BK's may result in shut-in production
Posted: Fri 12 Dec 2014, 11:08:36
In our area in 1998, almost half of the oil production was shut-in. Some was voluntary, but most was due to operators running out of cash and going bankrupt. The largest operator in the area went under, and its production dropped by 2/3 in a year as the money simply ran out.
I read where most assume that the producing shale wells will not be shut-in because they are profitable and the money has already been sunk to drill and complete them. I suppose some production may be bought by solvent operators at fire sale prices. However, if the price keeps dropping and stays there for awhile, why wouldn't the same thing happen that has happened in the past? The operator runs out of cash, lays off everyone and files BK. There is no one to pump the wells and no money to pay utilities, down hole chemical, water haulers, etc. It is not easy for the bankruptcy trustees to operate oil production, especially if there is no cash with which to hire contract operators.
Would appreciate input.
I read where most assume that the producing shale wells will not be shut-in because they are profitable and the money has already been sunk to drill and complete them. I suppose some production may be bought by solvent operators at fire sale prices. However, if the price keeps dropping and stays there for awhile, why wouldn't the same thing happen that has happened in the past? The operator runs out of cash, lays off everyone and files BK. There is no one to pump the wells and no money to pay utilities, down hole chemical, water haulers, etc. It is not easy for the bankruptcy trustees to operate oil production, especially if there is no cash with which to hire contract operators.
Would appreciate input.