[Pops]

Done Forever

For stripper-well operators like Shulman and thousands of others across the U.S., the situation is especially dire: unlike shale fields that can be quickly shut down and restarted in response to price swings, stripper operations are geologically and technically delicate.

Shut a stripper well down and chances are the bottom of the hole will fill with water or permanently clog with sand and you’ll never see another barrel of oil, said Brad Gessel, who operates 200 stripper wells in fields formerly owned by the likes of Shell near Whittington, Illinois.

“If you shut it in, you may never get that production back again,” Craig Hedin, a veteran Illinois oil lawyer whose four-decade career included helping negotiate Exxon’s 1989 sale of the sprawling Loudon field in 1989. Loudon was a 400 million-barrel jewel in Exxon’s crown for half a century until output slowed to such a slow gurgle that it was no longer worth the company’s attentions. Now, the 25-mile vein of oil-soaked rock north of Vandalia is being worked by strippers.

More:
http://www.bloomberg.com/news/2015-01-2 ... -rout.html

[diemos]

Damn. For a second I was concerned that there was some existential threat to our nation's supply of exotic dancers.

[shallow sand]

That's a pretty good one diemos. We need some humor right now.

Seriously, though, for as much as stripper well production is looked down on by the rest of the industry, as well as most in our country, it does give an opportunity to be one's own boss, which I feel should be valued. It also does provide our country with a stable source of oil, which although is less than a million bopd, is not insignificant, and will not decline in half or more like the LTO will without continued drilling.

Finally, there are many people who work in this segment who are given a lot of responsibility, and have been making a good income in the last few years. If this goes away, they are looking mostly at lower wages in other occupations for sure, just as those are who are affected by rig count declines elsewhere.

[shallow sand]

In fact, although they will not admit it and will be insulted, shale drillers are just stripper well folks on a larger scale.

Drill a stripper well, spend $300,000 on a 3000' vertical hole, IP 25 bbl, cumulative production 100,000

Drill a shale well in EFS or Bakken $8 million, 15-20,000' horizontal hole, IP 700, cumulative production 600,000

The shale well production will be more front loaded and will probably have lower OPEX in the early years. What other differences are there? Probably the stripper operators have less debt because the main street banker will not lend to drill unless there is sufficient other collateral to be pledged.

When you get down to it, just about all North American land based production is stripper production. Tar Sands seem like "scavenger" production to me.

I understand the technology gains, but economics is always the driver. I have contended that LTO on the whole is not really any more economic than stripper production. Maybe that notion will be proven out in the next couple years. I do admit its scale cannot be denied.

Ask yourself what locations remain in the North America that would have been drilled in the 1990s oil price environment? They are out there, but are few and far between.

[dolanbaker]

Damn. For a second I was concerned that there was some existential threat to our nation's supply of exotic dancers.

I would have preferred the headline, "US strippers more exposed than usual!"

[GHung]

How much does it cost to operate the average stripper well? $10/barrel? $20?

[shallow sand]

Wouldn't know about average. Anywhere from $10-80 on a well by well basis, although would note one of the operators in the story says he cannot make it at $35 and I suspect that would be true on the whole for most. A lot depends on how much water is produced too. A lot also depends on down hole failure rate. Having to pull a well can double annual OPEX.

[PrestonSturges]

Damn. For a second I was concerned that there was some existential threat to our nation's supply of exotic dancers.

Yeah I was thinking "Are there really that many chicks named Britney majoring in Communications?"

[ROCKMAN]

What Shallow didn't out is that many stripper operators are very small with regards to full time employees...some times only one. A small operator many pay third parties and the royalty owners the bulk of the revenue stream. I the recent price drop reduces the operators net income from $200k to $70k that means he only makes $70k that year. And as Shallow might explantation that for 70 to 80 hours per week. And he may have $100k+ plugging liability hanging over his head.

Shallow - As I type I'm sitting in my van watching the well I just perf'd unload and hoping I at least have a stripper. Gotta swab again. I'll keep you posted.

A least it isn't raining and I still have 2 Honey Buns left. LOL.

[shallow sand]

ROCKMAN. And you are down there where it does not get too cold, although we are having a heat wave for January. A real muddy mess out here, but better than a freeze off like last winter. That one was rough. Hope it fills the tanks daily!!

[ROCKMAN]

Shallow - Looks like we have a little 600 mcf/day gas well: the Rockman doing his part for US energy independence. LOL. Might as well stop off at Denny's for a celebration senior omelet. Otherwise I hit rush hour in Houston if I head straight back now.

[Withnail]

Strippers should be able to continue their good work in the community without fear.

[Quinny]

You beat me to it diemos. It was actually the first thought that came into my head when I saw the heading

Damn. For a second I was concerned that there was some existential threat to our nation's supply of exotic dancers.

[Pops]

The headline was originally

US strippers in danger if donkeys stop pumping

... but I knew you all would have a conniption

[Graeme]

Pops, Thanks for posting this. Here another article by Greencarcongress, which provides more detail:

Oil price collapse hurting some more than others

US oil and gas rig counts dropped to their lowest level in over four years, falling by an additional 74 units for the week ending on January 16. The lower count provides fresh evidence that low oil prices are forcing drillers to pare back operations and slash spending.

While that may soon begin to cut into actual production figures, a new Wood Mackenzie report finds a lot of nuance in the oil patch, painting a complex picture of what to expect in 2015. The report identifies several trends beyond the simple narrative that low prices will force a cutback in drilling.

First, Wood Mackenzie estimates that at $40 per barrel, many producing Wells could be shut in. In fact, about 1.5 million barrels per day of production would be “cash negative”—meaning it wouldn’t even make sense to continue pumping at the most marginal wells, which tend to have extremely low-output. These stripper wells, which only produce 15 barrels of oil per day or less, have high costs given their level of production.

Wells producing such a tiny flow of oil may seem like a non-issue, but with hundreds of thousands of them dotting the country, they collectively account for about one-tenth of the nation’s production. As these wells become unprofitable, production should start declining.

Elsewhere, larger projects face a complicating set of factors that could slow drilling, but not as fast as some think. That’s because slowing activity is also pushing down the rental rates that drillers pay for rigs. With weak demand, drillers can negotiate down rig prices. This leads to lower costs, helping drillers stay in the game.

Another interesting twist occurring from lower oil prices is the fact that the economics of natural gas production have been relatively enhanced. To be sure, natural gas prices are also low, but over the last several years, the revenues generated from a barrel of oil were so much greater than the equivalent form of energy in natural gas. That pushed companies to focus on wet gas and oil.

For the equivalent amount of energy, natural gas priced at $3 per MMBtu is equal to about $17 to $20 per barrel of oil. That is still significantly lower than the $50 oil is trading for now, but the disparity is not nearly as severe as when oil was trading for $100.

With that said, the fact is that oil and gas are often produced in tandem, so a drilling cutback could hurt the gas patch as well. Nevertheless, the composition of drilling could change in favor of more gas-rich areas relative to before.

greencarcongress

[dashster]

http://www.bloomberg.com/news/2015-01-2 ... -rout.html

What were the "strippers" doing in the 1990's when prices were even lower?

[shallow sand]

How was Denny's ROCKMAN? LOL! To expand on your comment up post, there are a ton of non-operator Americans who are getting the first "short check" too about now. For the et al's, writing a joint interest bill check equal to or greater than their oil check will be a jolt.

We have a few RI owners who were drawing a check of $500-$5000 a month. They will notice the cut too I'm sure. Few realize we are pretty much the only country in the world where the people, and the not government owns the minerals. Many of those are retired people who have 1/2% cds and now have had that royalty slashed too.

[shallow sand]

dash: Not making much $. However, OPEX was a lot lower. I guess OPEX (what I call LOE) has tripled at least since 1998. Also, even though decline is usually low on these wells, it is present. So the well that made 3 bbl in 1998 now makes 2 or less. Add that to higher electricity, chemicals, service work, labor and equipment and it just costs so much more than the 1990s. Hands on pulling rig were making $7-8 bucks an hour no benefits back then, for example.

How much did a new car or house cost in 1990s compared to now? Better yet, how much was tuition and medical care in the 1990s compared to now. I think $1.79 gasoline in 2015 not a whole lot more expensive than 99 cents in late 1998. ROCKMAN has pointed out to hit the 1998 low in today's prices, we would be at $18. Sure seems like cost of many things has more than doubled since 1998. Wonder how accurate CPI numbers really are.

Kind of like grain farmers. Several years ago they loved $3 corn. Now with cost of inputs, $3 corn means negative cash flow on the farm. At least their fuel cost will be cheaper. LOL.

[shallow sand]

To expand, know rig rates have skied in part due to the rapid inflation seen in the medical industry. Working on a rig is inherently dangerous. As medical costs have skied, so have workers comp premiums in the oil patch. Guys I know that own contract rigs says for every $1 they pay to employees in wages, pay more than 50 cents to comp carrier. Funny about unintended affects of things.

[vtsnowedin]

Strippers should be able to continue their good work in the community without fear.

That is a relief. For a moment there I thought you guys were talking about a serious problem.