U.S. Deepwater Offshore Oil Industry Trainwreck Approaching

SRSrocco's picture

SRSrocco

By the SRSrocco Report,

The U.S. Deepwater Offshore Oil Industry is a trainwreck in the making.  The low oil price continues to sack an industry which was booming just a few short years ago.  The days of spending billions of dollars to find and produce some of the most technically challenging deep-water oil deposits may be coming to an end sooner then the market realizes.

Drilling activity in the Gulf of Mexico hit a peak in 2013 when the price of oil was over $100 a barrel.  However, the current number of rigs drilling in the Gulf of Mexico has fallen to only 37% of what it was in 2013.  This is undoubtedly bad news for an industry that fetches upward of $600,000 a day for leasing these massive ultra-deepwater rigs.

One of the largest offshore drilling rig companies in the world is Transocean, headquartered in Switzerland.  They lease ultra-deepwater rigs all over the globe.  When the industry was still strong in 2014, nearly half of Transocean's fleet of 27 ultra-deepwater rigs were leased in the Gulf of Mexico.  Even though Transocean was quite busy that year, its ultra-deepwater rig utilization was 89% during the first half of 2014, down from an impressive 95% in 1H 2013.

The term utilization represents the total number of working rigs in the fleet.  So, in 2013, Transocean had 95% of its rigs busy drilling oil wells.  But if we look at the following chart, we can see the disaster that has taken place at Transocean since the oil price fell by more than 50%:

Currently, Transocean's ultra-deepwater rig count has dropped to a low of 12 versus 27 in 2014.  And it's even worse than that.  Since 2014, Transocean added three more new rigs for a total number of 30.  Thus, Transocean's ultra-deepwater rig utilization is down to a stunning 37% compared to 95% just four years ago.  So, when a rig isn't working, it's not making revenue.

The loss of revenue from these ultra-deepwater drilling rigs seriously hurts the company's bottom line.  According to Transocean's Q2 2017 Report, they lost $1.7 billion in one quarter.  However, the majority of that loss was due to a large asset disposal.  Regardless, even if we go by adjusted income and remove the large disposal writeoff, Transocean still only made a whopping $1 million adjusted profit on total revenues of $1.5 billion.

To give you an idea of the size of one of Transocean's rigs lets takes a look at its Sedco Express ultra-deepwater drilling platform.

The Sedco Express deepwater is semi-submersible that is longer than a football field (364 ft) and weighs 38,000 tons when operating.  The Sedco Express rig has a crew of 184 people and can drill a well 35,000 feet deep.  When these large rigs were in high demand; they were contracted to drill oil and gas wells all over the world.

For example, the Sedco Express was hired by Erin Energy Corp (formerly Camac) to drill oil wells off the coast of Nigeria.  Transocean received $300,000 a day for leasing Sedco Express to drill these wells.  At nearly a $10 million a month, it doesn't take long for these rigs to earn some serious revenue.

Unfortunately for Sedco Express, its drilling days are numbered.  How numbered?  Actually, its drilling days are over for good.  Why?  Because Sedco Express is now being sent to the junkyard to be "environmentally scrapped."

You see, Sedco Express is an older rig that is no longer useful or commercially viable, especially in the depressed ultra-deepwater drilling industry.  As I stated above, Sedco Express did receive that $300,000 per day to drill oil wells off the Nigerian coast, but that was back in 2014.  If we take a look at Transocean's Fleet Status Report, we can see Sedco Express at the bottom:

Here we can see that Sedco Express entered service in 2001.  Thus, Sedco Express is only 16 years old.  Again, if we look at the list above, Transocean had most of its rigs in service at the beginning of 2014.  Furthermore, half of the rigs were leased in the U.S. Gulf of Mexico.  Now, let's look at a more recent Transocean Fleet Status Report:

Please notice the number of STACKED rigs on the list (right-hand side of the table).  Transocean now has 11 rigs working, 16 stacked and 3 idled.  However, the rigs highlighted in yellow represent the rigs heading to the junkyard.  Transocean is junking these 5 ultra-deepwater rigs plus another deepwater rig called the Transocean Marianas.  Instead of paying the $40,000 a day to warm stack or $15,000 a day to smart stack these rigs, Transocean decided it was a better financial decision just to remove them from their fleet.  I would imagine if Transocean believed the price of oil would recover to $80-$100 quickly, they might have held off this decision.

Unfortunately, mainstream energy analysts do not believe the ultra-deepwater rig industry will recover until at least 2020 or more realistically by 2024.  While the mainstream energy analysts believe the ultra-deepwater drilling rig industry will improve within the next 6-7 years, I don't think it will ever recover.  Rather, I see a continued disintegration of this HIGH COST, LOW EROI energy industry (EROI - Energy Returned On Investment).

Before we get into the final part of the article, I wanted to explain the highlighted RED rig.  The Discoverer Clear Leader rig leased to Chevron was contracted to end in October 2018.  However, Chevron recently announced an early termination of that contract to end in November 2017.  Chevron will pay Transocean $148 million for contract termination fees.  When this was published in the media, Transocean's stock fell 5% that day.  Lastly, at its peak of 95% utilization of its ultra-deepwater rig fleet in 2013, Transocean's stock price was trading in the mid $40's.  Today is it trading below $10.

The Low EROI Of The Ultra-Deepwater Drilling Rig Industry Is Not Sustainable

An article published in 2011 titled, Ultra-Deepwater Gulf of Mexico Oil and Gas: Energy Return on Financial Investment and a Preliminary Assessment of Energy Return on Energy Investment, stated the following:

The preliminary EROI based on financial costs and subsequent sensitivity analysis using three different energy intensity ratios. ranged from 4:1 to 14:1 for 2009 total GoM ultra deepwater oil production while the EROI for total oil plus natural gas production in the ultra-deepwater GoM in 2009 was slightly higher at 7:1–22:1.

We believe that the lower end of these energy return on invested (EROI) ranges (i.e., 4 to 7:1) is more accurate since these values were derived using energy intensities averaged across the entire domestic oil and gas industry.

The two analysts that put together the study believed that the EROI of Gulf of Mexico ultra-deepwater oil production was at the lower end of the range, 4 to 7:1.  However, this study was done using 2009 data.  For example, they were calculating their Gulf of Mexico EROI values on the following:

The financial cost per barrel of ultra-deepwater oil in the GoM at the well-head ranged from $71/barrel to $86/barrel.

Today, the price of oil trading closer to $50, not the $71 or $86 used in the analysis.  Thus, the lower oil price translates to a lower EROI.  Also, the analysts also made the following important comment:

The EROI values of this study were based on financially-derived energy costs of production at the well-head only, and did not include all of the indirect costs of delivery to end use. Thus, these estimates are conservative.

If all indirect costs were included in the EROI calculations, EROI would decrease.

Moreover, one significant direct cost, such as insurance on the rigs, was not included in the EROI calculation.  Again, according to the study:

In addition, the insurance costs associated with rigs operating in ultra-deepwater were not included but are estimated by market analysts to range between 10–35% of the present value of the rig [50]. For a $500 million dollar rig, that would add between $50–$175 million in insurance costs per year of operation. If all of these costs were included it might decrease the EROI by perhaps 25 percent.

So, not only does the research suggests that the EROI of ultra-deepwater oil production is closer to the lower end of 4-7:1, but its even lower if we include additional indirect and direct costs that were not factored into the analysis.  This is BAD NEWS because our advanced high-tech society needs something north of 10-12:1 EROI of oil to be sustainable.  Here we can see that ultra-deepwater oil production only made sense at much higher oil prices.

As the oil price fell by more than 50%, its impact on Gulf of Mexico ultra-deepwater drilling took its toll.  According to Reuters article in July 2013, the number of oil rigs working in the Gulf of Mexico hit a peak of 57 (43 oil & 14 gas).  Take a look at the ultra-deepwater drilling rig count and location today:

There are only a total of 20 rigs working in the Gulf of Mexico, with 17 drilling for oil and 3 for natural gas.  The BLUE triangles represent rigs drilling for oil, and the ORANGE triangles are for natural gas.  However, we must remember that one of those rigs leased to Chevron will be terminated next month.  So, it will be down to 16 rigs.  Regardless, the Gulf of Mexico ultra-deepwater oil drilling rig count is nearly two-thirds less than it was at its peak in 2013.

While Transocean still has a large backlog of drilling contracts, they could experience more terminations if the oil price takes a noise-dive.  We must remember, the stock market and economy is being propped up by a great deal of Central Bank monetary printing and asset purchases.  When the stock market finally experiences a 20-50% decline, this will take the oil price down with it... and BIG TIME.

We could easily see a $20-$30 oil price during a market melt-down.  Certainly, this would destroy the already weakened ultra-deepwater drilling rig industry.

Lastly, the low EROI of ultra-deepwater oil production is not sustainable for an advanced society that needs something north of 10-12:1.  My best guess is that ultra-deepwater oil EROI is likely closer to 3-5:1 when we factor in all indirect and direct costs.  Compare that to the U.S. oil industry that was producing oil at a 100: 1 EROI  in 1930.  The amount of energy and technology that it took to produce oil in the early days was a fraction of what it is today.

Also, the notion that technology will solve our problems is one of the BIGGEST MYTHS we tell to ourselves.  Technology doesn't increase the EROI of oil; it lowers it.  Thus, the more technology that is used to drill and extract oil, the more the EROI of that oil is destroyed.   While ultra-deepwater oil production has supplemented our total oil supply, I don't see it being a long-term sustainable industry... especially after the U.S. and world markets finally crack under the massive amount of debt and derivatives propping it up.

Check back for new articles and updates at the SRSrocco Report.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
RTUT's picture

Fuel prices have gone up some .60 cents a gallon in the last year where I am.  $3.00+ per gallon for diesel is pretty spendy in my opinion so who is getting the $$?

Cloud9.5's picture

 

 

We are in a sort of damned if you do and damned if you don’t scenario.  If energy prices go up, the economy tanks.   If they stay low, the major oil producers tank.

Cutter's picture

Good investment idea, thanks.  Wait until the market corrects and pick up RIG at 5 a share. 

Folks who think Elon Musk is the second coming and oil is on its way out are badly mistaken. I admire Musk's aggressiveness, but anyone who has examined his plan to integrate solar and electric recognize it as fantasy.  At the efficiency of solar, it would take 3 days to recharge a Tesla, and that is if there are no clouds and full sun all three days.  Not workable.

Oil consumption will only continue to rise.  Second and third world countries can't afford electric vehicles, nor do they have the energy infrastructure to accomodate electric vehicles. 

This lack of oil exploration investment is going to produce a real oil crunch after 2019, with prices skyrocketing well above 100.  

Outright RIG shares, or, perhaps even better, LEAPs, will be a good investment when we have $150 a barrel oil.

Consuelo's picture

 

 

"We could easily see a $20-$30 oil price during a market melt-down."

 

The statement above assumes all geo-world market dynamics identical to previous economic downturns/crisis - vis a vis the $USD specifically I am speaking.    It remains to be seen if the previous 'deflationary' dynamic (rising $dollar) will remain the same during the next crisis.

Goldbugger's picture

The train wreck hit two years ago, the cabose is about to finally hit.

Kefeer's picture

Saw who the story came from, which is always an advertisement, made this comment without reading and now I'm off to somewhere else...have a  great day.

MaxThrust's picture

"Transocean still only made a whopping $1 million adjusted profit on total revenues of $1.5 billion."

Well I would personally tell that CEO "your fired!" if all he can make from $1.5b in revenues is a lousy million.

mkkby's picture

Terrible CEO.

If those rigs are insured, why weren't they parked in front of one of those hurricanes?

HoPewGassed's picture

"The days of spending billions of dollars to find and produce some of the most technically challenging deep-water oil deposits may be coming to an end sooner then (sic) the market realizes." 

................. Lions and Tigers and Bears, Oh My!

DanDaley's picture

Steve, get a good proofreader.

To Hell In A Handbasket's picture

Oil is a finite resource, in a world where use is going up and the price is going down and some retards on ZH defend this logic? Welcome to ZH in the era of the Trumpettes, where "The Art Of The Deal" has become indispensable and become the modern bible for trade and commerce. 

Jokes aside, the oil market is another rigged market, where supply and demand, price discovery and the invisible hand, no longer plays a fucking role.  Who is manipulating the oil market? Do we need to ask, like the answer isn't obvious.

It was obvious LIBOR and FOREX was rigged pre 2008 crash, yet those in Wall Street who knew the obvious, never had the balls to call it out and name those who were doing it. Where was CNBC, Bloomberg, Reuters et al on this issue when it mattered? These cunts only reported after the event.

High oil prices help our enemies, more than they help us, so the price is manipulated by the usual suspects. So USSA jobs, that Orange Jesus promised to protect and bring home, don't fucking matter.

MAGA!

 

Oldwood's picture

How about the weather? That Trump's fault too? Tired of it.

frank further's picture

Well, the US is exporting that finite resource like crazy for short-term profit.  Trump could stop that.

No one apparently has or plans to have any grandchildren.

any_mouse's picture

What type of train wreck is he talking about?

Two trains moving towards each other on the same track?
One train stalled on a track section and a second train is approaching?
A train moving at a unsafe speed for a track section?
A train approaching a crossing where a vehicle has stalled on the tracks?
The vehicle is a Tesla?
The vehicle is radioactive waste hauler?
A honey wagon?
The vehicle is a school bus with Evergreen college students?
An Evergreen Coed wants to pull a train, but no wants that ride.

Please explain to me how the US Deepwater Offshore Oil Business can have a train wreck?

Drawing from Business:

Go full Enron?

Corzine the investors or obama the bond holders?

Pull a TARP?

Open a Macondo?

Execute an Exxon Valdez?

WTFUD's picture

The 'Execute' at the end of your comment perked my interest.

assistedliving's picture

Three Roughnecks were working up in the derrick: John, Lonnie and Donnie. As they start their descent John slips, falls out of the derrick and is killed instantly.

As the ambulance takes the body away, Lonnie says, “Well, someone should go and tell his wife.” Donnie says, “OK, I’m pretty good at that sensitive stuff, I’ll do it.”

Two hours later, he comes back carrying a case of Budweiser. Lonnie says, “Where did you get that beer, Donnie?” “John’s wife gave it to me,” Lonnie replies.” That’s unbelievable, you told the lady her husband was dead and she gave you beer?”

“Well, not exactly”, Donnie says. “When she answered the door, I said to her, you must be John’s widow’.”

She said, “You must be mistaken, I’m not a widow.”

Then I said “I’ll bet you a case of Budweiser you are.”

PitBullsRule's picture

I roll with a crowd of people every morning burning that shit, and then we all turn around and burn it some more going home at night.  Thinking about all the labor it took to make that steel, all those parts, carry it all out into the ocean, and weld it all together, connect it to the sea floor, drill those holes under that high pressure water, all that damage and risk and danger.  All the tankers, all the pipes, all the pollution, the killed sea life, the oil spills that ruined LA shores, the oil spills that ruined Alaska, all the smog and shit put into the sky... Just so we can all roll down the freeway to sit in an office and do the useless bullshit we all do.  And you know, sure as shit, that what we do is not worth it.

Thats not very smart.  Its actually pathetic, its embarassing.  There's got to be a better way.  

Even if Tesla isn't making money, Elon Musk is on the right track, that oil sucking industry is one stupid ass industry.

D503's picture

Elon Musk is a con man whose products consume even more energy than the ones they prepose to replace. There is no overunity and EVs are less efficient than ICVs as a matter of the laws of physics. When Elon Musk proves his cars, Panasonic's batteries, and his bullshit solar panels are made using the power from his bullshit solar panels, let me know and I'll find the hidden cord.

Fishthatlived's picture

"Killed sea life?" Ever fish an oil platform?

HoPewGassed's picture

"Elon Musk is on the right track, that oil sucking industry is one stupid ass industry."

That works nicely if you think electricity comes from the outlets.  Power your car with nuclear or coal, or maybe the same NatGas or Petrol you decry, after the power has been sent over a grid that loses 80% of the juice, and is not currently built to handle the demands of electric vehicles, into which we need to put metals for which there is not currently sufficient mining supply to build the number of batteries and motors contemplated (don't believe me? ask Volkswagon.). 

SixIsNinE's picture

recharging lipo batteries for bikes work great.    cars i don't know about, other than india has small cheap electric four wheelers. 

i like my ebike a LOT.

 

toocrazy2yoo's picture

Fuck them. I like 50 dollar oil and 2.50 gasoline. Far more benefit is achieved with cheap oil than a few riggers printing cash on the backs of hundreds of millions who need to eat at night. Fuck them.

BobEore's picture

First of all -

gas n oil production is for CHUMPS/
IT produces chump change - compared to the real lucre which is dredged up by the REAL PLAYERS in our post-reality economic world. Namely - drug runnin mafiyas and their state-actor pardners!

If there's ANY remaining economic rationale for parking good $ in bad production plays - it is simply for the purpose of laundering those lucrative profits referred to above. Which is why we desperately need to get beyond facile 'analyses' like this one - which - pretending that the actors and motives behind international geopolitical power plays are simply greedy \corporations/ whose depredations can be "fixed" as simply as electing some new Congress or Potus...

and get down to the real bizness = minus all the weird xhristain-sionist ann harnhardt-type guntotin /gold-hustlin gonzos... like SGT Roxx sponsor "TOM CLOUD" ...

AND start talkin bout how DRUGS/GUNS/N/GOLD are the fatal nexus of evil by which the new world ordure/new jerusalem creeps ever closer.

take a look at that there map... for instance... and focus in on the real story - the ZAPATA oil rigs of one GWBUSH AND CO... from which strategic locale once zoomed daily high speed boats loaded with dope run from Cuba and central merikan sources... over to the rig... and then on to the right hand corner of same map... just below "Tampa"... where

in the canals of Sarasotan suburbs - nighttime drops on docks of those quiet looking homes would take place via minisubs silently cruisin in from the island barrier.

Pieces./pu\zzles/ - "Barrick Gold" - where arms(khashoggi)mining(Munk)n munknee*(bushybandit)all came together to forge an alliance of international finance capital with the pirate empire of talmudic se Meditteranean origin...

to tske down \towers/ an make \merikans/ trade in their freedoms for some \'securities'/ of the BROWN ROOT HALIBURTON kind!

But let's not talk bout that stuff - BACK UP THE TRUCK I SAYS -

CAUSE THERE'S NEVER BEEN A BETTER TIME .... to blow smoke over the crime scence of a criminal cartel called BIG GOLD... and its numerous petty henchmen - defrauding the lil guy, one over-premiumed "Eagle" at a time!

Nickel off expired baby food - TODAY ONLY! (CALL 1 900/shinyhustlersforsionism)NOW!

D503's picture

You do understand with infinite oil you can have infinite drugs and without oil there will hardly be any drugs right? I mean gasoline is literally an ingredient in cocaine. I know you are not this fucking stupid.  

BobEore's picture

If |stupid\
means being... too dumb not to notice when the guys running the shell game signal to their pardners in the audience to start workin the wallets... \I'm with stupid, stupid!/

This whole precis on display here is exactly THAT/a distraction from political machinations which will leave every one of the onlookers ruined - cept for those who paid close attention to the hands.

lemme know how it works out for ya - 'smart' guy!

SixIsNinE's picture

of course it all makes very logical sense to use the oil infrastructure to facilitate the drug runnin' DEA & Bushies.

 

pitz's picture

The assets will still remain.  THey'll just be bought out of Chapter 11 cheap by somebody.

Utopia Planitia's picture

They need to look at alternative markets for those splendid platforms. Imagine what some pirates off the coast of Somalia could do with one of those.  Or the Iranians to shut down oil traffic in the Persian Gulf?  Or Musky Scent using one as a launch platform to fly TSLAs to Mars?  Or...

hedgeless_horseman's picture

 

So, you are simply telling us that at $50 per barrel it's not profitable for western corporations to produce oil from a 3 mile deep hole in the ground, under hundreds of feet of saltwater, located hundreds of miles offshore, especially in places like Africa?

Well, maybe we could raise prices, if it wasn't for those pesky Russians and their cheap oil.

https://en.wikipedia.org/wiki/List_of_countries_by_oil_production

Maybe this is why we are supposed to hate them?

Conservative Calitopian's picture

God bless the Russians, they’re people like us too.
Is there any chance we can just use fking dog and cat poop for energy!?
Where I live in California Calitopia everyone has 16 of em or so. I love critters but it’s over the top here and disgusting how much shit they produced that gets loaded into heavy trash cans and hauled away to the dump. Did I mention kitty litter!? Disgusting! There’s got to be a way of turning that crap into energy for my darn pickup truck. Forget Deepwater drilling! We’re swimming in shit!

Volkodav's picture

     well...that and gas reserves and everything other...

     https://www.indexmundi.com/energy/?product=gas&graph=reserves&display=rank

     consumption per country is most important in real

     US is internal consume maybe 7x Oil vs RU

     I may try look RU EROI of production oil/gas would be interesting

     Only Offshore we invest is AWLCF

boattrash's picture

HH, I know you're smarter than that, so I'll go out on a limb and assume that comment to be "tongue in cheek".

I can verify the numbers in the first part of the article, as it actually took 2014-2016 to earn what I did in the GOM in 2013.(that's on an OSV supplying these rigs). That being said, these rigs do one thing...they drill fucking holes. Contrary to the knowledge of J.Q. Public Re where their energy comes from, there's a shitload of infrastructure involved between said holes and the fucking gas nozzle at their local filling station.

I've helped set and supply $3 Billion production platforms, hauled multi-million $$ BOPs to location (to be placed beneath the sub-sea pipelines and platforms) and yes, we even had Lloyd's of London reps riding out with us.

The bottom line is always different depending on the quality of crude that goes to the refinery as well...Good crude Vs Tar Sands crap and so-on...   As I've said for years, it takes deep pockets to stay in the offshore oil game, but people better hope that Big Oil does so, as they won't like energy costs if all of that shit crashes and they're forced to pay "corrected prices" after the fact.

Pasadena Phil's picture

There are still too many "players" dumping oil out of desperation to fund their parasitic, non-productive, dark ages economies. So long as they are not disciplined into respecting the organic supply/demand market forces and discontinuing their desperate price manipulation antics, everything will continue to be upside down and overly political.

The only real near-term solution is for America to become energy independent and at least re-establish market-based pricing in the US while exporting to those who don't want to become enslaved to the new OPEC/China/Russia mercantilist globalism. Dollars over clams remains by far the better deal. Capitalism over central planning. Stabilize the prices and capital will again become efficiently deployed. The US is the ONLY country that can get this done.

I don't know where normalized free markets would be setting the price but $55-60 seems to be a good guess. It works for the US. For the rest of the world's parasites, abandon your medieval cultures. Grow up!

D503's picture

If you want the US to become "energy independent" then you better be prepared to reduce the population by half or the quality of life by half because it is not coming out of the ground any faster, for much longer. You may as well say you want your car or kids to be energy independent and stop feeding them all.

Pasadena Phil's picture

There are lots of ways to become much more energy efficient without impairing our quality of life. Not spending 3-4 hours stuck in traffic everyday comes to mind. And evolving our housing esthetic to accept designs that don't create huge two-way radiators necessitating constant heating and cooling would be a big help too. Why not build houses mostly underground? It's already happening and they are fantastic.

SRSrocco's picture

hedgless,

Unfortunately, Saudi and the Russians aren't making a lot of profit on their oil.  For example, Saudi Arabia continues to liquidate their Foreign Exchange Reserves even at $57 Brent crude price.  They just aren't making enough money to cover the State bills.

Lastly, I don't see the price of oil rising much unless we have massive Fed & Central bank money printing.  However, this won't last that long.  We won't be able to save the economy for another eight years with printed paper money.

Thus, when the markets finally crack and drop 50%, the oil price will go down along with it.  This should destroy the already weakened Deepwater Oil Industry.

steve

Axenolith's picture

Using a backed money conversion as a metric, there are several hard walls oil has to break down to remain above a per barrel price that is subsequently reflected in higher than $0.32/gallon silver adjusted gasoline (~$3.95/gallon FRN at $17/oz silver). A sustained period over that price brings all of the crappiest oils and tars into play and all the difficult onshore drilling environments plus you're entering into territory where turning organic waste into it or biologically farming it becomes economically viable. That's a tough market for those deepwater investments to compete in, they have very narrow, serendipitous widows of profitability.

Technological civilization can't operate without a hydrocarbon base so we're never going to eliminate it as a significant component of human activity barring some profound leap like household fusion generators and nannite synthesizers. Save the cool old car for the great grandkids, don't sell it like I did my 70-1/2 RS back in 1988...

Conservative Calitopian's picture

I’m bummed that our wonderful oil industry is in distress. And the politicians are fighting over stupid irreverent things. I see a lot of hippies here in California with their Bernie stickers and ‘get off oil’ mantras while their fking diesel trucks bring their ‘pure’ organic food to their favorite local market. Good God! Give me a break! Stupid idiots! Life is VERY FRAGILE without oil.

Pasadena Phil's picture

Agree on DWOI being in desperate trouble but " Saudi and the Russians aren't making a lot of profit on their oil"? Not so. So long as they can get oil out of the ground at $10/bbl while oil is at $55 and still need $110 to break even, the problem is not with the dynamics of the oil markets. It's burdening their only mule with a crushing load. The US can be profitable even at $40/bbl cost. Oil may be mispriced currently due to all of the manipulation but the true equilibrium price will never be adequate to meet their parasitic social demands.

Take away the social overhead needs and their oil businesses are VERY profitable. It's their backwards and insanely corrupt cultures that are killing them, not oil prices. They are their own worst enemies.

hardcleareye's picture

It will do more than destroy the already weakened Deepwater Oil Industry....   that will wipe out shale oil, tar sands and the "investors" in those corporations...  Nice article, thanks.

pitz's picture

Oilsands are profitable at current levels.  

DownWithYogaPants's picture

Probably supposed to hate Russia because they kicked out the Rothchild bankers.  And that my dear sir is probably why Putin's chauffer is dead.

new game's picture

oil at 50=demand and sunday drives. cheap enough to not give a shit. not sustainable price, but low ee oil undermines price. SA.

at 100/bbl the world thinks twice about energy. oh shit that trip is going to be expensive. every energy dickhead and his oily sister start to drill.

at 150/bbl the world inovates like hell and finally findscost effective alternatives. poor people walk, bike or suck a taxpayer ride from the gov.org tit.

i am all for 200/bbl if that rids the roads of low iq drivers, no nationalities mentioned here as i don't want to rile any oil hypocrits...

Stuck on Zero's picture

I didn't see Deepwater Horizon on that list.

John Law Lives's picture

The charred remains of that rig are in Davy Jones's Locker.

bwh1214's picture

I'm the Master/OIM on the Discoverer Inspiration, on her right now.  Hard times for sure, but the lack of investment over the past few years is going to bite.  Shale is a flash in the pan.  Our wells may cost 10-20 times as much all in, but they produce 10-20 times as much and for ten times as long.  The new discoveries off shore are also the vast majority of new oil.  When shale burns out, which it's in the process of doing, they will have no choice but to turn back offshore.  Fingers crossed that this analysis turns out like his silver analysis. 

Relayer74's picture

Agree, what passes for Shale nowadays is just not going to last any period of time. At this point, it doesn't surprise me that the general public remains clueless about most of the underlying factors in the oil business. This is what we have for journalism in the field. Some of the points made are worth talking about, but so incomplete.

He should get back to us when he figures out how to drill oil while not actually having to go where the oil is.

D503's picture

Got a list of the supposed volumes of these "new" discoveries?