Comments on oil and natural gas production in this thread. Thank you.
45 thoughts to “Open Thread Petroleum, February 22, 2018”
Pioneer CEO announced his resignation yesterday, just a week after their fourth quarter earnings release. The stock is up 4% today. I wonder if that’s possibly about trying to manage growth and return more to shareholders in the form of dividends and share buybacks rather than BOEPD growth.
Looks like vulture funds started to descend on shale oil companies
And that was just overnight. On Friday morning, another activist, Kimmeridge Energy Management Co., announced it had taken a stake in PDC Energy Inc., an exploration and production company with operations in Colorado and Texas. Kimmeridge wants PDC to overhaul its financial priorities, costs, governance and maybe, given the line about “considering all strategic alternatives,” its entire identity.
Thanks for sharing this highly interested information. There is no doubt shale plays seems to lost momentum as Investors seems to be more pesimistic based on what they have exsperianced and what own investigtion have discovered related to decline rate i.e. Consolidation might give a short time improvement but the rock quality suppose to get wurst , increased frack hit from child wells and soon the fundamentals will remain the same or even become wurst. As Mark Papa told in 2018 , the best shale periode is past sad that Investors not want to listen to one of the most exsperianced entrepreneurs in US Shale history , eighter not the CEO of Shlumberger Kimsgaard.
I did not know fracking was seasonal and went down during winther, is that because if snow and ice should cover fraction went to surface with possibility for polution? Or is it simply because of wind, temperature makes it difficult?
Fracking in the Bakken slows down in winter because it is North Dakota. Protecting workers from extreme temperatures slows them down and winds (with or without snow) are often too high for completion work.
Freddy
In the early years of the Bakken, virtually all frac water was trucked in and keeping it from freezing was an ongoing, arduous process.
Most frac water is now piped to the pads (or nearby staging areas) so this is not as big an obstacle.
Perhaps the major – of several – reasons there is a completion slowdown in the winter months is due to the several week long road closures that occur every spring.
With severe restrictions on the load carrying capacity of trucks, the flush, early production from just-frac’d wells cannot be transported offsite.
… and for folks looking to get a slightly deeper perspective on this whole ‘Shale Revolution’ thing – specifically the dreaded Decline rates – check out Enno’s fine site with the easily viewable profiles of Continental’s Dunn and McKenzie county wells with 2008 to 2012 vintage start dates.
You will see the averages from the 2008 and 2011 wells are back up to almost 100 bbld.
This is partially due to reworking/refrac’ing/halo effects.
Expect this profile to become more the norm for wells in outlying areas in the coming years.
Hmm… tried to post and it somehow didn’t show up.
I tried to replicate those numbers unsuccessfully.
For all of Continental’s bakken wells, I couldn’t get above 40 something bpd for any year between 2008 and 2011.
When I looked at just the two counties you mentioned, I got 65 bpd exit rate in 2018 from a high of 113 in June when some were refrac’d? Just a guess. For 2011, I got an exit rate of 60bpd for those wells from a peak of 93 bpd just a few months earlier with a seemingly very steep secondary decline.
I also don’t understand the economics. What does it cost to rework or refrac a well? Is it worth it? Is this a pilot test for them or part of a long term strategy to manage production?
Don’t let coffee bamboozle you.
CLR just said that it’s net operating losses are so high it will pay zero Federal, North Dakota or Oklahoma ncome taxes for many years into the future.
I’m sure all pure shale companies in USA are the same.
I think that’s all you need to know about shale economics.
EPS is meaningless. So much of CAPEX just maintains production, making it more like LOE/OPEX.
Mario
Process I used …
Advanced Insights (bottom graphic)
Default ‘Ultimate Recovery’
Show by ‘First Year of Flow’
Operator – Continental
Counties – Dunn and McKenzie
‘First Producing Year’s – 2008 thru 2012
Tapping (using tablet) last point on graph gives …
2008 with 20 wells averaging 97.3 bbld
2011 shows 69 wells with 97.2 bbld
For contrast, doing the same procedure with Williams and Divide shows huge production differential from Dunn/McKenzie.
Poorer quality rock coupled with minimal re-working are the biggest reasons.
It is speculation – informed, but still not publicly described – that when the offset wells are frac’d, the older wells benefit from the increased formation pressure.
Further, some operators re-pressurize older wells with water when newer wells are frac’d to minimize unwanted frac hits.
The produced water numbers (published every month for every well), invariably show a 5 to 10 fold increase in the older wells along with a huge bump in hydrocarbon output.
Bruce Oksol has been chronicalling this for years on his ‘Themilliondollarway’ blog.
(Additional, informative data point … check out Marathons profiles for 2007 thru 2012).
Anyone using simple, state wide production numbers relating to decline rates is missing the much bigger picture.
What I did was pretty straightforward. I went to his site (shaleprofile.com) and looked at each month’s production numbers by hovering the cursor over each time period. He gives number of wells and total barrels produced that month. I did it for each year for Continental only for all their bakken well for the 2008 to 2011 period, then for the two years you mentioned for the specific counties you mentioned.
The numbers I mentioned in my prior post are just simple divisions. Barrels produced that month divided by the number of wells.
On a broader note, I am aware of successes here in Canada in slowing or temporarily reversing production losses from water flooding. It seems to be reasonably successful in some fields, although these were fields with initial decline rates in the mid to high 20% range, not greater than 50%. I don’t know how those things translate.
Crescent Point Energy has been a leading innovator with waterflooding unconventionals.
They hope, at some point, to apply their techniques to their North Dakota Bakken operations.
Check out tiny Canadian outfit Granite Oil’s Dec. 2018 investor presentation.
They have been successfully re-injecting field gas back into their Bakken acreage for years now.
I believe itis true fracking in one latheral will also increase the presure in other and some increased flow , this is as I understand what frac hits is about as you might get not only some increased pressure , and not only oil will come out but also chemical in wurst case the whole well will be destroyed. I know sometimes there is huge challabges with getting out what is exspected from offshore field as water injection gives only limited impact. To use such solution in a tight rock formation must me almost impossible with a good result. At the same time if suxseed this will be a tremendus improvement for shale production. As I understand chemical are today injected to improve flow , guess this also cost dollars…
Coffeeguyzz,
And likewise those who cherry pick a couple of wells (200 out of 14,000) are looking at a small piece of the puzzle.
There is an adage that sometimes the forest is missed while looking at the trees, this may be one of those cases.
The big picture is captured pretty well by population statistics.
This is why one cannot judge hockey players in general by looking at Wayne Gretzky or basketball players by looking at L J or M J.
Also tried to reproduce Coffee’s results. So we are talking about 20 wells from 2008 and 69 wells from 2011. Rather than all 1600 wells from those two years or all 13,000 North Dakota Bakken/ Three Forks wells completed from 2008 to 2018.
This is about as far from the big picture as one can get.
Note there is indeed a bump up in output followed by an equally drastic drop in output, see chart below.
Dennis
Again, you continue to validate my statements without seeming to recognize it.
For this, I thank you.
Want to know WHY the graph shows such steep declines as the 2008 and 2011 (yellow and red lines) indicates? They were taken offline as nearby wells were being frac’d.
This is one of the vulnerabilities in Enno’s methodology as he uses calendar dating rather than actual, online producing days.
The online producing days is a common framing as this provides a MUCH clearer picture of the actual productivity of individual wells.
Furthermore … in regards to averaging …
there are numerous reasons to contrast Continental’s Dunn and McKenzie well results with their Divide, Williams, even Billings counties’ wells as these distinctions ‘tell the tale’ of much of Continental’s history in the Bakken. (At least in the ‘Shale Age’. Continental has been drilling in North Dakota for decades).
If people continue to base their analysis by merely looking at charts and numbers, inaccurate prognostications will continue to arise as the ‘story’ behind the numbers is a crucial component to understanding what is going on.
zzzz says:
“If people continue to base their analysis by merely looking at charts and numbers,”
Yes, much better to use zzz’s recipe of marketing blurbs, low-hanging fruit, and tea leaves 🙂
Mexico peaked a while ago. They produce oil from a few huge fields and unless they replace Cantrell with something of similar magnitude, there’s no way they can achieve that production again.
I’m guessing – a lack of new discoveries, as most of their production is from mature fields. And also Mexico’s state oil company now holds roughly USD$103 billion in financial debt…
It’s a state owned company. The govt can infuse capital entirely on a whim and this would cover payments, and maybe even reduce the principal — which, btw, is owed mostly to Mexican entities.
Remove the peso from foreign exchange, have the Mexican central bank erase the Pemex debt and then hang around for a few years before re-entering FX.
Money is a substance created from thin air by central banks. It doesn’t have to make logical sense and it doesn’t have to cause any problems. The reason Bernanke style money creation isn’t done all the time is it would erode an underpinning of society. But when you need to, you enshroud the process with obfuscation and you eliminate whatever problem has arisen.
Remove the peso from foreign exchange,
That would create instant havoc in Mexico, they would not be able to import or export anything. Mexicans living in the USA would not be able to send any money home and the millions of foreigners living in Mexico would have to leave immediately because they could get no money from abroad. Every nation must have a foreign exchange and their currency must be rated at a given value versus other currencies.
Money created from thin air doesn’t necessarily do anything if it is matched by additional goods and services in the economy. But that doesn’t always happen. What happens when a nation just prints new money willy-nilly causes inflation.
Inflation is caused by more money chasing fewer goods and/or services. Deflation is caused by a glut of good and/or services. Creating money is not the pernicious device you seem to believe. It is necessary for any credit-based economy, which virtually all economies are.
Remittances can convert at a government decreed rate. Because of remittances Mexico could do this easier than other countries. Remittances are a source of foreign currency. It’s the no-doubt non free market exchange they need not have.
Mostly, Mexico can do this because they have enough oil. They have a crude surplus. They also have an agricultural surplus, mostly with the US and Japan.
Look, this is not even debatable. PEMEX is state owned. The government can do all sorts of hand waving phrasing obfuscation and allocate money to capital and then offset it with created money elsewhere.
BTW as for inflation is from excess money chasing goods and services, seriously cliche by now, how did Ben Bernanke willy nilly create 23% of GDP from thin air, have sub 3% GDP growth over that period and not see inflation above 4%? We don’t dare to examine Japan, I guess, who surely you would agree is the very definition of willy nilly money creating. Hell, they don’t have any oil at all and are utterly desperate to get inflation. What more printing could they do to get this . . . chasing you talk about?
No, Ron. If you have oil, you can do anything you want with this stuff called money and not see inflation. Hasn’t Japan proven that?
Oh, and a last item from FOMC conversations, and a few Fed governor speeches. The Fed, now having to stop rate increases and probably ending “normalization” of balance sheet, has opened an internal dialog about “other tools”.
They want to follow the lead of other central banks. One of the prominent tools under examination — like the Swiss, ECB and BOJ, they will examine direct purchase of equities.
Remittances can convert at a government decreed rate.
No, the government does not declare the exchange rate. The exchange rate is what it is and it changes daily, often several times daily. The exchange rate is set by the bid and asked price on the open market.
Because you have oil doesn’t mean you can control the exchange rate, the inflation rate, or anything else. They may try to manipulate the market by producing more or less oil. But there is a world market. What Mexico does would have little effect on the world market.
No one, not Ben Bernanke nor anyone else, can dictate the inflation rate. They can hope what they do, quantitative easing , does not cause too much inflation. But they cannot dictate that what they do will not cause inflation. If it does, it does, if it does not, it does not. That is just the way it is.
If quantitative easing causes more goods and services to be created then it will not cause inflation. Or, more correctly, inflation will be lessened by the amount of new goods and services it creates. But some inflation from quantitative easing is bound to happen. It did.
No, Ron. If you have oil, you can do anything you want with this stuff called money and not see inflation. Hasn’t Japan proven that?
Good grief! What are you talking about? Japan doesn’t have any oil. Well, they produced 4.25 thousand barrels per day in 2015. That is next to nothing. Japan is the third largest importer of oil in the world.
But no, if you have oil you still cannot create money willy-nilly and not cause inflation. Again, inflation is caused by too much money chasing two few good and services. The oil you have, or like Japan, don’t have, has not one goddamn thing to do with it.
That unconnected sentence preface about having oil didn’t relate to Japan, though my mistake in letting it be the same sentence. But that was no excuse to evade the point.
Japan has printed willy nilly for 20+ years. There is no inflation there. Let’s just stop this point right here and note how crushing this is to narratives. You said printing willy nilly chased currency after goods and services. Japan has printed enormously, beyond any imagined willy nilly, and there’s no inflation. Damn near no GDP growth, either.
Point being . . . Japan has proven printing doesn’t create inflation. There is no dodging this. Whether there is oil there or not. But if there is. . . .
Mexico and Pemex are actually in a better position. They have oil. If Japan’s willy nilly printing didn’t cause inflation, why would Mexico’s?
Oh give me a break. There are perhaps a hundred explanations on the web. Look it up.
The Main Causes of Inflation. Proponents of the theory of demand-pull inflation argue that there’s inflation when the aggregate demand (the total amount of goods and services desired in an economy) outpaces the aggregate supply. In other words, prices shoot up when there’s more competition for products in short supply.
In other words, more money chaseing fewer products. Common sense: To increase the price of oil, just cut the supply. OPEC has done that for decades. It works. It’s working right now. The price of oil is going up. It’s called “supply and demand”. Cut the supply without cutting demand, and the price increases. (inflation) Increase supply without increasing demand, the price goes down. (deflation) Just common sense.
As to just printing money and inflation. Germany after WWI is an example, or Venezuela today.
You can have the last word. I will not reply.
lol
I’ll go with the reality on this one. Ron.
Japan doesn’t want inflation. Neither does Europe or USA. Thats a myth. You know damn well interest rate cannot rise in Japan regardless of where inflation is. Their debt load is too large. All they want to do is prevent or hold off debt deflation as long as they can.
Their lack of inflation has nothing at all to do with their lack of oil. It’s their debt load. And they fact that they are in population decline and are not all that open to emigration.
The FED reversing course on interest rate hike and eventually on QE run off is the same deal. Trying to hold off debt deflation. Take a look at what China’s central bank just did. Same deal. They are all trying to prevent debt deflation.
Oh, and there can be no end to it. There will always have to be another round of bond buying or interest rate cuts or buying equities. Central banks have no way out. They stop buying we get debt deflation from hell.
I suppose it’s ok to talk about inflation in this thread, since so many regular are, and it does relate to oil, and everything else for that matter.
Look folks, I’m no expert, but when you do something in countless lines of work, expecting something to happen, it CAN HAPPEN, without being OBVIOUS.
In a situation where deflation is likely, printing money can REDUCE the amount of DEFLATION…. which is precisely the same thing as CAUSING inflation, under more normal everyday circumstances. There’s a continuum of inflation and deflation, it does not have to be one or the other, as measured against the most recent purchasing power of the currency being discussed.
IF a central bank prevents a DEFLATION, by printing say one hundred billion, a second hundred billion might be enough to create OBVIOUS inflation, the sort that’s obvious to a layman.
This ought to be perfectly clear to anybody used to working with at least high school level math.
Japan also benefited from oil price collapse greatly. Back in Oct. 2012 Bank of Japan started QQE when price of WTI was $110.00 ish. So while they devalued against the dollar 30% or so over the follow years. Price of oil fell 50%. If oil went back to $110.00 ish they’d have a world of inflation in dollar terms which is what they use to buy oil. And they’d be in a world of trouble too. Because they can’t hike rates. Yen would implode.
There lies the danger of high oil prices. If one domino falls like Japan it’s going to take everybody else down with it. That is why price of oil won’t be allowed to reflect real world fundamentals like supply and demand. Mark to market no longer.
How do you see rationing taking place? Just whatever people can afford?
Hi Dennis
I second Volvo740’s question.
Do you want more discussion of oil and inflation and deflation moved to the other thread?
Oil demand is so inelastic that that doesn’t work forever. Unless oil demand itself drops about as quickly – and permanently – as production.
Hi OFM,
Inflation relates to oil prices which affects oil output, so ok in this thread in my opinion.
Printing money, by itself does not cause inflation. What can happen is the money can just sits in bank accounts and not be spent. In the recent Great Financial Crisis, central banks increased the money supply, but the “velocity of money” slowed down markedly (this is the average number of times an average dollar bill changes hands) so that inflation did not change very much.
Perhaps this one was posted and I missed it:
Is An Oil Supply Crunch Looming?
by Nick Cunningham | January 24, 2019 http://energyfuse.org/is-an-oil-supply-crunch-looming/
“The global oil industry needs to come up with 35 million barrels per day (Mbd) of fresh supply between 2017 and 2025 in order to compensate for rising demand and natural decline from existing oil fields”
What I read today was the focus now is to cut cost in shale further by use of same modell that made subsea and offshore fabrication some cheaper. In additional use of more digitalization , web solution exspect to save some cost by discover leacages earlier i.e. Cost level of riggs, equipment, pepole increase. Lots of investors, banks have lost confidence as they never get back what was promised. Seems there is a common understanding shale today even with the improvements done are far from profittable enough for this kind of capital demanding buisiness. It might come some increase production from Alaska but I believe soon will the ultimate test for Saudi Arabia come as they might need to add 2 MMbpd that exspect anual oil demand growth + decline that might be more because of years with low investment. Beside that President Trump want low oil price , seems he mean WTI 55 usd is to high…
Permian Pipelines: +200 kb/day of new capacity just started…
2019-02-22 (Reuters) – Crude inventories in West Texas dropped this week to the lowest in four months after a converted pipeline began transporting crude from the nation’s biggest shale oil field to the U.S. Gulf Coast, data from market intelligence provider Genscape showed.
Enterprise Products Partners LP began shipping crude on a converted natural gas liquids pipeline, the 200,000 bpd Seminole-Red line, two months ahead of schedule.
Permian area storage levels could rise again in mid-2019, weakening Midland prices, before other pipeline projects begin, analysts said. https://www.reuters.com/article/us-usa-crude-permian-basin/new-pipelines-drain-west-texas-crude-stocks-to-four-month-low-idUSKCN1QB1Y2
Good NYT article on falling auto demand in China…
>> Chinese consumers are buying fewer cars as the country’s economy slows. Local competitors have raised their game. Many young people would rather use ride-sharing services similar to Uber than own vehicles themselves. <<
Pioneer CEO announced his resignation yesterday, just a week after their fourth quarter earnings release. The stock is up 4% today. I wonder if that’s possibly about trying to manage growth and return more to shareholders in the form of dividends and share buybacks rather than BOEPD growth.
Looks like vulture funds started to descend on shale oil companies
https://www.bloomberg.com/opinion/articles/2019-02-22/the-next-shale-fracker-revolution-has-begun?srnd=premium
Thanks for sharing this highly interested information. There is no doubt shale plays seems to lost momentum as Investors seems to be more pesimistic based on what they have exsperianced and what own investigtion have discovered related to decline rate i.e. Consolidation might give a short time improvement but the rock quality suppose to get wurst , increased frack hit from child wells and soon the fundamentals will remain the same or even become wurst. As Mark Papa told in 2018 , the best shale periode is past sad that Investors not want to listen to one of the most exsperianced entrepreneurs in US Shale history , eighter not the CEO of Shlumberger Kimsgaard.
I did not know fracking was seasonal and went down during winther, is that because if snow and ice should cover fraction went to surface with possibility for polution? Or is it simply because of wind, temperature makes it difficult?
Fracking in the Bakken slows down in winter because it is North Dakota. Protecting workers from extreme temperatures slows them down and winds (with or without snow) are often too high for completion work.
Freddy
In the early years of the Bakken, virtually all frac water was trucked in and keeping it from freezing was an ongoing, arduous process.
Most frac water is now piped to the pads (or nearby staging areas) so this is not as big an obstacle.
Perhaps the major – of several – reasons there is a completion slowdown in the winter months is due to the several week long road closures that occur every spring.
With severe restrictions on the load carrying capacity of trucks, the flush, early production from just-frac’d wells cannot be transported offsite.
… and for folks looking to get a slightly deeper perspective on this whole ‘Shale Revolution’ thing – specifically the dreaded Decline rates – check out Enno’s fine site with the easily viewable profiles of Continental’s Dunn and McKenzie county wells with 2008 to 2012 vintage start dates.
You will see the averages from the 2008 and 2011 wells are back up to almost 100 bbld.
This is partially due to reworking/refrac’ing/halo effects.
Expect this profile to become more the norm for wells in outlying areas in the coming years.
Hmm… tried to post and it somehow didn’t show up.
I tried to replicate those numbers unsuccessfully.
For all of Continental’s bakken wells, I couldn’t get above 40 something bpd for any year between 2008 and 2011.
When I looked at just the two counties you mentioned, I got 65 bpd exit rate in 2018 from a high of 113 in June when some were refrac’d? Just a guess. For 2011, I got an exit rate of 60bpd for those wells from a peak of 93 bpd just a few months earlier with a seemingly very steep secondary decline.
I also don’t understand the economics. What does it cost to rework or refrac a well? Is it worth it? Is this a pilot test for them or part of a long term strategy to manage production?
Don’t let coffee bamboozle you.
CLR just said that it’s net operating losses are so high it will pay zero Federal, North Dakota or Oklahoma ncome taxes for many years into the future.
I’m sure all pure shale companies in USA are the same.
I think that’s all you need to know about shale economics.
EPS is meaningless. So much of CAPEX just maintains production, making it more like LOE/OPEX.
Mario
Process I used …
Advanced Insights (bottom graphic)
Default ‘Ultimate Recovery’
Show by ‘First Year of Flow’
Operator – Continental
Counties – Dunn and McKenzie
‘First Producing Year’s – 2008 thru 2012
Tapping (using tablet) last point on graph gives …
2008 with 20 wells averaging 97.3 bbld
2011 shows 69 wells with 97.2 bbld
For contrast, doing the same procedure with Williams and Divide shows huge production differential from Dunn/McKenzie.
Poorer quality rock coupled with minimal re-working are the biggest reasons.
It is speculation – informed, but still not publicly described – that when the offset wells are frac’d, the older wells benefit from the increased formation pressure.
Further, some operators re-pressurize older wells with water when newer wells are frac’d to minimize unwanted frac hits.
The produced water numbers (published every month for every well), invariably show a 5 to 10 fold increase in the older wells along with a huge bump in hydrocarbon output.
Bruce Oksol has been chronicalling this for years on his ‘Themilliondollarway’ blog.
(Additional, informative data point … check out Marathons profiles for 2007 thru 2012).
Anyone using simple, state wide production numbers relating to decline rates is missing the much bigger picture.
What I did was pretty straightforward. I went to his site (shaleprofile.com) and looked at each month’s production numbers by hovering the cursor over each time period. He gives number of wells and total barrels produced that month. I did it for each year for Continental only for all their bakken well for the 2008 to 2011 period, then for the two years you mentioned for the specific counties you mentioned.
The numbers I mentioned in my prior post are just simple divisions. Barrels produced that month divided by the number of wells.
On a broader note, I am aware of successes here in Canada in slowing or temporarily reversing production losses from water flooding. It seems to be reasonably successful in some fields, although these were fields with initial decline rates in the mid to high 20% range, not greater than 50%. I don’t know how those things translate.
Crescent Point Energy has been a leading innovator with waterflooding unconventionals.
They hope, at some point, to apply their techniques to their North Dakota Bakken operations.
Check out tiny Canadian outfit Granite Oil’s Dec. 2018 investor presentation.
They have been successfully re-injecting field gas back into their Bakken acreage for years now.
I believe itis true fracking in one latheral will also increase the presure in other and some increased flow , this is as I understand what frac hits is about as you might get not only some increased pressure , and not only oil will come out but also chemical in wurst case the whole well will be destroyed. I know sometimes there is huge challabges with getting out what is exspected from offshore field as water injection gives only limited impact. To use such solution in a tight rock formation must me almost impossible with a good result. At the same time if suxseed this will be a tremendus improvement for shale production. As I understand chemical are today injected to improve flow , guess this also cost dollars…
Coffeeguyzz,
And likewise those who cherry pick a couple of wells (200 out of 14,000) are looking at a small piece of the puzzle.
There is an adage that sometimes the forest is missed while looking at the trees, this may be one of those cases.
The big picture is captured pretty well by population statistics.
This is why one cannot judge hockey players in general by looking at Wayne Gretzky or basketball players by looking at L J or M J.
Also tried to reproduce Coffee’s results. So we are talking about 20 wells from 2008 and 69 wells from 2011. Rather than all 1600 wells from those two years or all 13,000 North Dakota Bakken/ Three Forks wells completed from 2008 to 2018.
This is about as far from the big picture as one can get.
Note there is indeed a bump up in output followed by an equally drastic drop in output, see chart below.
Dennis
Again, you continue to validate my statements without seeming to recognize it.
For this, I thank you.
Want to know WHY the graph shows such steep declines as the 2008 and 2011 (yellow and red lines) indicates? They were taken offline as nearby wells were being frac’d.
This is one of the vulnerabilities in Enno’s methodology as he uses calendar dating rather than actual, online producing days.
The online producing days is a common framing as this provides a MUCH clearer picture of the actual productivity of individual wells.
Furthermore … in regards to averaging …
there are numerous reasons to contrast Continental’s Dunn and McKenzie well results with their Divide, Williams, even Billings counties’ wells as these distinctions ‘tell the tale’ of much of Continental’s history in the Bakken. (At least in the ‘Shale Age’. Continental has been drilling in North Dakota for decades).
If people continue to base their analysis by merely looking at charts and numbers, inaccurate prognostications will continue to arise as the ‘story’ behind the numbers is a crucial component to understanding what is going on.
zzzz says:
Yes, much better to use zzz’s recipe of marketing blurbs, low-hanging fruit, and tea leaves 🙂
Mexico crude oil production (without NGLs)
January is down -87 from December to 1,632 kb/day
2018 average: 1,813
2017 average: 1,949
Chart: https://pbs.twimg.com/media/D0GjxsYWoAAoFd1.png
is it a peak from Mexico or a bad management ?
Mexico peaked a while ago. They produce oil from a few huge fields and unless they replace Cantrell with something of similar magnitude, there’s no way they can achieve that production again.
I’m guessing – a lack of new discoveries, as most of their production is from mature fields. And also Mexico’s state oil company now holds roughly USD$103 billion in financial debt…
2018-September (Rystad Energy) Pemex’s above-industry-average historical spend on exploration activities has not translated into new discoveries in recent years.
https://www.rystadenergy.com/newsevents/news/newsletters/OfsArchive/ofs-september-2018/
2018-12-20 (S&P Platts) Pemex’s largest challenge is to replace declining production from its mature fields. The company’s base production will fall to 1.52 million b/d by December 2019.
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/121918-mexicos-pemex-faces-challenges-in-2019-with-a-limited-upstream-budget
It’s a state owned company. The govt can infuse capital entirely on a whim and this would cover payments, and maybe even reduce the principal — which, btw, is owed mostly to Mexican entities.
Remove the peso from foreign exchange, have the Mexican central bank erase the Pemex debt and then hang around for a few years before re-entering FX.
Money is a substance created from thin air by central banks. It doesn’t have to make logical sense and it doesn’t have to cause any problems. The reason Bernanke style money creation isn’t done all the time is it would erode an underpinning of society. But when you need to, you enshroud the process with obfuscation and you eliminate whatever problem has arisen.
Remove the peso from foreign exchange,
That would create instant havoc in Mexico, they would not be able to import or export anything. Mexicans living in the USA would not be able to send any money home and the millions of foreigners living in Mexico would have to leave immediately because they could get no money from abroad. Every nation must have a foreign exchange and their currency must be rated at a given value versus other currencies.
Money created from thin air doesn’t necessarily do anything if it is matched by additional goods and services in the economy. But that doesn’t always happen. What happens when a nation just prints new money willy-nilly causes inflation.
Inflation is caused by more money chasing fewer goods and/or services. Deflation is caused by a glut of good and/or services. Creating money is not the pernicious device you seem to believe. It is necessary for any credit-based economy, which virtually all economies are.
Remittances can convert at a government decreed rate. Because of remittances Mexico could do this easier than other countries. Remittances are a source of foreign currency. It’s the no-doubt non free market exchange they need not have.
Mostly, Mexico can do this because they have enough oil. They have a crude surplus. They also have an agricultural surplus, mostly with the US and Japan.
Look, this is not even debatable. PEMEX is state owned. The government can do all sorts of hand waving phrasing obfuscation and allocate money to capital and then offset it with created money elsewhere.
BTW as for inflation is from excess money chasing goods and services, seriously cliche by now, how did Ben Bernanke willy nilly create 23% of GDP from thin air, have sub 3% GDP growth over that period and not see inflation above 4%? We don’t dare to examine Japan, I guess, who surely you would agree is the very definition of willy nilly money creating. Hell, they don’t have any oil at all and are utterly desperate to get inflation. What more printing could they do to get this . . . chasing you talk about?
No, Ron. If you have oil, you can do anything you want with this stuff called money and not see inflation. Hasn’t Japan proven that?
Oh, and a last item from FOMC conversations, and a few Fed governor speeches. The Fed, now having to stop rate increases and probably ending “normalization” of balance sheet, has opened an internal dialog about “other tools”.
They want to follow the lead of other central banks. One of the prominent tools under examination — like the Swiss, ECB and BOJ, they will examine direct purchase of equities.
Remittances can convert at a government decreed rate.
No, the government does not declare the exchange rate. The exchange rate is what it is and it changes daily, often several times daily. The exchange rate is set by the bid and asked price on the open market.
Because you have oil doesn’t mean you can control the exchange rate, the inflation rate, or anything else. They may try to manipulate the market by producing more or less oil. But there is a world market. What Mexico does would have little effect on the world market.
No one, not Ben Bernanke nor anyone else, can dictate the inflation rate. They can hope what they do, quantitative easing , does not cause too much inflation. But they cannot dictate that what they do will not cause inflation. If it does, it does, if it does not, it does not. That is just the way it is.
If quantitative easing causes more goods and services to be created then it will not cause inflation. Or, more correctly, inflation will be lessened by the amount of new goods and services it creates. But some inflation from quantitative easing is bound to happen. It did.
No, Ron. If you have oil, you can do anything you want with this stuff called money and not see inflation. Hasn’t Japan proven that?
Good grief! What are you talking about? Japan doesn’t have any oil. Well, they produced 4.25 thousand barrels per day in 2015. That is next to nothing. Japan is the third largest importer of oil in the world.
But no, if you have oil you still cannot create money willy-nilly and not cause inflation. Again, inflation is caused by too much money chasing two few good and services. The oil you have, or like Japan, don’t have, has not one goddamn thing to do with it.
That unconnected sentence preface about having oil didn’t relate to Japan, though my mistake in letting it be the same sentence. But that was no excuse to evade the point.
Japan has printed willy nilly for 20+ years. There is no inflation there. Let’s just stop this point right here and note how crushing this is to narratives. You said printing willy nilly chased currency after goods and services. Japan has printed enormously, beyond any imagined willy nilly, and there’s no inflation. Damn near no GDP growth, either.
Point being . . . Japan has proven printing doesn’t create inflation. There is no dodging this. Whether there is oil there or not. But if there is. . . .
Mexico and Pemex are actually in a better position. They have oil. If Japan’s willy nilly printing didn’t cause inflation, why would Mexico’s?
Oh give me a break. There are perhaps a hundred explanations on the web. Look it up.
Causes of Inflation
The Main Causes of Inflation. Proponents of the theory of demand-pull inflation argue that there’s inflation when the aggregate demand (the total amount of goods and services desired in an economy) outpaces the aggregate supply. In other words, prices shoot up when there’s more competition for products in short supply.
In other words, more money chaseing fewer products. Common sense: To increase the price of oil, just cut the supply. OPEC has done that for decades. It works. It’s working right now. The price of oil is going up. It’s called “supply and demand”. Cut the supply without cutting demand, and the price increases. (inflation) Increase supply without increasing demand, the price goes down. (deflation) Just common sense.
As to just printing money and inflation. Germany after WWI is an example, or Venezuela today.
You can have the last word. I will not reply.
lol
I’ll go with the reality on this one. Ron.
Japan doesn’t want inflation. Neither does Europe or USA. Thats a myth. You know damn well interest rate cannot rise in Japan regardless of where inflation is. Their debt load is too large. All they want to do is prevent or hold off debt deflation as long as they can.
Their lack of inflation has nothing at all to do with their lack of oil. It’s their debt load. And they fact that they are in population decline and are not all that open to emigration.
The FED reversing course on interest rate hike and eventually on QE run off is the same deal. Trying to hold off debt deflation. Take a look at what China’s central bank just did. Same deal. They are all trying to prevent debt deflation.
Oh, and there can be no end to it. There will always have to be another round of bond buying or interest rate cuts or buying equities. Central banks have no way out. They stop buying we get debt deflation from hell.
February 22, 2019 (Rystad Energy) Total US fracking rate by Frac Focus – It should be noted that in both November and December 2018 fracking activity level exhibits negative year-over-year change.
https://www.rystadenergy.com/newsevents/news/press-releases/Update-frac-disclosure-reveals-25percent-contraction-in-the-US-fracking-over-the-second-half-in-2018/
Some international inventories week/week changes (million barrels)
Total (Crude + Products): +3.76 (shown on chart)
Total Distillates: -3.70
Crude Oil: +7.46
Light Distillates: -0.33
Middle Distillates: +0.57
Heavy Distillates: -3.94
Chart https://pbs.twimg.com/media/D0HV8ZtW0AEYLyQ.png
Japanese (PAJ) weekly inventories (million barrels)
Total (Crude oil + Products): +2.82 (shown on chart)
https://pbs.twimg.com/media/D0HWcgLX0AAn16C.png
US inventories week/week change (million barrels)
Crude Oil: +3.67
7 Products: -0.58 (shown on chart)
Propane & NGPLs: -5.9
SPR: flat
https://pbs.twimg.com/media/D0HWpncXgAAbHlb.png
where do you find this informations ? (which twitter account)
Hello, they are on here https://twitter.com/Monkey_Charts
thanks mate
I suppose it’s ok to talk about inflation in this thread, since so many regular are, and it does relate to oil, and everything else for that matter.
Look folks, I’m no expert, but when you do something in countless lines of work, expecting something to happen, it CAN HAPPEN, without being OBVIOUS.
In a situation where deflation is likely, printing money can REDUCE the amount of DEFLATION…. which is precisely the same thing as CAUSING inflation, under more normal everyday circumstances. There’s a continuum of inflation and deflation, it does not have to be one or the other, as measured against the most recent purchasing power of the currency being discussed.
IF a central bank prevents a DEFLATION, by printing say one hundred billion, a second hundred billion might be enough to create OBVIOUS inflation, the sort that’s obvious to a layman.
This ought to be perfectly clear to anybody used to working with at least high school level math.
Japan also benefited from oil price collapse greatly. Back in Oct. 2012 Bank of Japan started QQE when price of WTI was $110.00 ish. So while they devalued against the dollar 30% or so over the follow years. Price of oil fell 50%. If oil went back to $110.00 ish they’d have a world of inflation in dollar terms which is what they use to buy oil. And they’d be in a world of trouble too. Because they can’t hike rates. Yen would implode.
There lies the danger of high oil prices. If one domino falls like Japan it’s going to take everybody else down with it. That is why price of oil won’t be allowed to reflect real world fundamentals like supply and demand. Mark to market no longer.
How do you see rationing taking place? Just whatever people can afford?
Hi Dennis
I second Volvo740’s question.
Do you want more discussion of oil and inflation and deflation moved to the other thread?
Oil demand is so inelastic that that doesn’t work forever. Unless oil demand itself drops about as quickly – and permanently – as production.
Hi OFM,
Inflation relates to oil prices which affects oil output, so ok in this thread in my opinion.
Printing money, by itself does not cause inflation. What can happen is the money can just sits in bank accounts and not be spent. In the recent Great Financial Crisis, central banks increased the money supply, but the “velocity of money” slowed down markedly (this is the average number of times an average dollar bill changes hands) so that inflation did not change very much.
Donald J. Trump (Verified account)
Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!
https://twitter.com/realDonaldTrump/status/1100002139282309121
He tweeted the oil price 2% down with this.
Looking Ahead in 2019: Oil Fundamentals
02/ 14/ 2019
http://blog.gorozen.com/blog/looking-ahead-in-2019-oil-fundamentals
Perhaps this one was posted and I missed it:
Is An Oil Supply Crunch Looming?
by Nick Cunningham | January 24, 2019
http://energyfuse.org/is-an-oil-supply-crunch-looming/
“The global oil industry needs to come up with 35 million barrels per day (Mbd) of fresh supply between 2017 and 2025 in order to compensate for rising demand and natural decline from existing oil fields”
What I read today was the focus now is to cut cost in shale further by use of same modell that made subsea and offshore fabrication some cheaper. In additional use of more digitalization , web solution exspect to save some cost by discover leacages earlier i.e. Cost level of riggs, equipment, pepole increase. Lots of investors, banks have lost confidence as they never get back what was promised. Seems there is a common understanding shale today even with the improvements done are far from profittable enough for this kind of capital demanding buisiness. It might come some increase production from Alaska but I believe soon will the ultimate test for Saudi Arabia come as they might need to add 2 MMbpd that exspect anual oil demand growth + decline that might be more because of years with low investment. Beside that President Trump want low oil price , seems he mean WTI 55 usd is to high…
Permian Pipelines: +200 kb/day of new capacity just started…
2019-02-22 (Reuters) – Crude inventories in West Texas dropped this week to the lowest in four months after a converted pipeline began transporting crude from the nation’s biggest shale oil field to the U.S. Gulf Coast, data from market intelligence provider Genscape showed.
Enterprise Products Partners LP began shipping crude on a converted natural gas liquids pipeline, the 200,000 bpd Seminole-Red line, two months ahead of schedule.
Permian area storage levels could rise again in mid-2019, weakening Midland prices, before other pipeline projects begin, analysts said.
https://www.reuters.com/article/us-usa-crude-permian-basin/new-pipelines-drain-west-texas-crude-stocks-to-four-month-low-idUSKCN1QB1Y2
Good NYT article on falling auto demand in China…
>> Chinese consumers are buying fewer cars as the country’s economy slows. Local competitors have raised their game. Many young people would rather use ride-sharing services similar to Uber than own vehicles themselves. <<
Ford down to one shift per day from three?
https://www.nytimes.com/2019/02/27/business/china-auto-industry.html