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How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None)

Tyler Durden's picture




 

Submitted by Jim Quinn via The Burning Platform blog,

I’m tossing you a softball. Now think carefully. The choices are:

A. Zero

B. Zero

C. Zero

D. Zero

I know Americans are math challenged and need a calculator to subtract 10 from 20, but I think even a CNBC bimbo or Princeton economic professor could get this one right.

Last year there was much banter from the Wall Street shysters and Bakkan shale oil experts about the true breakeven price for shale oil not being $80 (which is the truth) but actually being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies.

 

Well, we are now six months further down the line and Bakkan shale oil this morning is selling for $37 per barrel. Where are the babbling baboons of bullshit with storylines of shale oil breakeven prices of $30? I guess even corrupt lying scum can’t work up the gumption to try and convince the ignorant masses of that doozy.

Think about this for a minute. What business in their right mind would start a project that is guaranteed to lose $43 per barrel produced? How long will these small shale oil companies with gobs of junk bond debt last at these prices? The answer is easy. Not long. The bankruptcies have begun. The rig counts are collapsing at the fastest pace in history. And the number of layoffs is increasing exponentially. It’s like watching a devastating car crash in slow motion. And it has only just begun.

And as OilPrice.com's Andrew Topf explains it's going to get worse...

100,000 Layoffs And Counting: Is This The New Normal?

 

This time a year ago, the oil industry’s biggest problem was finding a way to deal with the “retirement tsunami” about to crash down on it as older oilfield workers hung up their cork boots to enjoy freedom-55. Now, with oil prices still in the doldrums, many of those same workers are lucky to be hanging onto their jobs, while others have been booted from the payroll as an ugly wave of layoffs takes hold.

 

One of the worst-affected areas is the Canadian oil sands, where a higher per-barrel cost of production than conventional sources has oil companies scrambling to cut capital expenditures and in several cases, put long-term projects on ice.

 

On Thursday one of the region’s big players, Husky Energy, announced that about 1,000 construction workers employed by a contractor at its Sunrise oilsands project, would be issued pink slips. The bad news for the workers came a day after Husky said that it had started to produce from the $3.2 billion, steam-assisted gravity drainage (SAGD) Sunrise operation, which it co-owns with BP.

 

The layoffs by Husky followed Suncor’s decision in January to cut 1,000 employees and Royal Dutch’s Shell’s announcement that it will shed close to 10 percent of the workforce at its Albian sands project – around 300 workers.

 

The Canadian Association of Oilwell Drilling Contractors, which closely tracks drilling activity, said in February that up to 23,000 jobs could be lost as the number of rigs fall. Since the price started dropping last September, about 13,000 positions in the Alberta natural resources sector, mostly oil and gas, have been eliminated, according to Statistics Canada.

 

The bloodletting among the oil majors and their vast web of ancillary services has of course extended to the United States – which appears to be taking far more casualties than Saudi Arabia in the battle for marketshare. In January oilfield services giant Baker Hughes said it will lay off 7,000 employees, about 11 percent of its workforce; that number was rivalled only by its competitor, Schlumberger, which let go 9,000 workers. Shell, Apache, Pemex and Halliburton are among major oil companies to issue recent pink slips to the growing army of unemployed oil workers. In the U.S., the worst pain is, not shockingly, expected to be felt in Houston. Assuming a one-third reduction in oil company capital expenditures this year and 5 percent in 2016, the hydrocarbon capital of the world could lose 75,000 jobs, in a city that has added 100,000 new positions every year since 2011, said a professor at the University of Houston.

 

The oil jobs nightmare is in fact spreading like a cancer. According to Swift Worldwide Resources, “the number of energy jobs cut globally has climbed well above 100,000 as once-bustling oil hubs in Scotland, Australia and Brazil, among other countries, empty out,” Bloomberg reported recently. Examples include foreign-trained engineers whose promise of employment at LNG plants in Australia have evaporated as projects get delayed; development projects halted in Brazil resulting in the closure of international schools and the relocation of workers; and 8,000 Mexican workers left without paycheques after Petroleos Mexicanos slashed contracts and purchases, Bloomberg said.

 

Of course, industry defenders say the oil and gas business is boom and bust by nature, and most veteran oilmen have gone through many a cyclical downturn and lived to fight another day. The question of whether or when the oil price will recover and all those laid-off workers are rehired is best left to the prognosticators. In the meantime, there is a danger in oil companies cutting too deep, according to oil and gas industry recruiters. They say firms that lay off too many workers will put pressure on older workers who may opt for early retirement. That could leave companies in the same situation as the 1980s, when an oil downturn meant few businesses hired and new graduates went into other more promising fields, leaving a serious talent gap.

 

“They will be very careful about reducing staff, because they’ve seen cycles like this before where commodity prices are weak for a certain period time, they lay off employees and they’re not well-positioned to get access to high-quality talent,” said Mike Rowe, vice president of exploration and production research at Tudor Pickering Holt, an energy investment and merchant bank, in a story run by CNBC on how the layoffs could come back to haunt the industry.

By the time this plays out, North Dakota, Texas, Oklahoma, and parts of Pennsylvania will be in smoldering ruins of unemployment and dramatically reduced tax revenues. These energy jobs were high paying. Maybe they can get themselves an Obama job – waiter, bartender, hotel room cleaner, social worker, or government drone.

 

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Thu, 03/19/2015 - 12:56 | 5906510 Larrioto
Larrioto's picture

Mad ?

Thu, 03/19/2015 - 13:03 | 5906531 Haus-Targaryen
Haus-Targaryen's picture

Looking forward to $35.  I don't think it can go much lower. 

Thu, 03/19/2015 - 13:19 | 5906592 Chuck Knoblauch
Chuck Knoblauch's picture

You don't?

What's a bailout?

You'll be paying them to drill for it soon.

Thu, 03/19/2015 - 13:21 | 5906600 Publicus
Publicus's picture

Once the debt is canceled the cost of production goes way down. Oil will be free.

Thu, 03/19/2015 - 13:35 | 5906659 CrazyCooter
CrazyCooter's picture

If I have all my debt paid off before this whole son of a bitch blows sky high I will be sooooooo happy. This is going to get downright scary before its over.

WTI may see a 20 handle before the real bottom is in. I think a 30 handle is baked into the cake. This is going to destroy huges swaths of the private economy and the bag holders (i.e. the owners of all these junk bonds) are going to take one hell of a bath. Munis, counties, and states are going to be belly up on tax revenue, so look forward to more taxes if you own assets in these areas.

As always, the deep pockets will show up during the carnage, armed with knowledge and experience and they will pencil fuck everybody of the good assets at rock bottom prices.

Oil will go back up eventually, it always does, but it is going to be a really rough ride until then!

Regards,

Cooter

Thu, 03/19/2015 - 13:54 | 5906729 Osmium
Osmium's picture

I guess that depends on who the bagholders are.  Pension funds for Joe Six Pack, yep, they will get hammered.  Large banks?  Nope, they will receive another bailout.

Thu, 03/19/2015 - 14:30 | 5906924 Pool Shark
Pool Shark's picture

 

 

Cooter,

I hear ya. I worked petro-chemical here in Kalifornia between 1984 and 1995. I remember the period well; it was ugly (even though the rest of the country was coming out of recession). This time, the entire country is just entering a recession as the price collapses.

It's déjà vu all over again,... except worse...

Thu, 03/19/2015 - 22:09 | 5908581 cornflakesdisease
cornflakesdisease's picture

"This is going to destroy huges swaths of the private economy and the bag holders (i.e. the owners of all these junk bonds) are going to take one hell of a bath."

 

Oh, you mean Wells Fartgo?

Thu, 03/19/2015 - 22:10 | 5908586 cornflakesdisease
cornflakesdisease's picture

"This is going to destroy huges swaths of the private economy and the bag holders (i.e. the owners of all these junk bonds) are going to take one hell of a bath."

 

Oh, you mean Wells Fartgo?

Thu, 03/19/2015 - 16:49 | 5907493 Excursionist
Excursionist's picture

$35 or $45... doesn't seem to matter much here in SoCal, where gasoline is stuck around $3.50 a gallon because of regulations & no new refineries in decades.

But hey... at least the endagered orange-striped farting beetle won't go extinct.  This year.

Thu, 03/19/2015 - 13:59 | 5906765 zjxn06
zjxn06's picture

Bakken (Improv your crudibility by speling it kurrektly)

Thu, 03/19/2015 - 14:50 | 5907021 Cpl Hicks
Cpl Hicks's picture

True that.
When a writer can't get the little things correct it's hard to take them seriously on the bigger issues.

Thu, 03/19/2015 - 17:24 | 5907605 phaedrus1952
phaedrus1952's picture

Yeah, zjx, one would think if Quinn cannot even spell Bakken properly, the rest of his 'analysis' would be suspect ...which it sure is.

Thu, 03/19/2015 - 12:58 | 5906513 McMolotov
McMolotov's picture

They lose money on every sale, but they'll make it up on volume.

Thu, 03/19/2015 - 13:05 | 5906537 RadioactiveRant
RadioactiveRant's picture

Relax, its working for AMZN.

Thu, 03/19/2015 - 13:11 | 5906561 angel_of_joy
angel_of_joy's picture

It's working for AMZN only as long as there are enough suckers out there to buy their stock regardless of performance. Don't you love the new US economy ? It's run by giants like Apple, Amazon, Facebook, LinkedIn & Tweeter... world would be a sadder place without any of them ! /s

Thu, 03/19/2015 - 13:24 | 5906616 Publicus
Publicus's picture

The Fed can print an infinite amount of money to fund economic activity.

Thu, 03/19/2015 - 13:45 | 5906698 angel_of_joy
angel_of_joy's picture

Yeah, and it's worth shit !

Thu, 03/19/2015 - 14:25 | 5906916 kaiserhoff
kaiserhoff's picture

Burning worthless money causes air pollution.

Just send it to me, and I'll be glad to dispose of it properly.

 

Thu, 03/19/2015 - 15:18 | 5907144 angel_of_joy
angel_of_joy's picture

By that time it won't be worth the shipping costs. I'm affraid you'll have to collect it the old way, by wheelbarrow.

In the mean time though, you could ask the FED to share with you some of their amazing "assets" they store on their balance sheet (I suggest some of those Fanny Mae MBSes from, say '07). They'll ask you for full nominal price, but I'm sure you could crank out some sort of deal with them eventually...

Thu, 03/19/2015 - 13:33 | 5906652 Buckaroo Banzai
Buckaroo Banzai's picture

Actually it will work great for Amazon as soon as they drive out of business every brick and mortar establishment. Bookstores died 5 years ago, now shopping malls are getting murdered. Once they get monopoly power see what happens.

Of course, AMZN shareholders won't see much of it, most of the actual cash will get looted by Bezos and other Amazon executives.

Thu, 03/19/2015 - 13:47 | 5906702 angel_of_joy
angel_of_joy's picture

If Amazon shareholders are dumb enough to believe Bezos, then they deserve to be parted from their money...

Thu, 03/19/2015 - 13:00 | 5906521 Hohum
Hohum's picture

Always interesting.  It suggests to me not even $80/barrel is break even in the Bakken, but who knows?

https://www.dmr.nd.gov/oilgas/stats/statisticsvw.asp

Thu, 03/19/2015 - 13:16 | 5906528 Kirk2NCC1701
Kirk2NCC1701's picture

"How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None)"

Ah, but the Big Fish still get to eat the Little Fish (via bankruptcy fire sales) -- thanks to the Fed and its QE: "Money for nothing, and checks for free!"

Sing along now... "Money for nothing... easy, easy money..."

Note that Big Fish control Big Gov. Little Fish do not. Place your bets accordingly.
.

p.s. "Ditto" for AU and AG mines: "Con-so-li-da-tion", i.e. hostile takeovers and bankruptcy sales.

You should know by now that it is in the very Fabric/DNA of the current Monetary System (fiat currency + FRB + Derivatives) to culminate in Socialism for the Western Oligarchs (asymmetric Benefits that privatizes profits, and nationalizes debts/losses).

Amschel Meyer Rothschild must be glowing in his grave, and toasting with Lucifer.

Thu, 03/19/2015 - 13:17 | 5906590 Seasmoke
Seasmoke's picture

Flies are buzzing around my head
Vultures circling the dead
Picking up every last crumb
The big fish eat the little ones
The big fish eat the little ones
Not my problem give me some

Thu, 03/19/2015 - 13:31 | 5906645 swmnguy
swmnguy's picture

"Socialism for the Western Oligarchs (asymmetric Benefits that privatizes profits, and nationalizes debts/losses)" is a great description.

It's what Mussolini referred to using the word "Fascism."

Fascism isn't about marching around shouting in cool uniforms, nor about having people lecture you on behavior.  Those are surface characteristics that can be found elsewhere.  It's about allowing corporate power to take over and subsume state power, for the benefit of the corporate elites.  That's why "Islamo-Fascism" is a nonsense term.  The Islamists are religious fanatices bent on a repressive and violent theocracy, which is something I want no part of, but it's not "Fascism."  

Same with American Liberals; they're not inclined toward fascism because a lesbian might lecture you on pronouns, or a vegan might lecture you on eating meat.  That's annoying, but what makes American Liberals tend toward fascism is that they support measures which put more and more public and state interests into the hands of corporate interests, for the benefit of the corporate interests first and anybody else second if at all (examples being "ObamaCare" with is a bailout of corporate insurance and medical interests which have otherwise priced themselves out of business; "HAMP" which uses public/government money to bail out corporate finance housing lenders who would otherwise lose on investments they never should have made; Any student loan program, which will use public/government money to bail out corporate finance education lenders and their collaborators in the Education industry who have also priced themselves out of business; among many other available examples).

I hate to get pedantic about word choices, but words have meanings and when the subject is important, it's critical to use the right word to refer to what you're talking about.  America's political vocabulary has been very intentionally drained of meaning, and words are used to refer to things other than what the words mean.  That has the eventual effect of preventing us from communicating with each other on political topics, and I don't have to tell you who benefits from, and desires, that outcome.

Thanks for the good, concise description.

Thu, 03/19/2015 - 13:50 | 5906704 Buckaroo Banzai
Buckaroo Banzai's picture

Sorry, but you're wrong. Words do have meanings, and you are misusing the word "fascism". Fascism is defined as NATIONAL SOCIALISM. Under fascism, corporations do work closely with the State, but they maintain a separate identity, and are subsidiary to the State.

What we have today in this country is an entirely different system. Corporations have evolved into INTERNATIONAL entities, not national entities as they were in the 1930s and 1940s. Furthermore, corporations don't work closely with the State, rather, Corporate EXECUTIVES have been wholly integrated into the ruling elite, which is a class that now consists of corporate executives, national politicians, and SES-level federal bureaucrats. The modern publicly-traded International Corporation has been reduced to a privileged legal entity that is looted by the entire elite class via stock options, stock buybacks, political contributions, lobbying expenses, and the associated revolving doors between the corporate suite, K Street, and capitol hill. Corporations are still nominally owned by the "public", but the wealth and power they generate have been completely co-opted by the Elite class.

What most people miss is how dramatically corporations have evolved over the last century, and how the role of corporate executive has changed. That is where the confusion lies.

Thu, 03/19/2015 - 14:41 | 5906987 thamnosma
thamnosma's picture

Nice explanation.   Still, the State hands out benefits to some corporations and punishes others.  In that sense, there remains a measure of the classical fascism.  Obviously, the international corporations can do some level of moving around, shifting to more favorable State environments.  However, that is becoming more difficult as "global governance" moves forward on various levels.   I have a hard time sorting out these ruling elite relationships but lean toward the State still maintaining ultimate dominance.

Thu, 03/19/2015 - 15:51 | 5907298 Buckaroo Banzai
Buckaroo Banzai's picture

"Still, the State hands out benefits to some corporations and punishes others.  In that sense, there remains a measure of the classical fascism."

Not really. A better way to look at it is an internal political struggle between competing factions of the elite. And don't forget, if you are a corporate executive at a corporation that is on the losing end of lobbying or politics, you will get paid regardless. Ultimately it is the shareholder that will get screwed, not the executive.

Thu, 03/19/2015 - 13:48 | 5906706 Consuelo
Consuelo's picture

Probably something more akin to a 10 ft. tall demon with a 20" schlong and a big shit-eating grin on his face...

Thu, 03/19/2015 - 14:13 | 5906866 papaswamp
papaswamp's picture

Oh yea the mineral rights fire sale that is about to hit will be epic.

Thu, 03/19/2015 - 13:14 | 5906530 Callz d Ballz
Callz d Ballz's picture

It's ok, the U3 number won't count them.

Thu, 03/19/2015 - 13:05 | 5906535 zeroaccountability
zeroaccountability's picture

I was cleaning out my storage locker over the weekend, and met a young guy also cleaning out his.  I asked, "Are you moving?"  He said he just moved up from Texas.....got a job in an oilfield in Brighton (Colorado).  I said "cool!".  I felt sorry for the guy.  He left TEXAS to get an oilfield job in COLORADO?  I give him 2 months before the pink slip, if that. 

Thu, 03/19/2015 - 13:11 | 5906560 walküre
walküre's picture

He misunderstood the employment ad.

The job in Coloroda is producing medicinal Mary Jane's oil. Excellent pain killer and great alternative to typical chemicals.

Good growth industry especially with more suffering and depression due to lower crude prices.

Thu, 03/19/2015 - 13:13 | 5906573 Captchured
Captchured's picture

Don't feel sorry for him. He got out of Texas.

Thu, 03/19/2015 - 13:06 | 5906538 Bunga Bunga
Bunga Bunga's picture

E. Booyah

Thu, 03/19/2015 - 13:09 | 5906549 Be_Optimistic
Be_Optimistic's picture

Hurry up with QE4 already. Bursting of bubbles suck. 

Thu, 03/19/2015 - 13:16 | 5906582 Chuck Knoblauch
Chuck Knoblauch's picture

When did QE3 end?

Thu, 03/19/2015 - 13:24 | 5906617 sun tzu
sun tzu's picture

Fed's balance sheet is still expanding by about $5 billion per week

Thu, 03/19/2015 - 14:42 | 5906996 thamnosma
thamnosma's picture

Hey, that's stealth QE.  We need official pronouncements.

Thu, 03/19/2015 - 13:09 | 5906552 Captchured
Captchured's picture

The best areas in the Bakken are currently in development mode (that means that at least one well has already been drilled in each unit and rest are being drilled) or have been fully developed. The industry knows what the wells will do over the long haul (there are error bars on this, obviously, as tech and understanding change). A 20%+ ROI is very difficult to achieve at today's prices in all but the very best areas. Big pain being felt. bigger losses straight ahead.

It is a business of big cycles and we are in the thick of one of them right now. It will be interesting to see how many of the 60+ crowd take a look around and say, "I've seen enough of this shit" and just retire. Like the article states, there is a huge knowledge vacuum induced by the downturn in the 80s. There is no easy way to replace that. good times, good times.

Thu, 03/19/2015 - 13:09 | 5906553 zeroaccountability
zeroaccountability's picture

I think it was Shedlock's chart showing only 2 states, Texas and Colorado, had HIGHER nominal real estate prices than before the meltdown (e.g. California still -20%, etc).

Texas had the oil..Gone.

(Colorado has the dope...for now).

Thu, 03/19/2015 - 13:10 | 5906559 SDRII
SDRII's picture

US just closed Djibouti embassy for few days

Saudi embassy close extended

US General says troops to Syria

UK deploys to Ukraine

How many countries need to be curtailed to fill the OPec mandated 1M b/d surplus...

Just saying

 

 

Thu, 03/19/2015 - 13:16 | 5906574 Dr. Engali
Dr. Engali's picture

Life's a bitch when the laws of supply and demand catches up with an overly financialized market. Market forces always win out in the end.

Thu, 03/19/2015 - 13:38 | 5906669 swmnguy
swmnguy's picture

Very much so.  Actual supply and demand is much closer to a "Natural Law" than anything in our financial system.  Supply and demand applied to economies long before anyone thought up Finance.  Yet we hear a lot of talk that tries to attach the inevitability of Natural Laws to Finance.  Guess who tries to convey that as reality?  Financiers, obviously.  But Finance is abstract, dependent on human-made rules and those rules can be, and frequently are, changed.  Natural laws like Gravity and Thermodynamics don't change.  Supply and Demand, in their essence, are more like Natural Laws.  Therefore, when Finance (and any other abstract conceptual framework) gets too far out of synch with Natural Laws, the feces approaches the impeller at a foreseeable (if not predictable) rate of acceleration.

Thu, 03/19/2015 - 13:14 | 5906575 orangegeek
orangegeek's picture

100,000 lost jobs

 

and unemployment is down, right yellen?  you fucking asshole!!!

Thu, 03/19/2015 - 13:16 | 5906585 walküre
walküre's picture

"Patience"

Thu, 03/19/2015 - 13:26 | 5906597 Chuck Knoblauch
Chuck Knoblauch's picture

Should we bailout the Shale Industry too?

I think we should pay for them to drill for shale oil.

What do you think?

/sarc.

In the name of national insecurity, vote yes.

You all know its inevitable with this Congress.

None of those sissies want to get beaten like a Harry Reid.

Thu, 03/19/2015 - 13:25 | 5906622 TuPhat
TuPhat's picture

Article starts out with statements about shale oil but then verifies the premise with data about oil sands and Natgas.  Typical Jim Quinn garbage.  The price of oil has dropped.  All good for consumers and bad for big oil.  Jim, why can't you support your statements with real data.  It is out there.

Thu, 03/19/2015 - 13:29 | 5906627 Kirk2NCC1701
Kirk2NCC1701's picture

"Deficits don't matter" - Sith Lord Cheney

"Unemployment doesn't matter" - Fed cynics

Deficits and Unemployment are just very effective "Bright, shiny, bouncy, noisy Distractions" from the Main Event: The slow, steady, systematic wealth and asset transfer from the Many to the Few (from the 99% to the 1%).

To the 0.1%, actually. The Top 10% are buffers and Marks for the 1%, who in turn are buffers and Marks for the 0.1%. And so on...

Thu, 03/19/2015 - 13:29 | 5906637 Chuck Knoblauch
Chuck Knoblauch's picture

BAILOUT SHALE

BAILOUT SHALE

BAILOUT SHALE

 

young fools

Thu, 03/19/2015 - 13:30 | 5906638 Vergeltung
Vergeltung's picture

I file this crap away, along with the pieces on rig count.

 

(yawn)

 

Thu, 03/19/2015 - 13:30 | 5906639 BigStupid
BigStupid's picture

"What business in their right mind would start a project that is guaranteed to lose $43 per barrel produced? "

The trick is to make up for it in volume.

Thu, 03/19/2015 - 13:38 | 5906673 Downtoolong
Downtoolong's picture

You left out the two most essetial choices now pervasive in every online questionaire:

 

E. I don't know.

F. Kim Kardashian

Thu, 03/19/2015 - 13:47 | 5906693 moratar
moratar's picture

Once you have bussines going, the cost of keeping going is very low. Finding oil and starting the extraction costs a lot, but once the oil starts flowing it costs next to nothing.

Check out "lifting oil cost".

http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6

 

So new companies will not start. but the one working atm, will keep on going till like 13$ or till oil fields go dry (10 years? 40 years?)

So preety much 100% of companies can keep on going and still make money.

Thu, 03/19/2015 - 16:58 | 5907519 Jim Quinn
Jim Quinn's picture

Shale oil wells are 85% depleted after two years.

 

So you're wrong.

Thu, 03/19/2015 - 18:06 | 5907707 itchy166
itchy166's picture

Jim, you are confusing production rate with total reserves.  The rate decreases by as much as 85% in the first couple of years, thats correct.  The well can produce for decades afterwards with a pumpjack.

Once the investment in drilling and completing a well has been made, it costs very little to keep it pumping.  

Thu, 03/19/2015 - 13:48 | 5906707 FieldingMellish
FieldingMellish's picture

BLS will report this as 10K job gains in the energy industry.

Thu, 03/19/2015 - 14:02 | 5906780 Jack Burton
Jack Burton's picture
How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None)

Thank you for that post. I've posted long comments trying to make clear that fracking is oil and gas on the MARGIN. It is the high cost end of the supply. It is that simple! If you need all the resources of a fracking rig, it's supplies and man power just to get a short life well producing, you can only function with high oil and gas prices. Laws of Physics! Laws of Market economics! Neither of these two tell lies. But many people with a stake in fracking do lie! I have seen and read their false claims a hundred times.

Thu, 03/19/2015 - 14:05 | 5906809 Jack Burton
Jack Burton's picture

" being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies."

Another GREAT point. I kept saying this months ago. It was obvious they were playing investors for fools. And the big boys were spreading lies to keep the fools fully invested, while the big boys exited. If you are an investor, why would you fall for CNBC and the others lies. They talk the big boys books for them, manipulating you for fun and profit. Turn the fucking TV off, and start reading ZH, your wallet will love you for it!

Thu, 03/19/2015 - 14:16 | 5906872 Chuck Knoblauch
Chuck Knoblauch's picture

Half a trillion gambled by the banks on shale.

What happens next?

Is half a trillion a lot of money?

Thu, 03/19/2015 - 14:12 | 5906858 Jack Burton
Jack Burton's picture

 

"One of the worst-affected areas is the Canadian oil sands, where a higher per-barrel cost of production than conventional sources has oil companies scrambling to cut capital expenditures and in several cases, put long-term projects on ice"

This was Harpers "Pot of Gold at the end of Canada's Rainbow". Harper's economic plan for Canada was openly touted as "Tar Sands Mining". Making Canada the energy giant of the world. The big political battles were going to be pipelines for how to get oceans of thick tar sands crude down to US refineries in the Gulf, and also across the Rockies to BC ports for export to energy hungry China. Harper foresaw Canada Tar Mine extending as far as the eye coudl see in all direction. A Bonanza of high paying jobs and Provincial and State tax revenues! Mass Profits for invetors, pension funds, insurance companies and the corporate billionaires.

HARPER, it isn't happening. And your silence is breaking my eardrums!

Thu, 03/19/2015 - 14:14 | 5906870 Jack Burton
Jack Burton's picture
Husky Energy Inc swings to loss, cuts 2015 spending again to help ride out oil’s collapse

 

Thu, 03/19/2015 - 14:35 | 5906960 herman55
herman55's picture

https://www.dmr.nd.gov/oilgas/

.....the unhedged well head price for Williston Basin Sweet on Wednesday March18 at approximately 11:00 a.m.  was............$28.44.

Of that 1/6 goes to some farmer mineral acre holder; 11 1/2% goes to the State of North Dakota..........so the OWHP, Operator Well Head Price = $21.90 barrel

 

We are bleeding up here.

Thu, 03/19/2015 - 14:39 | 5906977 herman55
herman55's picture

.......and I told you before, watch the service rig count not the drilling rig count. when the service rig count starts to drop you will know, then and there, no one can take the pain any longer; if the oil well breaks down........it sits there.

Thu, 03/19/2015 - 14:45 | 5907004 venturen
venturen's picture

These medium companies aren't going to pull back till they are bankrupt! Thinking that the individual company will pull back for the collective good is DREAM LAND! $25 A BARREL!

Thu, 03/19/2015 - 15:05 | 5907095 Volkodav
Volkodav's picture

If production falls enough, also.

shale are quick depleters

Thu, 03/19/2015 - 15:25 | 5907189 herman55
herman55's picture

.......up here in the Bakken those 2 year old fracked wells are calle "Ron Burgundy non-secreeters".

 

That should add just a bit of humor to this discussion.

Thu, 03/19/2015 - 14:44 | 5907003 venturen
venturen's picture

Baloney! Faith in capitalism is truly gone. Remember when all the talking heads said we were at peak oil or Goldman said it was going to $200. Well welcome to the real American where people solve problem and make things cost effective. This is like thinking paying teachers $100k to teach inner city kids will make them smart. They get smarter when they want to...not because you throw money at it! I think $25/barrel is in the cards....they have built WAY TOO MUCH capacity and we will find out who can pump at $25! One thing is finally making sense. Note how cheapa your produce is, chicken, pork, etc That is because people are challenged on price....NOT WALL STREET ONE WAY UP FANTASY!

Thu, 03/19/2015 - 15:21 | 5907162 Grimaldus
Grimaldus's picture

Wow man such negative karma man. Jim Quinn dude take a big Quaalude and let the positive karma floooooow man.  How about some nice positive karma like how fracking has reduced carbon emissions like nothing else ever?

Yes it's true. So much nat gas production now, due to FRACKING (you assholes) all the coal fired plants are switching over. Huge reduction in carbon emissions. FRACKING has saved the f**king planet man. Wow like totally heavy man.

But don't take my word for it. Read em and weep. Take your negative karma and stick it up your ass. Then FOAD.

http://www.americanthinker.com/blog/2015/03/fracking_saved_us_economy_.html

 

Grimaldus

 

Thu, 03/19/2015 - 15:27 | 5907200 Totentänzerlied
Totentänzerlied's picture

I told you so.

Thu, 03/19/2015 - 15:40 | 5907262 dscott8186
dscott8186's picture

The lower price only means there is MORE oil to be sold to displace Brent oil to the PADD 1 refiners.  The trick as always is to find the bottom on price to balance the volume to be sold.  ZH already covered the dynamic of oil companies having to cover bond interest expenses by selling more oil as the barrel price gets cheaper.  IF $80/barrel was the break even price at x barrels a day, then 2x barrels are required to cover $40/barrel to make the same profit dollar amount, we call this "discounting".  Discounting is what Walmart does, making their profit on volume.  The layoff of workers is regretible but the market will stabilize as it always has done before.  Like you said, the oil market is a boom bust business.

Thu, 03/19/2015 - 16:15 | 5907386 Oso
Oso's picture

actually, not entirely true.  bakken shale plays are expensive because they cant get enough sand.  refrac off wells there brings costs down to $20 / barrel easy.  prob same thing in the other plays too, but depends on how much sand you can get.

Thu, 03/19/2015 - 16:31 | 5907432 AusteninTX
AusteninTX's picture

$5,000,000 to drill well/600,000 BOE = $8.33 break even cost. There are other cost invovled, but you get the point.

 

Thu, 03/19/2015 - 16:50 | 5907499 mastersnark
mastersnark's picture

No worries, just use non-GAAP numbers. You can "profit" all the way down to $14, then get a bailout.

Thu, 03/19/2015 - 18:45 | 5907827 Wild Theories
Wild Theories's picture

Hey, there are shale companies that have costs lower than $37, wait what? bakken shale you say? well, darn, and I thought we were talking about all shale plays

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