[Tanada]

The STEO is hot off the press. Last December they were expecting production to start increasing by the end of 2016. Now they are saying 0.6 mbd decrease in 2017 from 2016 - wow, that tune has really changed.

U.S. crude oil production is projected to decrease from an average of 9.4 million b/d in 2015 to 8.6 million b/d in 2016 and to 8.0 million b/d in 2017. The forecast reflects a decline in Lower 48 onshore production driven by persistently low oil prices that is partially offset by growing production in the federal Gulf of Mexico.

EIA estimates total U.S. crude oil production has fallen by 0.7 million b/d since April 2015 to an average of 9.0 million b/d in March 2016. The entire production decline came from Lower 48 onshore.

To be fair about it since the last STEO came out a couple large fracking companies did announce they are suspending additional drilling this month and suspending fracking operations once their backlog have been brought into production.

I think a lot of the stripper folks are also looking at closing in wells because of the profitability factor, here in Ohio there were a few new wells being drilled to rework old formations in my county in 2014, but when prices fell last year all that activity quickly ceased. The thing is the USA gets something like 500,000 bbl/d from stripper wells that are only economically viable at $65/bbl and up. Once those wells get shut down it is often difficult or impossible to restart production without a significant investment. As the saying goes, nobody drills to lose money on purpose.

[PeakOiler]

Here's a chart of US oil production since 1958 I made from the downloaded data from the EIA:



MS Excel is such a great tool. A must learn imo.

Reference:
http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

[rockdoc123]

The thing is the USA gets something like 500,000 bbl/d from stripper wells that are only economically viable at $65/bbl and up. Once those wells get shut down it is often difficult or impossible to restart production without a significant investment.

when you talk about economic viability of stripper wells you should be looking at the lifting cost or operating cost, that is all that matters once all other costs (drill, complete, tie-in) are capitalized. I've looked at some pretty tough, badly run fields over the years and most have opex well below $20 if they are onshore and do not require pressure maintenance. Most wells that are just left to produce their 5-10 bbls/d require very little capital. So you won't see them shut-in at current prices. But in some cases the cost to recomplete if they are shut-in is formidable, another reason why those who are still making some money will not shut down wells.

the $65/well cost you reference is likely the breakeven cost for a new well (drill, complete, tie-in) and that well is likely to be one that is deep and long reach. That level of operating cost doesn't even exist in offshore wells.

[GoghGoner]

Well, well, OPEC is singing a completely different tune. They expect prices to bounce above $60 in the next few weeks and US shale oil supply to start increasing by the end of 2016. Take that doomerish EIA! I'll just let it play out before making my prediction, I think Rock is with me on that one.

http://finance.yahoo.com/news/opec-report-suggests-massive-oil-203952161.html

Yes, OPEC is predicting that non-OPEC supplies grow by 500,000 bpd in the fourth quarter of 2016. In their estimates – half this growth – 270,000 bpd comes from the Americas with the U.S. leading the pack, growing volumes by 140,000 bpd from Q3 to Q4 2016.

To do this, the rig count would have to increase by something on the order of 3x current levels and all other oilfield services would necessarily steeply ramp up. This is achievable, but to get there, I believe would require oil to shoot to around $60-70/bbl and we would have to start right now. My real prediction is a slower ramp through the first half of 2017, mirroring a ramp in oil prices. The good news from this report is that this will happen at minimum, barring collapsing world GDP forecasts or surging OPEC volumes.

[GoghGoner]

Down to 9/2014 production levels now.

http://finance.yahoo.com/news/eia-u-crude-production-down-221155335.html

[GoghGoner]

http://www.platts.com/latest-news/oil/london/latest-iea-us-shale-scenario-paints-worsening-21434369

The latest forecast expects US light tight oil production to decline by 3 million b/d in the 2015-2020 period if oil prices average $40/b over the period and would still decline slightly at $60/b.

Only at $70/b prices would light tight oil production rise slightly, while $100/b prices would result in a 1.5 million b/d increase over the period, according to the forecast.

"The US oil industry is fighting very hard and I'm really impressed by how hard they fight, but they cannot overcome the laws of gravity. So investment is declining in the US quite significantly," Varro said.

[GoghGoner]

Drilling activity picked up in 2015 around the $55 price, however, to be adequately profitable the price needs to be over $100.

http://www.oilandgas360.com/median-breakeven-price-oil-55-per-barrel-gas-3-50-per-mcfe-klr/

In order to generate 10% unleveraged rates of return, U.S. basins need $104 oil and $5.50 gas

[ROCKMAN]

Goner - "...but to get there I believe would require oil to shoot to around $60-70/bbl and we would have to start right now." I have a somewhat different view: if oil were to start selling for $100/bbl tomorrow I doubt we would see a production increase this year and perhaps just a small one by the end of 2017. For a number of reasons. First, can't drill new wells if you don't have the capex. Many companies are having trouble just servicing debt and paying overhead. And many companies can't even do that: thus the growing list of bankruptcies. Second, can't drill/frac wells without a healthy service industry. Lots of focus on oil companies going under but little about the HUNREDS of service company shops that have closed down. Consider the area in Mississippi where the Rockman took over operations last December. A year ago I could have gotten certain services from Schlumberger's yard just 30 miles down the road. Now the closet yard to get those same services from Big Blue is 820 miles away in Midland. About 75% of the service industry shops in Laurel, MS (the state’s "oil hub") have closed. I can find most of those services in Lafayette, La. That's only 250 miles vs 30 miles from Laurel. But, like Laurel, many of the shops in Lafayette have closed or at least eliminated some divisions.

Third, much of the shale acreage, at least in the Eagle Ford, has expired or will before the oil patch could gear up in response to $100/bbl. So the lease brokers would have to get to work…what very few of them are left. Most don’t realize that most leasing is actually done by independent field agents…even for Big Oil. They were the first big group to get slaughtered and it happened OVERNIGHT as oil prices fell: once companies knew they couldn’t drill much of their existing leaseholds they IMMEDIATELY fired every leasing company they had working with them. And every one of those companies IMMEDIATELY fired every one of their employees. That included the husband of one of my coworkers who is now a salesman handling Toyota heavy construction equipment. It would take him a great deal of confidence in the long term to return to the leasing business. This same scenario has been played out hundreds of thousands of times across all the oil patch jobs. Some will be lured back by big paychecks and some won’t. And some have/will retired and won’t come back at any price. If the Rockman’s current gig folds he become one of those disappeared gray hairs. More than 4 decades of dealing with the boom/bus cycles is enough. And there are tens of thousands (the vast majority of senior old patch hands) that fit that potential category.

These are easy predictions to make because the dynamic would be no different then what the Rockman witnessed firsthand in the 1980’s bust. This is not just a bump in the road for the oil patch. This bust combined with PO may well be the beginning of the eulogy for much of the oil patch if prices don’t recover significantly in the next several years.

[PeakOiler]

Eagle Ford rig count falls to the 20s despite rising crude oil prices

Eagle Ford Rig Count Falls to the 20s

New figures from the Baker Hughes Rig Count released early Friday afternoon show that the Eagle Ford Shale only has 29 active rigs, compared to 110 during the same time period last year and 213 active rigs during the same week in 2014.

Figures from the Baker Hughes Rig Count show that new drilling is holding steady at 173 active rigs across Texas and 404 across the entire United States. Figures from the Austin-based oil field tech company DrillingInfo show that there are 435 active rigs across the 50 states.

Many experts believe that crude oil prices will have to stay above $50 or $60 per barrel before the rig count starts to climb back up. Huggins said some companies are able to work with the current price environment but the majority are waiting for better commodity prices.

More info and links in article.

[GoghGoner]

Easy come, easy go (except for investors in these scams).

hale Loses 9 Billion Barrels of Reserves After SEC Inquiries

Ultra’s rise and fall isn’t unique. Proven reserves -- gas and oil resources that are among the best measures of a company’s ability to reward its shareholders and repay its debts -- are disappearing across the shale patch. This year, 59 U.S. oil and gas companies deleted the equivalent of 9.2 billion barrels, more than 20 percent of their inventories, according to data compiled by Bloomberg. It’s by far the largest amount since 2009, when the Securities and Exchange Commission tweaked a rule to make it easier for producers to claim wells that wouldn’t be drilled for years.

[rockdoc123]

Easy come, easy go (except for investors in these scams).

not scams at all. The reserves don't go away they are simply recategorized as P2 or probable reserves. When price comes back up or costs go down further those reserves will be elevated again to P1 or proven status which includes all of Proved Developed Producing, Proved Developed non-producing and Proved Undeveloped. This is not something new, gas producers were very used to this seasaw when prices were bouncing between $3 and $10/MCF. This is why when financial analysts look at companies and compare them they use proven plus probable reserves as their metric.

Note that it is very unlikely for reserves to drop to the resource category unless there is a cogent argument to make that something has changed such that the hydrocarbons will not be economically recoverable for a long long time under projected circumstances. Currently all the banks and analysts are predicting recovered prices sometime in the next 5 years hence the hydrocarbons in question will remain somewhere in the reserve category.

[ROCKMAN]

Cog - And to follow up on Doc's point: a company’s proved reserves have little bearing on it’s value. I’ve bought companies off and on for more then 4 decades and the price was never based upon its reserves but on its cash flow. IOW on its PDP reserves: Proved Developed Producing reserves. And even that price doesn’t include all the PDP reserves but only those produced in the next 7 or 8 years. That’s because we use the NPV to calculater a company’s value. Using the Net Present Value (which factors in time) essentially assigns ZERO VALUE to any reserves that would be produced more then 8 years or so in the future. And that's true even assuming constant oil/NG prices.

If stock investors want to buy on a company's booked proven reserve estimated that's their mistake. And another critical factor determining future value of a pubco stock is its debt load and repayment schedule. The majority of companies that have filed bankruptcy in the last two years probably collectively have many tens of $billions in proven commercial reserves. They went under because their cash flow was insufficient and not for a lack of reserves. Which is why the feeding frernzy has begun with the healthy companies buying up those PROVEN COMMERCIAL reserves on the cheap.

[GoghGoner]

Here is another quote from the article. Almost a billion in debt was raised based on bogus numbers. Ultra isn't an exception, this is how the game worked. The emperor wears no clothes or will investors go hog wild when/if the price gets back up to $100.

In its first letter to Ultra, in July 2014, the SEC said it would take about 13 years for the company to drill its backlog. About two months later, Ultra raised $850 million in debt. The SEC letters weren’t yet public. Over the next 19 months, the regulator twice told the company to revise its estimates.

[GoghGoner]

Pulled this off of Ron's blog.

http://peakoilbarrel.com/north-dakota-down-over-70000-bpd-in-april/#more-12826



And just for the fun of it:

[copious.abundance]

I think it's about time this thread gets updated.


LINK

[vtsnowedin]

I think it's about time this thread gets updated.


LINK

So we are producing nine and using nineteen? A long way from oil independence or the USA being the next Saudi Arabia.

[vtsnowedin]

What is wrong with you vtallsnowy Don't you believe in Inurgy INdependance?

Is USA energy independence a worthy goal? Most assuredly.
Are we anywhere near being independent or likely to get there any time soon? Not a snowballs chance in Hell!

[copious.abundance]

[AdamB]

Are we seriously going to peak the US in oil production? AGAIN?!?!?!?!

How many times would this be just since this website began? 2? Maybe 3?