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Page added on October 30, 2015

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Oil Companies Have Cut Back Everything Except Crude Production

Production

A year after the bear market in crude began, oil companies have cut workers, are using fewer rigs and have less money to spend.

But they’re still pumping more oil.

BP Plc, Royal Dutch Shell Corp. and Hess Corp. are among the companies producing more crude than a year ago. In the U.S., shale explorers have focused on the most productive parts of their land, drilled faster and better wells there and negotiated lower prices from oilfield service companies. It’s helped keep total U.S. output about 1.6 percent higher than at this time last year, even as drilling rigs have fallen by 63 percent.

“A well that broke even at $60 18 months ago is now at $40,” said Harold York, a senior analyst for Wood Mackenzie Ltd. in Houston. “If drilling a well generates a return greater than the cost of capital, companies are going to do it. That’s the rationale behind producing in a low-price environment.”

High production all year has pushed U.S. inventories to the highest October level since 1930, helping keep prices deflated. West Texas Intermediate futures settled at $46.06 a barrel Thursday, down from a 2014 closing high of $107.26.

The good news for oil bulls is that production gains may be ending soon. Hess and Whiting Petroleum Corp. are among companies that produced less in the third quarter than in the second. U.S. onshore production is expected to fall to 7.7 million barrels a day in the fourth quarter, according to Rystad Energy AS, about 100,000 less than the same period last year.

Some companies have maintained production because they used financial hedges, so are still getting paid pre-crash prices for their crude.

“We still have clients enjoying $80 oil,” said Richard Ennis, head of natural resources at ING Capital LLC. “Those days are going to end but they are still enjoying that kind of pricing.”

RIGZONE



33 Comments on "Oil Companies Have Cut Back Everything Except Crude Production"

  1. Dredd on Fri, 30th Oct 2015 1:59 pm 

    “Oil Companies Curtail Spending on Everything–Except Dividends”

    And of course climate change propaganda (Oil-Qaeda & MOMCOM Conspire To Commit Depraved-Heart Murder- 2).

  2. Plantagenet on Fri, 30th Oct 2015 3:31 pm 

    Good to hear that US domestic oil production is finally starting to fall, but unfortunately US GDP and world GDP growth are both slowing as well. In order for the oil glut to end, either oil production has drop below demand or demand has to rise to match current oil consumption, and that seems to be at least a year away.

    cheers!

  3. Mike616 on Fri, 30th Oct 2015 5:26 pm 

    So, you’re telling me Oil Managers/CEO’s are so stupid they’d continue to create a surplus in supply and be paid break-even profits.

    Maybe they are too dumb to understand Global Warming.

  4. makati1 on Fri, 30th Oct 2015 7:59 pm 

    Mike, they understanding all too well. They just hope it will go away and let them make more profits in the future. Greed has no logic.

  5. Bloomer on Fri, 30th Oct 2015 11:22 pm 

    Soon the future oil contracts will expire as will the shale oil wells production.

    Long and now medium term capital projects to expand oil production are being shelved.

    As they say- low oil prices will cure low prices. The restless consumer should enjoy the oil over-supply while it last. We are about to start another journey, climbing to the largest peak in peak oil.

  6. apneaman on Sat, 31st Oct 2015 12:18 am 

    Apparently they are cutting back on hiring professional PR people too and letting the executives just wing it.

    Women ‘don’t understand’ fracking due to lack of education, industry chief claims
    Professor Averil Macdonald said men were more in favour of the controversial extraction technique because they were persuaded by ‘an awful lot of facts’

    http://www.independent.co.uk/news/uk/home-news/women-dont-understand-fracking-due-to-lack-of-education-industry-chief-claims-a6705166.html

  7. rockman on Sat, 31st Oct 2015 6:25 am 

    “. It’s helped keep total U.S. output about 1.6 percent higher than at this time last year”. Not only that US oil production is much greater then it was in 1776. But enough ancient history. According to the EIA current US oil production is less then the peak rate in 2014. Not by much but they predict it will continue to decrease. This BS is just left over bullsh*t from last January when the lag time from drilling to first production gave the ILLUSION of increasing production in the face of falling prices. As the Rockman pointed out many months ago we won’t see the full impact of the price collapse until early 2016…or later.

    And once more: almost all companies, including Chevron and AHC, will do all they can to produce cash flow by producing as much as possible. The continued high rate of oil production isn’t in spite of lower oil prices but because of it. Likewise they are also cutting budgets to max NET INCOME and thus be able to maintain dividend payments to the owners…the shareholders.

  8. shortonoil on Sat, 31st Oct 2015 7:37 am 

    “A well that broke even at $60 18 months ago is now at $40,”

    Until a year and a half ago these companies apparently were letting $trillions in profits slip through their fingers by not cutting cost sooner. The article claims that the cost of producing oil fell 50% in 18 months. For a hundred and fifty year old industry that level of performance must be the result of some form of genius?

    The Industry continues its misinformation, disingenuous forecasts, and out right lying to the public. The cost of producing oil did not fall 50%! A larger portion of the cost was unloaded on to service industries, drillers, and the buyers of hedges. A 1000 drilling rigs now stand parked in some yard, 10’s of thousands of people have permanently lost their jobs and 10’s of $billions have been paid out by investors. That is not cutting production costs, that is getting someone else to pay for it.

    The industry can no longer produce oil at a profit. Pumping reserves that are not being replaced is not turning a profit; it is the turning of their fixed assets into cash flow. The industry is now selling itself off one barrel at a time. This is merely the cannibalization of the system that the Etp Model says must occur. There will be another $39 trillion of it over the next decade if the oil is to continue to flow!

    http://www.thehillsgroup.org/

  9. kanon on Sat, 31st Oct 2015 8:24 am 

    I thought the basic idea of peak oil was that oil would become increasingly difficult to produce, so production would decline. Well, the expected high prices did not last, but the difficulties in production do seem to be persistent. I am guessing there is not a good match between difficulty levels and production volumes.

  10. peakyeast on Sat, 31st Oct 2015 8:26 am 

    @short:

    If we imagine that those oil workers starts to get the same wage as MacD workers – and the corporate structure above it is replaced by something vastly cheaper. Could we then imagine all those unconventional resources could be extracted at some profit?

  11. shortonoil on Sat, 31st Oct 2015 9:55 am 

    @ peak,

    “If we imagine that those oil workers starts to get the same wage as MacD workers – and the corporate structure above it is replaced by something vastly cheaper. Could we then imagine all those unconventional resources could be extracted at some profit?”

    I’ll answer that question over in the forums:

    http://peakoil.com/forums/the-etp-model-q-a-t70563-340.html

  12. rockman on Sat, 31st Oct 2015 9:56 am 

    For Dog’s sake: everyone please pay attention to the terminology. The conversation becomes very confusing when the cost of “producing” a well is used when referring to the cost of “developing” production with a new well. It typically costs considerably less to produce ($/bbl) SOME oil wells then to drill new oil wells. I’m producing a well in La that’s producing 400 bopd. It costs about $2/bbl to PRODUCE that oil every month. Unfortunately this well isn’t a good example of an expensive hole to drill: currently that cost is $0.50 per net bbl produced…so far: after 360,000 bbls of production it’s still making 400 bopd.

    And no: it ain’t bragging if it’s true. LOL. When conventional drilling works it can be truly amazing.

  13. peakyeast on Sat, 31st Oct 2015 10:39 am 

    @short: Thanks for the link.

    Ugh… 357 posts to read.. 😀

  14. Boat on Sat, 31st Oct 2015 12:10 pm 

    apneaman

    There is simply to much cheaper oil out there compared to fracked and tar sand oil. You see Iraq having a problem getting development money in the midst of a war? I would bet Iran will not have any problems getting development dollars either.

  15. marmico on Sat, 31st Oct 2015 12:35 pm 

    EIA July 2015 oil production record – 80.456 mb/d.

    http://www.eia.gov/totalenergy/data/monthly/pdf/sec11_5.pdf

  16. BobInget on Sat, 31st Oct 2015 6:41 pm 

    80.456 only nine million barrels a day short.
    Way to go guys!
    Make those loses up with volume.

  17. Kenz300 on Sat, 31st Oct 2015 6:51 pm 

    Boom and Bust…… maybe energy companies need to diversify……… putting all your eggs in one basket has always been a costly mistake

    All Fossil fuel companies need to transition to “ENERGY” companies and embrace safer, cleaner and cheaper alternative energy.

    Wind Power Now Cheaper Than Natural Gas for Xcel, CEO Says – Renewable Energy World

    http://www.renewableenergyworld.com/articles/2015/10/wind-power-now-cheaper-than-natural-gas-for-xcel-ceo-says.html

  18. makati1 on Sat, 31st Oct 2015 8:33 pm 

    peaky, when the workers/management get McD’s wages, they will be able to afford LESS of everything. When they can no longer afford cars, does it matter what the cost of gasoline is? Or the cost of a barrel of oil?

    Our Western lifestyle is based on abundant, cheap to recover, oil. Cheap as in relation to the average consumer’s wage. Meaning that lowering the wage of oil workers will NOT improve the ability to consume oil by the masses. Why?

    Because you would have to lower the wages of the makers of the materials that go into the oil recovery and delivery process. Then the wages of the makers of the machines that make those materials. Then the wages of the miners of the ores that make the machines. Then… Do you see that nothing is independent of the other? ALL wages would decline to the new level. It is happening in the Us as we type.

    Besides that, an oil worker making less would quit and go to where he could make more. Wouldn’t you?

  19. Dredd on Sun, 1st Nov 2015 8:45 am 

    They are still funding confusion stubborn (Weekend Rebel Science Excursion – 52).

  20. Kenz300 on Sun, 1st Nov 2015 9:10 am 

    Climate Change is real….. we will all be impacted by it……

    Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist

    http://www.huffingtonpost.com/entry/exxon-evil-bill-mckibben_561e7362e4b028dd7ea5f45f?utm_hp_ref=green&ir=Green&section=green
    ———–

    Oil and Gas Companies Make Statement in Support of U.N. Climate Goals – The New York Times

    http://www.nytimes.com/2015/10/17/business/energy-environment/oil-companies-climate-change-un.html?&moduleDetail=section-news-2&action=click&contentCollection=International%20Business&region=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article

  21. apneaman on Sun, 1st Nov 2015 5:13 pm 

    Between Rock and Hard Place

    “Since 2000, each incremental dollar (euro, yen or other currency) produces less crude than the dollar before. That is, today’s dollar produces less crude than yesterday’s dollar, tomorrow’s dollar will produce less crude than today’s. What is important is the relationship between the real cost of gaining fuel relative to the ability of the customers to meet this cost. This relationship is driven by the need of the driller to spend more in order to return less: this is net energy, it is currently declining, at some point net energy will become negative, that is, the use of energy will not provide returns, in the form of credit, sufficient to bring new energy supplies to the market.”

    http://www.economic-undertow.com/2015/11/01/between-rock-and-hard-place/

  22. apneaman on Mon, 2nd Nov 2015 1:30 pm 

    Cut baby cut. It starts on the periphery and works towards the center.

    Transport System Shrinks as Agencies Stop Fixing Rural Roads, Bridges

    “Rural communities complain that they are being shortchanged in favor of cities.”

    http://www.nbcnews.com/business/travel/transport-system-shrinks-agencies-stop-fixing-rural-roads-bridges-n451796

  23. onlooker on Mon, 2nd Nov 2015 1:34 pm 

    Oh yes we are witnessing globalization in reverse.

  24. bug on Mon, 2nd Nov 2015 3:46 pm 

    Apenea, thanks for the between a rock and a hard place link. That article explained it easy enough for even me to understand.

  25. Capatin on Sat, 1st Oct 2016 12:44 am 

    I feel so much happier now I untensdard all this. Thanks!

  26. GregT on Sat, 1st Oct 2016 2:41 am 

    “I feel so much happier now I untensdard all this.”

    Try your best not to think about where you’ll be in a few very short decades from now. That’ll really kill your buzz.

  27. kfz versicherung für a4 on Sun, 5th Feb 2017 12:36 pm 

    Hepatitis A- caused by a bacteria. No, it’s unlikely to get after sharing a glass. It is usually spread by conctact with fecal matter.Hepatitis B- Caused by a virus. Yes, it is possible to catch by sharing a glass. It is spread by coming into contact with any body fluids. There is a vaccine available for this virus and in the US, everyone is recommended to have the vaccine.Hepatitis C- Caused by virus. Same answer as Hep B, except there is no vaccine yet.

  28. http://www./ on Mon, 6th Feb 2017 8:13 am 

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  31. http://www.loboheights.com/ on Wed, 15th Feb 2017 11:13 am 

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