Every shale well evaluated used an estimated cash flow metric to calculate the ROR: reduce that revenue stream, especially in the very critical early days of a shale well, and you will kill many of those potential drilling projects
The tragedy of the commons is a term, probably coined originally by William Forster Lloyd[1] and later used by Garrett Hardin, to denote a situation where individuals acting independently and rationally according to each's self-interest behave contrary to the best interests of the whole group by depleting some common resource. The concept was based upon an essay written in 1833 by Lloyd, the Victorian economist, on the effects of unregulated grazing on common land and made widely-known by an article written by Hardin in 1968.
It was true then. It was true 100 years ago. And it's true today. Why would Petrohawk sold their undeveloped EFS acreage for $15 BILLION and walked away from the play if they thought they could turn a better profit drilling? Trust me: we might be mean and cutthroat...but we some of us ain't stupid.
ROCKMAN wrote:h-man: it was BHP Billiton (Aussies) that bought the Petrohawk acreage in July 2011. They bought the company for 65% more than the closing price the day before. Also: Earlier that year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy. And how did those “investments pan out for them: before they did the Petrohawk deal the stock was trading for $102/share in April. After in August: $79/share. And since then: they had fairly stable price of around $60-$80/share. And today: $34/share. About 1/3 of their value before they bought Petrohawk.
And as of last September: BHP Billiton Limited (ASX: BHP) has been a big casualty in today’s heavy selloff. The miner’s shares have fallen 5.8%, compared to a 2.7% fall for the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Despite its staggering dividend yield, which has now climbed to 7.7% fully franked, investors continue to avoid the stock based on the headwinds facing the resources industry. Although BHP Billiton remains one of the lowest cost operators, and one of the industry’s most diversified, each of its primary commodities are under intense pressure. Copper and coal are both hovering near multi-year lows while iron ore and oil, which are BHP’s two most important resources, are also expected to fall further in the coming months.
I suppose the take-way there is no matter how well you run a company deflation will still cripple it in the end.
ROCKMAN wrote:Sub – “…what percentage of the depleted wells became strippers with very low but steady production vs what percentage just get capped off or plugged?” Difficult to put hard numbers on it. First I suspect you mean low volume producers and not “depleted wells” because depleted wells don’t produce anything. And a lot of low volume EFS wells were P&A because they cost a lot to pump and more to dispose of produced salt water. I was told back when oil prices were high that EFS wells didn’t have much more than a 5 or 6 year commercial life. But I just pulled this up: in July 2015 there were 618 EFS wells producing less than 30 bopd each. Of that number 283 were doing 10 bopd or less. On the flip side 1,245 were doing 200 bopd or more. But most are fairly recent: 426 of those wells are 1 year old or younger and are still in the relatively high decline rate period.
And a reminder: those counts are actually leases and not wells since Texas oil production isn’t reported by the well. So on a well basis all those numbers are too low to some uncertain degree.
If you slow the lifting rate way way down, to say just 10 barrelsof fluid a day, does theratio of water to oil change? Or is it fixed at a slowly rising percentage that just gradually keeps getting worse?
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
ROCKMAN wrote:h-man: it was BHP Billiton (Aussies) that bought the Petrohawk acreage in July 2011. They bought the company for 65% more than the closing price the day before. Also: Earlier that year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy. And how did those “investments pan out for them:
theluckycountry wrote:ROCKMAN wrote:h-man: it was BHP Billiton (Aussies) that bought the Petrohawk acreage in July 2011. They bought the company for 65% more than the closing price the day before. Also: Earlier that year, BHP paid nearly $4.8 billion to acquire some shale natural gas assets from Chesapeake Energy. And how did those “investments pan out for them:
True true, makes me wonder though, is it really a bad play, or did BHP have another deal going. There is the con jobs Rockman talks about here, at his level of operations, but what goes on above? I have long been of the opinion that large corporations making huge profits deliberately invest in failures so as to reduce payments to stockholders and siphon capital off, they write the losses off, ok, but what happens to the money after it's paid? Who actually owns that company? Is it possible that the same people at the top control both? I am particularly suspicious when a large public company buys a dud of a private company.
Being a major shareholder in a mob like BHP puts you in the inner circle, the board controls and appoints the CEO, he does what he's told. He can even wreck the company and many do, only to move onto the leadership of another corp. Very suspicious... These are the people that control the decisions to buy and sell major assets, all you have to do is control them and you control everything. Here in Australia, the home of billiton, most boards of major corps are stuffed with ex-government types, prime ministers, ex-central bank types, and more often retired heads of other corporations. All insiders in other words.
The stock market is a casino and the house is the only winner at the end of the night.
Subjectivist wrote:
I remember an article I read a couple decades ago that compared the members of the boards of directors of the twenty largest publicly held companies. It turned out that about 18 of those boards had all the same people serving on them and deciding each others compensation packages. Nice gig if you can get on the inside track.
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