see the fallout from these....

But having kept official interest rates near zero for seven years during the Great Recession and its aftermath, officials have said they are keeping a close watch for potential asset-price bubbles.
Moreover, economic growth forecasts have not risen materially above the recent 2% annual trend despite optimism about the prospect of corporate tax cuts and a large fiscal stimulus, both of which require extensive and complex congressional action

Yes, Sir, the real world LOL
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Yoshua » Wed 24 May 2017, 01:22:47

Rickman

I believe the article is trying to indicate that the decline rate of newer wells are going to be even higher as the sweet spots are depleted and gone.

https://srsroccoreport.com/shale-oil-ga ... ash-flows/
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Re: Shale Oil is now profitable at $20 barrel

Unread postby marmico » Wed 24 May 2017, 06:45:08

Image

Leopold does not have a clue about cash flows. A 2017 Permian well has twice the cash flow in the first 24 months relative to a 2014 well @ $50 Midland FOB.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby ROCKMAN » Wed 24 May 2017, 09:28:31

Yoshua - "I believe the article is trying to indicate that the decline rate of newer wells are going to be even higher". Might be but very difficult to document. And maybe in bbls!day but not in percentage. The decline isn't going to be a function of when a well is drilled or how it's completed. The high DR is the nature of production from fractures.

And while Mark's point is valid those curves aren't normalized for different laterals lengths or number of frac stages. IOW cost differences. A bit of apple to orange comparison.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Wed 24 May 2017, 10:14:15

A bit of twist and spin...as usual from the Rock.....
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Re: Shale Oil is now profitable at $20 barrel

Unread postby asg70 » Wed 24 May 2017, 10:16:57

Midnight Oil wrote:And my I ask...what has occurred?


You're talking about negative interest rates and the Fed is raising them. That's what. Sorry to have to point out the obvious to you.

You can keep issuing prediction on top of prediction all you want. When you can claim a successful prediction, then I'll take your analysis seriously. Until then, it's just the usual end-is-nigh-ism on peakoil.com.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Wed 24 May 2017, 11:33:59

What has been written to me repeatedly here?
Oh, now I remember, a sock puppet salesman, how many does he need?
If the shoe wear it...BTW...your opinion is on file...in the circular bin.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Yoshua » Wed 24 May 2017, 14:43:30

Rockman

I hold oil men next to angels. I really mean it.

If you can beat the laws of physics, then "drill baby drill" until we "crash and burn".

Well... we all know that we don't have any other option.

The "private money" won't run out since the Fed will print it to the banks and hedge funds who will lend it to the oil companies until it all comes down. "What ever it takes".
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Re: Shale Oil is now profitable at $20 barrel

Unread postby tita » Fri 26 May 2017, 07:34:40

ROCKMAN wrote:tita - You're confusing individual well stats with the collective. Obviously new shale wells are producing much better then the older wells...on an individual well basis. But as a group the new wells have little impact on the TOTAL production in the country.

"...legacy hz wells older than 2 years produce less than newest wells that started in the last 2 years." Collectively those legacy wells constitute the vast majority of current shale production. From the latest numbers from the EIA: before the increase in drilling due to higher/stable oil prices the Eagle Ford Shale was doing 1.91 million bopd. And the new wells, while arresting the decline, only increased production to 1.21 mm bopd. IOW currently the legacy EFS wells constitute about 90% of the production. Also let's not forget that "new wells" eventually turn into legacy wells.

I was talking about the collective production of wells that started between jan 2015 and jan 2017 vs the collective production of wells that started before jan 2015. And I was talking about the specific LTO fields from hz wells. I was referring to this work which compile data from TRRC:
https://shaleprofile.com/index.php/2017 ... uary-2017/

Almost half of US oil production come from LTO drilled with hz rigs and fracked. Maybe this data is wrong, but with the depletion profile of these wells, you need a lot of new wells to avoid a strong depletion of the output.

But of course, I wasn't talking about the other half of US production (offshore, Alaska and conventional), which wasn't collapsing before.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby ROCKMAN » Fri 26 May 2017, 08:31:34

tita - "Maybe this data is wrong, but with the depletion profile of these wells, you need a lot of new wells to avoid a strong depletion of the output." So if I read you correct "these" wells are those wells drilled since 2015. Yes, those wells would have high decline rates and would require new wells to replace that production. But "these" wells represent a very small % of total US production. IOW how fast they deplete will be very noticeable in the total count. The total decline rate is dominated by the huge number of legacy wells with much lower decline rates.

Back to the Eagle Ford...a good model. It peaked in 2015 and those LEGACY WELLS eventually established a rather clear and predictable decline rate. Newer wells did stop that decline and reversed it a bit. And, as you point, did so with high production rates that will also have high decline rates just as every one of the legacy wells went thru. So as the newer wells become legacy wells they also evolve into low decline rates just as all previous legacy wells. And unless ever more new wells are drilled the decline rate of all the wells we return to the previous level.

I don't think we are looking at the dynamic very differently: you focused on the newer wells and I the entire collective.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Sat 27 May 2017, 07:58:44

Oasis Petroleum - More Than 77 Percent Of Drilling Locations Are Uneconomic
May. 22, 2017 8:53 AM • OAS
Summary
Passport Capital revealed a large, new position in Oasis Petroleum.
While several high profile investors are short shale oil producers very few have taken long positions despite big share price declines.
At current oil prices it would appear that almost 80 percent of the company's shale drilling locations are unprofitable (according to the company's own optimistic presentation).

From what I can tell there are a few groups of people who have gotten rich from the shale revolution.
Those groups include:
- Investment bankers who have financed the equity and debt raises of these shale companies
- The landowners who have leased their land to the shale producers and now receive royalty payments from production
- Drivers of vehicles who now have gasoline prices that are based on $50 oil instead of $100 oil (might have been even higher without shale)
Missing from that group are the shareholders of the shale oil producers. Many of these companies have been wiped out after the oil crash, and many (MOST) of those that have survived haven't generated any shareholder wealth.

https://seekingalpha.com/article/407520 ... uneconomic

Now for the Twist and spin show...LOL
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Re: Shale Oil is now profitable at $20 barrel

Unread postby rockdoc123 » Sat 27 May 2017, 10:38:30

Missing from that group are the shareholders of the shale oil producers. Many of these companies have been wiped out after the oil crash, and many (MOST) of those that have survived haven't generated any shareholder wealth.


Looking at the period from the bottom of the credit crisis in 2009 to present of a few companies that are pure shale players:

Continental Resources from $9.42/share to $39.61 share
EOG from $25.02/share to $91.22/share
Pioneer from $12.69 to $170.24
Concho Res from $17.21 to $131.28

All of these companies are situated in sweet spots within the basins with relatively low average breakeven costs compared to Oasis which is a pure Bakken player and being a late entry to the Bakken they are in a lot of fringe acreage.
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Re: Shale Oil is now profitable at $20 barrel

Unread postby Midnight Oil » Sat 27 May 2017, 11:48:55

More. Twist and Spin

Pioneer Natural Resources Beats But Costs Rise; Continental, Concho Mix
Pioneer Natural Resources (PXD) easily bested estimates late Wednesday but its costs in the Permian Basin are rising as overall activity there heats up, while Continental Resources (CLR) and Concho Resources (CXO) swung to profits but turned in mixed results
Continental Resources Estimates: EPS of 3 cents vs. a loss of 41 cents a year ago


But the International Energy Agency recently questioned the ability of increased U.S. shale production to offset a decline in conventional oil projects as demand rises.

The agency expects liquids production from U.S. shale plays to expand by 2.3 million barrels per day by 2022 at current prices. But conventional resources sanctioned for development last year fell 30% to 4.7 billion barrels, and overall exploration spending will be down for a third straight year to less than half of 2014 levels, with offshore projects especially hit.

http://www.investors.com/news/u-s-oil-p ... -earnings/

Continental's Operating Profit Perfect Example Of Accounting Inadequacy When Dealing With Shale Producers
May. 24, 2017 2:13 PM • CLR
Summary
Continental reported a rare quarterly report where it claims a net operating profit.
The problem with following operating results when it comes to shale producers is that it does not account for capital spending which takes up a large porting of revenues.
My view remains the same after this latest quarter as it was at the beginning of the year, namely that it will take $60/barrel for true profitability this year.

https://seekingalpha.com/article/407620 ... -producers
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Re: Shale Oil is now profitable at $20 barrel

Unread postby shortonoil » Sat 27 May 2017, 13:00:33

"Many of these companies have been wiped out after the oil crash, and many (MOST) of those that have survived haven't generated any shareholder wealth."


40% of the crude that now enters US refineries does not contain a sufficient enough quantity of the specific molecules needed to produce fuels. Those additional molecules must be acquired from the remainder of the crude stream, and thus add a subsequent additional cost to the process. It is not surprising that most producers can no longer make money producing petroleum, and its products. If the quantity of crude that contains all the components needed to produce fuels continues to decline at the same rate that we have witnessed since 2005 within 5 years none of them will be able to show a profit from petroleum production. It appears that the monied elite are already moving their wealth to difference areas of the economy.

http://thehillsgroup.thehillsgroup.info ... el-is.html
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Re: Shale Oil is now profitable at $20 barrel

Unread postby ROCKMAN » Sat 27 May 2017, 13:27:30

MO - "Missing from that group {of winners} are the shareholders of the shale oil producers." Not at all true. Many shareholders/investors made many tens of $BILLIONS in the shale plays. Of course, those were initial players that bailed before TSHTF. LOL.

Consider Petrohawk: with probably no more then a couple of hundred $million invested it sold its little bit of Eagle Ford production and a lot of undrilled acreage FOR $12 BILLION. And how did the company, Billiton, do? From the day they closed (and long before oil prices crashed) they stock slide down and down until it had lost $90 BILLION IN MARKET CAP.

Owning a piece of a shale drilling companies was very profitable...if you timed it right.

Consider Chesapeake. You could have bought it for $17/share in 2004 and just 4 years later sold it for $66/share. And you don't have to go that far back: if you had bought it last June @ $4.25/share you could have double your money in just 3 months selling @ $8.50/share.

Investing in company doesn't mean you automatically lose money if it drills shale. Depends on when you choose to buy. Just like buying Apple at $127/share in 2015 and then selling 12 months later for $95/share... loosing 25% of your investment. That doesn't mean investing in computer companies is a bad idea.

Just because someone doesn't know when the f*ck to buy or sell a company they don't get to blame the industry for their ignorance. LOL.

BTW playing the boom/bust cycles in the oil patch has a well documented 140 year history of how to make a sh*t load of money. If you're too stupid to spend 20 minutes on the INTERNET to know how to play the sector you get what your greedy ass gets. LOL.
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