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Page added on August 22, 2017
The Latest Red Flag For U.S. Shale
The U.S. shale industry has had a rough few weeks, with a growing number of reports suggesting that the industry is facing much more financial trouble than many analysts had expected. Now, a new report adds further evidence to the notion that shale is losing its luster in a $50 per barrel market, with producers forgoing shale in favor of older wells.
U.S. shale was thought to be the most competitive source of oil out there, and indeed the industry appears to be ramping up production at today’s prices. Shale had adapted to a $50 per barrel market, producers had streamlined operations to make them almost resemble an assembly line, and in a volatile and unpredictable market, the short-cycle nature of shale drilling made it one of the least risky options for drillers.
But in just a few weeks’ time, investors are starting to ask major questions about the viability of shale drilling at such a large scale.
A couple of notable things have occurred in the past month or so. Pioneer Natural Resources, a top Permian producer, raised concerns when it told investors that its Permian shale wells were coming up with a higher natural gas-to-oil ratio than expected, a potentially worrying sign. The company also reported that it had trouble with some of its wells, forcing it to delay some completions.
Separately, Goldman Sachs reported that top investors are souring on U.S. shale E&Ps, with poor performances leading investors to search for ways to “reallocate capital” elsewhere in the energy space. That is big red flag for the shale industry, which is still struggling to consistently post profits despite the highly-touted cost reductions over the past few years.
But the newest sign of trouble comes from the Wall Street Journal, which just reported that more oil producers are shunning shale drilling and using their scarce dollars to reinvest in older conventional wells. “As crude prices languish under $50 a barrel, and with increasing costs for land, labor and infrastructure, some shale fracking operations are starting to look expensive,” the WSJ reported.
The WSJ says that although Wall Street has showered the shale industry with billions of dollars in capital, and although that has led to a surge in oil production, shale producers by and large are still not profitable. At today’s prices, the WSJ says, “most producers are losing money on every barrel they pump.”
As a result, some oil companies are returning to conventional wells – long thought to be much less attractive today than new shale drilling – and trying to tap them again to squeeze out more oil. The cost to drill a conventional well is a fraction of that for a shale well – $1 million per well versus upwards of $8 million. But those types of wells, in many cases, were taken offline decades ago during periods of low oil prices and declining production.
However, technology has advanced quite a bit since some of these older wells were last online. A couple of companies profiled by the WSJ are tapping old wells outside of Los Angeles, Fresno, and in Oklahoma, Louisiana and parts of Texas. These wells produced a handful of barrels per day, but tapping them again with new drilling techniques allow drillers to squeeze out something like 100 barrels per day, a profitable play considering the low investment required.
One company told the WSJ that the old well essentially breaks even at $15 per barrel.
Part of the problem for U.S. shale is that it is showing some bubble-like symptoms. Land prices have soared in the Permian as so many top shale producers shifted their resources to West Texas in the past few years. Even the oil majors started to scale down their billion-dollar investments in places like Canada’s oil sands, or major LNG export terminals, or offshore drilling, instead reallocating capital to the Permian.
While land prices are inflated, the supply of oilfield services has also tightened significantly. A shortage of fracking crews and other equipment and services has also contributed to higher production costs as well as delays.
The result is rising costs for shale at a time when production problems are also starting to crop up. All the while a long list of companies are still not profitable, despite succeeding in boosting production.
The contrarian strategy, then, seems to be returning to old conventional wells, even small ones, and trying to eke out a few more barrels.
With all of that said, retapping old wells probably won’t lead to a rush of new supply since we are stilling talking about relatively small numbers. But it’s a striking development that some ancient wells are getting a second look by companies falling out of love with U.S. shale.
81 Comments on "The Latest Red Flag For U.S. Shale"
Boat on Tue, 22nd Aug 2017 8:17 pm
I see a rare post that fracking crews are in short supply causing delays and increased costs. I have looked around a couple times with limited success as to the impact these problems. Just in the last 3 years drilled but unfracked wells have grown around 2,000.
If you have any internet skills maybe you can find the report at the eia website. Hint, drilling productivity report.
Boat on Tue, 22nd Aug 2017 8:23 pm
http://www.reuters.com/article/us-usa-shale-insight-idUSKBN16V0IL
GregT on Tue, 22nd Aug 2017 8:43 pm
Much of that oily stuff that came online when oil was selling for $100/bbl, is not profitable now with oil at $50/bbl, and even less profitable when oil was at $25/ bbl. Like it was for an entire century in inflation adjusted dollars during non recessionary periods.
Boat on Tue, 22nd Aug 2017 8:54 pm
greggiet,
Like you say, at today’s prices the electric car will rise. I actually enjoy saving money for gasoline/$1.89 per gal last fill up, but the planet would have been better off when it was $3.80.
But all those deaths from a higher oil price, would you feel bad?
GregT on Tue, 22nd Aug 2017 11:30 pm
Which deaths would those be Boat? The poverty stricken around the world don’t have access to oil already, and the first worlders would merely go even deeper into debt. And to answer your question. No I would not feel bad at all. Bring on $10 a gallon gas. The sooner, the better.
Makati1 on Wed, 23rd Aug 2017 12:34 am
GregT, I vote for $20 gas. People like boat don’t realize that at least half of humanity has no need of, or access to, gasoline or even NG. Ditto for the many millions, even in the US, who are too poor to own a car or motor bike. Yes, they may ride the bus, and, if they own a home, need heat, but that can come from electric also, or wood or….
onlooker on Wed, 23rd Aug 2017 6:40 am
Greg and Mak, I think your forgetting that even many poor around the world need Oil to remain at not too high a price as the transportation costs would rise if the price per barrel of Oil rose. In turn that would make what food they can afford higher in price and probably unaffortable.
Davy on Wed, 23rd Aug 2017 7:28 am
onlooker, shhh, that would mess with the agenda of the noble 3rd world’er that is decoupled from the evil 1st world’ers. It is one of those inconvenient realities that oil equal food even in the 3rd world now that agendist try to discount and dismiss for everyone except the developed world. The world is now overpopulated and interconnected in mutual risk. This is something you can’t rationalize away in a fantasy pastoral world.
Makati1 on Wed, 23rd Aug 2017 7:38 am
Onlooker, not all of the world relies on oil. There are at least a billion people that do not even have electric, running water or other “conveniences” of the West. They do not rely on chemicals to farm. They do not need vehicles as most never go farther than they can walk. You have a very narrow view of the real world. The Ps manages on less than two cups of petroleum per day, per person, vs the US’ two plus gallons per day, per person. Most of that two cups of oil is burned in the big cities, not the countryside.
BTW: gasoline is still $3.70 per gallon here. When you make less than $10 per day as a laborer, how much gas do you buy? Answer: little to none. You walk. You may own a bicycle but no motor vehicle. Laborers here live at the work site and may go home once a month or less. Americans have no idea what the real world is like. Only the picture painted by the USMSM propaganda department.
Makati1 on Wed, 23rd Aug 2017 7:40 am
Ah, the Missouri Jackass has brayed again. LOL
GregT on Wed, 23rd Aug 2017 7:43 am
Onlooker,
Regular gasoline at the pump in Vancouver BC today is $5.14 per U.S. Gallon. Many places in Europe are paying over $7. Norwegians pay closer to $9 per U.S.
gallon. People are not dying en masse because of it.
GregT on Wed, 23rd Aug 2017 7:51 am
Like Makati said above. People drive less, walk, ride bicycles, and take mass transit more. In 3rd world countries, they rely far more on human, and animal labour to grow food.
Sissyfuss on Wed, 23rd Aug 2017 7:53 am
“Most produces are losing money on every barrel they pump.” Not to worry, President Blowhard will ramp up the pressesfor his Goldman Saks loving buddies. Print and distribute, print and distribute.
Davy on Wed, 23rd Aug 2017 8:03 am
Lol, I always know when I make a point those with agendas can’t deal with. “Missouri Jackass has brayed again”. Stay balanced onlooker and watch who you hang around with…double lol.
Makati1 on Wed, 23rd Aug 2017 8:08 am
Davy, no one can ignore a jackass braying. It is loud and meaningless. You have no real ammunition to rebut any of my comments so you bray meaningless noise. The US is going down and you are one of the reasons.
GregT on Wed, 23rd Aug 2017 8:14 am
Much of the world’s population will notice little difference if oil was no longer available, especially those in the 3rd world. They do not own cars, they work the land by hand, and they have no need to travel large distances.
Those of us who live in the first world, would be completely screwed.
Davy on Wed, 23rd Aug 2017 8:19 am
Keep digging your hole deeper makat. Maybe your boyfriend will jump in with a defense because you are so fragile and unable to take any damage to your emotional agenda. What is it ignore my comments or comment on every one of them. You don’t know anymore because you are losing your mind in old age. Of all the long term posters you are most off in the deep end of emotional extremism. What a dork too “jackass braying” is that supposed to be cute. LOL. It is stupid to me like something a stale old man would think up.
onlooker on Wed, 23rd Aug 2017 8:25 am
https://www.minnpost.com/christian-science-monitor/2011/02/rising-global-food-prices-squeeze-worlds-poor
http://articles.latimes.com/2011/jun/19/opinion/la-oe-saunders-urban-migrants-20110619
I think Greg and Mak, what you are not accounting for is how transport is needed to get food to many rather inaccessible places in the world. And also, how many people have transfered from the country to the cities. And finally how everything is monetized, so that even the poorest need to have some money to buy food. Oil going up affects the entire world oil market and hence the costs of good transported including food are jacked up to account for the higher oil price. In Manila and other sprawling cities of the third world, people need the food prices NOT to go up because they cannot afford even a slight increase in prices. Anyway, we can all research more this topic as it is a complex one.
GregT on Wed, 23rd Aug 2017 8:36 am
Cities all around the world are where people go to make money onlooker. They all have affluence, and poverty. They all require resources to be transported from far away places, and they all require vast amounts of energy. Cities are not the places to be if/when the wheels fall off of modern industrialism. They will become death traps.
onlooker on Wed, 23rd Aug 2017 8:49 am
Quite agree Greg. Unfortunately, “More than half of world’s population now living in urban areas, UN survey finds”
http://www.un.org/apps/news/story.asp?NewsID=48240
GregT on Wed, 23rd Aug 2017 9:20 am
I’ve read over 80% in 1st world nations onlooker. 55% in China, and 30% in India.
Those who live rural, who are already living off of the land, will fare much better than those who are completely reliant on modern industrial JIT delivery systems, like supermarkets.
Urban areas are not the places to be in a collapse scenario. Only 20% of North Americans live rural. Those 20% are not dirt poor sustenance farmers like 45% of Asians, and 65% of Indians are.
GregT on Wed, 23rd Aug 2017 9:33 am
Another point onlooker,
The trends of urbanization in 3rd world nations are a relatively recent phenonemon. Young people are flocking to the cities in pursuit of the American Dream. Many still have ties to rural family farms. In the first world, we are already two or three generations removed.
Hello on Wed, 23rd Aug 2017 9:39 am
>>> Young people are flocking to the cities in pursuit of the American Dream.
No, young people are flocking to the cities because there’s not enough land to farm, or because there’s not enough water, or because life on a subsistence level farm is miserable.
I think you have a wrong romantic idea of what subsistance farming looks like.
GregT on Wed, 23rd Aug 2017 9:44 am
I’ve travelled extensively throughout Asia Hello, and stayed on some of those farms. I have first hand knowledge of exactly what they ‘look like’.
Davy on Wed, 23rd Aug 2017 9:48 am
The 55% and 30% when combined these fractional population are more than the 100% of the developed world let alone the 80% figure. That is just two nations already barely feeding themselves and with imports. A little clarification goes long way. Once their mega cities and less mega cities but still very large depopulated the so called noble 3rd worlder will be overrun with desperate urban dwellers. These so called rural 3rd world areas are already overpopulated equal to any suburban area in the 1st world. 3rd worlders rich, poor, urban, and rural are all tied to overshoot. Apologist try to tell us otherwise but numbers don’t lie.
Davy on Wed, 23rd Aug 2017 9:51 am
I agree hello. Science and common sense are telling us otherwise.
GregT on Wed, 23rd Aug 2017 9:53 am
The single most lasting impression was; I never saw any children crying, or throwing temper tantrums, and no matter how filthy dirty they were, they always had smiles on their faces.
GregT on Wed, 23rd Aug 2017 9:57 am
“These so called rural 3rd world areas are already overpopulated equal to any suburban area in the 1st world.”
I have thousands of photographs that say otherwise, as well as first hand experience.
onlooker on Wed, 23rd Aug 2017 10:09 am
Yes, and the overpopulated third world face other daunting constraints such as fresh water,soil erosion, desertification, not to mention the fallout from a Pandemic as such large populations with little access to antiobiotics and living in close quarters to vector animals like chicken and pigs and rats are extremely vulnerable to the outbreak of a Pandemic. And also note how reliant China and India with almost one third of the worlds population are on synthetic fertilizers and pesticides
https://www.chinadialogue.net/article/show/single/en/5153-The-damaging-truth-about-Chinese-fertiliser-and-pesticide-use
https://www.usnews.com/news/world/articles/2008/07/07/the-toxic-consequences-of-the-green-revolution
Makati1 on Wed, 23rd Aug 2017 10:20 am
GregT, you have seen the real Asia. It is useless to argue with those who haven’t. They don’t want to believe what I keep telling them, even though I live here.
Most of those who currently live and work in or near Manila will go back home to their family farms when the SHTF. Odds are good, that their parents are still farming and certainly their grandparents. I see few old people in Manila. They are still in the countryside, like my friend’s two 80+ year old aunts. Both live on their own and manage quite well.
Hello on Wed, 23rd Aug 2017 10:22 am
>>>> as well as first hand experience.
What do you mean first hand experience?
How long did you live on a subsistance farm without using your credit card as a backup?
How was it when you got sick?
How was it when the harvest was exceptionally meager for one year and you had to go and get a line of credit from the local shark to finance the seeds for next year?
What did you do when the descision was between eating today or buying a badly needed pair of new sandals?
I’m curious.
Hello on Wed, 23rd Aug 2017 10:24 am
>>>> Most of those who currently live and work in or near Manila
ahh, here we go. Them exceptional asians actually work in the city. I thought family subsistance farming is such a great thing?
GregT on Wed, 23rd Aug 2017 10:39 am
“I’m curious.”
If you’re under the age of 50, I’m sure that you’ll get the opportunity to figure out all of those question, and more, through first hand experience.
Hello on Wed, 23rd Aug 2017 10:44 am
>>>> I’m sure that you’ll get the opportunity
Thanks. I thought so. You don’t have an answer because your “first hand experience” is limited to “first hand” taking picturs with the expensive Canon camera.
onlooker on Wed, 23rd Aug 2017 10:53 am
I do not think we should romanticize the subsistence lifestyle and past more primitive times. they were hard, unpredictable and tedious. However, they were much less stressing and in certain ways more fulfilling. But what cannot be denied is that they were more sustainable. Given that whomever is alive 25 to 50 years from now will be living as such, I think everyone who is 50 or less or has children should consider learning more about this lifestyle.
GregT on Wed, 23rd Aug 2017 10:53 am
I’ve always preferred Nikon.
GregT on Wed, 23rd Aug 2017 11:02 am
” I think everyone who is 50 or less or has children should consider learning more about this lifestyle.”
Exactly what we’ve been trying to do here for two years. Two years pales in comparison to the knowledge and experience passed on throughout multiple generations. We in the first world, have already completely lost that knowledge and experience. Trial and error does not work so well when your very survival depends on doing things right the first time.
onlooker on Wed, 23rd Aug 2017 11:14 am
Good point Greg, in that farming and the entire lifestyle is not so easily learned. Another point that I think is sometimes overlooked is that real farming require physical exertion, something many first world people would not fare very well at. We are once again entering a phase in human history when survival is precarious and not at all guaranteed
Hello on Wed, 23rd Aug 2017 11:16 am
>> in that farming and the entire lifestyle is not so easily learned
It’s actually learned very easily. It’s very low tech. Even the dumbest members of society can farm. Once the decition needs to be made between starving or learing how to farm, I bet a lot of people will learn very quickly.
GregT on Wed, 23rd Aug 2017 11:25 am
“you have seen the real Asia. It is useless to argue with those who haven’t.”
It amazes me that people will argue with somebody when they don’t have the slightest idea what they are talking about.
I’ve been to villages that took me over a week to walk to, that have no roads in or out, no running water, no electricity, and no oil. I understand what it is like to live on dal baht, which isn’t all that bad with enough spices. I’ve slept on dirt floors in mud huts, helped butcher a water buffalo, and even walked for a month in the Himalayas with a pack on my back to 18,000 ft above sea level. There are tens of millions of people on this Earth that would notice no difference in their lives if the oil age ended tomorrow. I doubt that there would be more than several tens of thousands in all of North America, and I have even spent time with some of them.
GregT on Wed, 23rd Aug 2017 11:31 am
” Once the decition needs to be made between starving or learing how to farm, I bet a lot of people will learn very quickly.”
A lot more will starve to death very quickly, and judging from your complete lack of knowledge, my bet is that you would be among the first to croak. You don’t have the slightest clue…..
Hello on Wed, 23rd Aug 2017 11:45 am
>>>>> my bet is that you would be among the first to croak
maybe, don’t care much. Not sure if you know, but everybody goes to dust.
In the end it comes down to philosophical preferences. You prefer living 100 years toiling the soil as a subsistance farmer? Or do you prefer 50 years living in the fast lane?
Pick your fancy. Important thing is that you’re happy. But thinking somehow that life is a race and who makes it the longest is the winner? That’s just crazy talk.
GregT on Wed, 23rd Aug 2017 11:57 am
“You prefer living 100 years toiling the soil as a subsistance farmer? Or do you prefer 50 years living in the fast lane?”
I’ve already spent over 50 years living in the fast lane, and I’m now toiling the soil. So I have a bit of experience with both. There is no way that you could ever force me to go back to life in the fast lane. If I knew back then, what I know now, I would have left a very long time ago.
Kenz300 on Wed, 23rd Aug 2017 12:02 pm
So how do Tar Sands in Canada survive? They don’t.
Investors are beginning to see that fossil fuels are the past.
There is much money to be lost in fossil fuel investments.
The smart money is already getting out.
Hello on Wed, 23rd Aug 2017 12:07 pm
>>> There is no way that you could ever force me to go back to life in the fast lane
I respect that. I chose the middle way, living in the country, buying most groceries from local farms, yet still enjoying ‘fast lane luxuries’ once-in-a-while.
There’s a million different personalities with a million different lifestyles to fit. It’s not up to me to judge them. I also accept that young people are attracted to what the city has to offer.
Davy on Wed, 23rd Aug 2017 1:06 pm
I am sure our board Asian experts have been all over Asia. They know every nook and cranny. They have all those years of experience. They have the education to interpret their touristic photo travels. Please spare me the self-importance it is getting old. If that were the case these Asian experts would speak like experts instead of promoting their brand of meaning that is anti-Western and pro Asian. They want us to believe the overshoot and overpopulation in the world is only in and a result of the 1st world. No blame and no issues are in the 3rd world. BS if I have ever heard any. The 3rd world is a mess and getting worse. In fact it is cascading into decline in an accelerated pace because of multiple issues environmental and systematic.
Davy on Wed, 23rd Aug 2017 1:15 pm
Here are some of those glorious 3rd world’ers with picturesque and pastoral subsistence farms. I wonder if our Asian experts have been to Pakistan?
“Alarmingly high’ levels of arsenic in Pakistan’s ground water”
http://tinyurl.com/yd484gdl
“Up to 60 million people in Pakistan are at risk from the deadly chemical arsenic, according to a new analysis of water supplies. The study looked at data from nearly 1,200 groundwater quality samples from across the country.”
Hello on Wed, 23rd Aug 2017 1:25 pm
That’s all in pakistan, Davy.
Around Manila, I can assure you, all subsistance farms are in prime shape, clean and healthy as a whistle. And the men working are young, strong and well educated, and the women are sexy and scantily dressed. 🙂
onlooker on Wed, 23rd Aug 2017 1:35 pm
Yes, I have to side with Davy here in the interest of objective truth. The third world has atrocious and corrupt governments every bit as much as the US. They have horrific traditions and customs like throwing acid on women who dishonor the family, or KSA beheading people and look at the way they treat women there. They also have dogma and traditional ways of acting that can hardly be defended like what I just mentioned much of it against women. And while I am not blaming them directly the fact of the matter is most of these places are terribly overcrowded. So many people were not meant to live for example in Egypt and some of those other Middle Eastern countries it is a perfect example of overshoot. As we speak India is draining its aquifers and deep wells. And no way anybody is going to convince me that global warming will not affect first these hot Southern regions of the world. What crops grow there, what water accumulates will be in serious jeopardy from even slight average warming. Not to mention ever more deadly natural catastrophes like flooding etc. set to overwhelm certain areas like Bangladesh. Oh and wet bulb temps. Already they are dangerously high in place like the Middle East and the Indian subcontinent.
Makati1 on Wed, 23rd Aug 2017 6:08 pm
Onlooker, get a grip. Look close at America. You will see every negative there as you seem to see in Asia. Have you been here in the last 10 years or do you guzzle the Koolaid vids the US MSM propaganda machine puts on the ‘news’ to scare America serfs?
Davy knows shit about Asia. He has a phobia and it is a very narrow one. In his world there is no better place than America. Bullshit! That is a 1%er mindset whose life depends on that bullshit being true. I can tell you from experience, it is not. But, side with the Missouri jackass if you want. You still have some freedom of speech in America. For a while.