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Why The US Is About To Be Flooded With Record Oil Production Due To Plunging Oil Prices
One would think that plunging oil prices and the resulting mothballing (or bankruptcy) of the highest-cost domestic producers would lead to a collapse in US oil production. And sure enough, if looking simply at headline data like the Baker Hughes count of active rigs in the US, then US oil production grinding to a halt would be all but assured. However, what will actually happen, even as the highest-cost producers and those with the weakest balance sheets are taken to their local bankruptcy court, is that as Bloomberg reports, the US is - paradoxically - set to pump a 42-year high amount of oil in 2015 "as drillers ignore the recent decline in price, pointing them in the opposite direction."
Here is the surprise for all those thinking Saudi Arabia will declare a quick win when half of the US shale is bankrupt and supply plunges: U.S. energy producers plan to pump more crude in 2015 as declining equipment costs and enhanced drilling techniques more than offset the collapse in oil markets, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells. That and the scramble to put competitors out of work, before competitors do just that to you.
On one hand oil companies are, logically, shutting down expensive production. However, in borrowing a page from the playbook of the iron ore producers who also are caught in an AMZNian race to the bottom, and are producing more raw materials than ever in hope of putting their competitors out of business as fast as possible, what they are also doing is shifting their focus to their most-prolific, lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs Group Inc. Global giant Exxon Mobil Corp. the largest U.S. energy company, will increase oil production next year by the biggest margin since 2010. So far, the Organization of Petroleum Exporting Countries’ month-old bet that American drillers would be crushed by cratering prices has been a bust.
In short, what the US energy industry will do at the national level, is precisely what OPEC did as an international cartel: battle plunging prices, and demand, with surge, if not record, production:
“Companies that are already producing oil will continue to operate those wells because the cost of drilling them is already sunk into the ground,” said Timothy Rudderow, who manages $1.5 billion as chief investment officer at Mount Lucas Management Corp. in Newtown, Pennsylvania. “But I wouldn’t want to have to be making long-term production decisions with this kind of volatility.”
Everyone's hope: flood the market with as much cheap oil as possible to take out higher cost competitors, and remove supply as quickly as possible. The problem is that this is precisely what everyone else will also do, and in the biggest paradox of the crude price collapse, the near-term outcome will be an unprecedented surge in oil supply, which will lead to an even greater crash in prices before everything reverts back to a more stable equilibrium... at some point in the distant future.
Some of the facts according to Bloomberg:
- U.S. oil production is set to reach 9.42 million barrels a day in May, which would be the highest monthly average since November 1972, according to the Energy Department’s statistical arm.
- Exxon, the world’s biggest oil producer by market value, is expected to boost crude and natural gas output by 2.8 percent next year to the equivalent of 4.1 million barrels a day, based on the average of eight analyst estimates compiled by Bloomberg.
- Existing wells remain profitable even as benchmark crude futures hover near the $55-a-barrel mark because operating costs going forward are usually $25 or less.
While as we have shown the vast majority of US shale is no longer profitable below $60, when one factors in the entire US energy sector, the average cost to operate an existing well in most parts of the U.S. "is about $20 a barrel," according to Tom Petrie of Petrie and partners. "It might be $5 higher or it might be $5 lower, that’s the out-of-pocket costs that we’re talking about. Until you dip into that and start losing money on a cash basis day in, day out, you don’t think about shutting in” wells.
So what does this mean for the US energy industry: simple - while capital spending and growth projects are about to be frozen for years to come, companies are about to set existing production on turbo Max, as everyone hopes to not only "make up for lower prices with soaring volume", but to take out their immediate competitors before their competitors do just that to them.
And so the race to the bottom truly begins. The only question is will Saudi Arabia's cash reserves last long enough to keep its "bread and circuses" social fund solvent while the US energy sector implodes under its own weight, or if with a little help from outside, something "black-swany" were to happen to Saudi Arabia and/or its production infrastructure.
Then those very deep OTM 2016 Brent calls we bought a few weeks back will seem like quite the bargain.
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Long tank farms.
Saudis holding physical. But also sold futures. That's why they were fine without decreasing production. They profited from the Drop.
Http://hedgeaccordingly.com
There has never been a better time to buy or lease a new GM.
2015 YUKON DENALI
STARTING MSRP: $63,770
MPG (City/Hwy) 15/22
I love managed economies.
No guys... seriously.
This is basic agricultural and resource economics.
If the price of the commodity drops, the breakeven for each producer whether it be wheat farming or oil pumping, is to do more. The lower price must be made up on volume production.
This is not a joke, but reality.
So, if any producer is above his break even, (below it he'll logically close down except for cash flow, or tax reasons, etc.) he'll just pump more to increase the gross income.
Not a joke, not planned economies, nothing like that. It is what it is and this is one of the it is is'
Well you know.....ishit is cheaper, er, I mean oil. Signed Eduard Quince Can we drink Oil? Rhetorical question from the audience
Big companies will make it on their finanacial credit alone. The small mom and pop will get slaughtered.
Not particularly. My operator is a small mom and pop and he has no debt and wells that produce from 600-1500 bbl/day. He is planning to drill 17 new wells in the next 18 months in the Wolfcamp. He has to do that in order to hold the leases he still hasn't drilled. He has already gotten a 20% rig cost cut worked out. Saudi Arabia is pissing up a rope and I started making the point this article is just now getting to, a month ago on this forum.
Exactly, wrs1. There will be blood, but not the widespread devastation many seem to expect (hope for?).
Outfits like Goodrich and Halcon may be pinched going out on a limb in the Tuscaloosa Marine Shale, but many of these operators are extraordinarily resourceful as well as resilient.
The TMS may even offer a window of 'what may be' as oil prices rebound - whether that occurs next month or next decade ...
After spending a few years drilling about 50 VERY tough wells, the big three in this play - Encana, Halcon, and Goodrich finally 'broke the code' on the specifics of how to effectively develop this play (such as where to place the laterals, number of stages and their placement, type of frac'ing, length of lateral, as well as several other not-so-trivial aspects of drilling/completing this difficult formation.
Some outfits, these or others, will capitalize on this as the financial circumstances justify it.
In the Bakken, operators are permitting much higher density wells on already established pads in highly productive areas (the sweet spots). Companies right this moment are gearing up to drill 12/16 wells on these pads.
Well depletion is too rapid to be flooded with production if rig count drops significantly, and it will. Already is. When your average ND well is choked at 1000 bbls/day day one and loses 85% of that by year three, and the industry's only generated 3/4ths of its cash burn with revenues, borrowing the balance, the math and timing until Saudi "victory" is fairly simple to calculate.
Thorny Xi, Continental's 14,000 bbl/IP Hawkinson pad, their 24,000 bbl IP Rollefstad wells will be the template for the Bakken and other shales in the productive areas.
At bout 100$/bbl, the payout for many of these companies was achieved in under one year.
The oil and gas is there, not going anywhere, and will be developed and recovered as many factors - economics being one - prompt it .
The big oil ones are TBTF so banks will cut there credit lines because banks will be stuck holding the bag for big oil when the bailouts happen.
The above is why allot of people that think big oil can just ride this out for a few years using debt are going to be rather surprised.
There's a bunch in that aricle that is pure bunk and reads like marketing copy for a buncha Wank Street hacks caught with some product they wish to move.
For example, it says the CLR is producing oil for 99 cents a barrel out of the SCOOP formation.
Uhhhh, well let's see here...average well costs $9M in the SCOOP, they flow at 1/2 the rate of an average Bakken well, for a 12 month first year total of 35,000 barrels (BOE) and a total EUR per well of perhaps 250k - 300k barrels of oil..
Using my fingers and toes, I come up with ($9M)/300k = $30/barrel...and that does not includes SGA, Lease, Royalties, or taxes none of which are variable expenses...so Bloomberg can take their 99 cents a barrels and shove it.
buncha Wank Street hacks
yes, we should do both
knuks.....I'm usually right there with you, man. But you're mistaken on this point only in the fact that what looks like market conditions is an illusion brought on by a planned economy. If cheap, easy and forever centrally planned debt issuance was not the order of the day you would not have ever seen the build out of "Saudi America". And .....consequently.....you would not have seen the big fish about to eat the small fry as you are about to now....even though this looks like the "market" at play.
We are talking about shale here. If new production shuts down, as it has to and existing wells are produced faster, it will blow out our entire domestic production in six months. The faster you produce from shale the faster the wells will deplete. A 500 barrel per day well produced full bore could be down to 75 barrels per day in 6 months and down to 6 barrels per day within a year. Even wells that have been choked back substantially will deplete to almost nothing in two years so that is why they have to keep drilling to stay ahead of the depletion curve. This policy to deprive Russia of foreign currency reserves is going to backfire big time and kill the entire US oil industry. Without domestic oil we will be back to buying from the Saudis at $200 a barrel or more in almost no time. They only have 15% of their reserves left so why else would they be going along with this insanity.
The rule in the oil patch is if you have a rig, drillstem, a lease and can make payroll, you drill. Most of the drillers have hard drilling and easy drilling projects, you just set the hard stuff aside and drill the easy stuff. With modern drilling technique and 3-d imaging your hit chances are pretty good. You can either go down fighting or sit around and wait to die.
Yes, knuks. just so.
I do not know if Harold Hamm regrets his comment a few months back calling OPEC a "toothless tiger" - he has lost over 10 billion since then - but the operational position of many of these shale operators is far stronger than the current slew of reporting would indicate.
There are hundreds of billions of barrels of oil, hundreds of trillions of cubic feet of gas that are now accessible/HAVE BEEN recovered by methods that will continue to be deployed as economic circumstances permit.
These E and P guys are tough, resourceful people who - as the past 15 years have demonstrated to any and all who look - have changed our world.
Airlines dont go bankrup with empty seats.
I share the view of one blogger yesterday(?), who thought that this is actually a great time to buy gas MISERS, since the car makers will be especially motivated.
And when the party ends, you'll be well positioned to profit from lower Operating costs. If you bought a quality car, you might even enjoy lower Ownership costs (with fewer repairs over lifetime of ownership).
Anyhoo... it sounds like it's a good time for the newly laid off Frackers to trade in their Denali for something more sensible. If they have positive equity in the Denali, that is. Which many guys don't -- cause they just had to stroke their egos, and impress their buddies and "the chicks". Now, with the money and the Denali gone, they might be "stroking" only themselves.
A fool and his 'money'...
why buy a car when soon you can steal it - once the defaults start for sub prime it will be 50% off used blue book to keep the factories running and clear the inventory
There's never been a better time then now to buy everything on credit and then ... joins the mobs and 'just walk away.'
Better yet, wait for a 'Ferguson Moment" and get anything you want for Free!
"It's only fair."
Bloomberg can spin it all they want, but they're still just trying to polish a turd. The production increases won't be caused by lower costs or magic new technology. The production increases will be due to sheer desperation and panic. The tight oil shale operations are all financed (with a dangerously high Corzine coefficient), and they have to generate cash flow to make their monthly payments.
When the price drops, they must pump more oil to make up for it.
I wonder who will be left holding the bag. Again.
Well at least I won't be left holding the bag with my CHEAP GAS!! Gonna go out and pump the GDP bitches! Yeah! Let's spend that extra scratch on some more crap! (all 30$ a week I'm guessing)
Directly or indirectly, all of us. IMO, this is going to turn into a crisis in the energy sector of the junk bond market, which is going to turn into a general junk bond crisis, which is going to turn into a stock market crisis, and when all taken together, I'm expecting system wide financial contagion.
The question is, what will the Fed and the government do, other than saying "BUT! BUT! BUT! WE NEVER SAW IT COMING!?" I expect them to really fire the printing presses up, and bail-in some folks, and give us hyperinflation/hyperstagflation, but we'll see.
You kow this because you read someone else saying this stupid stuff right? I mean you have no actual first hand knowledge of individual wells and production rates or costs to drill or any of that do you? You really are a dog on the internet aren't you? bow wow, woof, woof....
LOLOLOL!
all this does is speed up the peak's decline
Same shit as always... Banks print money out of thin air & use derivatives to CRASH a market & force bankruptcies & become whatever is trendy. (Landlords, oil drillers, gold miners)
Fuck paper money & the Toucan Sam weasels that control it.
+1
LOL! Toucan Sam. I like Toucan Sam (the bird on fruit loops) but I hate banksters..
Bloomberg will be wrong. There is a first time for everything, I guess. In the Bakken, you need 100 NEW wells per month to stay constant.
And the production on a per well basis is decreasing. They've just been drilling fast enough to make up for that and then some. In June of '12, they were averaging 144 barrels per well per day. Now, they're down to 130.
bbls oil going up or down?
https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf
Because the figures I'm looking at looks like they've doubled.
Barrels of oil PER well PER day is going down. The very right hand column in that table. That means that the frackers are already on the part of the curve that denotes diminishing returns.
Looks like it's up from 129 two months prior and up 3 from the previous 5 months and 4 barrels from 6-9 months prior.
...or there is just variance.
Go back to 2012. It was 144 bbls/well/day. That's a 10% drop over ~2-2 1/2 years. During that time period, the amount of new oil from each new well has decreased too. They're in the phase where they can still increase total output by increasing the total number of wells drilled each month.
The average for the previous 29 months in that link is 133 per day. We're at 130 now.
Production per well should go up now and # of wells will go down as drillers try to become more efficient.
That's my guess.
If they 100% stopped all drilling and fracking today, within 3 months, the output would decline by 12%-20%. I expect that they're going to finish up drilling wells that are already started, they're only going to drill what they think are the sweetest spots and squeeze every last bbl out of existing wells. They don't have much of a choice.
(Not my junk)
Hey, El Vaq, I usually am in sync with what you post, but - although the numbers from ND DMR are indusputably clear, they mask the bigger picture.
The near 17 million barrel/month increase from 6/12 to 10/14 (essentially doubling production in slightly over two years) came from the additional 4 1/2 thousand wells.
As the right-most column is the clear oil per well number, every one of the 8 1/2 thousand wells - including the 3 thousand or so that were rapidly drilled/produced during the multi-year 'land grab' phase - is included in the total oil/well figure.
The 'land grab' years were 2009 to 2012 when the operators had 36 months to produce hydrocarbons on leased land, or lose the mineral rights (or pay a ton more money in a now-recognized valuable area).
As a large number of those wells were hastily drilled/completed using exceptionally rudimentary methods compared to what is known today, the earlier production numbers pull down the last few years' output when all is lumped together. (The oil per well average naturally includes the few wells going back to the early '50s.)
Bottom line, the output is not only rising per well, it is set to shoot substantially higher for a host of reasons in the next year. (There are about 650 wells - 3 months production - drilled and simply awaiting completion).
Setting aside the economics for a moment (not disregarding, certainly, as it is a (the?) dominant metric), the 90% hydrocarbons remaining in the formation after this drilling/completion is performed, is actively being targeted with an array of not-yet-deployed technologies ... and I am not counting the re-frac'ing process which is just getting underway in shale plays nationwide.
Best regards, Gerard
.
Red Queen ftw!
Makes sense, any recoup of sunk costs is a lot of free cashflow.
The smaller producers are still bankrupt, but can stave it off a few months.
Once the well is capped "you're just managing pressure.". The only thing not free is the transportation and refining at that point.
Buy your fuel straight from the fuel truck and cut out the middle man!
Seriously....the Fed is raising rates and price to sales are soaring. If youre long real estate here " you're gonna get annihilated.". The only question is are you knocking on Putin's door or are you gonna kick that thing in?
No sure if Bloomberg is serious.
Reads like an Onion article.
Read my above post.
Ignore the "black swanny" comment or embrace it. I embrace it.
Covenant-light junk bonds means management is free to risk everything for any slim chance at survival.
Suddenly the price to get shale oil out of the ground has plunged also ... This we call "bluff".
What variety of crack is this author smoking?
How many wells are left in the US that are pumping oil at a cost of $20 a barrel???? 5? 10? Come on, the entire Shale Oil industry would not exist if there were a signficant number of these magical $20 a barrel wells? nor, would we be buying Middle Eastern Oil if we had any $20 a barrel oil left ourselves...
Really, what is this nonsense?
Sunk costs are already spent, actual running cost is another price altotether.
On the shale rigs those sunk costs could be $20-40 bbl, or more
I don't believe those actual running costs are $20 a barrel...that is nonsense and funny math, and certainly doesn't include all of the junk bond financing that keeps these companies going.
Maybe some private equity/vulture captial will come in and pick up a few of these on the cheap once all these tiny companies go bankrupt, but the life span of these Shale Oil rigs is incredibly short, nothing like a conventional oil rig.
http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-bo...
The economics does not work, pure and simple.
Those rigs don't keep runnig once the companies that run them go bankrupt and can't pay employees or any of there debt obligations, and they've already produced the first year of high flow rates.As usual, Winston, you'correctly nailed it.
Look at it on a per well basis. Here are two shale wells in the Wolfcamp drilled a year ago that are already paid for.
http://tinyurl.com/ng7ctgv
http://tinyurl.com/q9n9p6o
The only cost is the royalty and any shipping from the tanks to the refinery on the oil. On the gas, they are pretty much getting over $5/mcf due to the NGLs.
Hmmm.. interesting link, what caught my eye was the decrease in the production rates in Nov 2013 - 100,447 MCF to 50,000 MCF in Aug 2014...... that is less than 9 months of production.
Can you cite a source for your statement that the purchase price at the well head is $5/MCF? Is this for the "whole" period of production or is it for a peak spot price????
What was the all in capital cost for this well???? You claim it is already paid for... so if your not blowing smoke up my dress you should be able to cite a source for the all in cost for each these two wells...
(yes I am indeed... politely calling bullshit on your statements.....lol)
By the way, per Cimarex Energy Third Quarter Financial statement....... "Natural gas prices averaged $4.10 per thousand cubic feet (Mcf)...."
And yes there will be some additional revenue from the 138,583 BBL produced from this well that was trucked off..... per code. But to say it paid for itself in a year......... well I have to see the numbers....
edit... further reading on Cimarex Statement...
Expenses per Mcfe of production for 2014 are estimated to be: on the high side it cost them $4.69/MCF for exploration and development.... the low side $4.47 /MCF.... plus a 5% taxes mol.....
http://cimarex.investorroom.com/index.php?s=43&item=192
Expenses per Mcfe of production for 2014 are estimated to be:
Production expense
$1.08 - $1.12
Transportation, processing and other expense
0.61 - 0.65
DD&A and ARO accretion
2.55 - 2.65
General and administrative expense
0.23 - 0.27
Taxes other than income (% of oil and gas revenue)
5.3 - 5.7%
Trying to get a feel for the expense cost of the condensate side of production... ratio 6 MCF is equal to 1 bbl.... so each bbl of production cost 6 times the MCF expense production number quoted in the financial statement.... so lets say $4.50/mcf x 6 is $27/bbl expense.... the price paid for purchase of this oil varies... fair to say they lost money on the gas side of the production but made money on the condensate side.... you don't have all the information to determine if they paid for the well in one year of production (I didn't see the amortization of the capital expense/mcf calculations and assumptions used for these numbers in the financial statements)... given the margin and depletion rate of this well....... I doubt they did.....
Lot of kids Gona get the Prius after dad kicks the tire on the king cab
Raptor all the way. I am looking at trading my M5 for either a new Raptor or a 2012 supercharged RR HSE.
The circuit of the illegal oil from North Iraq
It's quite possible the cost to frack will go down as new tech gets invented. I don't see the technology at some magical "wall" and not developing further.
Just sayin'
Grimaldus
You raise a valid point, like many things the price does in fact go down.
Just one thing you left out......cheaper fracking does not mean there is more oil to frack, no?
But better technology increases recovery.
Which increases depletion rate of each well. Which forces drillers to go back to the bank for more money which issues more junk bonds. Drillers poke moar holes in shittier plays....use new fancy technology to deplete already shittier play which forces them to drill moar and go.back to the bank.........
Red Queen Scenario. It will effectively be done by 2025-2030.
Concur... maybe sooner..
Depends on the definition of "more oil"..... we will never run out of oil in the ground... what we will run out of is oil reserves that can be developed....
Think of a tall apple tree.... and you need those apples today... lots of apples on the top... but you need a cost effective efficient way to get to them.
Fracking.... a straw in a cup of thick ice water.... verses Jeb Clampett's "... and up from the ground comes the bubbling crude"....
There is a silica mine/pit a mile and a half from my house. They are not running 24x7 like they were a few months back. somebody must be cutting back on fracking.
Lots of sand coming from Arizona now.
This thought process... new tech will save us... is one that has peaked my curiosity in the past. My experience in life is that tech brings with it unanticipated and unintended consequences..... "mistakes will be made".....
It takes time to develop.... (getting your ass handed to you and fixing the issues...) we are out of time and there is nothing that is even close to a substitute for oil. I remember this discussion, the need to develop a replacement for oil, starting with President Nixon...... (yeah I am older than dirt....)
Kunstler's book "Too Much Magic"..... is one pov on this subject.
Another issue is the concept of Rate of Return on Energy Invested... there is nothing out there that passes this "sniff test"..... lots and lots of "faux green" bullshit.....
The other Gail's Blog a Finite World..... http://ourfiniteworld.com/
By the way.... fracking has been around since mid 1970.... George Mitchell, it wasn't used till recently because the price of oil did not make it competitive till oil gets around $80/barrel.... yeah there have been refinments with time but IMO this is minutiae on the ledger.
A lot of SWAG (Scientific wild ass guessing) going on here.
Gas just dropped to $2.50 here.
I got 93 Octane in Versailles Ky. the other day for $2.39
I honestly never thought I would see that for premium again.
Paid 2.06 yesterday in the Centennial State.
And yet diesel is still a buck more per gallon than gasoline. *grumble* And yeah, I've heard the arguments...still doesn't make me happy. Granted, I like my TDI, but part of the reason I bought it was the fuel savings.
You're competing with the railroads and semi trucks my friend. You're going to lose.
It is a shitty irony that part of the added cost of diesel is due to increased rail traffic from transporting the very oil used in making diesel.
We export (mostly into Europe) roughly 25% of our diesel production... so you are also competing with the price that the European motorist are willing to pay for diesel....
http://www.eia.gov/dnav/pet/pet_sum_snd_d_nus_mbbl_a_cur.htm
I drive a Smart Diesel... get 70 to 80 mpg if I am "tender" with my foot...... can't buy those in the US.... ever wonder why???
hint... "regulatory capture" by the powers that be......
As far as I know Europe has a lot of rail and semi traffic as well.
Just paid 1.91 here in the heart of Dallas/Fort Worth.
This just points to inefficiency in the markets. Contracts do not unwind easily. The parties simply do not know how to shut it down. Handshakes have been made. Words have been given.
The US land based oil rig count has fallen for the 3rd week in a row. Whilst the international rig count had increased. That says enough.
This article is a LOAD OF CRAP the cuts are being made all over the oil patch especially in shale literally as we sit here. I would suggest a look at decline rates and how fast they are already challenging just holding serve on shale production gains. Rule #1 ignore sunk costs. One could almost make a case that one of the ancillary benefits of crashing the oil price is that it will disguise the already occurring crash in oil production from the shale fields and thus shale production can be revived when prices get better..... not. It keeps the hope alive even though it has to have higher prices to justify production. It ain't $60 for most of the plays its bumping mid $90's or more for most incremental production. The sweet spots have already been had.
http://srsroccoreport.com/big-trouble-for-the-bakken-oil-field-has-the-bust-begun/big-trouble-for-the-bakken-oil-field-has-the-bust-begun/
Excllent post Kansas! I appreciate some first hand information. In my post below I point out what I believe is a campaign of "good news" designed to keep investors feeding money to Frackers, at a time they may desperatly need to fund operations. ++++ 100
As you point out, how can they not be shutting down. Do they pump and drill at a large loss, when they are already stretched for operating capital?
Really?
Where is the collapse in natural gas production then you lying sack of shit?
It is really bad form to call someone a lying sack of shit... even more so when you do not cite sources to defend your statements......
Natural gas production numbers are always lagging.... takes time for all the final reports to come in...
However, a very good source to do a quick look see is Ron Patterson blog and of course the EIA....
That being said... production numbers are declining... just graph the eia's data set for gas wells and shale gas wells... combine that with the fresh info from Texas RRC and the trend is clear.... I would not call it a collapse..... yet.....
One thing I think worth mentioning is that prices will become extremely volitile should there be... IN THE WORDS OF THE EIA...... a "supply disruption".... the global political situation is not very stable...
http://peakoilbarrel.com/texas-rrc-october-oil-gas-report/#more-5609
http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_m.htm
"one of the ancillary benefits of crashing the oil price is that it will disguise the already occurring crash in oil production"
Pretty much: + a million!
" The sweet spots have already been had" Thus the flood of industry articles about miracle new recovery teachniques.
Banks are bookies always bet with the bookie. Bookie couldn't pay the numbers so he moved the dice, now the numbers dont pay what they would have.
Putin says this low oil is over in 2 years, my bet its less then a year.
" U.S. energy producers plan to pump more crude in 2015 as declining equipment costs and enhanced drilling techniques more than offset the collapse in oil markets"
Okay, if so, then they will contribute to a further collapse in oil prices and further weaken their income potential. This idea that they can make up on volume what they lose in price is just what OPEC nations are doing, along with some non-OPEC. What we have then, is a race to the bottom and mass bankruptcy for those who can't out sell Saudi and their pals. And let me tell you, Saudi Oil comes out of the ground for at least 1/3 of the cost of the best producing Frackers. In many cases, new production advances or not, this is alomst a 8-1 cost ratio. Do you think American high cost, high leverage Frackers can stay in the race with Saudi and other conventional oil that comes out of a straw stuck in the ground right into existing pipelines and tanker hulls?
Look, I am no oil expert, but the article above implies that the oil markets do not function like other markets, that production costs are immaterial, that debt servicing of loans and bonds play no role, that cheap oil is the same as expensive oil for the producers. That Saudi oil at one 8th the cost per barrel to produce gives no advantage to Saudi Oil Producers, versus American Fracking Miracle oil coming out of highly leveraged operations with 6-8 times the cost to prodcue per barrel.
Markets would tend to make the article above seem irrational. Or is this another cheerleader article for the Fracking Miracle. I notice they added the new talking points about miracle productivity advances in fracking wells, bringing them back to high production with ease. I haven't fully investigated these miracle claims, though some industry hand outs on other economics blogs maintain there is a new miracle at work. Or, as I suspect, these "miracle" stories might just be an industry ploy to keep the investors happy, and to draw new people into their bonds and stock issues. Hmmm. Who benefits if the "miracle" is not all industry says it is? I wonder, because it seems industry are the ones touting the well life revival miracle, while analysts with a neutral bias, seem stangley silent on the newest stories of "miracles" in the shale patch. One industry report painted a very rosy picture, rosy enough to keep capital flowing into Fracking. I suspect we are being played here, but can't prove it. Only time will tell.
your instinct is correct the independents are motivated only to keep the bonds current - the competition doesnt matter - they will cut drilling program except for lease expirys - otherwise the majors will buy them out for cents on the dollar
in 86' the price went down 77% to $9.62 Bbl - top to bottom of the cycle with lower leverage and the rig count went down 72% from record of 3000+ (US + Canada) which never has been seen since
your instinct is correct the independents are motivated only to keep the bonds current - the competition doesnt matter - they will cut drilling program except for lease expirys - otherwise the majors will buy them out for cents on the dollar
in 86' the price went down 77% to $9.62 Bbl - top to bottom of the cycle with lower leverage and the rig count went down 72% from record of 3000+ (US + Canada) which never has been seen since
Michele Foss, a Geology Economist at UT said on the radio today the low oil prices will hurt Alaska, Oklahoma, La, Texas, and SD the most. She also mentioned most of the GDP growth the last 8 years has been from these states esp Texas so as they slow down so will the entire GDP. Some other expert said the influx of people to the oil cities like the Houston area will drop 50% in 2015 due to a slowdown that was already happening and is compounded by this plunging oil price.
She also said oil prices will not rise any time soon.
Take that as you may.
Uh, what we do know for sure is that none of us know nothing for sure. Right now gas prices are down. At some point this will positively effect the economy. The dollars not leaving the country going to the ragheads will now be spent here. Although not a great amount per person, overall, it will lift the mood of the average person who sees this as a positive thing. I love how all the idiots on here try to guess what will happen. There are endless scenarios. It like guessing where a handfull of marbles will go when you throw them on a table. Entrepreneurs get smart when costs get squeezed. That is when innovation most certainly occurs. Not when they are fat dumb and happy. Some will go under some will survive. Its called a free market. Obama has not figured out a way to fuck this up yet. The real market always bats last. This is free market outsmarting the idiots on the east coast. I am so sick of so many people always betting against we the American people. We are the best on the planet for a reason......everyone else sucks.
Money going to rag heads? But the US buys most of its oil from Canada. Do your homework, redneck.
Sure it does bright boy. That must be what the c stands for in opec. I suppose that the saudis want to flood the market to put the canadian oil producers out of busine........wait a minute.... why would they do that when the frackers in the states are pumping out so much crude.....oh, I see, they want to knock out the massive canadian oil suppliers so they can protect the frackers, because we Americans dont buy their oil anyhow. You my friend are a complete idiot. The us is the largest market on the planet for oil. The arabs made their fortunes here pindick. You tho thmaaat. And tho spethl.
Import sources Gross imports Exports Net imports
Total, all countries 9.859 3.621 6.237
OPEC countries 3.720 (38%) 0.237 3.483 (56%)
Persian Gulf countries 2.009 (20%) 0.022 1.988 (32%)
Top five countries2
Canada 3.142 (32%) 0.549 2.593 (42%)
Saudi Arabia 1.329 (13%) 0.003 1.326 (21%)
Mexico 0.919 (9%) 0.532 0.387 (6%)
Venezuela 0.806 (8%) 0.081 0.725 (12%)
Russia 0.460 (5%) 0 0.460 (7%)
http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6
rolling eyes,,,,,,,,,,
Hey maybe Germany has a high labor participation rate since the have a Triparte System and are the powerhouse of Europe.
Do you like knowing we need 30 Million good paying jobs in the USA?
US Employment
319 Million = Total Population (FRED)
245 Million = Total Population over 16 years old (BLS)
147 Million = Total Employed (FRED & BLS)
92 Million = Total Not in Labor Force (FRED)
98 Million = Total Not in Labor Force (BLS over 16)
37% are not Employed and over 16 years old (BLS population)
40% not Employed using BLS over 16 Population minus Total Employed
Civilian Employment-Population Ratio
2014-10: 59.2 Percent (+ see more)
Monthly, Seasonally Adjusted, EMRATIO, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/EMRATIO
Civilian Employment
2014-10: 147,283 Thousands of Persons (+ see more)
Monthly, Seasonally Adjusted, CE16OV, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/CE16OV
Not in Labor Force
2014-10: 92,041 Thousands of Persons (+ see more)
Monthly, Not Seasonally Adjusted, LNU05000000, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/LNU05000000
Total Population: All Ages including Armed Forces Overseas
2014-10: 319,302 Thousands (+ see more)
Monthly, Not Seasonally Adjusted, POP, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/POP
Civilian Employment-Population Ratio
2014-10: 59.2 Percent (down frim high 64.7% in year 2000)
Monthly, Seasonally Adjusted, EMRATIO, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/EMRATIO
---------------------------
Civilian Labor Force Participation Rate - With No Disability, 16 years and over
2014-10: 68.8 Percent (+ see more)
Monthly, Not Seasonally Adjusted, LNU01374593, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/LNU01374593
Civilian Labor Force Participation Rate - 25 to 54 years
2014-10: 81.1 Percent (poor trend, decreasing)
Monthly, Not Seasonally Adjusted, LNU01300060, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/LNU01300060
Active Population: Aged 25-54: Males for the United States©
2013: 53,964,000.00000 Persons (+ see more)
Annual, Not Seasonally Adjusted, LFAC25MAUSA647S, Updated: 2014-02-05
http://research.stlouisfed.org/fred2/series/LFAC25MAUSA647S
Full-time equivalent employees
2013: 125,980 Thousands (+ see more)
Annual, Not Seasonally Adjusted, A4301C0A173NBEA, Updated: 2014-08-21
http://research.stlouisfed.org/fred2/series/A4301C0A173NBEA
Employed, Usually Work Full Time
2014-10: 119,632 Thousands of Persons (+ see more)
Monthly, Seasonally Adjusted, LNS12500000, Updated: 2014-11-07
http://research.stlouisfed.org/fred2/series/LNS12500000
SSA Wages by income
http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2013
---
But I think this is related. US Puts many males in prison since there isn't enough work, and since we don't respect intellectuals we only respect people that work.
- Crime rates have decreased by about 25 percent from 1988 to 2008.[24]
- In recent decades the U.S. has experienced a surge in its prison population, quadrupling since 1980, partially as a result of mandatory sentencing that came about during the "War on Drugs."
- Violent crime and property crime have declined since the early 1990s.[25]
- Prior to the 1980s, private prisons did not exist in the US. In the 1980s, as a result of the War on Drugs by the Reagan Administration, the number of people incarcerated rose. This created a demand for more prison space. The result was the development of privatization and the for-profit prison industry.[112]
- "a majority of Louisiana inmates are housed in for-profit facilities, which must be supplied with a constant influx of human beings or a $182 million industry will go bankrupt."[115]
- Sociologist John L. Campbell of Dartmouth College claims that private prisons in the U.S. have become "a lucrative business."[121] Between 1990 and 2000, the number of private facilities grew from five to 100, operated by nearly 20 private firms.
- Within three years of being released, 67% of ex-prisoners re-offend and 52% are re-incarcerated, according to a study published in 1994.[149]
- One in three Americans have a criminal record, according to recent FBI estimates.
http://thinkprogress.org/justice/2014/09/17/3568232/the-united-states-ha...
So with Exploding Federal Continuing Resolutions (now called Budgets)... Exploding Budgets for MIC & Prisons... Maybe we should stop putting people in jail, labeled at a criminal, for non-violent crimes or just consensual crimes like Drug Use or Drug Possession???
More Women today work than men. Maybe we are Gelding our US Men. Maybe we disrespect people that are intellectuals, don't work, are in academia, religious leaders, or Bloggers. Maybe the privileged would like to make Eunuchs out of most men in the USA.
- Or we could encourage small businesses to compete with big corporations
- Or we could plan apprenticeships, encourage 17 year olds to apprentice and learn life long skills and get experience
- Or we could help men & women pursuit studies other than for careers
https://en.wikipedia.org/wiki/Incarceration_in_the_United_States
Incorrect tense Eric, should say "Everyone else has sucked"
Your turn to have a suck now, lie down, open wide........
IF they are pumping more crude, I don't think the over production is just to put competitors out of business, I think it is also to maintain cashflow. You halve the price of your products, you have to make twice as many to make the same turnover. The larger the organization, the larger the fixed costs, besides the fact that these rigs were leveraged to the hilt in the first place.
You cant overproduce oil, its used up or stored. So where is this new oil coming from; im looking at hedge funds, they might want them to force them to put the storage on the market. Will see soon, if the rummors are true about off shore oil.
Bloomberg = Sham Wow.
Spent the morning there today.
I thought my head would explode from all the Putin horseshit sandwiches they serve up.
Apparently Russia's so dead it's no longer on the map.
JP Morgan's chief economist says the oil-price plunge may tip Texas into recession next year
It's like the old vaudeville joke "I'm losing money on each sale but I'll make it up in volume". Oil cos are reacting to their quarterly cash flow stmts,not their P&L.
Considering that Wall Street can distort the "fair market price" of most any marketable item these days, who is to say that WTI and Brent won't rise next year DESPITE a supply overhang. I wouldn't be surprised in the least if oil stages a recovery (at least for a while) in spite of the fundermentals...
Considering how hard Central Bankers in concert with TBTF banks have "worked" to promote the illusion of "economic prosperity", it seems hard to believe they will sit idly by and watch oil prices crash... which could wreak massive collateral damage in the process.
FUBAR.
Since it is basically a nazi corporate system, with all 6 years of NIRP, ZIRP, & QE infinity... it only help those with:
- Monopolies!!
Author has some learning to do about the business. Capital to drill is a sunk cost. Operators will pump oil as long as it provides positive cash flow; disergarding UOP rates. I doubt many can operate at $20 oil. Difficult in the early 80's. Most of the bigger fields in the US are cutting 98% water. Remember the joke at the time..." how do you get a geologist out of a tree?"... "u cut the rope".
The only water coming out of these wells is what was pumped in to carry the sand.
I look at this way...cheaper and more numerious molotov cocktails. Those MRAPs will be burning like a mofo
Bloomberg gets more retarded by the day. Does anyone look at the structure of their articles? It's always out of date shit copy pasted together to back up the first paragraph which they're pretending is some new news.
It's some of the sloppiest shit I've ever witnessed and that includes the hacks at my local bum fuck newspaper.
Gasoline will halt and reverse its downward move sometime between December 24 and January 2.
Lower petrol prices will have played their pathetic part in stimulating Christmas shopping by then. How much more have you spent on gifts because of low prices at the pump?
And Exxon will be anxious to get back to gouging it's customers
How much more have you spent on gifts because of low prices at the pump?
0$ I may start day tripping away from home on my days off, but I ain't buying more shit because premium is closer to $2 than $3. My family is spending less every year on Christmas gifts. We have all been blessed beyond our wildest dreams and don't need more stuff. I'm getting smoked pork shoulder and belly from my brother. I am roasting micro-lot coffees for everyone. I buy enough green coffee now that I pay about $4/lb for the best coffees in the world. The oil companies never made as much per gallon of gasoline sold as Fedzilla anyways.
http://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-...
How much more have you spent on gifts because of low prices at the pump?
Nothing, but I spent a lot on gifts because of royalties on a big shale oil well in the Wolfcamp, low oil notwithstanding, last months check was $90k. Wont be that big for November and December production but I think oil is going back up to $75 by the end of the year. OCICBW and I am biased.
You and Bumbu Sauce are completely off the savvyness chart; quite unlike the other 99.97% of Americans.
Your neighbors are even more blessed than you are.
"Hey, bid, come on over. We got a ton of baby back ribs. And bring a jumbo Tupperware."
"Hey, bid, my monthly shale oil check came today. Let's go to Sear's and I'll get you that 2 speed Toro lawn mower you've been lookin at."
Remember when life used to be like that?
Headlines, Headlines...
-
- 11 million fewer Americans in labor force...
- Govt Data: 1 in every 5 jobs now held by foreign workers...
- Census: Immigrant population has doubled since 1990...
- 80 million immigrants by 2060...
- NEW AMERICA: Immigrants Account for All Jobs Growth Since '07...
Well at least we are investing in Nazi Technology, nice that we built backdoors into computers & the internet
- Hackers expose massive federal contractor...
- Personal info on 50,000 employees...
- Security breaches skyrocket...
- ARMY developing wing-flapping robot fly...
Bloomberg, Bloomberg, Bloomberg.
ZH and Bloomberg must be lovers because they definitely are in bed together.
Ugh (hurls on keyboard)
i'd like to go old school, invest in, or deposit money into a state bank like n.d. who invests in, loans to co.'s, and citizens doing business in their state, they have more to gain, making a co. work, and not just hedge one way or the other.
i don't have much, but i'd invest in a fracking co. directly, or through a n.d. state bank, if they had a vision of a good central location for refineries, work deals with REGIONAL co.'s that already have pipe-lines coming from their refineries, and both make money by creating effiecentcies in refining, and using current pipe-lines in place.
there's no doubt some fracking operations have to go, i compare it to flipping houses in july of 2008, some caught the market high, just ahead of the market low crash.
the solid fracking co.'s will still be here later, and be fine tuned without levered money, thats where i want to be.
most pipe-lines go from the so.-no., large refineries and the product are in the south, with n.d. wells, and canada wells, going to several refineries in n.d., and a deal being made with REGIONAL existing pipe-line owners there would be no need for keystone, canadas oil could be refined in n.d..
oil coming from overseas would still be refined in the south and be used to supply america, n.d., and canadas oil wells would be refined and used to supply northen states in america and canada.
you want stable, and most likely future lower energy costs for america, lets us be energy independent.
there're two large, and equal hurdles though, govt. who publicly state they want energy independence, then make it impossible, behind close doors, and then there's mother nature.