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Page added on May 30, 2018

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It’s Getting Tough for Smaller Drillers

Production

Pipeline bottlenecks in the Permian Basin are hurting prices for cash-strapped producers

Bob Watson said his company is in the process of selling its Eagle Ford land, which totals more than 14,000 acres, according to a March filing with the Securities and Exchange Commission.

Watson spoke Tuesday at an Association for Corporate Growth Central Texas event in San Antonio. He didn’t say when the Eagle Ford land would be sold or who is interested in buying it.

“The treadmill is so fast” in the Eagle Ford, Watson said, that small companies like his can’t spend the money to keep drilling at the high rate needed to make the field profitable. Watson added that the Eagle Ford “doesn’t attract capital for us” compared to shale plays in West Texas and North Dakota.

“You’ve got to keep drilling, keep drilling, just to keep up,” he said. “The big guys can do that, with the big balance sheet, the EOGs and the Marathons, they’re going to keep blowing and going in the Eagle Ford because there is oil there.”

The oil man, who has been in the industry for more than 40 years and founded Abraxas in 1977, pointed to other difficulties operating in shale oil fields in West Texas and North Dakota, where Abraxas holds tens of thousands of acres.

Watson said that in West Texas’ Permian Basin, where Abraxas has the largest amount of acreage, pipeline bottlenecks to get the oil from the pump jack to the Gulf Coast are hurting the prices producers are getting for product.

“There’s very little uncommitted capacity right now,” Watson said. “In fact, what’s setting that differential, which is about $12, is the cost to truck oil from West Texas to Houston, where you get Gulf Coast prices.”

He said he hopes that new pipelines under construction — such as the 700,000-barrel-a-day Gray Oak crude oil pipeline announced in April by Andeavor and the 440,000 barrel-a-day EPIC crude oil pipeline — will relieve the pressure on West Texas infrastructure.

Watson added that Abraxas is building its West Texas acreage “brick by brick” and through acreage swaps with other companies.

Abraxas’ holdings in the North Dakotan Bakken shale oil field — where it has the majority of its producing wells — totals 22,000 acres. But growing that acreage “is just not possible,” Watson said.

“It’s just too tightly held, period,” he said. “We’re dealing with Exxon, Continental Resources, ConocoPhillips. All that land is HBP, held by production, not going anywhere. They’re in no hurry to give it up, and they’re not going to.”

The U.S. had 1,059 drilling rigs in operation for the week that ended Friday, according to Baker Hughes. Of that total, 478 are operating in West Texas’ Permian Basin oil field, while South Texas’ Eagle Ford Shale has 78 rigs.

At its peak in 2012, the Eagle Ford had 259 rigs, the majority drilling for oil, and continued to have more than 200 rigs until 2015. At its lowest, in mid-2016, only 29 rigs were operating in the Eagle Ford.

In the first quarter that ended March 31, Abraxas posted income of $10.8 million, or 7 cents a share, compared to a loss of $40.9 million, or 39 cents a share, for the same period in 2017.

In fourth-quarter filings in March, Abraxas Petroleum reported a $4.1 million loss but a $16 million profit for 2017.

oil gas 360



39 Comments on "It’s Getting Tough for Smaller Drillers"

  1. deadly on Thu, 31st May 2018 5:37 am 

    here is why they are there.

    More oil out there than you can shake a stick at, getting it is the problem.

  2. Manila1 on Thu, 31st May 2018 8:28 am 

    In more important news: “These underpin American society, and have ruined education. For some time the sciences seemed less susceptible to the prevailing enstupidation because mathematics would present an impenetrable barrier to the the insufficiently bright. This, astonishingly, is changing. The sciences are being dumbed down to–are you surprised?–spare the feelings of included affirmative diversity.”

    https://www.theburningplatform.com/2018/05/30/affirmative-action-and-the-american-mind-if-any/#more-177245

    “Psychometrists, people who endeavor to measure intelligence, universally agree that the Chinese are more intelligent than Eurowhites. So are the Koreans and Japanese…. The Chinese advantage is measured at around five IQ points. This is not great but makes a considerable difference at the high end of the distribution…. A fully developed China will be able to deploy several times as many researchers and engineers, these being at least as intelligent as America’s, on problems of its choosing. … the future is in the East.

    It also suggests that the United States would be well advised to do all it can to maintain its competitiveness for as long as it can. Instead it seems to be committing imperial harakiri, deliberately lowering the quality of education in all fields at all levels…. Only 37 percent of 12th-graders tested proficient or better in reading, and only 25 percent did so in math.”

    3rd world America…

  3. Davy on Thu, 31st May 2018 8:52 am 

    The US has a diversified population. We have intelligent people from all over the world here. China has mostly Chinese. This diversification and ability to import intelligent people is what keeps the US competitive. It is not all about intelligence either. In many cases competent hard working people in a variety of walks of life make a nation strong. The US has this diversity.

    more 3rd world humor.

  4. twocats on Thu, 31st May 2018 8:53 am 

    I’m betting they finish pipeline capacity just in time for rapid decline. Like the fields and fields of subdivisions in Vegas that went unpurchased and unoccupied so will a lot of these pipelines go underutilized.

  5. Outcast_Searcher on Thu, 31st May 2018 10:12 am 

    So in recent years if the average price was $40, but now they “only” get $50 to $60, what’s the problem, again?

    If resource bottlenecks (pipelines, etc) limit how much they can produce from the Permian, then it will take longer to deplete the Permian. What’s the problem, again?

  6. BobInget on Thu, 31st May 2018 10:13 am 

    EIA Report out 11:)) Eastern

    Summary of Weekly Petroleum Data for the Week Ending May 25, 2018

    U.S. crude oil refinery inputs averaged about 17.2 million barrels per day during the week ending May 25, 2018, 527,000 barrels per day more than the previous week’s average. Refineries operated at 93.9% of their operable capacity last week. Gasoline production increased last week, averaging over 10.4 million barrels per day. Distillate fuel production increased last week, averaging about 5.3 million barrels per day.

    U.S. crude oil imports averaged over 7.6 million barrels per day last week, down by 528 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.7 million barrels per day, 5.5% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 959,000 barrels per day. Distillate fuel imports averaged 237,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week. At 434.5 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 0.5 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories increased, but blending components inventories decreased last week. Distillate fuel inventories increased by 0.6 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories increased by 2.0 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories increased by 1.8 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.7 million barrels per day, up by 1.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.7 million barrels per day, up by 0.8% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, down by 1.5% from the same period last year. Jet fuel product supplied is up 0.5% compared to the same four-week period last year.

  7. Outcast_Searcher on Thu, 31st May 2018 10:19 am 

    twocats: Perhaps, but, no one with a brain ever said oil production is a risk free business. Liberals, for example, love to cry about oil profits, but of course they love to rake in the taxes from those profits for their government programs.

    And how long have the fast crash doomers been crying “doooooom is right around the corner” due to rapid depletion, no more oil, yadda yadda now? Certainly since about 1985 since I started paying attention. Same thing for financial doom predictions.

    And yet here we are with record oil production, record global GDP, approaching the lowest global unemployment rates in 40 years, etc.

    Yes, there are big problems, especially in the longer term like AGW and BAU growth vs finite resources. However, that doesn’t mean the world is constantly on the brink of disaster because of oil depletion.

    When the price is right, I predict there will be MASSIVE oil resources available from oil fracking globally, for example. Thus far, lack of investment, environmental regulations, social opposition, etc. have prevented much of that from being developed and limited exploration too. But again, when the price gets high enough, people who want massive profits will find a way to develop those resources.

  8. BobInget on Thu, 31st May 2018 10:19 am 

    Quite bullish seeing as most can’t quite get a handle on EXPORTS.

    GET THIS. all morning there has been a $10.
    differential between Brent and WTI.

    Why? Most of what is called crude oil is in fact too light for many refineries. Condensates are fine for
    cutting heavy hoil Not so great for diesel with is in short supply. (I never use the word ‘very’ and neither should you)

  9. BobInget on Thu, 31st May 2018 10:39 am 

    With a arb of $10. why wouldn’t exports fly off the shelves?
    In the mean time we are selling off our SPR!

    “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week.”

    Does this STORAGE excludes SPR, but, decline of 4.2MM INCLUDES THE SPR release (so that decline was actually more)?

    Most observers had inventories RISING last holiday weekend. Not so. (Inventories drive WTI pricing)

    Powerful forces, need to keep WTI, gasoline prices in check till November elections.

    The problem? Everyone wants our good crude selling at up to $10 UNDER world price.
    WE are selling off your birthrights as though we were Nigeria.

    Most oilMEN don’t even want to TALK about AGW.
    One fine year however, this one for instance, Gulf Coast refineries are gonna take a hit so sever, new refineries will need to replace old inland.

  10. MASTERMIND on Thu, 31st May 2018 12:42 pm 

    Manila1

    Why are there no great scientist from China? It doesn’t matter how intelligent you are when you are brainwashed from cradle to grave to be a sweat shop worker..And China has way to much debt and are headed for a “Minsky moment” that isn’t my words..That is the leader of the bank of China..

  11. MASTERMIND on Thu, 31st May 2018 12:54 pm 

    But peckerwoods have the high iq’s rite?

    https://imgur.com/a/N0HszIN

  12. twocats on Thu, 31st May 2018 1:28 pm 

    “Psychometrists, people who endeavor to measure intelligence, universally agree that the Chinese are more intelligent than Eurowhites. So are the Koreans and Japanese…. The Chinese advantage is measured at around five IQ points.”

    does it hurt the point that this statement is about the most idiotic thing I’ve read this week? almost every word in the sentence is a misstatement. so are we going to trust an idiot (not you manila1, but the author of the piece) to tell us about intelligence?

    from merriam webster –

    Definition of psychometry
    1 : divination of facts concerning an object or its owner through contact with or proximity to the object

  13. Manila1 on Thu, 31st May 2018 1:32 pm 

    MM, maybe they don’t advertise their intelligence, but they have the most powerful super computer in the world, by far. The first hypersonic missile (well ahead of the Us), a thriving economy growing at three times that of the Us. A satellite communication system that cannot be broken or intercepted. And on and on.

    Xi didn’t get elected to office. He had to work his way up through the bureaucracy by proving his intelligence and competence. He is likely a genius and more educated than you ever could dream of being. Asians move up through the ranks by proven ability, not crony connections or family like in the Us. Or bullshit campaigning (lying/paying) for office.

    Ancient Chinese inventions: Compass. Gunpowder. Paper making. Printing.

    Today’s Chinese discoveries: Chen’s theorem. Chen prime. Cheng’s eigenvalue comparison theorem. Culturing Chlamydia trachomatis bacteria. Arteminisinin, anti-malarial treatment. Feathered theropods. Etc.

    https://en.wikipedia.org/wiki/List_of_Chinese_discoveries#Modern_era

    Not exactly in the stupid class.

  14. Steve on Thu, 31st May 2018 1:33 pm 

    If the largest refinery in the U.S. is owned by the Saudis [https://tinyurl.com/l9w934h] and they import oil to refine and export, do those exports count as U.S. exports or Saudi exports? If we export light/tight to Canada and then import dilbit from them, is the light/tight double-counted in global production numbers? Inquiring minds want to know.

  15. twocats on Thu, 31st May 2018 1:39 pm 

    now when it comes to conditioning for doing homework and taking tests the chinese are ahead of the US. they teach to the test and they teach hard. teachers here have been resisting this trend here for the points that davy made above.

    no doubt there is a huge achievement gap in the students here. but maybe its not innate intelligence but a lack of motivation amongst youngsters here. maybe its the dearth of opportunity or impending sense of doom (zombie and apocalypse movies aren’t happening in a vacuum). maybe its the loss of social contract or feeling of connectedness with community. while chinese youth really feel like their time is now and that things are improving.

    If that’s true, that’s not really what we refer to as “intelligence” or “IQ”.

    I think the social need that articles like this one are fulfilling (we’ve been reading about “lazy americans” for decades now) has been to dehumanize and devalue american workers so that when the inevitable neoliberal and disaster capital principles spread to the homefront that it was more readily accepted. hard to fight the system that’s killing you and the planet when you are busy questioning your own worth. we are at the end game of that now – and before long we will accept absolutely nightmarish reactions to those deemed to not have “value”.

  16. rockman on Thu, 31st May 2018 1:57 pm 

    Outcast – As usual you see the real world pretty much as it is. For instance from the article: ““The treadmill is so fast” in the Eagle Ford, Watson said, that small companies like his can’t spend the money to keep drilling at the high rate needed to make the field profitable.” Complete bullshit: how fast wells are drilled does not determine the profit margin. The quality of the prospects does. Drilling more good wells faster increases the cash flow…not the profit margin. The main reason so many companies are stuck with acreage not profitable to drill even though oil prices have increased is because they WERE NOT worth drilling when those leases were taken when oil was $100/bbl.

    Again, for the umpteenth time, the Eagle Ford Shale is not a FIELD…it is a TREND. Whether it’s a conventional or unconventional play the vast majority of acreage in any TREND is not profitable to drill even at higher oil/NG prices. There are very specific geologic factors REQUIRED for any shale well to be profitable. When a play gets hot companies start leasing huge blocks of TREND ACREAGE…not specific and well-defined PROSPECTS. Once wells begin drilling the good and bad acreage positions become better defined.

    About 4 years ago the Rockman looked at a company’s 35,000 acre lease position it had picked up in the Eagle Ford Shale TREND. The company drilled 10 wells with very poor results. IOW they proved this was a very unprofitable portion of the TREND even though oil was going $90/bbl at the time. There were other trends under the same acreage that the Rockman evaluated. I thought they had some potential merit but my boss didn’t so we passed on the offer to sublet their acreage. Not sure but I don’t think anyone else did so all of it expired when the primary lease term was reached.

    One of the reasons we’re seeing longer laterals with many more frac stages being pumped is that previous well designs in many areas were not sufficiently profitable…even at higher oil prices. Rather common sense: if companies could make profits drilling shorter laterals with fewer frac stages (IOW cheaper wells) why would they drill more expensive wells? Notice that Mr. Abraxis says his problem is “…that the Eagle Ford “doesn’t attract capital for us”. Abraxas had a revenue of $40 million for Q1 2018…or an annual rate of $160 million. He has the capex to drill EFS wells on his acreage position…if he thought he had low risk and profitable PROSPECTS to drill. But he would rather let someone else risk their money drilling his undeveloped TREND acreage.

    You wanna guess why? LOL.

  17. Davy on Thu, 31st May 2018 2:15 pm 

    “they have the most powerful super computer in the world, by far.”
    We have super computers and many of them and nearly as fast….nothingburger

    “The first hypersonic missile (well ahead of the Us)”
    You don’t know what the US has 3rd world. You just regurgitate MSM reports that are highly inaccurate. The US has about more of everything military than the Chinese. They are playing catchup. Another nothingburger

    “a thriving economy growing at three times that of the Us.
    The US is still in the top two with China and does not need to grow like China. China is destroying its country and the world with this growth. You are bragging about this?

    “A satellite communication system that cannot be broken or intercepted. And on and on.”
    WTF do you know about satellites 3rd world? Get out of here….

    “He is likely a genius and more educated than you ever could dream of being.”
    Get the frig out of here 3rd world you stupid old man.

  18. MASTERMIND on Thu, 31st May 2018 2:24 pm 

    Rockaman

    Source please?

  19. MASTERMIND on Thu, 31st May 2018 2:25 pm 

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude
    https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html

    It takes 2,500 shale wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to IEA. Iraq could do the same with 60 conventional wells.
    https://www.bloomberg.com/news/articles/2014-02-27/dream-of-u-s-oil-independence-slams-against-shale-costs

    US Real Cost per Crude Oil, Natural Gas, and Dry Well Drilled -EIA
    https://www.eia.gov/dnav/ng/hist/e_ertw0_xwwr_nus_mdwa.htm

  20. GregT on Thu, 31st May 2018 2:33 pm 

    Nothingburger?

    How old did you say you were again Davy?

    Sounds like you’re somewhere between six and twelve.

  21. Manila1 on Thu, 31st May 2018 7:12 pm 

    Greg, Nine sounds about right. lol

  22. Manila1 on Thu, 31st May 2018 7:30 pm 

    twocats, I agree with much of your observation. American youth are being deliberately dumbed down and have been for decades. TPTB do not want educated serfs. They want unthinking slaves. Asians study almost from birth with strict competition all the way.

    “According to the OECD, the number of weeks of instruction in China is 35 compared to the U.S.’s 36 weeks. Some Chinese students attend school six days a week, so even though the U.S. has more instructional weeks Chinese students could be attending school nearly 20 percent more days per year.”

    https://www.google.com/search?client=firefox-b-1&q=number+of+school+days+by+country&sa=X&ved=0ahUKEwjw142FmLHbAhXLrVkKHa3eDGIQ1QIIuQEoBg&biw=1280&bih=486

    “The United States spends more than other developed nations on its students’ education each year, with parents and private foundations picking up more of the costs, an international survey released Tuesday found. … Despite the spending, U.S. students still trail their rivals on international tests…. United States spent $15,171/yr on each young person in the system.”

    https://www.cbsnews.com/news/us-education-spending-tops-global-list-study-shows/

    But then, the American students are taught to the test, not how to think and reason. Quality means more than quantity and there is where the Us is fainting.

  23. Davy on Thu, 31st May 2018 7:42 pm 

    greggie, flanking the old man again.

    What is it like to have a young man walk you across the street, 3rd world? He likes boys too. That has to be a plus for you.

  24. Davy on Thu, 31st May 2018 7:45 pm 

    3rd world, then why are all these Chinese here at Missouri S&T. Rolla is my nearest big town and Chinese are all over? The reason is they come to where they can get a good balanced education not a chinese style one that is rigid and stale.

  25. MASTERMIND on Thu, 31st May 2018 7:54 pm 

    Protesters meet US military convoys streaming through Europe ‘preparing for war’

    https://www.rt.com/news/428350-us-military-europe-movement-germany/

    The Russians are going down down..Bye Putin..

  26. Anonymous on Thu, 31st May 2018 9:10 pm 

    Rock is right. There is no reason why that EF acreage can’t get drilled if it were a sweet spot. Capital will go where the opportunity is.

  27. GregT on Thu, 31st May 2018 9:13 pm 

    “3rd world, then why are all these Chinese here at Missouri S&T. Rolla is my nearest big town and Chinese are all over? The reason is they come to where they can get a good balanced education not a chinese style one that is rigid and stale.”

    Wrong. They’re there because they can afford to be, and they’re getting their children prepared for the takeover.

  28. MASTERMIND on Thu, 31st May 2018 10:15 pm 

    The price of oil causes inflation in commodities as well..See Copper for example..

    http://www.infomine.com/investment/metal-prices/copper/all/

  29. MASTERMIND on Thu, 31st May 2018 10:17 pm 

    Why poverty is rising faster in suburbs than in cities

    https://theconversation.com/why-poverty-is-rising-faster-in-suburbs-than-in-cities-97155

  30. GregT on Thu, 31st May 2018 10:49 pm 

    The middle class is being wiped out MM.

    A feature, not a bug.

  31. MASTERMIND on Thu, 31st May 2018 10:59 pm 

    Greg

    Children of immigrants being caged like dogs at ICE detention centers. 21st century concentration camps..

    https://imgur.com/a/MQXO6U2

  32. GregT on Thu, 31st May 2018 11:06 pm 

    We live in the best of times MM, enjoy them while you still can.

  33. Davy on Fri, 1st Jun 2018 4:59 am 

    “Wrong. They’re there because they can afford to be, and they’re getting their children prepared for the takeover.”

    grehgie, I am used to your stalking n pricking but that was a new angle of distortion. They are there because the University education here is excellent and affordable.

  34. Davy on Fri, 1st Jun 2018 5:01 am 

    “The middle class is being wiped out MM.”

    Extremism and exaggerations, the middle class is under pressure and splintering into higher and lower classes. It is still very much alive.

  35. Manila1 on Fri, 1st Jun 2018 6:24 am 

    Denial Davy … living in a world that does not exist outside of his mind.

  36. Davy on Fri, 1st Jun 2018 7:06 am 

    You are the one in denial 3rd world. Most all of your comments are delusional emotional driven attacks on the US because of personal failures in the US. Instead of blaming yourself you want to blame a entire country. You are pressured and this shows your subjectivity. You try too hard 3rd world and it betrays your objectivity. You are a FRAUD.

  37. Steve on Fri, 1st Jun 2018 10:21 am 

    China beats in life expectancy: https://tinyurl.com/y7yblxcf

  38. MASTERMIND on Fri, 1st Jun 2018 11:20 am 

    As of 2015 China’s middle class became larger than the US..And the US middle class became a minority in America as of 2014..

  39. Manila1 on Fri, 1st Jun 2018 1:21 pm 

    MM, correct on both points.

    BTW: Number of foreign students studying in China:

    From the US = 23,838 (2016)
    ” France = 10,404
    ” Germany = 8,145

    “In 2016, there were 442,773 foreign students from 205 countries and regions had been studying in 829 universities and academic institutions in China.”

    https://www.statista.com/statistics/430717/china-foreign-students-by-country-of-origin/

    “Of the more than 1 million foreign students who enrolled at universities in the United States in the period, 350,755, or about 35 per cent, were Chinese… the US was still a popular destination for many mainland students, but no longer the top choice for his clients.

    http://www.scmp.com/news/china/society/article/2119903/chinese-students-still-drawn-us-universities-growth-rate-slowing

    Slip slidin’…

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