Texas Petroleum Report – July 2016 and LTO scenarios

by Dennis Coyne

I have attempted to correct the reported Texas output using the methodology provided by Dean. Usually Dean provides the spreadsheets and I simply reproduce his charts with a few comments.  This month Dean may be on vacation or busy and I have not yet received his input. If I get his charts I will post them.

Dean uses the average of the correction factors from Jan 2014 to the present in order to reduce the month to month volatility of the correction factors.  I tried several averaging methods (all data, 12 month average, 6 month average, and 3 month average) where for the x month average the most recent x months of correction factors were averaged.

The only method with a significant difference was the 3 month average, so I present the “corrected” output using Dean’s usual method and an “Alt (3 month)” alternative. The RRC data and the EIA estimate are also included for reference.


Last month’s “corrected estimate for TX April crude plus condensate (C+C) was 3511 kb/d, which is revised to 3451 kb/d this month (60 kb/d lower), May output fell by 78 kb/d (2.3%) to 3374 kb/d. The “Alt (3 month)” estimate is 3385 kb/d for April 2016 and 3288 kb/d for May 2016 (a 3% decline). The EIA estimate for April 2016 is 3230 kb/d.

Data for estimates below, separated by commas:

Month, RRC, corrected, alt(3 mo), EIA
Jul-15, 3357, 3462, 3468, 3452
Aug-15, 3316, 3439, 3442, 3413
Sep-15, 3294, 3438, 3438, 3415
Oct-15, 3265, 3436, 3431, 3404
Nov-15, 3229, 3430, 3419, 3409
Dec-15, 3160, 3399, 3386, 3348
Jan-16, 3167, 3454, 3437, 3361
Feb-16, 3110, 3455, 3428, 3315
Mar-16, 3035, 3452, 3408, 3277
Apr-16, 2948, 3451, 3385, 3230
May-16, 2674, 3374, 3288

The average output for the “corrected” estimate from the March 2015 peak to May 2016 is 3461 kb/d and for the “alt-3 month” estimate the average since the peak is 3447 kb/d. The chart below shows the linear trend over that period using least squares to fit the line. For the corrected estimate the annual decline rate is 113/3461=3.3% and for the alt-3month estimate the annual decline rate is 186/3447=5.4%.



Last month’s corrected estimate for April 2016 natural gas output in TX was 24,623 million cubic feet per day (MMCF/d). This month the April 2016 natural gas estimate was revised to 24,046 MMCF/d (577 MMCF less, 2.4% lower), May output fell by 660 MMCF/d to 23,386 MMCF/d a 2.8% decline in one month.

The annual decline rate for Natural Gas output in Texas since April 2015 (near term peak) is shown in the chart below. Average output over the period in the chart is 24,208 MMcf/d for the “corrected estimate” and 24,093 for the “alt-3 month” estimate.  The annual decline rate is 943/24208=3.9% for corrected and 1262/24,093=5.2% for alt-3month.


I collected RRC data for the Eagle Ford and determined the percentage of total Texas output from the Eagle Ford play. This percentage was multiplied by the “corrected” estimate for Texas to obtain an estimate of Eagle Ford output, which is shown below.


Output peaked in March 2015 at about 1600 kb/d and has fallen to about 1276 kb/d in May 2016, the alternative estimate using only the most recent 3 months of correction factors reduces the May 2016 estimate to 1243 kb/d.

The decline rate since the March 2015 peak is about 18% per year, average output over that period was 1416 kb/d, annual decline is 262/1416=17.8%.


Eagle Ford output was from the following fields: Eagle Ford 1, Eagle Ford 2, Briscoe Ranch, Sugarkane, De Witt, Hawkville, Gates Ranch, Southern Bay, Giddings, and Cypress Landing. Other fields listed as being Eagle Ford fields had negligible output over the 2014 to 2016 period.

The Texas Permian Basin consists of Districts 7C, 8, and 8A in Texas. The same method as before was used to estimate TX Permian Basin C+C output in kb/d. Output of C+C dropped by 47 kb/d in May 2016 from 1754 kb/d to 1707 kb/d.


The combined Eagle Ford and TX Permian basin output is shown in the chart below in kb/d.


The two fields combined fell by 55 kb/d in May from 3038 kb/d to 2983 kb/d.
Based on these estimates, much of the decline in Texas output has been from conventional fields outside the Permian basin. The combined output of the TX Permian and Eagle Ford peaked in March 2015 at 3107 kb/d and in May 2016 had fallen to 2983 kb/d, a decrease of 124 kb/d. If there was about 497 kb/d of output outside these two plays in Texas in March 2016, this conventional output has fallen by 107 kb/d to 390 kb/d, about a 24% decline since the peak (this is not an annual decline rate as it is over 14 months).

In any case the rapid rise in Permian basin output has kept Texas C+C from declining very steeply.

If oil prices remain low for the medium term (5 years or so), Permian basin output might not continue to rise, the drop of 78 kb/d in May’s TX C+C output is likely to continue unless oil prices rise above $65/b.

The raw RRC data from Sept 2014 to May 2016 (most recent data point from each set of data) is shown in the chart below.


Correction factors for TX C+C from April 2014 to May 2016 in the chart below for most recent 12 months (T to T-11).


Natural Gas correction factors are shown in chart below.


A conservative Eagle Ford Scenario is presented below, new wells added falls to 105 new wells per month from an average of 164 new wells per month for the June 2015 to May 2016 period. The number of new wells added per month remains at 105 from Sept 2016 to Dec 2023. Output falls to 1100 kb/d in Dec 2016 and 1000 kb/d in Dec 2017.


A conservative Bakken scenario below shows output falling to 850 kb/d by Dec 2016 and to 825 kb/d by Dec 2018. The number of new wells added gradually increases to 64 new wells per month by Feb 2017 and remains at that level until 2023.


I do not have a model for the Permian basin, but I assumed output would remain at May 2016 levels for 9 months and then decline by 1% per month for 12 months, level off for 10 months, and then decline more slowly at 0.5% per month until 2023. This Permian scenario is combined with the Bakken and Eagle Ford Scenarios above to give an LTO scenario for the “big 3” LTO plays from 2013 to 2023.


Output falls from about 4000 kb/d in May 2016 to 3680 kb/d in Dec 2016 and to 3360 kb/d in Dec 2017.

This scenario would be consistent with oil prices rising to $80/b by June 2017 and remaining in the $75 to $85/b range until 2023. Higher oil prices would be likely to result in higher output levels, but it is doubtful that output would rise above the March 2015 peak (4236 kb/d) for these three plays combined, even if oil prices rise to $120/b by 2020.

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328 Responses to Texas Petroleum Report – July 2016 and LTO scenarios

  1. Guy Minto says:

    Month to month on the RRC data, it computes to a 127, 526 drop per day in oil, alone. Mix the numbers around all you want, but empirical data says it is plummeting.
    April had first reporting of oil to be 74,597,958. May has first oil production numbers to be 73,131,246. There are 30 days in April, so a comparative to May would be 77,084,556

    • Dennis Coyne says:

      Hi Guy,

      I take the reported RRC numbers and divide by the number of days in the month, I add the oil output to the condensate output and report crude plus condensate.

      The drop in C+C output from April to May was 273.7 kb/d according to RRC data, I estimate how much the reported RRC data will increase over the next 24 months as more data gets reported and the data becomes complete. For April 2016 this “correction factor” is 503 kb/d and for May 2016 it is 700 kb/d (May has a 197 kb/d larger correction factor than April).

      Dean has been using this methodology for a couple of years now and it works nicely.

  2. shallow sand says:

    Dennis. Thanks for the analysis.

    It appears that EFS is tanking, Permian horizontal is holding strong and TX is steadily fading away, as it is in the rest of the US lower 48.

    I am still not sure about Permian horizontal economics. Stock prices, equity raises and acreage sales say it is very economic at present levels. Well production histories say it is not. However, those I have debated the histories with state that new Permian horizontal wells (2015, 2016) are going to end up being much more productive than 2011-2014 wells.

    One area that will be very interesting to watch will be QEP Resources purchase of about 9,500 acres in Martin Co., TX for $600 million. That appears to be a record $ per acre amount, and is especially noteworthy given the commodity price bust we are presently experiencing. QEP is funding the bulk of this purchase with a common stock (equity) issuance. It seems Wall Street is very taken with the Permian, and also the STACK resource play.

    One thing to note about the QEP transaction, it appears that Devonian wells drilled many years ago on the acreage were extremely strong, many over 1 million BO cumulative PER WELL. These are vertical holes from the 1970s and 1980s, still going strong.

    I would note QEP paid a bundle for acreage in the Bakken, and that acreage turned out to have some of the most productive Bakken wells, so the Permian purchase fits QEP’s M.O.

    So, over the next couple years, we should watch how QEP’s wells do on this acreage.

    Thanks again for the post.

  3. Cracker says:


    Thanks for the analysis and charts. I can’t help but wonder what your scenarios might look like if you kept oil prices at an average of, say $50 or $60, rather than in the $75 range where LTO might be profitable.

    Overall, seem a little too rosy to be real. Much more volatility seems likely. Long term oil investments get risky with volatility in prices. There isn’t likely to be a good, stable price environment in which to make long term project investment projections.

    Take a look at Tony Seba’s discussion of disruptive technologies and business models at the link below. Your beloved electric vehicles and related technologies will soon disrupt oil, electric utilities, and much of everything else. Your price assumptions will be sorely tested.

    I just realized that your ideas of economic stability are probably at odds with your correct assessment of new technologies coming at us. Interesting times indeed.


    Thanks for keeping up the site.


    • Dennis Coyne says:

      Hi Cracker,

      I think at oil prices of $50 to $60 per barrel these scenarios would work until 2017, but higher oil prices would be needed after that. I am doubtful of arguments that suggest oil is not affordable at $75/b, this price level is about 3.25% of World GDP on liquids consumption (in barrels of oil equivalent), the average spending over the 1980 to 2015 period was 3.1% of World GDP.

      If the economy crashes it is unlikely that oil at $75/b will be the cause. Perhaps oil prices will be very volatile in the future, this is difficult to predict, if predictions of economic collapse are correct, this would tend to limit volatility on the high side (maybe to as little as $90/b according to Art Berman) on the low side, I can’t imagine even the middle east producers would be profitable at under $10/b, so the volatility would be limited to that range.

      Steps could be taken to reduce volatility by controlling output to make prices more stable, if it becomes a serious problem these steps will be taken (along the lines of the RRC at a national or even international level).

      I do not expect economic stability, I just cannot predict how the instability will play out.

      I assume economic stability for simplicity, but faster or slower growth will clearly affect prices and output so any smooth lines on my charts should be though of as a smoothed trend line (such as a 3 year centered average) the real world output will fluctuate above and below these lines in unpredictable ways.

      • Guy minton says:

        Lol. Actually, I couldn’t imagine the upstream US companies wouldn’t have banded together with OPEC, in the past, if they didn’t have that Federal law in effect dubbed price fixing.

        • Dennis Coyne says:

          Hi Guy,

          Laws can be changed. The RRC regulated output from 1931 to 1972 and nobody was thrown in jail for this practice as I understand it. The US government could regulate US output for the good of the industry just as the RRC did in the past.

          • Guy minton says:

            The method of regulating production is still part of Texas laws, as it would be for a lot of other states. It is aimed at overproduction of oil that could damage the life of oil fields. It is still used. Spacing, allocation rules, etc. Oil in Texas is already heavily regulated by the State. By established rulings, the oil in Texas is considered part of the land that contains it. In essence, the oil is owned by the landowner, and the oil company is just leasing it. So, you are proposing a new Federal law that would affect each owner of the mineral rights. What’s next, the Federal government takes over building codes? Texas would, no doubt, file suit over states rights, along with over half of the mineral right holders in Texas, and other states. Depending upon how left wing the Supreme Court winds up, they probably would agree that it is a law that should remain within the State’s jurisdiction, and not the Federal government. Giving the Federal government more power is extremely repugnant to many of us, especially so in Texas. But, there is a growing political mass, that believes that what the US needs is more regulation by the Fed. We already have “big brother”, and giving that section of power, more power, is very scary to me.

            • Dennis Coyne says:

              Hi Guy,

              It could be done at the state level, though the law could be changed so that state agencies could cooperate if they chose to do so.

              For example the RRC and NDIC could both regulate output as the RRC once did, but they could work together to keep the industry healthy.

              • Guy minton says:

                So, how does the State or Federal government determine how much oil is taken out of each well to obtain the necessary allocation of oil?
                Really think we have broken into an area that belongs on the other board.
                Obviously, I am a conservative, but not overly conservative. Definitely think I am independent, because neither party has exhibited any intelligence in their choice of candidates. For a laugh, Trump’s front runner for Secretary of Energy is Harold Hamm. I agree they have to overhaul the Oil and Gas section, but what is his knowledge in the atomic energy area? We need to develop renewables for the future. Oil and gas won’t stay with us forever. Not well thought out, and acting similarly stupid as his opponent, who wants to obliterate fracking, requiring renewables to be available far sooner than they could possibly be available. I keep hoping for a real statesman, or stateswoman, to be in the running; but not this time.
                Yes, we can change it all. Not all countries allow their land (minerals) to be owned by the people. Look at Saudi Arabia, Iraq, or Iran. Now, those are some real models. Heck, then we could be part of OPEC.

                • Early in my career we had state regulations to control how much oil a well could produce. Some were quite inflexible, using what appeared to be arbitrary allowables. The federals controlled offshore well output with a bit of engineering put behind the numbers. The state agencies also cooperated and seemed to work out how much each state could produce. That went mostly out the window in the 1970’s.

                  • Guy minton says:

                    It went out the window, because? That’s right, OPEC. Then, their method was an embargo, rather than overproduction. We are going to always be in a vexing situation, where we either allow capitalism to work inefficiently, or put ourselves in a position to have foreign powers control our economy. If we start trying to limit our production, we hand the keys to the car back over to them. Even though they won (I guess) this time, it won’t always come out that way.

                • Dennis Coyne says:

                  Hi guy

                  The method would be similar to what rrc did in the past.

                  If you are fearful of too much federal power it can be done at state level.

                  • Guy minton says:

                    No actually the point I was making, is that limiting what can be produced in the US is a very, very bad idea. In my opinion. We give up potential in deference to foreign powers is absolutely anti America.

                  • Dennis Coyne says:

                    Hi Guy,

                    Was it anti-American when the RRC limited oil output before 1973?

                    What was the reason that the RRC limited output in the 1931-1972 period in your opinion.

                    Allowing uncontrolled output in the US has not worked out very well since OPEC stopped controlling output.

                    It would be interesting to hear other views from oil industry folks.

              • texas tea says:

                without the unlimited access to capital the industry may be far more disciplined as we mover forward. But if the government “underwrites” the price of oil with tariffs or import quota system, the cash taps will flow again. Some may remember Saudis called for and defended $100 back in 2011, that at least to some degree that gave non industry investors some confidence to make the decisions that were made. The same thing will happen again if the government does a similar thing. If we as a nation go down that road, and I am not advocating that, the states may very well step in and regulate production. It is my hope that Trump/ Pence will quietly work with the gulf states to once again become the swing producers, to target a price that would allow for future needed investment worldwide, but at the same time not over stimulate the animal spirits desperately seeking some type of real after tax income. 👍🇺🇸

                • Guy minton says:

                  Sorry, bad tag. It is not necessarily anti American. More like anti capitalism.
                  Again, Texas still has the capacity to regulate the amount of oil produced from a well. One needs to understand the early production of oil from Texas to understand why it was ever put on the books to begin with. It began, when they “overproduced” from the initial fields, causing it to “ruin” production from those fields, based upon what they understood about geology, at the time. As Fernando has opinionated, it became somewhat arbitrary over time, and was considered as limiting potential production. Seems many laws have that propensity.
                  Again, I apologize, by calling it Anti American, which I am quite sure you are not.
                  The EIA is still considering that the US can become self sufficient on oil. So, many are still following that concept. I think it is a “pie in the sky” possibility. I think we will always be a big net importer. So, if we limit US production, we will necessarily require that it will import more oil. How can that possibly be good for the US? It will be used against us, one way or the other.
                  If world consumption is going to increase for awhile, maybe the US can maximize their production, without incurring the wrath of OPEC. Leaving them in a better position until alternate fuels becomes more of a reality. However, if we limit US production to facilitate what OPEC is saying is their desire, that is to make a comfortable price for everyone, I think we are playing along the story lines of the scorpion and gator. That is, the scorpion asks the gator to take him across the river, and the gator ask him not to sting him as they cross. The scorpion agrees. Halfway across, the scorpion stings him. Before they both went under, the gator ask why? The scorpion replied that it was only his nature to sting.

                  • Dennis Coyne says:

                    Hi Guy,

                    I think overproduction is bad for the oil industry. Capitalism with no regulation is not always the best option which is why the RRC regulated output for many years. If OPEC was controlling output as they did from 1986 to 2014 (for most years), there would be no need for anyone else to do it.

                    If you think unregulated is best, just look at the US industry since 2015, things have not been going well for oil producers.

                  • One could argue that restricting production from Bakken, Eagle Ford, and other fractured horizontal wells may increase recovery factor.

                    If I were running those operations I would choke them down to 100 BOPD.

  4. Guy minton says:


    The most telling statistics on Texas drilling, permits, and plugging is found at the above. Can’t keep up with production drops with this activity. Almost more plugs than completions.

  5. The Baker Hughes Rig Count is out. Big jump in the rig count. Oil rigs up 14, gas rigs down 1. Texas up 15, Permian up 8.

    • Guy minton says:

      Based upon Schlumberger and Halliburton calling the bottom, I wonder how much of the active rigs coming on are really drilling more holes? Based on an estimate of a week per well, one rig can drill more wells than one a month. Are drillers trying to gear up for the future? Based upon permits to the end of June, there are not a lot of additional permitted wells to be drilled in Texas (see previous post).
      Of course there is no worry about new masses of new oil, not with the response of having 18 new rigs being the price of oil lowered to 43 a barrel. The consumption of oil keeps growing. The OECD supply sits at 3 billion, give or take. That is a 66 day supply. In 2003, I read an article where there were getting nervous, because the supply was at 77 days. Historically, it appears we are not grossly over supplied with oil, based upon consumption. I suppose we will need a corresponding shortage of oil, before we realize that peak production from cheap conventional oil is gone, way gone. We can not make it lower for longer, no matter what kind of story we conjure.

    • GJ says:

      Interesting to see the year over year change- US production peaked in March-April 2015 but the Permian still had 77 more rigs in July 2015 compared to now. It’s impressive that the production has held up as much as it has over the last year-or is it about to fall off too?

    • Toolpush says:

      BH doesn’t show an increase in the Bakken, but over the last week or two the ND gov page has. The interesting thing to me is, the new increases are from small companies, and in different counties. They certainly do not seem like the push to the core of the core, that has been going on for the last couple of years.

      Not sure if this a sign that the companies that have not drilled in the past 12 to 18 production is depleting and they need to boost their production, or new money coming in from Wall Street so they can continue to explore and potentially boost reserves?

      The other thing about the rig count, the gas, has yet to respond to the recent increase in price from below $2 to high $2. I know I have argued about the future price of Nat Gas with Heinrich, but unless gas supply can increase after the 2016-17 winter draw down, then gas supply for 2017-18 will be tight. The new LNG plants will be consistently coming on stream, new industrial demand is coming online as a response to the previous years of low gas price, and power demand is growing as well. If supply doesn’t respond next year, It will be interesting to how long the LNG plants will keep export for, and how much LNG gets imported into the NE. Remember the pipelines that have not been built, and LNG on the world market i under $6 mcf.

      • Coffeeguyzz says:


        There seems to be a lot of ‘build up’ of supply/transportation issues in the US natgas world, particularly in the Appalachian Basin.

        By this time next year, the Mariner East 2 pipeline is expected to be operational (not even built yet). Capacity is for near 275,000 bbl/d – expandable to almost half million bbl/d – of propane and ethane to Marcus Hook. Firm transportation commitments are in place.

        Antero just announced almost two dozen Marcellus and Utica wells turned online this past quarter with average flow rates of 16 MMcfed for first 30 days. Five of the Utica wells are on restricted choke with flatline production of 16 MMcfd for an as yet undetermined period.

        I’ve been tracking the ongoing output (mixed results) of the dozen Deep Utica wells that sparked so much attention last year.

        The Scott’s Run from EQT has just ‘dropped down’ to 20 MMcd with 300 days published production. Total cumulative is just under 9 Bcf.
        The 10-well pad this is on has over 60 Billion cubic feet produced, yet is still not the number one producing pad in Greene county.
        Somewhat surprisingly to me, two shallower Upper Devonian wells have recently come online. One, targeting the Middlesex formation, produced 73 MMcf its first 14 days.
        The other, targeting the Genesee, produced 1.6 Bcf in 5 1/2 months.

        Just an amazingly prolific area.

        • Toolpush says:


          I do believe the gas is in the Marcellus and Utica, but looking out to next year and a few years forward, they need to drill more wells, even though there are quite a few DUCs available to keep them going in the short term. I read figures of 10 bcpd extra gas for LNG export alone. At the moment gas supply is on the way down due to excess in storage. This is likely to change with the winter draw down season.
          The other thing is pipelines. The hurdles being put in front of the gas producers are maintaining the Marcellus gas at a discounted to HH. It doesn’t seem to be changing soon. The extra demand that is being placed on the system, with the Marcellus restricted, will mean more gas will be required from southern and Mid-continent areas. There is going to need a pick up the gas drilling rate. There are currently no signs of that happening. The question is, what price is required to make it all happen? and will all of this new demand be able to work with that price?

          PS The Marcus Hook pipeline is for NGLs. As ethane will now have a more ready market, rejection is likely to decrease and may actually lower the Nat Gas supply in the short term.

          • Coffeeguyzz says:

            Yes, just like with oil, there is a lot of turmoil going on in the gas world. Next several months should be interesting.

            Regarding the rigs in the Bakken … just did some checking on the Gis map and it looks like the three rigs in Renville, Golden Valley, and Burke counties are conventional, vertical operations. The White Owl outfit is drilling a SWD.
            Crescent Point may be drilling for HPB purposes as there are no wells presently on those sections.
            SM Energy has an interesting thing going on up there in Divide county as their ‘Gooseneck’ operation is fairly prolific even though located far from the core areas to the south.
            The wells are much shallower here and they claim to do a drill/completion for $4 million per.

  6. texas tea says:

    David Demshur, Core Lab’s CEO, has a saying that goes, “The decline curve never sleeps, and always wins.” The inevitability of the decline curve gives credence to the belief that production will slow and the market will find a balance.

    In its conference call, Core’s management team reaffirmed that it “continues to anticipate a ‘V-shaped’ worldwide commodity recovery beginning in the second half of 2016,” noting as
    evidence that “several U.S.-based operators have recently announced rig additions.”Reaching a Balance

    The oil and gas industry has thrown around the word ‘balance’ almost as much as the word ‘glut’ in the last year and half. These two factors are believed to be leading indicators of the oil price recovery. Core Lab believes that the market is reaching a balance and eliminating the glut in the second half of 2016.

    During the second quarter call, Demshur said: “Core believes that worldwide crude oil supply and demand markets are close to balancing and will balance this second half of 2016. On the crude oil supply side, U.S. unconventional production peaked at 5.5 million barrels of oil per day in March of 2015, and has since fallen by over a million barrels a day owing to high decline curve rates associated with these tight oil reservoirs.

    A year ago, month-over-month, the U.S. production declines were in the tens of thousands of barrels per day, per month. Now these month-over-month per day losses quite often reach 100,000 barrels of oil per day or more. So look for that to expand and continue to expand into late 2016 and into 2017. From these analyses, we would take the over on the drop of 1.1 million barrels per day by year-end,” Demshur said.


    There is a great deal more good info worth a read 👍

    • Watcher says:

      There is no market.

      • clueless says:

        Where will the first little piggy go?

        • Joe Clarkson says:

          Out of five little piggies, only one little piggy “went to market”. One stayed home, one had roast beef, and one had no roast beef. The smallest piggy just went home squealing.

          You may be confusing these pigs with another group of three little pigs that developed different house construction techniques.

        • HuntingtonBeach says:

          Walmart, have you been there lately ?

      • ktoś says:

        At the gas pumps worldwide 24/7. Market can’t be more.

    • Guy minton says:

      Thanks for the link. Have a lot of respect for what they come out with. They could be wrong, in that the desire to keep it lower for longer will outweigh reality until it becomes the Titanic.

  7. Chart Monkey says:

    A few more Texas RRC categories (if anyone is interested)
    Oil Completions
    Permits Issued
    Oil Wells Plugged
    Oil Wells Producing over 100 BOPD (TxRRC’s highest category)

    • Guy minton says:

      Nice chart.

    • Yes, nice chart. It is worth posting.

       photo Texas RRD amp EIA Prod_zpsvhlu90cc.jpg

      • Dennis Coyne says:

        Thanks Ron,

        I was going to do that, but you beat me to it.

        Notice how the oil completions have remained pretty steady since Nov 2015.

        It would be interesting to see oil completions from Jan 2015 to June 2016 on their own chart not zero scaled so we had a better idea what has happened with these, it looks like roughly 1900 in March 2015 and a drop to about 750 in Nov 2015 and a slower drop to about 700 completions in June 2015, maybe an average of about 850 completions per month from Nov 2015 to June 2016.

        Very interesting indeed.

      • Dennis Coyne says:

        The chart I was looking for is below.

        The oil completions in March 2015 were 1547. The average oil completions from Nov 2015 to June 2016 were 827/month and June completions were 700. In April 2015 there were 1867 oil completions, so there seems to be a one month lag between completions and reporting. Perhaps to 700 completions reported for June 2016 actually started producing in May 2016 which might explain the drop in output.

        • Dennis Coyne says:

          Chart with TX oil well completions from Jan 2015 to June 2016 in oil completions per month.

  8. shallow sand says:

    As I noted above, apparently the Permian has quite a few locations that work at sub $50 WTI.

    I guess I would like to see how that works, as I can only get some very exceptional wells to work at that price.

    Anyone who can lay out the payout on these hz Permian wells, we would appreciate you showing us.

    • Guy minton says:

      I think you have to step out of accounting, and just look at cash flow.
      It has to cover the cost of the well the first year.
      So, the first question is how much will it cost to drill?
      EOG would probably need a little more than 5 million for an Eagle Ford. So, 175k barrels the first year would cover it at 40 oil. It would, no doubt, be profitable at a lesser amount, but with no borrowing power, wells have to provide yearly cash flow.

    • shallow sand says:

      I look at different companies from time to time and see how their wells are performing.

      I took a look at Cimarex, they are considered one of the stronger Permian companies, with both a high stock price and high enterprise value.

      I pulled all of their Permian horizontal wells with first production in the years 2011-2014. I will assume a 25% royalty, common in the Permian Basin for hz wells. Here is what I find:

      13% have produced 200,000 BO gross, or 150,000 BO net, or more
      38% have produced under 100,000 BO gross, or under 75,000 BO net
      49% have produced between 100,000 BO and 200,000 BO gross, or between 75,000 BO and 150,000 BO net.

      As to most recent month’s production:
      16% produced 3,000 BO gross, or 2,250 BO or more net in the most recent month.
      50% produced under 1,500 BO gross, or 1,125 BO net or less in the most recent month
      34% produced between 1,500 BO and 3,000 BO gross, or between 1,125 and 2,250 BO net in the most recent month.

      Fully one half of Cimarex’s wells with first production from 2011-2014 (yes from about 16 months to 64 months old) are under 50 BOPD in the most recent month. Of those under 50 BOPD, 40% (20% of the total) were under 25 BOPD gross in the most recent month.

      I am not convinced Permian wells are going to payout within 5 years at sub $50 WTI, in any significant numbers. The only hope is that 2015-2016 and later wells are much more productive and much cheaper to drill, complete and equip.

      • Guy minton says:

        Whether it be the Bakken, Eagle Ford, or the Permian; to be profitable at sub 50, they have limited areas that they can drill in. Sub 40, they can make money, but cash flow is probably negative. At sub 30, keeping assets greater than liabilities is a problem. Limited area, means they can’t keep it up forever. However, the pundits consider everything homogeneous, and everything is easily calculated based on whatever they consider as the base. I’m not an expert, so if I need to find out, I ask an oilman, not a pundit.

      • Dennis Coyne says:

        Hi Shallow sands,

        The most interesting statistic would be the average barrels net for 2014 wells only.

        Maybe a comparison with the average first 24 months net of 2012 wells would tell us if the wells are improving. Do you have the data in a spreadsheet? If I have month by month average data either for all wells or by year I can fit a hyperbolic and estimate 60 month output.

  9. AlexS says:

    EIA/Drillinginfo U.S. LTO production estimates for June was released earlier this week.
    Output was down 108 kb/d from May and 543 kb/d from March 2015 peak level.


    • AlexS says:

      Eagle Ford accounts for 92% of the overall decline (down almost 500 kb/d from March 2015)
      Bakken is down 195 kb/d. Permian output is up 175 kb/d.

      Change from March 2015 by key shale plays (kb/d)

    • Dennis Coyne says:

      Thanks Alex,

      The Eagle Ford has declined a lot, but through May 2016 the decline has been about 346 kb/d from the March 2015 peak. My estimate (DC estimate in chart below) is based on the average of the “corrected” and “Alt 3 month” estimates for Texas C+C. The percentage of total Texas C+C output from the Eagle Ford is based on RRC data (38% in May 2016), I use the actual percentage for each month (below from Jan 2015 to May 2016).


      The output for the EIA estimate is below the line and for the DC estimate is above the line in kb/d.

  10. So…it looks like total world oil production capacity has dropped at least 2 mmbopd. Meanwhile the Iranians and Saudis keep at their price war.

    What we need is a projection of worldwide production and withdrawal from storage over the next 12 months. I have a hunch storage will be down from today’s levels to 2o14 levels by 2017. That should juice prices and get activity up a small amount.

    • Oldfarmermac says:

      This is mere speculation , but consider that in times past, countries at war have staged elaborate ruses of various sorts to fool the enemy. Men and machines have been moved, at great expense, to places there was no intention of actually using them,except for the purpose of diverting enemy men and equipment AWAY from the places where an attack is actually planned.

      So- Supposing China has a top down government, which is true, and that China is flush with cash, which is true, and that it would have been to China’s advantage,also true, to overstate Chinese prosperity, by exaggerating oil consumption, how hard would it have been for China to put a SUBSTANTIAL quantity of oil into storage without the rest of the world knowing the score?

      And of course the biggest reason of all for them to have done so is that they could have been buying that hypothetical EXTRA stored oil dirt cheap, knowing very well the price of it would be going up within a couple of years ?

      Nobody is paying much interest these days, except poor working chumps who are in debt with credit cards.

      There might be a LOT more oil in storage than most analysts would suspect, based on readily available data. It would be to the advantage of anybody with the money , and the intention of selling it later, or any country building a strategic reserve, to buy as much as quietly as possible.

      So this brings up a question.

      How much would it cost China to build a new storage facility NOW, with business slow, lots of skilled workers available, lots of existing machinery available, steel and concrete prices way off recent peaks, etc?

      Something tells me there is still plenty of potential for SOME oil at least to be going into long term storage, with production still falling off, layoffs continuing, etc.

      An elementary analysis from the farmers pov indicates that the price ought to be going up quite a bit, before too much longer, unless the world economy has a heart attack. The price of cows and corn and apples ALWAYS goes up again, when a shit load of producers drop out.

      I would be putting ten thousand gallons of diesel into storage myself if I weren’t retired., and I was one of the smallest of small individual businesses that uses diesel. Most such businesses can’t AFFORD to put fuel into long term storage, but there are plenty of people with lots of money who CAN afford the investment.

      So- What does it cost, on average, to store a barrel of oil for a year?

      • shallow sand says:

        OFM. For us small guys, we can buy a new 140 barrel tank for around $3,500.

        Another approach is to find an old used one that needs repaired, and have the bottom fiber glassed. That costs about $1,000, plus the cost of the tank, which is usually minimal.

        You would also need to build a berm around your tank, which can be costly, but you can do that yourself with a back hoe.

        I assume the larger the tank, the cheaper the per barrel cost. We actually go with smaller tanks, because a tanker can haul about 160-170 bbl per load and so they will normally pick up two tanks per trip, somewhere between 75-90 bbl per tank.

        Another point, it is always good to have a spare tank available in the event one of your tanks fails. About all the oil inside the dike is recoverable, but you will need a place to put it.

        You also will need to obtain a tank number and a division order number from an oil purchaser, and before they buy anything, they will measure your tank themselves.

        Tanks themselves last for many years, especially if you set them high enough in the berm so they do not sit in rain water and snow melt.

        I am sure tanks can be leased. I understand that happens in a lot of producing regions, but not around here.

        Funny thing, many of the shale guys have sold their gathering systems to raise money, and now lease them back. I’d sure hate to be doing that, but their world is different than ours.

        • I suspect the Chinese would store oil in quarter to half million barrel steel tanks or in storage caverns. I don’t think they got salt domes, so they need to dig these caverns in granite or very impermeable rocks. I don’t know much about current Chinese construction costs. My data base is limited to Latin America and the formervSoviet Union.

        • HR says:

          I stick with 10, 15, and 21 thousand gallon tanks. Those seem to be the tanks that are just laying around in the countryside. I can usually buy the tanks for $1000 bucks but I have to get a crane to the loading site to load it on a lowboy, and then the crane travels to the tank farm to unload. So the crane and lowboy costs are much more than the tank. Then I have to rig the tanks and weld some kind of feet on them for stability. And that’s not cheap. I like top loading tanks which speeds up the process and loading the trucks from the bottom. I built 60×40 concrete containment pits with three foot concrete floors to hold the weight. Concrete block walls that need epoxy paint to be liquid proof.
          How do you guys remove your water? And how do you dispose of it?
          And I really like the idea of fiberglassing the bottom. When a tank goes out, I’ve always called the scrap guys and away she goes.

          • shallow sand says:

            HR. I did leave out the cost to set the tanks, although the new cost includes delivery and set up.

            We separate oil from water with a gun barrel separator, water goes into water tanks, then through the injection pump and down injection wells in producing zone, or SWD well in a different zone.

            We run fairly low pressures, 150 to 600 psi. Most leases are in a five spot pattern.

            We build earthen berms, and cover with rock. Have inside of berm funnel to a low spot, where a 55 gallon plastic drum is set in ground with a small sump to pump out rain water and snow melt.

            Injection plant is within the berm, everything contained.

  11. HR says:

    Also, a friend just gave me 2 – 5000 gallon tanks, 2- 6000 gallon tanks, and 1- 8000 gallon tank. I’m letting them sit in place till the cash flow situation improves. Then I’ll move them, rig them and maybe use them for oily water or something. You can’t have too many tanks right?

  12. Chart Monkey says:

    EIA – Drilling Productivity Report – Permian – production per rig
    (I’m no oil expert, I’m only posting this to add to the conversation, especially for people who are new to oil)

    I was wondering how production per rig has managed to increase so much. As you can see on the chart, there was a sudden increase in November 2014.
    chart: https://s31.postimg.org/bo1bcc3fv/Permian_July_2016_Production_per_rig.png
    (I tried to include to chart in the post, but it wouldn’t upload, I got an error message)

    From November 2014 there’s a strong inverse correlation between the rise in production per rig and the fall in the rig count. And so I’m guessing that this can only be explained by operators dropping rigs from non core areas and concentrating on sweet spots (high grading). Also the retirement of slower rigs that needed more maintenance.

    Obviously if you remove the subset of less productive rigs then the average productivity of those that remain will appear to increase.

    A gradual improvement in drilling technology and strategy is another suggestion that I’ve heard. Althought I imagine that’s more of a longer term thing. I’ve tried to model this long term improvement with the green trend line on the chart.

    The adjusted rig count on the chart is the rig count weighted for the increase in production per rig. It’s as if productivity stayed constant from November 2014. In other words, how many rigs would it take to produce the same amount of new oil production without the increase in productivity.

    In theory, high grading could have given an 80% boost to production per rig. An increase from what it might have been at 279 bpd (the green trend line extrapolated) to 503 bpd (the number the EIA give for July 2016).

    It’s difficult to find reliable information about the amount of oil that’s available, and at what price level. Most of the information available for small investors is misleading. Costs are often omitted from the break even calculations, such as debt servicing, capex, dry wells.

    • Dennis Coyne says:

      Try to use gif instead of png, there is a 50 kb file size limit, you want to keep it small.

      There are more horizontal wells being drilled in the Permian lately and output per well drilled is higher. Basically horizontal rigs are more productive.

      • Reno Hightower says:

        Rigs are not more productive. They can be more efficient. More production comes from better rock or when talking about shale, better completions.

      • Chart Monkey says:

        I’ve had a quick look at the horizontal rig count, to try and see if it explains the big jump in production per rig. It does look like a long term factor.
        Longer laterals is something else that oil companies say is helping although there doesn’t seem to be much data available for it. Do longer laterals take longer to drill?
        Here’s the chart with the percentage of horizonal rigs (Taken from Baker Hughs – US Count by Trajectory).

        • George Kaplan says:

          They only drill in the best areas; they stopped drilling wildcats; only the best crews and companies are left; they are leaving new bad quality wells as DUCs and completing older DUCs in their place; they switched to well pads and walking rigs; infrastructure for transport, gas handling, well access, maintenance etc. has improved; there’s a natural tendency to improve anyway as geology and equipment is better understood. I don’t know if any of those are true. Really feet per rig is the best measure for drilling efficiency, and barrels per foot is probably a decent measure of well design and reservoir quality. If all the rigs stopped and one DUC was completed that would presumably give infinity for rig productivity, so at some point it becomes meaningless as a measure, maybe a point already reached.

        • Chart Monkey says:

          Shale Revolution Extended to Old Wells Seen Unleashing More Oil – July 14, 2016

          U.S. oil explorers are yet to fully reap all the rewards of horizontal drilling techniques that helped trigger the shale boom, research firm IHS Markit Energy said.

          From Texas to North Dakota, the method still stands to boost production from old, conventional wells where low permeability has restricted extraction to a fraction of their potential, an IHS Markit study showed.

          “When you’ve got the vertical well already drilled and then you drill it horizontally, you don’t have all the costs of initially drilling the well,” said Stephen Trammel, director of North American well and production content at IHS Markit. “You’ve already got pipelines there, you’ve already got infrastructure.”

          • It depends on casing size, and the rocks between kickoff and the horizontal. I’ve got myself in trouble for proposing sidetracks which gave us a huge hassle kicking and making the turn in crappy seal section above the reservoir.

            In some cases it does make a bundle of money if the well was cased with 9 5/8 inch casing. That gives a huge amount of working space.

            • coffeeguyzz says:

              Continental actually used a vertical well to save money when they did their first North Dakota horizontal in 2008.

              The idea of targeting reservoir rock with the latest techniques of horizontal drilling and fracturing is apt to be implemented if the economics make sense.
              The seven horizontals that Ener Vest just drilled in the Clinton Sandstone in Ohio were, by their accounts, successful in showing that it could produce hydrocarbons (1,100 bbld for all seven).

              With Consol repetitively drilling a ‘mile a day’, Antero drilling a 7,274′ lateral in 24 hours, monobore/one run drilling taking hold in the Niobrara, some of these older formations might warrant another evaluation.

              • texas tea says:

                Fernando and Coffeeguyzz, are correct, overwhelming the old wells were not plumbed for that type of reentry/re-completion. However, in the new plays like STACK and SCOOP and perhaps others where they know in advance there is likely to be more than one horizon they can complete in, the pipe program is structured to accommodate just such a opportunity. For instance, in parts of SCOOP you can drill a Woodford well, with sufficient size casing to come up the hole 1200′ and drill a lateral in to the springer at a later date once the Woodford becomes uneconomic or is lost due to some mechanical issues. Back of the napkin calculations could shave off $2,000,000 a well.

    • Chart Monkey says:

      Yes I can see that my post is badly worded. I guess that it should have read something like…

      Obviously if you remove the subset of rigs that are drilling in less productive areas then the average production per rig of those that remain working will appear to increase.

      • Chart Monkey says:

        Texas RRC – Natural Gas – Completions and Active Wells – As of June 30, 2016
        While it’s the weekend… as much data as I could fit into one chart, just trying to see if there is anything useful in it?

      • Chart Monkey says:

        Schlumberger’s CEO mentions high-grading during their earnings call…
        The operators have reacted to this crisis by initiating a massive reduction in oilfield activity and by sending unsustainable pricing shock throughout the entire oil industry supply chain. In addition, there is currently also a widespread high-grading of activity taking place in the industry aimed at maximizing short-term production and cash flow.

        • George Kaplan says:

          I’m not going to read all that, so does high grading mean only drilling in the best areas and deferring everything else, or specifically designing and operating wells to maximise initial production, possibly at the expense of ultimate recovery?

          • Chart Monkey says:

            Yes I’m sure he means the best areas.

            I looked up high-grading on the internet. It’s to do with the amount of oil that’s in the rock and how porous (permeable) the rock is. But I think it might also include things like, drilling the sites that are closest to existing pipelines.

            • Chart Monkey says:

              He also mentions that he doesn’t think that there has been a recent improvement in technology…

              Schlumberger’s CEO
              The operators have reacted to this crisis by initiating a massive reduction in oilfield activity and by sending unsustainable pricing shock throughout the entire oil industry supply chain. In addition, there is currently also a widespread high-grading of activity taking place in the industry aimed at maximizing short-term production and cash flow.

              Adding up all of this, the current cost per barrel for the oil producers now appears to be significantly lower than what was the case seven quarters ago. However, this should not be confused with a permanent improvement in the underlying industry performance as there has been little to no fundamental change in technology, quality or efficiency, no major step change in industry collaboration and no general transformation of the industry business model.

              • texas tea says:

                improvement in technology can be defined many ways. For instance, the extended laterals, went from 4500′ to 7500′ to now 10,000′. I don’t know if that can be defined as “new technology”. In addition, the time to drill those wells has also declined, usually see companies announcing “new record” time as there expertise improve within any play. There is little doubt to me that the boom raised cost to unsustainable levels and companies paid little attention because they did not need to and now the bust has driven cost down to unsustainable levels. Our industry is very good at finding ways to adapt.
                What SLB is really saying is, that as soon as they can they intend to raise prices, and that they are firing as many people as they can, so please keep buying our stock. 😜

                • Coffeeguyzz says:

                  What the CEO said a few times in the Q&A, especially in the next -to-last question from the analyst named Boyd, was that Schlumberger was going to press, in 2017, and particularly the NA land market, very hard to get operators to utilize a suite of technologies that Schlumberger offers that will increase output from new wells.
                  While he did not offer specifics, it is no secret that Schlumberger has sophisticated , real time mapping of microseismic events (fracs), highly effective diverting agents, and – now that they have recently joined with Packers Plus in a global wide collaborative venture – possibly the most effective frac process available today.

                  Leastwise, they probably think so.

                  Packers Plus has an interesting open hole system that has recently done 50 stages in 50 hours several times in the Balkan.
                  Some big advantages in open hole are time and money savings.
                  One downside has been fractures being inefficiently effected on a consistent basis.

                  If companies can have the entire wellbore exposed in 200′ increments (10,000’/50 stages) and have ‘thief’ fissures temporarily blocked allowing comprehensive complex fractures form throughout a controlled distance … and do all this in 50 hours, they are onto something big.

          • It means high grading the well locations, the completions, the way the well gets hooked up, the operating personnel, etc. Contractors get squeezed, good people get laid off, the ones who remain are like super athletes or married to the boss’s children.

            I’ve mentioned this several times. What really bugs about the whole process is that one survives and feels traumatized because the other guys were let go. A normal person doesn’t go through this without getting some mental scars.

    • gwalke says:

      Hi Chart Monkey,

      Dividing production by rigs is a fruitless exercise, certainly in the age where the bulk of new production comes from shale but probably before then, too. Aside from the valid concerns other people have mentioned below about the fact that operators are exploiting their best rock right now to keep their companies afloat, rigs drill the hole, but wells have to be completed before they produce. When producers were completing wells flat out in the boom, you could point to some kind of link between the two. Now, rigs have been idled but the wells they drilled are still being completed. A good way to consider the spuriousness of the measure is to consider: if all the rigs in the USA got idled but producers kept completing the drilled wells, rig productivity would be infinite.

      The EIA’s ‘rig productivity’ metric is a bit like dividing the number of shelves in your house by the number of electric drills you own to measure how good your drill is. If you sell your only drill to your friend once you’re done drilling the holes for the screws but before you actually put your shelves up, your ‘drill productivity’ would be infinite.

  13. AlexS says:

    We’ve discussed this before.

    A Bloomberg article explaining why shale companies are maintaining and even increasing production despite low oil prices and negative cashflows.

    Oil CEOs Still Paid for Growth Despite Crude Glut, Moody’s Says


    • Senior executives rewarded for increasing production, reserves
    • Industry finding it difficult to change course, report finds

    U.S. crude supplies remain at the highest seasonal level in at least a decade, but drillers are still rewarding their top brass when they add to the glut.
    Boosting production and reserves accounts for nearly a quarter of bonuses awarded to senior executives at North American exploration and production companies, Moody’s Investors Service said in a research report published Thursday. At some companies, executives’ share of bonuses tied to exceeding output targets is 40 percent or more.
    That may explain why output has remained stubbornly high despite a global oversupply.
    “They’re finding it difficult to change course,” said Christian Plath, a Moody’s vice president and corporate governance specialist. “It’s like a supertanker going full speed. Making a quick course correction is hard to do.”
    Production and reserves targets accounted for more than 23 percent of executives’ bonuses in 2015, according to a Moody’s analysis of 15 companies. Credit-enhancing metrics — like cash flow and return on capital — usually make up the smallest portion of energy executives’ bonuses, Moody’s said.

    • Watcher says:

      Hmm. Then why were exploration funds at all the majors slashed in Dec/Jan 2013/2014, six mos before price fall. This guy probably knows nothing.

  14. AlexS says:

    Also from Bloomberg on the DUCs.:

    Fracklog in the Biggest U.S. Oil Field May All But Disappear


    Crude in the $40- to $50-a-barrel range may wipe out most of the fracklog in Texas’s Permian Basin and as much as 70 percent of the inventory in its Eagle Ford play by the end of 2017, according to Bloomberg Intelligence analyst Andrew Cosgrove. While bringing them online is the cheapest way of taking advantage of higher prices, the wave of new supply also threatens to kill the fragile recovery that oil and gas markets have seen so far this year.
    “We think that by the end of the third quarter, beginning of the fourth quarter, the bullish catalyst of falling U.S. production will be all but gone,” Cosgrove said in an interview Thursday. “You’ll start to see U.S. production flat lining.”

    • George Kaplan says:

      Am I reading the chart upside down (or maybe Cosgrove is) but the number of DUC’s in the Permian is going up, and faster than any of the others, and in fact about as fast as it ever has. In 2016 only Niobrara is going down slightly. The decline in DUCs in Permian was mostly in early 2015 when prices really crashed. The plays have different areas and producing wells so comparing total DUCs is meaningless. How do the conclusions in the article come from that? There was another article around May, that I can’t find now, which had a more logical explanation that a lot of the DUCs just aren’t worth completing as they would be poor quality, but leaving them uncompleted allows the drillers to pretend they have all this production just waiting to go which (supposedly) keeps the share price high and the borrowing channels open.

      • Guy minton says:

        I know some DUCs are being completed in Texas, and total completions are not being raised, yet. Meaning that even less are being currently drilled and completed. You can see how total completions are reflected in a post that I made earlier that had an RRC webpage. Those that are labeled recompletions are, no doubt, largely DUCs. They previously submitted a completion report that indicated they were shut in, now they are re-completed as producing. Probably most are. I would agree that the location of most DUCs would be in a lesser producing area, otherwise they would have completed them before. They have more of a value this year for capital expenditure reason, as half the expense has already happened. However, look for the production in those wells to drag down per well production as EIA is now reporting.

    • Dennis Coyne says:

      Another article on DUCs at link below (from Oilprice.com on July 22)


      But Bloomberg Intelligence is not alone in predicting that DUCs present a threat to an oil price rally. Citigroup estimates that DUCs could add as much as 1 million barrels per day of new production in the second half of 2016, which would surely prevent oil prices from rising in any substantial way. “DUCs represent the low hanging fruit for U.S. oil producers,” Citi said in June.

      Other forecasters are more skeptical. Oslo-based Rystad Energy believes that about 90 percent of the DUCs are profitable at $50 per barrel, so for all intents and purposes, that can be used as a rough rule of thumb for when DUCs start to be worked through in earnest. But it sees completions proceeding only at an incremental rate of a few hundred per month, which could add 300,000 barrels per day by the end of the year. Wood Mackenzie more or less agrees, arguing that it is unlikely that the entire industry moves at once, especially since it takes time to activate fracking crews and equipment. The consultancy sees new production of about 250,000 barrels per day by the end of the year.

      If that is the case, DUCs could slow declines but not necessarily spark a revival in U.S. oil production.

      • AlexS says:

        Citigroup’s scenario is absolutely unrealistic:

        1) there is no fracking capacity sufficient to increase output by 1 mb/d in 6 months;
        2) shale companies lack cash to finance such investments
        3) current oil prices do not justify a sharp rebound in upstream activity

        • Dennis Coyne says:

          Hi Alex S,

          I agree, the Rystad and Wood Mac scenarios seem more realistic (though possibly those are too optimistic as well.)

    • Oldfarmermac says:

      I find it interesting that this report does not mention population growth, or depletion. It’s so obviously a piece of partisan shit, focused solely on the author’s agenda , that it’s good for nothing more than a belly laugh.

      Now to be perfectly straight forward, we DON’T actually know how long it will be before the depletion of old legacy oil fields starts taking a real bite out of oil production, but we DO know that nobody has discovered a new super giant field for going on half a century now, and that most of the new fields discovered are smallish, high cost, and fast depleting.

      I know that most projections of future trends made by government agencies are based on telling the public what it wants to hear, when it comes to business and industry. The overall record of such agencies as the ones mentioned are laughable.

      BUT ( OTOH ) we don’t know FOR SURE that new technology will or will not allow the industry to economically produce some of the very low quality but extensive oil deposits found in various places planet wide.

      I do know for a fact that the coal fields near my home are just about worked out, and that there is a state park in State Park, Pennsylvania, where you can see where the modern oil industry was born. I know that I personally passed up the opportunity to go to Alaska and make some serious money, for a young guy, when the pipeline up that way was being built. I hear production from ALASKA is off EIGHTY PERCENT.

      I know a fair number of REAL scientists myself, personally, and more via email correspondence, etc. Every last tenured professor of the biological sciences and the physical sciences I have met is professionally certain that the pollution resulting from burning coal, oil, and gas on the grand scale is fucking up the one and only home we have and are ever likely to have, to such an extent that hardly any layman can even COMPREHEND what they are trying to tell us.

      I don’t have any problem understanding what they are telling us, because I am personally professionally trained in the application of the physical and life sciences to my own field of agriculture.

      Right now we are collectively like a bunch of kids whose parents made a lot of money and died, and left it to the kids, who are blowing thru it like there is no end to it. Kids like that wake up broke one day. I have known some of that sort of people too.

      We suck on cigarettes and beer bottles, lots of us, with never a thought as to the consequences.

      We are COLLECTIVELY doing the equivalent thing of sucking on beer and cigarettes when it comes to the way we are treating the environment. Once the damage is done, it is generally impossible to correct it.

      People who have money invested in the fossil fuel industries, or who directly or indirectly collect money from the ff industries , are just as willing to lie their asses off, especially by cherry picking only the info they want you to hear, as any politician.

      Now I guess this rant is enough to prove I ain’t no stinking republican, but I will take this opportunity once again to remind everybody I am not a partisan democrat.

      I tell it like I see it.

      The D’s are better positioned on the environment, although they are also in the vest pocket of big business just as surely as the R’s. Anybody who is dumb enough to believe HRC is ethically fit to be president is about as deluded, or ignorant, in my estimation, as people who believe in Santa Clause. ( But for the record, Trump is worse.)

      Otoh, I am not willing to give up my personal freedoms and rights for a little temporary safety, and I am not willing to see the future of another generation of kids sacrificed to the public schools monopoly.

      I don’t believe in making welfare comfortable enough that people are no longer willing to go to work at low wage jobs, if nothing better is available.

      I hate to say ANYTHING that can be interpreted as supporting TRUMP, but I grew up in a working class farming and industrial world, and my heart still belongs to the horny handed sons of the soil, and the people who are man enough, and woman enough, to actually WORK , as best they can, the people who have been subjected to violent involuntary sex by globalization, people who are my relatives and neighbors.

      And yes I also know that BOTH the R and D parties are responsible for shipping their livelihoods over seas.

      • texas tea says:

        i think you hit the hard cider a bit too much tonight😜
        talking about a belly laugh, it would take you 2 hours and 1800 words to say “a skunk stinks”
        There Are None So Blind As Those Who Will Not See:
        what “folks” like yourself seem incapable of understanding is you will not be able to change the world or human nature. You are not going to convince your fellow man to not use use fossil fuels. Some may attempt to outlaw them in certain instances but ultimately that will not endure a full election cycle at least here in the US. Attempts to do so will result in prohibition type “criminal”activities. You are on the wrong side of this argument, but it seems to make you happy and give you something to do🇺🇸 With any luck at all, the clintons will be permanently retired, and Obama will go down as the worst president next to Carter in modern times ushering in a new era. Every advanced economy is strategically planning to secure long term sources of oil and gas. It amazes me despite your self professed credentials, you don’t understand that.😊

        • GoneFishing says:

          I would say you are mostly right about human nature. Although I disagree about the outcome. People generally don’t care if their cars are powered by electricity or by oil, as long as they can drive around.
          When the real costs of oil versus renewables finally sinks in, the cost advantage of renewables will force a shift away from fossil fuels. Until people stop harboring the delusion that oil is actually cheaper, then government mandates will have to be used to push the transistion. Once the reality sets in, there will be nothing to stop the changeover. This of course will be aided by the upcoming reductions in oil production.
          How long did it take to convert from coal powered locomotives to diesel powered locomotives? Most of it happened in a decade. That involved a huge change in industry, infrastructure and business. So don’t be surprised when EV’s suddenly predominate and ICE’s are fading out.

          • Caelan MacIntyre says:

            “How long did it take to convert from coal powered locomotives to diesel powered locomotives? Most of it happened in a decade. That involved a huge change in industry, infrastructure and business. So don’t be surprised when EV’s suddenly predominate and ICE’s are fading out.” ~ GoneFishing

            I seem to recall this kind of argument being made before and the responses being something along the lines of, in a nutshell, ‘But this time, it’s different.’.
            This time may indeed be different, since, for one, swapping coal with diesel was, if understood correctly, swapping a more difficult and lower form of energy (coal) with an easier and higher form (diesel) and in a growing economy with a lower population and more pristine resources, etc..

            History, while important, is of course not necessarily a good prediction of the future.

            • GoneFishing says:

              Actually, it was lower maintenance of the diesel locomotives and the ability to MU (reduce the number of employees) that caused the transistion to diesel. The efficiency of diesel engines helped too.

              Not sure what you mean about higher and lower forms of energy. Coal was easy to use and the infrastructure was already there. That infrastructure had to be removed and new infrastructure had to be installed. The locomotive shops were already there, some railroads even built their own steam engines and rebuilt them on site.
              Diesel locomotives meant less railroad personnel and dependency on external companies for support. Sound familiar.
              Remember, the railroad’s profits were already being eaten up by increasing use of trucking.
              The ease of use, though they lacked power at the time, and the ability to make electrically controlled power sets along with other increases in efficiency made the large investment worthwhile.
              Now we have similar ease of use and efficiency increase in new technology. At a certain point, the economics will take over and the transistion will occur.
              It has happened time and again in the last two hundred years. Economics push the transistion.
              So oil is now competing against itself, against alternative transport and efficiency and being pressured by government edict.

          • Watcher says:

            People don’t care if their F150 pickup truck is powered by diesel or electric. As long as they can get 250 miles hauling the same weight before needing to stop for more charge or fuel, and refilling their tank or battery in less than five minutes so they can be on their way, they don’t care which.

            • Caelan MacIntyre says:

              Ok good, thanks. Nice to know they aren’t too fussy.

            • texas tea says:

              can you put headers or glass packs on electric powered trucks…if not you might want to visit small town America….they are uniformly picky regarding their trucks, what they look like how powerful they are and how much noise they can make🇺🇸🚜

              • Caelan MacIntyre: Tesla, On ICE says:

                They can draw some of the juice for synthesized ICE sounds. Shouldn’t be much.

        • dclonghorn says:

          Clearly George W. Bush was the worst president in the last 60 years. I was a supporter of his in 2000, but there is no contest. No other president has been nearly as pitiful as George W. Bush.

      • clueless says:

        OFM says: ” Once the damage is done, it is generally impossible to correct it.”

        I can name hundreds of things that have happened to this earth that are far worse than the current MOST dire projections of climate change, all of which have self corrected to the climate that we now have. What the fuck are you talking about?? Give us some examples.

      • GoneFishing says:

        Old Farmer, manufacturing in the US has increased over the years. The reason for low numbers of jobs is automation and mechanization.
        US manufacturing output (in 2005 dollars) was 1.5 trillion in 1972. It rose to $3.5 trillion in 2007. Jobs fell from 18 million to 13 million in that period. The decline started around 1953.
        Manufacturing and agriculture employed one in three workers just after World War II. Today, those sectors employ only one in eight.
        The US is setting up to be the number one manufacturer in the world again (now number two) so the job problem is not that we lost manufacturing, it is because machines and computers with sensor systems took over many of the jobs.
        It’s not just manufacturing either, the need for people has been reduced in many areas.

        • Oldfarmermac says:

          I understand very well that the economy is constantly changing, and that certain kinds of work are necessarily disappearing.

          Hell, I was three times as productive when I quit as my Dad was when he started, in terms of man hours per unit output.

          My point is that the people who HAD these jobs I am speaking of took it up the backside dry, forcibly, when the government kicked them off the bus for the sake of globalization. Nobody has ever done jack shit for them, and nobody ever will, with the exception of a few training programs that at best might have helped ten percent of them get new jobs as good as the old ones lost.

          Just because something is probably inevitable doesn’t mean you necessarily fuck over your own people by the tens of millions, rushing it.

          AND there are prices to be paid for this sort of ignorant politics, including turning millions of formerly self supporting self respecting people into welfare cases and criminals. I know quite a few people who are breaking laws on a daily basis trying to make ends meet, people who used to do just fine as industrial workers.

          We hear a LOT of bullshit about looking after poor people, but so far as I can tell, I am the ONLY person in this forum who has actually come from a real working class background, made it up and out to the professional middle class world, and not forgotten the people I come from.

          Life is not all about AVERAGE wages, average benefits, etc. A man with his hands in ice water and his feet in a fire is ok on average.

          The working class in this country has been and is being fucked over by both parties.

          Right now I don’t feel up to ranting about the details, maybe tomorrow.

          • GoneFishing says:

            I agree with you that for some people, this period of time is similar to the Depression era with some frills.
            One wonders about the unemployment rate statistics, how unreal they are.
            People with two and three jobs are taking jobs from others. People who work 60 hours a week or more at jobs are taking jobs from others. I heard one young guy who worked lots of overtime every week said he would have his house paid off that year.
            So some have little and some have a lot. I guess equitable distribution of wealth and opportunity does not exist. Some have way too much and others are ground down to the lowest level. There are also a lot just hanging on or slightly better. More fodder for Trumpism. Too bad it is snake oil.
            The system is designed to be inverted and the rich get really pissy when they don’t have it all their way. Modern times have leveled out some of the inequities but not all and it’s easy to slip backwards.
            Globalization was a necessity not a convenience. Now we have an opportunity to de-globalize in some large areas and are not really taking advantage of that opportunity.

      • R Walter says:

        All that oil keeps the wheels of commerce a well-oiled machine, they don’t fall off. Take away the oil and all hell breaks loose. Hats off to the oil producers and drillers, a thankless job that must be done or it is sayonara for civilization. Well, it is anyway, it is just a matter of time.

        Burning 10 million metric tons of oil and 20 million metric tons of coal each and every day means there is a lot of it, that’s for sure. It is business as usual for BAU, but it won’t last forever.

        The old coal fields can be new landfills for garbage, a remediation of the land, the landfills can then be turned into golf courses or recreational parks after they are full. Throw some grass seed over the top that has been covered with three feet of fill dirt, spread old cow manure over it, and it is like new again. Make it new farmland. Trap the effluence that leaks out at the low spots, make good use of it.

        It would be Republican manure, much more of it than Democrat manure, nobody wants that kind of manure anymore. 😀

        The Bush’s weren’t at the convention in Cleveland. Donald Trump essentially dissolved the Republican masters of the universe into a slimey brine, which they were from the very beginning, so there is some consolation there. I could go on, but I’ll be kind and compassionate, give the Bush’s a break. They don’t deserve it. They got what was coming to them, and Trump delivered in spades.

        Trump is now the much maligned, oft-beat red-headed step child of the Republican Party, his book of faults would fill the Library of Congress.

        The business of politics is downright dirty. Filthy through and through.

        He should show up in Philadelphia and fight for the nomination in the Democrat Party too. What the hell, he and Hillary were photographed together at Chelsea’s wedding, it’s not like they are enemies, Donald loves everybody. Trump could choose a Democrat, maybe even Al Gore, as his VP choice. The Democrats could love him too. Republicans and Democrats could finally get along. If the Republicans can love him, so can the Democrats. I won’t hold my breath or stand on one leg.

        Trump is more or less a circus barker, convincing everyone they can win a prize, everybody would be happy as clams.

        The American people have been brainwashed to be morons, so it doesn’t really matter which moron they choose as the president. Trump would be confused which Trump to vote for, the Democrat Trump or the Republican Trump.

        Nonetheless, the moron would win. It is a Mad Magazine race to the White House, so Alfred E. Newman is the best choice. It is a cartoon this time around, that’s for sure. One feckless freak show.

        Maybe Americans will finally wake up, like Rip Van Winkle, highly unlikely, though. There is hope, but not much.

        It is Sunday, so I can pray that they do.

        When I was a kid growing up, I heard my Grandpa, on one of his many drunken nights, quip the words ‘If heaven is hell, then hell is heaven’. Like I say, he was drunk at the time, so it made sense to him. I burst out laughing, it was hilarious. It was the way he said it, the tonal inflections. Now I’m an old man just like he was then, so I understand his words. Took decades, but it finally sunk in. I am as dumb as I look, no doubt about it. It takes time.

        He was also one rock-ribbed, dyed-in-the-wool Republican, to the core. Died drunk too. Just disillusioned and disappointed is all, like we all are these days.

        Have a good day, today and tomorrow too!

        Fill your tank with gas, can’t get to the action if you ain’t got no traction!

  15. Petro says:


    So, a month ago you post this:
    to which Ron replied: “Rolling in the floor, laughing my ass off. 😉”

    In an exchange with me (and others) back then, you defended that scenario with spirited vehemence….

    In a “change of heart” 2 weeks later, you write to SS:
    “I have been amazed that LTO output has held up.”
    in this:

    …and now you write:

    “….Output falls from about 4000 kb/d in May 2016 to 3680 kb/d in Dec 2016 and to 3360 kb/d in Dec 2017.
    This scenario would be consistent with oil prices rising to $80/b by June 2017 and remaining in the $75 to $85/b range until 2023. Higher oil prices would be likely to result in higher output levels, BUT IT IS DOUBTFUL THAT OUTPUT WOULD RISE ABOVE THE MARCH 2105 PEAK (4236 kb/d) FOR THESE THREE PLAYS COMBINED, EVEN IF OIL PRICES RISE TO $120/b BY 2020….” (upper case mine)

    I hate to be the naughty argumentative fella, but I asked you a month ago and I am asking again:
    do you think BEFORE you post your models? What made you change your position 2-3 times in a month?

    I am confused…. can you help logically reconcile these positions of yours?

    Be well,


    • George Kaplan says:

      Dennis presents them as scenarios based on assumptions he states, not as predictions. The data changes, the assumptions change and the scenario changes. They are good for starting discussions and testing the assumptions. What’s the big deal?

      • Dennis Coyne says:

        Hi George,

        Thanks, that is a very concise and correct summary.

      • Petro says:

        What’s the big deal?

        What is this?
        Junior G-Man badge competition where the scoutmaster gives the next wilderness outing assignments and tells the kids to express themselves in what they think is possible, or might happen?

        While I firmly believe that in a scientific and intellectual setting (such as this respected blog) the “straying” of scenarios and assumptions must possess a healthy amplitude, I firmly object to:
        “Hey, look what I pulled out of my arse… ” type of thinking.

        ….and that’s the big deal.

        Be well,


    • Hickory says:

      Hey Petro- have you ever thought how much more unpleasant it is to be the dart board, rather than the dart thrower? Definitely takes more balls to be the dart board.

      • Petro says:

        My questions and inquiries regarding Dennis’ post and statements are fully in line with the spirit of this respected blog.
        I do not come here for “group support pleasantness” and certainly do not come here for “balls”.
        I play “Assassin’s Creed” and “Grand Theft Auto” with my teenager nephew for that.

        I come here for brains!
        Perhaps you should consider that before throwing your dart.

        Be well,


      • Caelan MacIntyre says:

        You mean like this?:

        “A new commenting standard will be introduced to Energy Matters within days. Of the 200+ comments on this thread, I’m guessing maybe 10 might make the new standard.

        If I have any readers who are interested in reading mindless opinion like this:

        ‘AC- you strike me as probably the most closed minded person to comment here’ [~ Hickory]

        Then I suggest you go find another blog to read.” ~ Euan Mearns

        “Euan, it is your blog and your rules, but please do not do so on my behalf.
        I have been insulted much worse by bigger & nastier bloggers than Hickory in the game of trying to understand where they are coming from and I am still looking for that bit of proof that they can offer which might ‘open’ my mind a little.” ~ A C Osborn

    • Dennis Coyne says:

      Hi Petro,

      The models are based on assumptions and when I change assumptions in response to the comments of others, the scenario changes.

      I expected low prices would cause LTO output to fall rapidly (my view in early 2015). I was wrong, so I adjusted my view. Now LTO output is finally falling in response to low oil prices.

      I do not expect low oil prices will continue forever (low oil price is less than $75/b in 2015$).

      As I explained earlier, Enno Peters encouraged me to adjust my well profile for the Bakken so that the model matched the data better (the model had been consistently too low by about 30 kb/d).

      The initial model that you and Ron objected to used this “high” well profile and assumed it continued unchanged until 2017 and then the EUR starts to decrease in June 2017 reaching a maximum rate of decrease in EUR of 4%/year in June 2018.

      The model I present here uses a more conservative well profile (notice how the model is below the data for Jan to May 2016.) It also uses very conservative assumptions about the number of new wells added which is why I called it conservative in the post.

      George Kaplan has suggested no more than 21,000 total wells are likely to be drilled in the ND Bakken/Three Forks (his best guess is 16,000 wells). Using George’s more optimistic estimate and assuming when oil prices reach $75/b or higher that new wells added per month gradually increase to 150 new wells per month (the high 12 month average was over 180 new wells per month), we get the scenario below. Note that proved reserves plus cumulative production in the North Dakota(ND) Bakken/Three Forks at the end of 2014 were 6.7 Gb.

      On my comment about all three plays, I expect ND Bakken/Three Forks to hold up better than the Eagle Ford, Permian I am less sure about. I have the most complete data for the Bakken (thank you Enno Peters), a small amount of data for the Eagle Ford (based on my own research and data graciously shared by Enno Peters), and very little data for the Permian.

      Notice my use of the word “doubtful”, and that the output is from all three plays. I think it is possible that the ND Bakken/TF might reach 1200/kb/d, but I also think it unlikely that the Eagle For and TX Permian combined output will reach their previous peak. Even if that occurred it is unlikely to coincide with a secondary ND Bakken peak.

      • Petro says:

        I think that when you write:

        “Higher oil prices would be likely to result in higher output levels, but it is doubtful that output would rise above the March 2015 peak (4236 kb/d) for these three plays combined, even if oil prices rise to $120/b by 2020.”

        you acknowledge the most likely outcome based on logic and evidence.

        The above is NOT an assumption!
        It is a realization which I am glad you finally arrived to.

        Thank you for the post.
        Be well,


        • Dennis Coyne says:

          Hi Petro,

          The conclusion is based on assumptions about what the future might look like.

          Things such as:

          the oil price
          the number of new lto wells completed each month in the future

          The second is affected a lot by the first.

          I have no evidence about future oil prices or the future number of wells added, only guesses based on logic and past output.

          My views and assumptions change based on what has happened in the past.

          The main assumption that changes is the number of new wells per month in the future, but sometimes the well profile is adjusted based on the data.

          The average well profile remained relatively stable from 2008 to 2013, but the first 12 months of output started to increase after 2013 (the evidence wasn’t clear until 2014), this increase in the first 12 months of output continued through most of 2015 (we only have 12 months of data for wells completed through June 2015).

          In many cases I have assumed the well profile would stabilize at its present level (as it had done from 2008 to 2013), so there was a tendency for my scenarios to underestimate actual output because the well profile had a smaller EUR than the real world wells, I also had to guess at the future number of wells and this guess was usually not correct.

          I have never claimed to be able to predict the future. I try to present my assumptions clearly and show what the model produces for output based on those assumptions.

          In the chart below it is assumed that the 2015 well profile represents the future average new well in the ND Bakken/TF until June 2017 and then new well EUR gradually decreases each month over the next 12 months until an annual rate of decrease of 4%/year is reached in June 2018. It is assumed that the 4%/year rate of EUR decrease continues through Jan 2022 (the end of the scenario).

          This rate of decrease for new well EUR results because eventually the sweet spots get fully drilled and EUR falls. The rate of decrease is based on the mean USGS TRR estimate and 40,000 wells drilled. In other words if 40,000 wells are drilled the URR would be about 11 Gb. Note that this rate of decrease corresponds with 150 new wells per month drilled (the lower scenarios would likely see a smaller rate of decrease in new well EUR than 4%/year, but this assumption remained the same for all three scenarios (50, 100 and 150 new wells per month). The number of new wells added per month increased by 5 wells per month until reaching 100 or 150 new wells per month. For June 2016 50 new wells were assumed for all three scenarios and then 55, 60, …, 95, 100 and continuing to 150 for the 150 well scenario.

          Note that I do not expect future output will look like any of these scenarios, they are presented to show how the scenarios are affected by different assumptions.

          If somebody can share with me a correct prediction of the future number of wells completed, I could easily input this into the model to show future output.

          I have asked for this in the past, but nobody has been willing to share this correct future scenario. 🙂

        • Dennis Coyne says:

          Hi Petro,

          I realized long ago that LTO output would peak, the question is when and how much will be produced. So the “realization” is not anything new.

          I have been surprised how quickly lto output increased and that it has increased as much as it has. For the most part my early predictions were incorrect because the predictions were too low rather than too high, not knowing the future number of wells added makes it difficult to develop an accurate scenario.

          In addition we would expect that eventually the well profile will change to a gradually lower EUR after it peaks at some level. We do not know how the well profile will change in the future.

          In Oct 2012 when I started doing these models, following the work of Rune Likvern, Webhubbletelescope, and Mason, I expected the well profile would remain stable for a time and then decrease. This was incorrect, the EUR of the average well over the first 36 months actually increased from 2012 to 2016, which I did not expect. Eventually the new well EUR will decrease, perhaps this year, but we won’t know until a year or two from now and the timing is difficult to predict.

          My scenarios clearly state the assumptions, common sense and logic do not tell us when this will occur, only that eventually it will.

          Below I have pulled an early model from Oct 2012 and put the actual number of new wells completed and NDIC C+C output data through May 2016.

          This illustrates how the early model underestimated actual output as the new well EUR increased after August 2012.

    • Dennis Coyne says:

      Hi Petro,

      My explanation for why I changed my view is at the second comment. I thought the explanation was clear:

      In Nov 2014 oil prices had fallen from $110/b to $60/b, I expected LTO output to fall as a result because new wells would not be profitable.

      I was wrong about the number of new wells that would be drilled.

      19 months later I adjusted expectations based on output over that period.

      Some people learn from their errors.

      I also realized that it was unlikely that oil prices would remain low forever.

      If that assumption is incorrect and oil prices remain under $75/b in 2016$ forever, Bakken output will stay below today’s level forever.

      The bottom line, I do not know the future, if you are clairvoyant and would like to share your view on the number of future lto wells that will be completed, I could show what output would look like if we assume the USGS mean estimate for the Bakken/Three Forks is correct and the number of wells is limited to 21,000 wells (as in my scenario below). Note that the scenario below assumes oil prices rise to $93/b.

      If oil prices remain under $75/b in 2015$ (which I believe is unlikely) over the long term (until 2030), output will be lower because very few wells will be drilled. A very pessimistic scenario (though too optimistic for many readers of this blog) is presented below with oil prices rising to $86.50/b (2015$) in Oct 2020 and then remaining at that price level until 2030. 46 new wells are added per month until 2018 and then the number increases to 65 new wells per month until 2024, then new wells added falls as new well EUR falls at an annual rate of 1.5% per year after June 2018 making new wells less profitable over time. Economically recoverable resources are about 5.7 Gb in this scenario, far less than the USGS F95 TRR estimate of 9 Gb and less than proved reserves plus cumulative output at the end of 2014 (6.7 Gb). The scenario assumes only 7000 new wells are completed after May 2016 (18,000 total, 11,000 already completed).

      The “model” was mislabeled as “100 well model”,

      the number of new wells per month can be read off the right axis, it should have been called “Bakken Model”.


      Corrected chart below.

      • Dennis Coyne says:

        Corrected chart.

      • George Kaplan says:

        Is the 6.7 oil only or with equivalent gas and condensate. By your model that is not going to be produced with in 5 years so I don’t think it meets SEC rules as proven, undeveloped. The company has to have plans in place to develop the oil, not just think it is a vague possibility.

        • Dennis Coyne says:

          Hi George,

          It is crude plus condensate (same as what is reported for proved reserves by the EIA) plus cumulative C+C from 1951-Dec 2014 from ND Bakken/TF.

          My guess is that the oil companies based the reserves on an expectation of higher oil prices, the scenario could be changed to higher completion rates, what happens if the reserves don’t get developed, is there some kind of fine? I would think they are re-evaluated every year based on oil prices. The model is extremely conservative, I doubt the wells will be drilled this slowly in the real world and also doubt oil prices will rise as slowly as in this model.

          An average completion rate of 117 new wells per month would result in 7000 wells completed in 5 years.

          • George Kaplan says:

            If things were bad enough there could be charges of fraud with penalties including imprisonment, or investors could sue with (I think still in USA) open ended jury awarded financial penalties. In the short term the SEC writes a letter and if the company can’t show their investment strategy meets the reserves they’d be expected to issue corrected figures. Whether any of that gets done ever I don’t know, but maybe $60 odd billion bankruptcy filings will sharpen some minds.

            • George Kaplan says:

              Came out wrong and edit function seems to have disappeared – I think sueing would be for a fixed amount, but fraud charge could have unlimited penalties on top of restitution (not my area of expertise though).

        • Dennis Coyne says:

          Hi George,

          To correct for the wells being added too slowly, I changed the scenario so 6600 wells are added within 5 years and 200 more wells added over the next 10 months beyond 5 years. The EUR declines a little faster (3% per year) because new wells are added faster in this scenario.

          • Dennis Coyne says:

            Hi George Kaplan,

            I misspoke above, 5800 total wells are added in the scenario above after May 2016 with 5600 of those wells completed by May 2021 and 200 more wells completed in the following 10 months. This is pretty close to your favored scenario where about 5000 more wells are drilled, to reach the proved reserve level plus cumulative output reported in Dec 2014 (6.7 Gb) by Dec 2019, a higher drilling rate would be needed, basically wells already drilled will produce 3.7 Gb. If we assume 250 kb per well on average due to falling new well EUR about 12,000 new wells would need to be completed by Dec 2019. This would be an average of 279 new wells per month, to accomplish completion od 12,000 wells by Dec 2020 would require 218 new wells per month on average. If they were to accomplish this in 60 months from now 200 wells per month would need to be drilled. It is unlikely that the completed wells would be in place after 5 years, however I don’t know what counts as “developed”.

            Fore example lets say I have a pad set up with slots for 8 wells, but I only have completed one of the eventual 8 wells, it seems that it would be difficult for an investor to know if the reserves have been developed within 5 years or not.

            If we assume 90% of 2014 proved reserves are developed by Dec 2019, we would need 8167 new wells if all wells are 300 kb (an optimistic assumption). That would require an average completion rate of 189 new wells completed per month, again not very likely. No doubt proved reserves have been reduced in 2015 due to the lower oil price environment.

      • Petro says:

        It is not about clairvoyance dear Dennis, It is about knowledge and common sense!

        If one goes flying out the 20th floor window, we can assume ALL kinds of scenarios, such as:
        that person flies up, straight, left, right, in circles… …. diagonally …and so on…..

        …but we all know the direction of that flight with fair amount of certainty, do we not?
        We know with the same amount of certainty what shall happen to that one at the end of that flight, as well!
        So again, (unless you believe in divine intervention) common sense and knowledge are the words here – not “tell me the future since you claim to know it” as you say.

        Be well,


        • Dennis Coyne says:

          Hi Petro,

          Well in my book it depends on assumptions. Was the person wearing a parachute?

          It changes things.

          Common sense is over-rated.

          Common sense tells us the Earth is flat and that feathers are less affected by gravity than a cannon ball. Both are wrong.

          There is no common sense reason that oil prices cannot rise to a level that would result in 150 new wells per month being completed in the Bakken/Three Forks. David Hughes in Drilling Deeper expected about 33,000 wells would be completed in the Bakken/Three Forks which could easily lead to at least 8 Gb of output if he is correct.

          The low oil prices forever scenario would result in lower output, if we assume oil prices fall and no more Bakken wells are completed (a highly unrealistic scenario in my view) we get the scenario below.

          • Petro says:

            You are correct:
            in your case, common sense is truly overrated!

            …but you left out the “knowledge” part.
            And that is why you assume the wrong conclusions.
            Contrary to what you state, it was common sense and knowledge that lead great man such as Galileo, Magellan, Columbus , Copernicus et al to conclude that indeed Earth was not flat well before the plebeian assumptions and numbers told them so.
            It was indeed common sense that told far older civilizations the above in practical terms, etc, etc…

            Your assumptions lead you to think and write stuff such as:

            “There is no common sense reason that oil prices cannot rise to a level that would result in 150 new wells per month being completed in the Bakken/Three Forks.”

            For the past 3 years on this blog I have tried (unsuccessfully, apparently) to narrate to you and others MANY of those reasons (and yes: there are many reasons why oil cannot go up by much and for long).
            Heck, even A.Berman and E. Mearns who are firm believers of “supply-demand” are leaning towards thinking that prices will not go up much, or for an extended time …
            G.Tverberg puts this in a painfully simple way that even you can understand if you care to do so.

            Keep writing your book of assumptions…. good for you!
            I am sure that one of these days, one of your assumed scenarios will prove to be correct.

            Be well,


            • Dennis Coyne says:

              Hi Petro,

              And perhaps one day you will be correct as well.

              • Petro says:

                Memo to you:

                I am on my 3rd year to being correct…
                and that is just on this blog….
                and with only one scenario….!

                Imagine if I followed your lead and assumed many scenarios…… I would be the definition of “correct”…

                Be well


                • Dennis Coyne says:

                  Hi Petro,

                  What exactly have you predicted correctly?

                  So three years ago was July 2013, what exactly were you predicting at that time? A quote would be of interest.

                  Did you predict the fall in oil prices in advance and did you say how much they would fall?

                  The only clear thing I can remember from you is that the oil price won’t rise above $75/b (2016$), I will assume you mean for a 12 month average.

                  I believe that prediction will be incorrect, I think the 12 month average price of oil for Brent crude will be above $75/b in 2016$ before Dec 2018. It is likely to remain above that level (for the 12 month average Brent oil price until 2025).

                  What is likely to keep oil prices from rising too high (above $120/b in 2016$) is better fuel efficiency and switching to hybrids, plugin hybrids and EVs.

                  It will be interesting to see how things play out.

                  • Petro says:

                    That is why I say you miss-understand and grossly miss-represent what I say .. and apparently intentionally so!

                    I have never said oil would not go above $75.
                    Au contraire, I have said that before everything starts to unravel, oil will spike uncontrollably.
                    I have said that oil above $65-$75 brl kills the economy (even A.Bertman is agreeing with that…2 years later)
                    Specifically I have told SS on numerous occasions:
                    oil above $65-$75 kills economy and below $60 kills SS and his colleagues:

                    I have engaged before with you on the price prediction game, but you have forgotten. I have showed you posts of mine on this blog since early 2014 where I state that oil will go the way of ’98….

                    That is what happens when you blabber and write so much and draw so many “scenarios” and graphs and end up saying and writing plebeian and simpleton things.

                    But when you do this maliciously and to insult me, you become moronically annoying. So give it a rest.

                    Let’s keep it civil, shall we?

                    Be well,


                  • AlexS says:

                    “oil above $65-$75 kills economy”

                    Could you substantiate this statement?

                    At $65-75/barrel annual average oil price, global oil expenditures would represent only 3-3.5% of the projected 2016 world GDP.
                    Empirical evidence suggests that this level is too low to cause any serious damage to the global economy.

                  • Petro says:

                    you are a great numbers/charts guy… but answering your question in depth, requires me to rewrite 3 years of mine on this blog.

                    Let me say this though:
                    the delinquency rate at the height of mortgage crises was 12% (or, so). If we assume a staggering rate of 25% deliquency, the amount of bad loans would account for roughly $300billion….. literally nothing compared to our GDP… peanuts!

                    Yet, it almost brought down the whole world….
                    You are thinking linearly in “supply-demand” terms…. theold fashion/within the system way… the Misses/Keynes/Irwing/Friedman/ way…. if you will!

                    In complex, nonlinear, dynamic, dissipative systems (such as we are), the “butterfly” flight is strong enough to bring down the kingdom…!!!!

                    Again, do not take my word for it…. believe A.Berman and E.Mearns who are FINALLY coming to the same conclusion that I have blabbered about on this blog for many years….

                    Be well,


            • Dennis Coyne says:

              Hi Petro,

              Just because we disagree does not mean that I am incorrect.

              You have never laid out very clearly why there will be an economic crash. Your “low prices forever” seems to depend on this crash, but the cause is unclear.

              Let’s say economists are correct that relative scarcity of oil would lead to a rise in oil prices ceteris paribus.

              World debt to GDP has remained relatively stable from 2010 to 2015, so that does not seem to be a problem.

              Oil scarcity will be helped by higher prices as it will tend to increase supply over the medium term. The higher prices for oil and falling costs for batteries, plugin hybrids, and EVs will tend to reduce demand for oil, keeping total spending on oil under 5% of World GDP.

              Eventually there is a fairly high likelihood that the World will realize that peak oil is behind us (around 2025) and within a few years there is likely to be an economic crisis. By that time maybe people will realize that aggressive policies to speed the transition away from oil are needed and those policies will be adopted.

              Oil prices will fall when this recession arrives.

              We agree there will be a recession/depression, but based on BIS data it does not look imminent.

              • Petro says:

                “You have never laid out very clearly why there will be an economic crash. ”

                …oh, I have laid it out… indeed I have … very, very clearly!
                Just not simple enough for you to understand…. that’s all.

                “Just because we disagree does not mean that I am incorrect.”

                Thinking that you are smart enough not to be “caught”, in other words what you are saying translates into:
                “Petro, you are wrong!”

                I agree, you win!
                Since I obviously struck a nerve, In the future I will not point out the inconsistency (and often plain old stupidity) of your scenarios.

                Just keep it civil and do not simplify my writings in a half statement…. or distort it.
                You are NOT as enlightened to do so (and get away with it) as you think you are.

                …oh, and keep those scenarios and graphs coming… as I said, one of these days you will be correct.

                Be well,


                • Dennis Coyne says:

                  Hi Petro,

                  We could both be incorrect. I did not say I would be correct, the choice is not a binary one.

                  Thank you for clarifying your position as you are correct, I misunderstood.

                  I agree oil prices cannot be sustained at above $75/b forever. I think high prices (above $110/b in 2016$) will reduce demand for oil as electricity replaces much of transportation fuel use over the next 30 years.

                  I have never said oil would not go above $75.
                  Au contraire, I have said that before everything starts to unravel, oil will spike uncontrollably.

                  Can you explain what “oil will spike uncontrollably” means?

                  There have been many times in the past when oil output has decreased when oil prices have decreased, often there is a lag of a year between oil price movements and oil output response and there are very logical business reasons for this behavior.

                  Why are you certain the system will fall apart when oil prices breach $75/b?

                  An explanation that it is too hard for me to understand or that complex non-linear dynamic systems can be unstable don’t get us very far.

                  More than assertions are needed.

                  I do not find the arguments for a 2015 peak convincing. Possibly 2015 will be the peak in oil output, but I expect a rise in oil prices will stem the rate of decline by the end of 2016 to under 1.5% per year and by mid 2017 output will be flat or rising. In my opinion the odds are even that output (centered 12 month average) of C+C will rise to above the 2015 peak by Dec 2020.

                  An undulating plateau of 78 to 82 Mb/d for World C+C output from 2016 to 2024 seems likely with oil prices in 2016$ between $85/b and $125/b from 2018 to 2022 (12 month centered average Brent crude oil price).

                  • George Kaplan says:

                    Dennis – where do you think the new oil will come from to maintain that plateau (e.g. ideally which projects, or countries, or deep vs. heavy vs. LTO etc.)? Rystad have indicated that decline in mature fields is accelerating to above 5%, which to me indicates that in fill drilling has pushed out the peak and at some time soon is going to run out of steam, coupled with increase proportion of high depleting online fields – i.e. deep water and LTO. Would you have a different explanation for this? At 5% there needs more than 4 mmbpd new production bought on line each year, that is 40 to 80 major projects, or 4 to 7 per month starting up, it’s not happening now, although masked a bit by continuing ramp up from projects started last year and gets worse going forward. Rystad (again) have indicated we will be short this year and next and then very short through 2020 (from my own review I think we will be at least 6 mmbpd down by 2021 based on projects that are approved and possibly approved at the moment). We are now at the point where the projects cancelled in 2015 and forward impact production in 2019 and later, and cannot be accelerated to fill the gap no matter what. Only small tie backs and LTO could be bought on line now fast enough to have any impact earlier than 2018. Discoveries of fields that could be tied back quickly pretty much stopped in 2014, although there are a few from earlier, -however these are all small producers. Most new production recently has been from discoveries made since 2005 or upgrades and extensions to older fields already in production. Discoveries started to fade away in 2010, and suitable fields for technology rework are fewer. So at a bottom up level I am lost as to how the shortage would be filled over the next 4 years, and to impact after that a fast ramp up starting now is needed.

                  • Nathanael says:

                    Use the following formula to predict Brent Crude prices.

                    Let ELEC be an average retail price of electricity in US dollars per kwh. (Preferably world price, but the best numbers I can get are regional.)

                    Let 0.310 kwh / mile be a typical efficiency for an electric car; this is Volt efficiency on electricity. (Tesla Model X is .357, and is easily the least efficient electric car out there.)

                    Let 42 miles per gallon be the best plausible fuel efficiency for a gasoline-powered hybrid car; this is Volt efficiency on gasoline. (There are a few slightly more efficient gasoline cars but this will not be something which can be built reliably.)

                    Someone I know ran a regression on US gas prices vs. Brent crude prices, and came up with
                    GAS == (.922 + .0261 * BRENT).

                    For a given electric price ELEC, a Volt owner sees an electric cost per mile of ELEC * 0.310, and a gas cost per mile of GAS / 42. So if GAS / 42 > ELEC * 0.310, gas prices will drop due to fuel switching.

                    Solve for BRENT in terms of ELEC and you get a max price for BRENT:
                    BRENT <= (ELEC * 0.310 * 42 – .922) / .0261

                    $0.20 seems to be a middle-of-the-road estimate for world electricity prices, which would give us a $64 cap. US electricity prices average $0.12, which would give us a $24 cap.

                    More usefully, the LCOE of unsubidized utility-scale solar is around 5 cents / kwh and dropping; at that point the utility distribution costs dominate the cost of electricity. In the US they're often in the range of 7 cents / kwh, so 12 cents / kwh is a reasonable number.

                    The price of rooftop solar in the US is currently dominated by markup to cover marketing overhead, which is ridiculous and has to end. In Australia with a more reasonable market, full installations are averaging AU$1.63/watt, which is USD$1.22. The US averages 4 peak-sun-hours per day more or less, so at a 25 year lifespan (pessimistic) a watt generates about 36.5 kwh. So converting Australian prices to LCOE, we get about 3.3 US cents per watt fully installed. For *rooftop*. Yow! That, however, includes a rather complex subsidy which is hard to estimate the size of. It is probably fair to assume that the unsubsidized cost is around the same as the utility-scale 5 cents per watt.

                    If we assume you can get 5 cents per watt on rooftop, this gives you a price of
                    BRENT <= -$10. OK, so the model breaks down here, because I guess oil is probably still used for things other than gasoline!

                    But anyway, in a few years as plugin hybrids and electric cars start being mass produced, it will be quite impossible for the global Brent Crude price to exceed $64. Can't happen. Too many people will be able to switch to electric.

                    At 8 cents / kwh electricity, the formula gives $4.58 Brent. Which I think is below Saudi Arabia's production cost. At 9 cents / kwh, it gives $9.57 Brent, which is probably still below Saudi Arabia's production cost. At 10 cents/kwh, it gives $14.55 Brent. At 11 cents/kwh, it gives $19.50 Brent. At these prices Saudi is OK but every other oil producer is bankrupt. I remind you that 12 cents/kwh is the current average American electricity cost, and it's lower in some areas.

                    The inescapable conclusion is that gasoline will be uneconomic as a transportation fuel *very quickly*, just as soon as electric and plugin-hybrid cars start being produced in high volumes at prices comparable to all-gas cars.

                    If you want to look at the future of oil prices and production post-2018, you will have to make a model in which gasoline and road diesel sales do not exist.

                    I'm not competent to make that model. Perhaps one of the oil industry people here is competent to make that model and show what the oil industry looks like after that happens.

                  • Nathanael says:

                    In short, George, Pietro, Dennis, I think none of you have properly analyzed the effects of fuel switching. Your projections may be OK for 2016-2018 while electric vehicle production is still small. In 2018-2020 electric vehicle production will massively accelerate and the demand destruction will be equally massive.

                    It looks like, very roughly, 2/3 of the oil produced is used as ground transportation fuel. World consumption is 96.78 million barrels per day. So, within 5-10 years, with the ground transportation demand eliminated, it will be about 32 million barrels per day. This should put the oil price at the price set by the marginal producer. Now, I may not have the best information as to who are the cheapest producers, but I’ll guess and try to see who that is:
                    Saudi 10 million barrels per day
                    Iraq 4.3
                    Iran 3.5
                    UAE 2.7
                    Kuwait 2.5
                    Russia 10.5
                    …and that’s it. Indonesia has comparable cost to Russia, and the US non-shale is a bit higher.

                    With Russia’s production cost being a bit under $20 and Indonesia being similar and the US not being much higher, there’s quite a lot of excess at this point, even if there is substantial depletion. So this calls for an oil price around $20 per barrel.

                  • Dennis Coyne says:

                    Hi George,

                    Output increases from Russia, US, Canada, Brazil, Iraq, and Iran will allow a plateau to be maintained as oil prices increase. Infill drilling in already developed fields and more drilling in US LTO plays will be adequate initially and longer term projects will be accelerated once higher oil prices arrive.

                    The higher oil prices and falling costs for plugin hybrids and EVs will lead to switching from petroleum to electricity for transportation as well.

                    I assume here that the World economy continues its growth of about 2.2%/year for real GDP (market exchange rate weighted).

                    If real GDP grows more slowly due to a recession there will be lower demand for energy due to lower income. The relative price difference between oil and electricity for transportation will continue to operate though perhaps more slowly as fewer will be able to afford the purchase of an EV or plugin hybrid.

                  • Dennis Coyne says:

                    Hi Nathaneal,

                    A couple of problems with your analysis.

                    There are many places in the World that do not have the high insolation of the US southwest where subsidized PPA prices for Utility scale solar are at best about 3.5 cents per kWhr and the average is around 5 cents per kWhr.

                    There is a 30% tax credit included in those solar prices, so the real cost is about 7 cents (7.14 cents per kWhr) and this may fall to 5 cents per kWhr by 2018 in the US Southwest, but that does not represent the World price.

                    There is also the convenience factor of oil for transportation, where 350 miles of transport can be gotten in a 5 minute fuel stop, EVs cannot match this. The plugin hybrid (unsubsidized) is more expensive than an equivalent ICEV and you need to figure that into your cost.

                    Bottom line, I agree that by 2035, your scenario might play out as costs of mass produced plugin hybrids and EVs are reduced. By 2020? I am often accused (correctly) of being optimistic, but clearly not as optimistic as you.

                    I hope that I am wrong and you are correct, but we should prepare for the possibility that George or Petro are correct.

  16. Meanwhile, here is an article about Venezuela and the cocaine trade


  17. GoneFishing says:

    With half of US pipeline infrastructure being more than 50 years old, what will be done in the near future to address this situation? I noticed that even during the oil and gas boom of late that only moderate amounts of pipeline were laid, compared to the 1950’s. The discussions here generally revolve around production, but without reliable pipeline transport, the oil and gas industry will be crippled.
    Will the pipeline industry want to replace these pipes in a dwindling demand scenario? They have a 50 year horizon to think about. What will the oil and gas industry look like in fifty years?


    • Oldfarmermac says:

      Technology is not the cure all it is often represented to be but it can work wonders, sometimes. One of those times will likely be in refurbishing old pipelines. It seems likely it will be possible to actually insert a smaller diameter pipe inside larger ones, or, clean out an existing old pipeline, and line it with a new interior coating of some sort of material that hardens up and is tough and strong and corrosion resistant to the point that it will last a long long time. Of course I actually know next to nothing about this sort of thing, but I have read about this being done already on a commercial basis.

      Putting a new plastic water line inside an older metal main is already easier and cheaper by far than digging up the main and replacing it. I suppose the smaller diameter is offset by using somewhat higher delivery pressure in the case of water. With oil production falling off in old fields, the smaller diameter wouldn’t matter much except maybe on trunk lines. Branch lines aren’t going to be oversupplied.

      In any case the rights of ways and permits are already in place and grandfathered, which is nothing to laugh about in terms of saving the expense of building from scratch.

      Raising the fee schedule ten or maybe twenty percent may very well mean a new or rebuilt old pipeline can be profitable in fifteen or twenty years rather than thirty or forty or fifty years.

      Rust and depletion never sleep, courtesy of Matt Simmons, an extraordinarily capable man whom I suspect suffered some problems, maybe a series of strokes, etc, before he got off the public stage.

      I have known a couple of other people ( not famous ) who were always previously entirely consistent and predictable saying things out of character for their last year or two in much the same way Simmons did.

      • I’ve been in operations where we had to deal with old pipelines. I’m used to fairly large sizes, so we run intelligent pigs to figure out what the line looks like. An intelligent pig is a gizmo loaded with sensors we put inside the pipe and allow to travel from point A to point B. The pig has a memory device, so we can download and find the bad spots.

        We also dig holes and check the outside surface.

        In some cases we replace a section. Sometimes we de rate the working pressure. And yes, we do push plastic liners in some old flowlines. I have also changed service. An old oil pipeline can be switched to low pressure produced water, or even used for the fuel gas system.

      • Nathanael says:

        Williams Company decommissioned lots of gas and oil pipelines some years back and used them as fiber optic cable conduits. I remember this.

  18. Oldfarmermac says:



    Now I have been a union organizer myself on two occasions, back when I was a kid, helping get what we called professional negotiations in for Virginia teachers, and helping get the Operating Engineers as representatives for the guys when I was driving a Cat truck off a cliff ( pushed back to the top with a dozer every trip) during the building of I77 off Fancy Gap mountain. My Daddy was a Teamster for almost fifty years, working his parttime forty or more in town. I have my old paperwork around someplace proving my membership in the NEA, the Operating Engineers, etc.

    And I know all about the history of the labor movement, and what it means historically, etc , etc.

    But when we get to the point that a handful of people can learn a trade, which is essentially all piloting a ship in coastal waters IS, which is all flying an airliner actually is, and charge four hundred bucks an hour, and charge half a million or more a year, if they stay busy ( which admittedly they don’t,as a rule, not forty a week ) then if we have eyes with which to see, and are willing to actually OPEN them, so as to see a little, we just might gain a little insight into just where labor unions actually stand in terms of working people.

    The odds are pretty high that the chances of a person getting into the pilots union, unless he has connections with existing members, are substantially WORSE by a factor of ten at least, than the chances of getting into say Harvard med school, with grades just adequate to get into PODUNK U in business administration.

    Now having said this much, I recognize as noted above that unions have done a hell of a lot for working people in times past in terms of getting standards set that make life easier, such as getting regular limited hours, safety rules, bennies, etc.

    My point is that it is rare that you hear anything that is actually HONEST when it comes to unions these days. It’s all one sided.

    Unions have had a great deal to do with the localized destruction of their own industries, but you won’t read about that unless you hear it in terms of actual anti working class politics, because when you are making say UAW wages up north, then your are only nominally and maybe culturally working class.

    Ninety nine percent of what I have seen in me msm media is all about peeing and moaning for the lost jobs in Detroit, with nary a word of sympathy for the people in say Kentucky or Alabama who were lucky enough to find jobs in the new auto plants built down this way.

    Comments such as this one are deliberately provocative. Fire away. Replies will make it into my book if they ring true and hit hard.

    • Fred Magyar says:

      Ha! What kind of self respecting captain of one of the largest Viking warships is willing to pay $400.00 an hour for some pitiful pilot services, that he obviously shouldn’t need after sailing across the Atlantic and making it all the way to Chicago?! That is piracy of the worst kind! They should have the politicians and bureaucrats behind those fees either tied to their mast or better yet have them walk the plank! 😉

    • Paulo says:


      You should take some time to go through some of the manuals and emergency procedures for a modern aircraft before you post. It’s a little bit more than ‘learning a trade’. I have two trade certifications (red seal), and 2 degrees, as well as 10,000 hrs flight time. If you added up all my training it would not equal the rigid requirements of operating a sophisticated aircraft. Military level is off the chart.

      My best friend flies multi-engine helicopters IFR. Or rather he did until this summer. His wage probably averaged $500/hr. Of course he received it whether he turned a blade or not, just to be available.

      If you add in the responsibility factor; that if these guys fuck up in the cockpit they might kill 300-400 people, you can see why they are paid what they are paid.

      • Oldfarmermac says:

        People learned to fly fighters and bombers in a few months back in WWII, planes which were infinitely harder to fly that those in the air today, which are loaded up with back up systems and electronics. A modern airliner doesn’t even NEED a pilot, except as a backup system.

        Do you know any commercial pilots who are making four hundred bucks an hour as a regular thing? My understanding is that they usually make a LOT less than that, except for maybe a few who are grandfathered at the top of the salary scales at or near retirement age, which is what my original point was all about.

        GOUGING. Having been a union member, and being the son of a fifty year member of the Teamsters, who was on the negotiating committee at his plant, I know what unions are about. Unions are about looking after their MEMBERS. Anything other than that is an afterthought. Anybody that thinks otherwise has never actually been in a union, or else ………..

        I mostly just post such stuff in order to see what responses I can get that are truly rational. My intent is to write a book that gores every sacred cow I can think of, and I am keeping a list, lol.

        It’s true that a commercial pilot might kill a thousand people or more if he screws up, but the planes these days are so good they actually land themselves, and the maintenance is so good in places like the USA that it makes headlines when a pilot has to actually FLY a plane once in a while, as with an engine out, etc.

        I used to have a commercial drivers license that allowed me to drive a school bus with sixty six seats and could have killed a hundred people by hitting another bus. It took me a whole day, waiting in line, to get that license, waiting for the road test. Of course I did already have experience driving trucks. There are probably a hundred times as many opportunities to royally fuck up driving a bus from one city to another as flying an airliner between two cities, but we don’t insist on bus drivers having advanced academic training and years of experience playing second fiddle to a senior driver.

        Half of all the shit people do these days is represented to be something really sophisticated and requiring great knowledge and judgement, but generally speaking, it just aint so.

        Now a military pilot no doubt does make a hell of a lot of money PER HOUR of actual flying time. But as you point out, military aircraft are in another class altogether, and they cost so much to maintain and fly, without bringing in any revenue, that seat time is extraordinarily expensive, running into many many thousands of dollars per hour. Military pilots can retire with only a couple of thousand hours of actual flying time, sometimes even less.

        My dentist admits to me that just about anybody with good eyesight and the understanding of infection control, etc, such as is usual for a community college trained nurse could learn to competently drill and fill and extract teeth and do ninety five percent of what he does, in a year , actual hands on training time.

        I do all the same basic procedures in my back yard shop, fixing old cars, except of course the car is not alive and subject to infections. I remove rotted out material, and fix it back with epoxy, and polish it off nice and smooth, and match the colors, lol. I make sure the patch is strong enough to give good service and last. Sometimes I remove an entire component part, and replace it by welding in a new part.

        Now an MD really does have to know some stuff, because he has to diagnose a very wide range of problems, which can be treated in a very great many ways. And of course the last five or ten percent of a dentist’s work does require some truly substantial understanding of physiology, surgery, etc. But most of them simply avoid that work, and send any patient needing it to a specialist. That’s what every one I have ever been to does.

        An engineer really has to know some stuff, in order to competently design a bridge or a skyscraper or a truck engine.

      • Caelan MacIntyre says:

        Credentialism and educational inflation

        …are any of a number of related processes involving increased demands for formal educational qualifications, and the devaluation of these qualifications. In Western society, there have been increasing requirements for formal qualifications or certification for jobs, a process called credentialism or professionalization. This process has, in turn, led to credential inflation (also known as credential creep, academic inflation or degree inflation), the process of inflation of the minimum credentials required for a given job and the simultaneous devaluation of the value of diplomas and degrees. These trends are also associated with grade inflation, a tendency to award progressively higher academic grades for work that would have received lower grades in the past.” ~ Wikipedia

  19. George Kaplan says:

    ConocoPhillips to cut 6 percent of workforce:


    Shell cuts US Gulf staff by 25%:


    I get the impression that as development projects are coming on stream, such as Stones for Shell, Surmont tar sands for COP, the project teams are being laid off, or others laid off to make room for the more experienced personnel. The majors and larger independent used to have enough projects to be able to continually cycle over 4 or 5 years – e.g. one in design, one in construction and one in completion, start up and hand over. With all the cuts that has broken down. They can probably find something for the design teams to do, at least for a year or so, but I think the big problem will be with hook-up, completion, commissioning and hand over teams (i.e. for the last stages of development). These tend to be the more seasoned individuals, maybe close to or past retirement age. If they get let go or leave from boredom then there might not be anyone suitable should they be needed again. Commissioning and start-up is when most accidents occur, and they can be very expensive, both in direct damage and deferred production.

    • shallow sand says:

      George. While this is what is happening with the majors, in the Permian we are seeing the ultimate in not making sense.

      I am going to give up after looking through well data for hz wells in the Permian basin. The Permian is heating back up, despite have wells that are inferior to the Bakken. No Sanish or Parshall there.

      I unfortunately think we need another price crash, below $40 WTI, maybe even below $30 WTI, to get wall street to leave the US oil patch.

      Permian hz producers have enterprise values above $200 K per flowing BOE, during a crash rivaling the worst since the great depression.

      It would seem maybe the service companies in the Permian need to raise rates, since Permian is more economic than the Burgan Field in Kuwait.

  20. Oldfarmermac says:

    Elon Musk is now putting his mouth in places he hasn’t ventured before, saying now that he thinks car sharing is going to be a much bigger thing than he thought previously.

    I tend to agree that once self driving technology is deployed, renting out your car is going to be a very very desirable thing to do. The most often made argument against it is that people won’t want strangers in their cars making messes, etc.

    But that can be very easily cured by having a rider on the fee schedule that guarantees the renter will be forced to pay up for cleaning up. This can be accomplished by adding a small surcharge to every hiring fee, with people who never make messes getting an exemption or refund or free rides after paying it a certain number of times. For sure a car that drives itself will be able to document its own cleanliness, etc. before and after a rental session.

    And with everything being computerized, pricing insurance – in the event of an accident- will be simple enough.

    The car biz may actually cannibalize itself to a VERY substantial extent, but I personally doubt I will live to see self driving cars outnumber conventional cars.

    As far as buses go, I can see electric buses, running entirely or mostly on battery power, because buses in cities can be recharged quite often, if the necessary charging stations are provided, and a relatively small ICE driving a generator can be used efficiently to charge the batteries that actually drive the electric traction motors. This combined with regenerative braking would be far quieter and far more fuel efficient than just using a conventional diesel drive train capable of accelerating the bus from a standing start over and over.

    I have my doubts about trucks out on the open highway , city to city. According to my own rough estimation, the best batteries now available are not even remotely powerful enough and cheap enough for this job.

    Does anybody in this forum think batteries will be four or five or more times as energy dense as they are now within the easily foreseeable future? And still cheap enough to put them in big trucks needing upwards of a thousand kilowatt hours just to get across town and back?

    I am willing to believe such batteries MAY be available, eventually , but so far as I can see, they are still vapor ware.

    • GoneFishing says:

      Old Farmer,
      I think batteries will double their charge density within the next five years. I also think we will get away from lithium batteries in most cases, within ten years. Double current charge density would make electric cars very practical as well as small trucks. They could also allow the development of hybrid semi-tractor trailers.

      As far as improvements go in semi’s, Daimler built a tractor with twice the mpg.

      Of course the 2000 horsepower natural gas fueled, electric motor powered Nikola One is coming. Has a 320 kWh battery.

      • Fred Magyar says:

        I think batteries will double their charge density within the next five years.

        I agree! I have fun going from lectures on state of the art materials science for batteries development at MIT https://goo.gl/kWmWff

        to watching Formula E racing on Youtube. https://goo.gl/kWmWff

        Battery technology is definitely getting better!

        • Longtimber says:

          For stationary applications we would rather see less density and reductions in Lifetime kWh cost.

      • Oldfarmermac says:

        Such trucks might eventually be out there on the road, hauling freight, but the odds of any ONE startup company undertaking such a radical project actually succeeding are very poor.

        It’s a lot easier to build a press release and a pretty trailer queen one off for the show circuit than it is to start more or less from scratch and found a truck manufacturing company.

        I strongly suspect the fuel economy mentioned is based on natural gas not yet being taxed as highway fuel, and there is the chicken and the egg problem. Where you gonna fill her up with natural gas?

        Two thousand horsepower may or may not actually be available to the wheels, for a very limited time, but that sounds more like advertising hype rather than reality, because you can get along just fine, maintaining legal speed limits almost everywhere, with an eighteen wheeler with five to six hundred horsepower.

        It’s going to take about two hundred horsepower to keep an eighteen wheeler fully loaded up to sixty five mph or so on a dead level road. It won’t take very long to run a three hundred kWh battery down. That sucker is going to have to run mainly on what the gas burner produces once it’s well started on a long haul.

        Torque sounds impressive, but any old conventional diesel truck with three hundred horsepower puts that much to the wheels within about three seconds of flooring the throttle in first gear with a real truck transmission, which typically has at least nine forward speeds. Truckers don’t do much drag racing.

        And as far as the batteries go, I hope the industry is able to live up to the hype. Maybe it will, maybe it will run into some real tough nut problems commercializing what works in the laboratory.

        Tesla is the company which is the exception that proves the rule that startups seldom succeed in competition with the big boys, in such a capital intensive industry as motor vehicles.

        Tesla lucked out, needing only batteries and blueprints, in essence, because electric motors are a mature technology, and Tesla lucked into buying a state of the art new car factory for peanuts. Tesla has Panasonic as the heavyweight battery partner.

        Having said all this, given that natural gas is probably going to be cheap compared to oil for a long time and maybe forever, a natural gas fueled truck appears to be a highly desirable item.

        The fueling stations will come once NG powered trucks are in production on a large scale. The first few dozen or hundred in any given city can all fuel at just one or two stations, since they will be running local routes. After that, it won’t take long for ng fueling to be available along heavily traveled highways.

        • Dennis Coyne says:

          Hi Old Farmer Mac,

          There is this new invention called the rail road, it can be converted to all electric power with current technology. There really is no need for long haul trucking, if there were swapping batteries at stations placed at key points would be an option, or even having charged up tractors along the route and switching trailers.

          Rail makes much more sense for the future and trucks will be short haul only.

          • Oldfarmermac says:

            I agree that rail is the future of long distance overland transportation.

        • GoneFishing says:

          There are currently over 1,300 CNG/LNG fueling stations in the US and growing rapidly. Europe is way ahead of the US on this with just Italy having as many as the whole US. There are over 22 million NGV’s in the world (2015).

          As far as the hybrid semi goes:
          You need to understand that the engine as well as the motors are more efficient. The regenerative braking and battery make stop and go traffic a cinch with the engine barely having to turn on. Electric motors have tremendous torque advantage over ICE engines, which is why diesel-electric locomotives and electric locomotives work so well. Full control over traction as well as the ability to switch from series to parallel running.

          Doubling mpg may not seem like a world saver, but it also does not use petroleum.

          • Oldfarmermac says:

            I have a hundred dollar bottle of sipping whiskey that says NIKOLA doesn’t have twenty five trucks on the road, in the hands of buyers or purchasers, three years from today, running inter city routes.

            They don’t even say if they are planning on using a piston engine or a turbine in the truck. I have not heard that natural gas piston engines are noticeably more efficient that diesels, thermodynamically , but it is possible that they are. The fuel savings will be mostly because gas is dirt cheap compared to diesel.

            My guess is that if natural gas fueling infrastructure becomes common, out on major highways such as the interstates, it will be because conventional manufacturers start building lots of trucks with conventional diesel engines adapted to run on EITHER natural gas or diesel fuel. This will make it possible to go anywhere with the usual hundred gallons or so of on board diesel, plus running on MUCH cheaper natural gas if it is available.

            Full control over traction is not generally a concern on a truck on a paved road except in icy winter weather. Then it would be of some help.

            Most people understand that diesel engines and gasoline engines have to be revved up to develop serious power, but this is NOT a problem with a big truck, because the transmission has low enough gear ratios to allow the engine to reach full rev’s within a few feet of a dead start in first gear. After that, you are in well up into the power band where the engine puts out ample horsepower all the way into top gear. My last old truck revved to 3500, at which speed the governer cut it off, and shifting to the next gear kept the engine up to about 2800 or more every shift. At twenty eight hundred it was putting out eighty percent of it’s max horsepower. Revving to the limit is not abuse in a commercial truck, it’s sop.

            I do recognize that electric motors MIGHT be lighter than the transmission otherwise needed, IF the batteries are large enough to supply the necessary kilowatts to accelerate the truck from a dead stop, and keep it up to speed on long hills. Otherwise, you will need an engine to drive the generator that is equal in power to a conventional engine using a transmission.

            Regenerative braking IS great, and will be well worth the investment on garbage trucks, city delivery trucks, etc. That Nikola poster child is an over the road tractor, not a city tractor.

            I hope I AM wrong.

            But the general rule is that such new tech takes twice or three times as long to work out the kinks and become established as the optimists think it will, on average.

            • GoneFishing says:

              They say on the site it uses a gas turbine, 40% efficiency, 400kW. It has an engine, it’s a genset with big battery. The engine turns off when not needed. The company estimates one hour of turbine running for every 3 to 5 hours of pure electric running.

              Why are you having such a tough time with this? Railroads have been using gensets for many decades and are now using hybrids. Also testing pure battery switcher locomotives.
              I guess you don’t get out northeast much. We have stop and go traffic that rivals a garbage truck route. 🙁

            • Lightsout says:


              I would have thought that you of all people who post on here would know the following.

              1 Diesel engines can run with a limited amount of LPG added in to the diesel fuel.

              2 Diesels can be converted to run on gas but this requires engineering alterations that can not easily be reversed.


              3 There is no such thing as a diesel engine that can run on EITHER diesel or gas LPG ,LNG or otherwise.

              • Oldfarmermac says:

                There are plenty of diesel engines already out there that will run on either gas or diesel fuel, but you do need a very small amount of diesel maybe five percent or so, for ignition. Ninety percent of the dual fuel conversion job is just adding the plumbing for the natural gas fuel supply.

                Once cheap, durable, light and safe tanks capable of holding enough natural gas are available, there will be plenty of trucks on the road running dual fuel gas/ diesel. This is assuming of course that such tanks DO become available. So far the lack of satisfactory gas tanks is the BIG problem, other than natural gas fueling stations.

                There are ways around the ignition problem as well, namely the spark plug, which can be integrated into NEWLY designed engines, but there is no way to install spark plugs in EXISTING engines.

                We can quibble about what such engines are CALLED, if you like. Most people refer to them as dual fuel engines.

                Once the fuel tank problem is solved, the trucks will roll out of the assembly plant with everything already in place, shiny new, no “conversion” necessary.

                All you have to do to make a diesel run on ninety percent plus gas is to feed the vapor into the intake air stream, while cutting back on the amount of diesel. From an engineering point of view , this is a trivial problem.

                The gas station problem will solve itself, because lots of truck operators will be able to refill their gas tanks at home base on a daily basis. When the truck needs to go farther than it will run on gas, the engine computer will simply instruct the diesel injection pump to deliver diesel in the usual amount. So such a truck can still travel intercity or interstate where there are no gas stations handy.

      • Longtimber says:

        I Friend of mine has a shop that services MB. He was the lead mechanic for the Local Dealer for 25 years. Says the latest sprinter vans with the DEF diesels are a nightmare …. stay away. May take years before they can get it right & make them reliable. The latest tier engines that use DEF to meet emissions should be simpler. When Car/Tractor dealers can’t service their own tech, the customer is screwed. Beware.

  21. shallow sand says:

    If anyone out there has the ability, would appreciate a chart showing LTO company ownership by state retirement systems, such as CALPERS.

    I came across an article about one company wherein CA and NY state pensions own a combined $30 million in it. This is a company that hasn’t been around long and all production is in one field. I have done my 36 and 60 month payout calculations on their wells, and it is not good, almost none of their wells are going to payout. The company pays no dividend.


    • Petro says:

      Why do you KEEP wasting your time with wells and cash flow….
      Aren’t you convinced already?
      Anything better to do?
      Do you have to try them all….?

      Tell me ONE LTO play that is good at $40-$50…. and is producing more than a few thousand brl/day and I will show you a flying pig.

      Be well,


      • shallow sand says:

        Hey, I agree with you, none of this stuff works, and besides, the price hasn’t been $50 in the field, or even $40 for any considerable period of time, since Thanksgiving, 2014.

        Don’t worry, I don’t spend all my time looking at this stuff. I go outside.

        Two things, I guess. One, this BS has cost us a ton of $$.

        Second, with ZIRP, there is absolutely nothing I can invest in. Since I used to spend some time doing the numbers on investments I might actually make, and no longer see anything worth buying, I guess I have to find something to do numbers on.

        • clueless says:

          Just clueless again. What is “ZIRP?”

        • HR says:

          Shallow you’re dead on the money. I’m a conventional oil guy like you and have always suspected that the shale sector is at best a ruse. Or at least most of it. Your analysis has proved what I always suspected and I have enjoyed your numbers very much as that is what it always matters right? The numbers. And my numbers aren’t very good because of this crap.
          So cheers to you amigo and keep it up. Some of these other guys like to talk in circles and don’t ever say very much. All of my phones calls average about a minute. It ain’t that hard to say what needs to be said.
          And btw, the gun barrel separator is under close scrutiny down here right now. I use heat. But we are clearing about $21 a barrel after transportation costs right now so any new capex is rather close to pulling out my teeth.

        • Oldfarmermac says:

          For what it’s worth, there are plenty of opportunities to invest in first mortgages in the real estate biz with PLENTY of collateral.

          For instance right now I would like to borrow say twenty five grand on property worth at least fifty, the tax appraisal is over fifty, nice neighborhood, before making any improvements with the borrowed money. The improvements would consist of a new deep well, a new septic system, gravel for the driveway, fencing, grading, etc.I will be putting in a least twenty to thirty thousand in sweat equity over the next twelve months.

          Being property rich and cash poor, and retired, with little visible income, I can’t get it at a decent rate at a bank, and expect to have to pay around ten percent. I suppose I will pay it, because I will still come out smelling like a rose, and can pay it off quickly out of current income. ( Old farmers are generally debt free and used to living modestly.)

          There are plenty of people who have LOTS of equity in their homes, sometimes even free and clear ownership, who will gladly pay seven or eight percent for twenty or thirty thousand bucks for four or five years. They will also be glad to pay for document preparation, title search, etc, out of the proceeds.

          There are people who would gladly borrow more, at seven or eight percent, who have ample security. Of course you must spend a little time looking into the situation, and have the documents prepared by YOUR attorney, at the borrower’s expense, if such investments are of interest.

          • texas tea says:

            as a former teacher, did you teach reading comprehension? or do you have some issues with following the guidelines and being respectful of your fellow bloggers?
            Open Thread Non-Petroleum
            by DENNIS COYNE posted on 07/22/2016
            A new post on Texas output will be up soon. This thread is for non-Petroleum discussions and news.
            give us a break pretty please👎😢

        • Watcher says:

          There is no more investing. It all went away starting in 2009.

          Now it’s betting on central banks and HFT engines, and only the young who don’t know what normal looks like are so inclined.

          Bonds have been a good bet. They yield 1.56% on US 10 year paper now, and the year started at 2.23 or so%. Lowering yield means the price of the bond increased, so bond holders have capital gains this year of significant amounts. How weird is that?

          And . . . with Germany at <0% and maybe a magnet as such, could be there's more capital gains to be had.

          Unified Field Theory? Oil scarcity is undoing everything, and there's nothing anyone can do about it.

          • Petro says:

            …. and this is just the beginning of the “undoing” …

            Be well,


            • Caelan MacIntyre: They're Great says:

              ‘The Great Undoing’… I like it.

              Like The Great Depression, only Greater

              Kid: “Great Grandpa?”
              GP (curmudgeonly): “What?”
              Kid: “What was life like when you were young?”
              GP: “You know those funny cracked ribbons of asphalt all over the place with trees and plants poking through that you keep wondering about?”
              Kid: “Yes…”
              GP: “Well I’ll tell you about it when I get back up from my snooze…”

              Little Fluffy Clouds
              Power Circles

              “Peak Oil Barrel is now Coyne-Operated™, for your convenience!”

              • Ptero says:

                I hate to be the mean guy, but You really have no clue what we are talking about here, do you?
                You think is a game, a joke … a pokeymon chase if you will.
                I understand people here trying to rationalize the best outcomes ……… I diagree, but I understand them…..
                ……but being joyful for what’s coming and expecting it with excitement?!?!?
                It’s got to be only you here…. and that is why I say you have no clue what we are talking about…

                Believe me Caelan:
                It is much, much, much better what you have right now….
                I pray everyday to be wrong on what I write here…. I do!

                If what you expect with excitement comes to fruition, those grandpa/grandson stories you write about, will be very, very scarce…..

                …oh, and Greater is comparative.
                For this one coming you will need to use superlative: Greatest…, for there will be no more after this one for a while…

                be well,


                • Caelan MacIntyre: The Great Undoing says:

                  Petro, I like ‘The Great Undoing’ and think I’m going to use it, irrespective of how bad or easy it’s going to be.

                  I suspect that the longer BAU is clung to, the worse The Great Undoing is going to be, so I’m all for it undoing ASAP– with people, also ASAP, properly trained and skilled, such as in the basics of survival and simple, self-empowered, community living.

                  Incidentally, BAU sounds so benign, but of course it includes the governpimps, their militaries and their foreign genocides.
                  And now we have a priest in France…

                  In order for BAU to go away, so-called ‘government’ (as usual) will have to go away along with it. If it doesn’t go away willingly, then forced removal may be a chosen option.

                  There is little joy in seeing my world getting trashed for crony-capitalist plutarchy technoshit, including the greenwashed kinds that still rely on the BAU setup and that people get duped into.

                  Incidentally, free range chicken doesn’t necessarily mean idyllic landscapes of happy chickens running all around the grass, meadows, under trees and alongside streams. Free range chicken can– and probably usually does– also mean a too-small door left open in the back of an overcrowded factory warehouse full of chickens, and assorted legal loopholes along those lines.

                  In a sense, wimbi left in time.
                  The rest of us, maybe more the younger ones, appear to be left to experience this shit liquify, quicken and turn into ever-runnier diarrhea.
                  I guess that’s what the body sometimes has to do in order to get rid of some kinds of infection in short order before it can do too much damage.

                  I recommend Titanic shiploads of prune juice.

                  • Petro says:

                    As I said:
                    you have no clue….
                    …but I am always ready for a good toast.

                    I prefer wine and cognac/armagnac my self instead of prune juice, but hey – what the heck.

                    Cheers to you brother!

                    Be well,


                  • Caelan MacIntyre says:

                    Так як ваше ім’я-походження, після пошуку, здається, виявити деякі цікаві places– Туреччина, Албанія і Україна для 3– і з огляду на ваш очевидною фон в маслі (і / або пов’язаних з ними?), Я припускаю, що у вас є кращі ідеї / підказки ,
                    Do you understand it without Google Translate (GT)?
                    Amusingly, if you feed that back into English in GT, the word, ‘clue’, gets lost in translation.

                    I am trying (and trying to help others) to ‘prepare’ for what I have little clues about in the context of peak oil and decline/collapse, which doesn’t include much BAUtech, as you might imagine.

                    Thanks for the ‘warning’, which I take very seriously.

                    Europe (lyrics)

        • Nathanael says:

          *cough* There are investments out there with decent potential to do better than cash. Not in the fossil fuel industry, in the renewable energy industry, obviously. Most of the segments are highly competitive but there’s investments to be made.

          • Petro says:

            Just go and cough somewhere else, will you?

            You are cluttering this respected blog with your “knowledge” which “ranges” for Civil War, to NRA/W.LaPiere, to Black Panther shit, to investment advice, to oil price formulas to…. my (you know what)…!

  22. aws. says:

    Pipeline leaks (what is probably) dilbit into North Saskatchewan River

    Prince Albert to update oil spill, North Battleford restricts water usage

    The City of Prince Albert will outline plans to protect its water supply at 3:30 p.m. CST

    CBC News Posted: Jul 24, 2016 1:46 PM CT

    As the City of North Battleford introduces water restrictions, the City of Prince Albert is preparing to update the public on its plan to protect the water supply from an oil spill in the North Saskatchewan River.

    A plume of oil mixed with a thinning chemical [dilbit, in other words], which leaked from a pipeline break reported by Husky Energy on Thursday, is drifting downstream towards the city.

    Prince Albert building a 30 km pipeline to bring cleaner water into the city

    A 30-kilometre pipeline will bring water from the South Saskatchewan River to Prince Albert’s water treatment plant as the city prepares for a plume of 200,000 litres of oil to pass by the city.

    Observers along the river reported seeing little evidence of surface oil at the Paynton ferry crossing.

    Dilbit in water – the thinners evaporate, and then the bitumen sinks.

  23. simon oaten says:

    does anyone have evidence of chocking back of wells (re gas decline) ?

    interesting paper:



    • Coffeeguyzz says:

      Mr. Oaten

      Not sure if you’re referring to something like the Basin-wide curtailment/shutins that occurred several months back in the Marcellus/Utica areas.
      If you are, there are numerous references, found via Google, describing how many of the operators forthrightly described choking back production (analysts pegged it at 1 Bcf cumulative) when prices at some of the transfer points hit 60 cents/mmbtu.
      Stone Energy went so far as to completely shut in a field in WV, the Mary field, which had been producing over 100 MMcfd.
      Enno Peters recently released data on the Marcellus which displays this.

      If, by choking back, you are referencing well/field management, this is occurring to an increasing degree with Utica wells, primarily, due to the exceptionally high pressures these wells possess.

      Rice Energy, with its dozen Utica wells in Ohio, restricts output (chokes back) at rates varying from 16 MMcfd to 18 MMcfd for months (12/18) As these 7,000 psi wells are optimally developed that way.
      Some of the 10,000 +/- psi wells such as the Gaut and Scott’s Run, are restricted at 18 to 30 MMcfd for the same reasons.

      Regarding the referenced paper on frac’ing, it may be a bit dated (2011), yet instructive on , amongst other things, describing succinctly some differences between conventional and unconventional characteristics.
      If you really want to traipse ‘ into the weeds’ with this frac”ing stuff, the aogr.com site has outstanding articles, listed under the Frac Facts tab that contain up to date, highly informative content.

  24. Oldfarmermac says:

    This article will be of interest to those of us interested in the politics of oil and anti oil.


    I am as usual not swallowing either camp’s talking points like a starving fish, getting gut hooked it the process.

    Without fossil fuels, and in the usual gargantuan amounts, for the next few decades at least, we will suffer an economic crash so bad that the consequences will extent maybe all the way up to WWIII. The environmental destruction will probably be WORSE than if we continued to have and burn the oil, coal and gas.

    On the other hand, the argument that we must leave eighty percent in the ground is probably sound, although I won’t bite on the exact percentage. It might be ninety percent, or sixty.

    We are in a damned in the short term situation if we DON’T keep the fires of industrial civilization burning hot and bright, and damned in the medium to long term if we do.

    So as I see it, we are collectively in the position of a general who HAS to win an upcoming battle. Lose it short term, most of us die a horrible short term death. Lose it long term, most of our descendants and most of the biosphere will live tough lives. Generals don’t expect to win fights without having to bury some of their troops.

    The only path forward that offers any real hope of long term safety and prosperity, so far as I can see, is to keep the pedal to the metal, pushing as hard as possible on the renewable energy, efficiency, and conservation fronts, while we are still rich enough – solely because of burning fossil fuels in awesome amounts- to pay the price of going renewable.

    Prosperity is not only the most important single key to progress on the grand scale, technologically speaking, it is also the most important single key in terms of an early population peak and eventual decline.

    Poor people have more babies than prosperous people.

  25. Longtimber says:

    Oh Goodie …

  26. Javier says:

    I think many of you will appreciate taking a look at this post from Wimbi’s daughter:

    • JN2 says:

      Thanks Javier. Just left a comment on the thread you linked to. Wimbi RIP…

      • Stilgar Wilcox says:

        I remember Wimbi from days on The Oil Drum message board – good guy, with broad knowledge on the topic and interesting ideas – sorry to see him leave us.

    • Wake says:

      Thanks Javier I had missed that

  27. Old Todd says:

    To the Beale Family:

    It was so kind and considerate to post your notice (although I’d bet he had something to do with it). So often important posters simply vanish. He always struck me as the kind of person it would be great to sit down with for some long conversations about a million topics. I think his life outside this forum also displayed a consistency of walking the talk which few do today.

    Our prayers will be with you.


    PS – And now know where “Wimbi” came from – William B.

  28. Oldfarmermac says:

    Experience has taught me that predicting is ok, and maybe not as hard as Yogi sez, so long as you don’t predict both WHAT and WHEN.

    The electric vehicle revolution expected by Tony Seba, Fred Magar, Nick G, and other regulars here may actually arrive on the express schedule they predict. I have high hopes to live to see it, but I am not willing to bet much on WHEN electrified cars will dominate the market place.

    Elon Musk never ceases to amaze me. I keep thinking he must eventually suffer a Humpty Dumpty fall, but hoping he avoids it.

    They are now running two shifts seven days a week hoping to get the battery factory ready soon enough to build Model Three’s by the tens of thousands.


    • Fred Magyar says:

      The electric vehicle revolution expected by Tony Seba, Fred Magar, Nick G, and other regulars here may actually arrive on the express schedule they predict. I have high hopes to live to see it, but I am not willing to bet much on WHEN electrified cars will dominate the market place.

      I don’t think any of us is willing to give solid dates as to when any particular disruption may or may not come to pass. However there are disruptions happening in so many areas and fields right now and almost all of them have taken the experts in those fields by complete surprise.

      Case in point, I was just watching a lecture by George Church titled The Augmented Human Being, he is a molecular biologist and I believe has worked with Craig Venter on synthetic biology, but I digress! https://www.youtube.com/watch?v=GSVIKC4R2Zo

      My point is that in his talk he mentions the development and the implications of CRISPR/Cas9 Gene editing and Gene Drive technology and the fact that this technology wasn’t available at all just a few years ago. Those are examples of massively disruptive technologies that literally no was expecting to become so cheap and ubiquitous in such an incredibly short time. It happened almost literally from one day to the next.

      We are currently living in the best of times and the worst of times. BAU is without a doubt dying but what is being born in its place I’m sure will yet surprise all of us in many many ways!


      • Caelan MacIntyre says:

        Some of this reads like a corporate brochure.

        • Oldfarmermac says:

          Hi Caelan,

          You want to read something that sounds like a corporate brochure?


          But as one o’ them old time Yankee ball players, used to say, when another one used to wave his bat at the outfield fences, indicating he was going for a homer, it ain’t bragging if he can do it.

          The scale of the battery factory is MIND BLOWING.

          The only thing comparable I know of personally is the old Ford plant they called the River Rouge IIRC, where Henry said it was his intention to take delivery of his own iron ore at one end and ship out cars at the other end.

          He is even going to build a goddamned railroad between his battery factory and his car factory!!!!!!!!!!!!

          • Fred Magyar says:

            Whether or not he actually succeeds, what he is doing will certainly serve as an example from which many future enterprises will learn going forward. Someone has to go first.

            3. The Gigafactory has already cut the fossil-fuel lines for Tesla
            Tesla cut and capped the natural gas line leading to the Gigafactory, so there’s no going back to on-site fossil fuels. There’s also no diesel generator for backup power. That means Tesla must rely on electricity for manufacturing processes that require heat, an unusual step for a major plant of any type.

            By the time the facility is fully up and running, the Gigafactory is meant to be net zero for energy, powered mostly by onsite solar backed with batteries.

            Well, we are all going to find out sooner than later if solar and batteries can cut it. Having followed the Solar Impulse round the world flight my hunch is that a lot of big corporations are getting ready to switch from fossil fuels and start supporting renewables in a big way! Solar Impulse’s engineering team proved that if you can fly a solar airplane day and night for five days to cross the Pacific Ocean, you can sure as hell power a house or an EV down on the ground.

            • Caelan MacIntyre says:

              What hunch?
              I have already mentioned hereon that many oil companies and governments (usually one-and-the-same) are hopping on the pseudorenewables bandwagon– with our coerced tax money, so, whether we like it or not. Chew the cud.

              Some people, perhaps without much of a working ethical compass, seem to find that sticking their finger in the air to find which way the sociopoliticultural wind is blowing, and going with that, is sufficient.

              “Solar Impulse’s engineering team proved that if you can fly a solar airplane day and night for five days to cross the Pacific Ocean, you can sure as hell power a house or an EV down on the ground.” ~ Fred Magyar

              One plane, one house. Keep counting.

              And while the numbers add up, pay attention to scale, like (global energy cannibalization), and planetary effects of it, and those effects on the living of the planet, such as corals.

              Reality is not as simple as some people frame it, perhaps including you and what with your self-ascribed ‘cognitive dissonance’, etc..

          • Caelan MacIntyre says:

            Hi Glen,

            I’m getting used to the shallow and/or conflicting, two-faced treatment some technoshit like EV’s are given on POB, as if success in some things is actually success, like a home run in a game not worth playing.

            With only a little bit of digging, I found out about stuff like U-shaped cost curves (such as for car batteries when some materials run out), energy cannibalization (such as for EV/PV buildout and inherent dangers of that to the climate), limits to global supplies for lithium (and something along the lines of how the older and more polluting battery tech may have to be used in other places, such as so-called ‘poor’ countries [that have some of the resources that the so-called rich countries avail themselves of], if they want to jump on that bandwagon), and affordability issues with EV’s in the face of economic decline (who will be driving them and where will they be going?), etc..

            But of course those kinds of things jam some people’s mental culture and so are inconvenient to their narratives, so they’re often swept under the carpet (denied) or ridiculed, etc..

            “…The cornucopian fantasy of ‘LOTS’ of rich Americans driving around in Leafs and Volts commuting to their ‘GOOD’ jobs, depends on our society turning a blind eye to the large swaths of the real poor in the world…” ~ FMagyar

            “Furthermore what makes you think those so called ‘GOOD’ jobs will continue to exist? Or the access to ‘EASY’ credit?

            Spec, I’d really like to see you and Nick without your rose colored BAU glasses and blinders on, taking a walk on the wild side in some of the poorer parts of the US and more importantly, the rest of the world. You guys really need to step outside of the Matrix for a little bit… Reality ain’t even close to what you guys imagine. But I realize neither one of want’s to hear that technology is not going to save the world you hold so dear!” ~ FMagyar

            “…I know that cars, ICE or EV of the type that most people think of when they say automobiles are simply NOT sustainable! What part of ‘unsustainable’ do people not understand?” ~ FMagyar

            Thanks, Fred.

            • Oldfarmermac says:

              Hi Caelan,

              Fred believes in progress in the direction of sustainability, and that such progress is both possible and desirable.

              Nobody is sure just what you believe in, unless it’s going back to living in caves and banging rocks together to make a few hand tools.

              Something tells me, reading between the lines of the stuff you post, that you are simply totally without a clue when it comes to actually understanding the hard facts of life.

              I strongly suspect that Fred is one of only maybe three or four regulars here in this forum who might live six months or longer in the event of TEOWACKI.

              Fred understands that the things we are doing now, on the grand scale, are not sustainable, long term. There is nothing inconsistent in what he has to say, but any body who says much at all is in danger of having his words cherry picked.

              • Fred Magyar says:

                Hey OFM, tks for trying to explain some of what I have been saying. A few days ago I replied to a post by Caelan saying that I would no longer respond to anything he says because I considered it to be an exercise in futility and a waste of time.

                I will add one more thing to what you have said. I have often give examples of things that I consider disruptions, CRISPR and Gene Drives being just a recent one. These disruption are real, they have huge consequences and have happened on a time scale of less than 5 years taking all the experts in the field by surprise!

                I have never suggested that I know if a particular disruption is a good or a bad thing let alone have I advocated for any particular technology as a solution to global problems. I have always said time will tell.

                I am not proselytizing and I do not have an agenda. I make comments on what I see and make some educated guesses on what I think might happen.

                Caelan consistently accuses me of trying to sell something, nothing could be further from the truth.

                BTW, to understand why CRISPR and Gene Drives are so disruptive you probably do need to have taken a few university level courses in Biochemistry, Microbiology and Genetics. It also helps if you understand the background of corporations engaged in Big Farma, GMOs, Medicine, Veterinary Medicine, etc, etc…

                Sticking ones head in the hole of the sands of ignorance at this juncture is not a very helpful modus operandi.
                Neither is being religiously dogmatic about any one particular perceived solution.

                • Duncan Idaho says:

                  CRISPR is already changing everything.
                  UCB and MIT are already is a patent battle, and the Nobel Prize for this one is up for grabs (Jennifer Doudna and Emmanuelle Charpentier for sure).
                  This is going to be interesting on so many levels.

                  • Caelan MacIntyre says:

                    “Civilized nations popularly assume that ‘primitive’ societies are poor, ill, and malnourished and that progress through civilization automatically implies improved health. In this provocative book, Mark Nathan Cohen challenges this belief. Using findings from epidemiology, anthropology, and archaeology, Cohen provides fascinating evidence about the actual effects of civilization on health, suggesting that some aspects of ‘progress’ create as many health problems as they prevent or cure.” ~ Google Books description for ‘Health and the Rise of Civilization’, by Mark Nathan Cohen

                    Pole Shift
                    “Riddles in stone – great cycles of time
                    Forgotten, ignored – the ancient paradigm…”

                • Caelan MacIntyre says:

                  I find myself pondering the validity of a recent comment along the lines of, if recalled, POB’s quality eroding to resemble something of The Wall Street Journal. While the comment may have been directed more at the ‘oil section’ of the blog, perhaps there is something to be said in that regard about the rest of it.

                  At any rate, there is a huge difference between some things one would not rather know about and deliberately choosing to ignore them. In fact, that someone would rather not know about some things may suggest quite the opposite of ignorance, because perhaps they are only too painfully-aware of how things inevitably end up panning out, such as in the wrong hands. And maybe the wrong hands can be humanity’s.

                  Do I have to re-post a quote from Chomsky regarding the human as a potentially lethal mutation?

                  We need to do more than just highlight some kind of technology, especially if we think it’s somehow revolutionary and/or disruptive. Alone, that’s child’s play. We need to also actively participate in its social, ecological, ethical, critical, etc. evaluations, and so forth, otherwise we risk falling into the kinds of traps that we seem to set for ourselves and fall into over and over again.

                  …Perhaps this is in part why Nate Hagens calls his site, The Monkey Trap.

                  “I currently teach a class called Reality 101 at the University of Minnesota. It is a 15 week exploration of ‘the human ecosystem’ – what drives us, what powers us and what we are doing. Only when viewed from such an ecological lens can ‘better’ choices be made by individuals, who in turn impact societies… I start with brief summaries of energy, economy, behavior and environment, followed by a listing of 25 of the current ‘flawed assumptions’ underpinning modern human culture.” ~ Nate Hagens

              • Caelan MacIntyre: If Only says:

                Oh if only POB was some sort of sanitized uncritical platform for all things techno and techno-disruptive, ay?

                The Tesla Cult


                “Over time, what has become known as ‘The Tesla cult’ has developed a near religious intensity – an ‘us-against-them’ style of thinking, an ‘all-or-nothing’ approach to investing, disregarding anything that questions the ‘revolutionary’ and ‘disruptive’ narrative…”

                Of course, I’ve been questioning some of the narrative
                (Not doing so seems like a particular kind of cherry-pick, denial and/or peddle for the narrative.), and so far, there appears little in the way of answers, just some shallow face-saving commentary, for example, from ‘You-know-who’ who now speaks with my name, through and behind you, Glen, adolescent-style.

                What about addressing some of the issues my preceding comment raises, Glen? Or do you not have time for that, given Fred’s needs, or prefer to cherry-pick?

                “If the virus and the host cell DNA have a matching sequence, CRISPR-Cas9 could target the host DNA instead of the virus DNA and splice an important gene, leading to a latent mutation within the body (5). Researchers have discovered that this could become a more common occurrence as the guide RNA’s 20 nucleotide base pairs do not need to be completely complementary in order to bind with the target DNA, giving an unwanted level of inaccuracy when dealing with important genes…

                …many are worried that by enabling the immune system to target healthy cells, this could lead to a widespread attack on normal tissues in the gut and adrenaline glands. The impact of these early trials cannot be understated. If researchers are able to accurately target and edit the genes of cancer cells using CRISPR-Cas9, many of the 500,000+ people estimated to die from cancer annually could be saved.” ~ Eric Delapenha

                If so, maybe half a million more, annually… I wonder what having even more people on the planet would be like.

                At any rate, unpredictability and human ignorance and arrogance abounds…
                Of course, some people still seem to think that, if only… if only with just the right technology, we could fix ‘it’.

                • Oldfarmermac says:

                  Hi Caelan,

                  There are always things to go wrong. My brother died in a house fire , as the result of using just about the oldest technology around to stay warm, other than clothing, namely burning some wood.

                  I have been lucky in that I have never had to watch any human beings starve myself, not having traveled in parts of the world where this is still a common occurrence.

                  But if we give up industrial farming NOW, a billion little kids will starve in very short order.

                  The difference between you and me, and you and Fred, is that you never have anything to say except that the sky is falling, and that the end of the world as we know it is right around the corner and most or nearly all of us are going to DIE, slow and hard, or fast and hard.

                  You don’t say so in so many words, but the conclusion is inescapable.

                  Fred and I are VERY well acquainted with the existential problems threatening to wipe us out, but we are not giving up. We see possible solutions. We advocate working on those solutions.

                  We are making use of the time available to us to do what we can to make the world a better place, a more sustainable place. We don’t expect complete spectacular success , but we don’t advocate just rolling over and giving up, which is basically what you are advocating, whether you are willing to admit it, or not.

    • islandboy says:

      Incidentally, last week I saw a Nissan Leaf at one of the auto dealers that specializes in used Japanese Domestic Market cars in my neck of the woods. I have found the owner of that particular establishment very approachable and have discussed EVs with him before, specifically sourcing a used commercial van based on Leaf running gear that has been on the market in Japan and Europe since late 2014. In our first discussion he told me that the Leafs he was seeing in on the used market in Japan were too expensive but that a customer had asked him to source one. In our second chat, he told me that he had found one that was affordable and would be importing it for his customer so, I was sort of expecting to see it. When I popped in last week to have a closer look at it, he offered me a test drive.

      It was a very pleasant drive. The car is very quiet and smooth as is to be expected. Visibility is good and the performance was a little surprising, not at all comparable to a Tesla but, no slouch either. The brakes felt a little strange but, I think it might be due to Nissan’s implementation of regenerative braking which IIRC uses the brake pedal to initiate stronger regen. I learned to drive using manual transmissions and prefer to down-shift a lot than rely on friction brakes alone (even when driving an automatic) so, I prefer the approach taken by Volkswagen for their eGolf, which has three regen modes, selected from a gearshift like knob between the front seats. I am looking forward to being able to drive around in a vehicle that can get it’s power from something other than liquid fuels but, for now, I am extremely grateful to the guys in the oil patch for doing what they do!

  29. Wholesome consuming can increase your confidence and happiness once
    you set health or weight objectives.

  30. Watcher says:

    1. What’s the tax on Texas oil production?

    2. Got a problem with lower costs for wells because of techno babble this or that. Versus costs from suppliers have been reduced, lowering break even prices. My problem is it says suppliers were gouging before and the producers knew it and allowed it. No way. Odds high they have borrowed money they won’t repay. Or complete fewer stages per well and claim lower cost via technical magic.

  31. The EIA’s Weekly Petroleum Status Report is out. US C+C production was up 21,000 barrels per day. Alaska was up 33,000 bpd. Lower 48, including the Gulf of Mexico was down 12,000 bpd.

    Storage was up 1.67 million barrels reversing the trend for the last few weeks. This might put downward pressure on oil prices.

     photo US Weekly CC_zpsdxw0gma0.png

  32. Longtimber says:

    ” Fifty-six companies covered in Wood Mackenzie’s corporate analysis will achieve cash flow neutrality at an average oil price of around US$50 a barrel Brent in 2016. ” “This is some achievement given the majority needed over US$90 a barrel in 2014,” says Tom Ellacott, senior vice president of corporate research at Wood Mackenzie. “A growing list of companies will even be free cash flow neutral below US$40 a barrel in 2016.”
    IIRC Albert E. quoted . ” Ist das wirklick so? ”

    • Watcher says:

      Complete crap. Cash flow neutrality has no universal definition.

      • shallow sand says:

        Yes, if you quit drilling and completing wells, that cash flow neutrality level drops quite a bit.

        So does production, especially the LTO stuff.

        And, as we know, we have not had $40 WTI all that much in the last year, and we are looking at that again now, WTI went below $42.

        Finally, what is the definition of $50 US per barrel in that article? ND in the low $30s now, most others in mid to upper $30s at the well.

        • Nathanael says:

          Quitting drilling and completing wells has been the correct financial move since 2008. Coasting on profits from the existing wells was correct; investing more in worthless new wells, for an era of zero oil demand, was dumb.

          But it’s hard to get an “oilman” to recognize this…

          • shallow sand says:

            The “oilmen” you are referring to, LTO company management, gets paid bonuses based on producing additional BOE, so they care not whether they make money.

            In fact, once they realize bankruptcy is coming, they get some big cash bonuses before filing.

            Then, after the company goes BK, they hook up with private equity and start a new company, drilling poorer acreage, losing more money, but continue to be paid 7 figures.

            • Nathanael says:

              ‘The “oilmen” you are referring to, LTO company management, gets paid bonuses based on producing additional BOE, so they care not whether they make money.’

              Ahhhh, you just explained something to me. Thank you! So this is an example of “It is hard to get a man to understand something when his salary depends on his not understanding it”.

          • Watcher says:

            You do realize the BP numbers indicate strong increases in global oil consumption in 2015?

            • Nathanael says:

              What year is it? I’ll go check. 2015 is in the rear-view mirror…

              I think most of the estimates for well profitability are based on total well lifetimes longer than 8 years, right? If I’m mistaken, then the date when it became uneconomic to drill new wells was a bit later than 2008.

  33. Dean says:

    Hi Dennis, Ron

    sorry for not sending you my corrected data this month, but I am on holiday with my family and I will be back to a working computer after the 5th of August.

    Regards, Dean

  34. shallow sand says:

    Upstream E & P earnings are starting to be released.

    Anadarko lost $692 million during the 91 days of the second quarter, but increased production in their US LTO basins.

    • Reno Hightower says:

      Someone on the Anadarko board needs to explain to their management that the name of the game is making money. or maybe in this environment, losing as little as possible. Maybe they should start releasing rigs as opposed to increasing production.

      • shallow sand says:

        Reno. I wish they were the only ones.

        See below. Plus I forgot about Hess, who lost $392 million in 91 days, with declining production.

    • George Kaplan says:

      And Statoil:

      “OSLO, Norway (Bloomberg) — Statoil deepened spending cuts after Norway’s biggest oil producer reported an unexpected loss amid lower crude prices and taxes on unprofitable international operations.

      The adjusted loss after tax, which excludes financial and other items, was $28 million in the second quarter after a profit of $929 million a year earlier, the Stavanger-based company said Wednesday. That missed the average estimate of 16 analysts for a profit of $294 million.”

      … “It’s especially marked by a poor result in the international unit.”

      • shallow sand says:

        Pioneer lost $268 million, growing production, adding rigs, bought 28,000 acres for $435 million.

        Whiting lost $301 million, production fell.

        QEP lost $197 million, growing production, adding rigs, bought 9,500 acres for $600 million.

        So, for the four LTO producers who announced today, $1.458 billion in losses in 91 days.

        I suppose we can add Statoil’s huge North American losses to that number.

        Clearly Midland and Martin Counties are the hot locations for Wall Street purposes.

        It appears less than 4% of hz wells in these counties since 1/1/2010 have cumulative production of 200,000 BO or more.

        Furthermore, 2/3 of those are on one of four leases.

        Looks like you need to be in the “supercore” to hope for a well that can payout. I think both of the acreage purchases set forth above are in that “supercore”.

        Man, I’d sure hate to be popping those open now, but I guess bonuses and Wall Street depend on it.

      • George Kaplan says:

        Suncor (not LTO but a big player in Tar Sands):

        “Operating loss was $565 million ($0.36 per common share), driven by the shut in of Oil Sands production in response to the forest fires, combined with low benchmark prices for crude oil. Net loss was $735 million ($0.46 per common share).”

        Husky (more problems to come with the pipe leak as well):

        “Net earnings were a loss of $196 million, which takes into account the factors affecting cash flow as well as three non-cash items: a $71 million after-tax loss associated with the dispositions, a $12 million after-tax property impairment and $22 million in exploration and evaluation asset write-downs. Excluding the above non-recurring items, the adjusted net loss was $91 million.”

        Hess (reduced production mainly blamed due to offshore failures):

        “Hess slumps as driller cuts production outlook on Gulf woes” … “The company’s second-quarter loss was $392 million, or $1.29 a share, compared with a shortfall of $567 million, or $1.99 a share, a year earlier, the company said. ”

        The capital cuts from late 2014 and 2015 are now starting to be seen in production figures, on top of continuing low prices, meaning more cuts are needed to try and stay profitable (Red Queen in reverse).

        • Greenbub says:

          Thanks, George.

        • shallow sand says:

          ConocoPhillips lost $1.1 BILLION in 91 days.

          But all is well per their press release.

          • George Kaplan says:

            ConocoPhilips press release is a classic: “ConocoPhillips Reports Second-Quarter 2016 Results; Continued Strong Operational Performance” and yet:
            “Excluding special items, second-quarter 2016 adjusted earnings were a net loss of $985 million, or ($0.79) per share, compared with second-quarter 2015 adjusted earnings of $81 million, or $0.07 per share.”

            PEMEX still losing a lot of money:
            “Mexican national oil company Pemex said on Thursday losses narrowed in the second quarter to 83.5 billion pesos ($4.6 billion) from 84.6 billion pesos in the year-ago quarter.”

            Total and Repsol made money, but less than last year:
            “French major Total reported adjusted net income July 28 in 2Q 2016 down 30% to $2.2bn, while the same figure for Repsol’s 1H 2016 was 26% lower at €917mn, both year-on-year. As the impact of low oil and gas prices continued to be felt, corresponding net income figures were $2.1bn and €639mn.”

  35. Nathanael says:

    Petroleum, but not petroleum production:


    Demand has peaked. Bang. This is it, peak oil has passed…

  36. Nathanael says:

    This is about petroleum. But it’s not about petroleum production. It’s about demand.


    Demand dropping, prices dropping, refinery profits shrinking.

    Peak demand has happened; peak oil has happened. Bang. This is it. I’m not going to try to pin the production peak down to a month or year because stupid companies may produce extra oil even if it’s highly unprofitable. But to a first approximation there will never be any more profitable oil exploration.

    • texas tea says:


      “World oil demand grew from 89 million barrels per day (mmb/d) in the first quarter of 2011 to 96 mmb/d in the second quarter of 2016. Both EIA and IEA expect 2016 oil demand to grow by 1.4 mmb/d. The IEA foresees a further growth of 1.3 mmb/d in 2017, while EIA foresees a 1.5 mmb/d increase. Most of this growth is taking place in non-OECD countries.”

      Nathanael, you really have no clue about the things you write about on this blog, and that does not seem to bother you. A defining characteristic of your is to ignore historic facts. One can argue about future demand, but unless something very dramatic happens TEOTWAWKI, demand will continue to increase at current price levels, and at the same time limit any competition and investment in alternatives. just the facts👍

      “According to the most authoritative energy forecasting organizations in the world, the demand for oil, natural gas and coal will continue to increase beyond the end of their projection periods. These projections are based upon realistic assessments of the likely changes in the global energy marketplace as a result of current government policies, including those intended to reduce greenhouse gas emissions through subsidies, mandates and regulations.”

      • Nathanael says:

        Actually, a defining characteristic of you is to ignore historic facts. You really have no clue about most of the topics you spew about on this blog, with the sole exception being oil production.

        Are we still using anthracite heavily? How about horses — are they still a big part of the transportation economy? No, they’re history.

        IEA and EIA long-term projections are simply implausible. The reasons why have been laid out in detail elsewhere. The electricity projections are, infamously, projecting massive *drops* in the deployment of solar and wind power, which is ridiculous nonsense; they’ve underpredicted solar deployment by orders of magnitude like clockwork every year, and cannot be considered authoritative in any way.

        I stick with Lazard numbers, which are investment-grade. The other *serious* energy forecasters, the ones whose numbers have to be good for investment decisions, agree with Lazard. The IEA and EIA make numbers for political paymasters who appear to want to believe in a rosy future for fossil fuels.

        If you want to see what’s actually happening in energy usage, just watch the trends in China. I do. In the recent past, they’ve been propping up the oil markets by increasing their strategic reserve. This is over:


        The problem oil, in particular (as opposed to NG or coal), has is that it can’t compete on price as a ground transportation fuel, even at $25/bbl. Alternatives are cheaper. If the oil price is driven below $10/bbl this would change, but I think you understand what happens to the production companies then.

        I know you haven’t worked out a model of pricing based on the pricing of alternatives to oil. I have been doing so. You’ve spent too long in the oil bubble, believing that there aren’t alternatives to oil.

        • Watcher says:

          Oh I just realized you’re one of those EV types.

          Find me an interstate 18 wheeler truck, refrigerated hauling food, that runs on battery power and doesn’t have to stop every 30 miles for recharge, and when it does stop for recharge it refills its tank, as it were, in less than, oh, 7 minutes. As opposed to overnight.

          Then you have alternatives.

          FYI, heard the phrase cattle car? That was back when trains didn’t run on oil. They didn’t have the power to refrigerate beef. So the beef had to be transported live. And most of a steer is inedible, but you had to haul that inedible mass along with the rest.

          Oil is everything. And its scarcity will kill just about everyone.


          • Petro says:

            I do not know about you, but this guy (Nathanael) reminds me of that bright fella who used to hang around here ….. what was his name: Futilistit, Fusilistit or something similar…
            I think he is the same …or close…. perhaps a battery/plug-in version of Futisilist….. that unfortunately wouldn’t discharge….

            Be well,


            • Caelan MacIntyre says:

              By the way of E.T. Productions. ‘u^

              • E. T. Productions says:

                Yeah, E. T. Productions. Pretty transparent, huh?

                Does anybody here remember the Etp model? Or is it taboo to mention it? If so, why?

                Am I still banned?


        • texas tea says:

          good grief. You live in a world that just does not exist. I understand that “renewables” will play a roll in the world energy mix but they are not going to replace oil/coal/nat gas any time soon. There may come a day when, without incentives and tax credits and other various perks to prod, polk, manipulate, or perhaps even force consumers to buy electric automobiles, they will chose to do so based on their own best interest en masse. But that day is not here yet, and the same thing goes for renewable electric generation. Without subsidies it stops in its track👎
          At best, one of two things is most likely to happen.
          IF the world continues to “grow” and electricity demand continues to increase, renewables will pick up “apart of the increase” in demand but in no way, shape or form will they replace existing demand within next 30 years. If the world economy contracts and demand for energy goes down, prices will rise for the scarcest sources of our energy mix and as prices rise, renewables will provide a value to consumers and begin to capture an increasing market share of existing demand over time. Those are the most likely outcomes, the scenario where renewables will become so cheap and plentiful as to make our current energy mix of 90% carbon based energy uneconomic is fantasy in the next few years. I have little doubt that your models will be equally as valuable as those used by the climate alarmist over the last 25years. We can call your model hockey stick II and with that I bid you good day😜

      • farmboy says:

        Texas Tea fact check According to EIA. consumption 2nd quarter of 2016 was only 94.9 (mmb/d).

        A significant portion of those additonal 6 (mmb/d) were condensates which do not produce motor fuel. Another portion of the increase was thick tar crud.

        In additon we need to figure in the additonal energy cost of all the extra drilling, fracking, rail and truck freight, construction of the boom towns etc, etc etc. And we end up with less fuel for the consumer. Heck 2005 was possibly the peak of fuel to power the non oil producing part of the worlds population while that population continues to grow exponentially.

        The proof is that now once the oil producers start to slow down the demand slows down so drastically that even as production is slowing down the reserves are filling up with WTI in the $40 to $50 range. So I expect demand to only get worse from here on out.

        But I’m sure the new wells in the STACK and SCOOP will pay out just fine heck they could break even at $10 WTI har har.

        • Watcher says:

          (psssst . . . surely we all see now that consumption is not the same as demand? Yes? Yes?)

          How, you ask? Well, if you remember gasoline lines in 1970s, you know those folks demanded more than they could consume.

          And we have a corollary of sorts. Storage. Storage addition is also demand that is not consumption. trala trala

          • Oldfarmermac says:

            “you know those folks demanded more than they could consume”

            Watcher, you are like an obsessed child, but we find your antic remarks entertaining.

            Actually, those folks consumed all they actually were able to GET, and consumption over any extended period of time always equals production, unless you know of some owners of oil who may be illegally dumping some in sewers or rivers,sort of the same way farmers occasionally dump milk to make a point about the price.

            In this case any individual consumer used what he got over the next day or two, or week or so, and what he didn’t get, he did without.

            • Watcher says:

              Doing without does not define a lack of demand. It defines a lack of consumption.

        • texas tea says:

          You say “were condensates which do not produce motor fuel”. That is factually wrong, condensate have been used as “motor” fuel for decades. The issues at least for US consumers is, it was not until we begin to develop LTO did we have sufficient amount of “condensates” to build refineries to refine the lighter liquids and therefor we do not have the domestic capacity to do so, as the overwhelming number of refineries were designed to refine the available heavier crude oil. There are of course other uses for refined condensate. Back in the day we were always paid a premium for it😢

          “Another portion of the increase was thick tar crud.” is that a industry term?

          I do not have the historic data to know if the EIA and/or IEA have changed how they determine worldwide demand, but I must assume they have always used heavy oil (tar crud) and condensates in their numbers as they have both been around for decades😊 Ron or Dennis may know off hand, if we are talking apples to apples or not.

          according to IEA world demand was 95.48 for the second 1/4 2016

          With respect to Stack and Scoop, here is the deal and it applies to all posters here. If you run a business you always plan for the future. You do not make decisions based on 1/4, or one day price changes. That applies to all businesses. If the worlds ends, it ends, and it does not matter what decisions you make. However if the world continues spinning like it has for 4.5 billion years, and people wake up hungry and want to go to work, the decisions we make today allow for that overwhelming probability. Maybe Petro can sit back and afford to wait until the system collapses, but most folks can’t. Who will be right and who will be wrong, only time will tell. As I have seen this exact play 4 different times in my career, I have a very good feeling how this story will end and I place my bets accordingly. 🇺🇸

        • AlexS says:

          RE: world oil demand

          1) Key energy agencies (IEA, EIA, OPEC and others) have different methodologies for calculating global oil demand, and there are significant discrepancies between their data.

          2) Global oil demand is seasonally lower in the 1st half of the year and higher in the 2nd half.

          3) Given points (1) and (2), when comparing demand numbers, you should clarify, what is the source of data and which period it refers to.

          4) A few years ago, energy agencies have been significantly cutting their long-term forecasts of global oil supply and demand. However over the past couple of years, short-term demand forecasts for 2015 and 2016 have been constantly revised upwards.

          5) Global demand is not declining. It continues to increase, albeit at slower rate than in 2015 and 1Q16, when growth rates were above average.

          World oil demand (consumption) estimates (mb/d)
          sources: IEA, EIA and OPEC July monthly reports

  37. shallow sand says:

    Weatherford, one of the largest service companies, lost $565 million in the most recent 91 days.

    Their workforce has shrunk from 67,000 to 32,000.

  38. shallow sand says:

    Art Berman has an new article up on his site, worth a read.

    • Chart Monkey says:

      here’s the link…

      U.S. rig counts have surged as oil prices sink. Capital is driving the oil markets and it enables bad behavior by producers. That is why oil prices will stay low.

    • Petro says:

      SS and Alex
      are you convinced now that price/finances and economy will bring about PEAK?
      When A. Berman is fully convinced that:

      “Most people think that fundamentals–supply and demand–drive the oil market but capital drives the market and oil prices.”
      tells me that the thinking “within the system” is shaking…

      However, Mr. Berman still finds it hard to completely think out of it and that is why he writes and is puzzled by (just like you SS):
      “Meanwhile, these companies tell investors tall tales of fantastic rates of return even at low oil prices that clearly do not pass even a superficial fact check using Google Finance or Yahoo Finance. Why would any rational investor give money to most of these companies?”

      And the reason is that although he has made the leap out of system thinking, he still hangs on tho vestiges of it.
      He still thinks that “capital” drives the market.
      He is incorrect!
      Capital USED TO drive the marked when we had a stable system and a free market based economy in which “supply-demand” was large and in charge….. you know, capitalism.

      Credit and most importantly DEBT drives everything now and debt MUST roll over and increase every year.
      IT CANNOT BE PAID…… or we crash to extinction….

      And that is the reason Mr.Berman does not understand why investors are still piling up and investing…. they want their roll over payments grow as the result of debt growing -NOT their debt paid back like Mr. Berman and a lot of other prominent brains in the field think.
      And as long as LTO will deliver a debt growth and PAY roll over costs to investors quarter after quarter, they will invest and shale will go on….. and drill rigs will go on Regardless of Price (remember SS when I told you that you and Dennis have the wrong idea how shale finance happens aka: price per brl goes up finances of shale by banks happen?). Debt and budget (for sovereins) obligations must be met at all costs, that is the reason Opec and Russia and shale guys INCREASE production and drilling when price drops (contrary to “supply-demand” belief….)
      Has little to do with capital, cash flow, well head price etc, etc, etc…..

      Debt MUST grow at ALL costs……

      Be well,


      P.S.: Shallow, how does it feel to learn now from Mr.Berman things I told you on numerous occasions a year ago?

      • shallow sand says:


        Shale debt is no longer being issued.

        The number of rigs being added is insignificant.

        I always thought oil was too high, now I think its too low.

        I don’t think Russia and Saudi Arabia will hold out forever, they reacted when WTI dropped below $30, although ultimately they did nothing, as specs immediately drove the price up when they started sabre rattling.

        Commodities cycle. It is not as if oil is the only commodity that is down. They are controlled by funds, and they seem to be getting more volatile.

        I assume shares are being issued successfully because pensions and funds need a certain percentage of that exposure, and hype gets the sales made. Permian and STACK are getting the hype. We saw similar, maybe more extreme mal investment during the dot com bubble? How long ago was tulip mania?

        Costs got too high, and all, including us, spent too freely. Our LOE has dropped quite a bit. So, there is a small silver lining there.

        $4 gasoline in US is too high, $2.50 is not. It is no different than $1.25 gas 25 years ago. I wish my kid’s college cost double what mine did. My house appraises for more than double what it did 25 years ago. $60 WTI, $2.50 gas, we make good money now that costs have come down.

        You may be right about the future, you may not. You haven’t been exactly clear, other than it seems you are predicting war, followed by mad max.

        My gripe is LTO public company lies. I know enough about oil financials and production to know they are liars. Maybe other public companies in other industries pull this crap too, I don’t know.

        I would rather ride around stripper oil wells, mow, cut weeds, hit golf balls, camp on the river, talk to my family, and calculate oil well payouts, than most other things. Maybe that makes me weird, so what, its a free country still.

        My ancestors lived in cabins heated with wood, farmed with horses, grew their own food. Later ones were farmers in the 1920s and 1930s, times were very tough. They made it through.

        I agree the financial system is messed up. The type A idiots started taking Wall Street over in the 1980s, I went to college with some of those fools. It wouldn’t surprise me if we have another financial crisis.

        I was pretty scared when this crash started, now I’m not so much. Maybe I should be?

        • Petro says:

          “Shale debt is no longer being issued.”

          …ha, ha.
          You think that “debt issuing” is only if they go to a bank and get a loan…..
          Is the same as people (including bright economists) think that the FED are not doing QE anymore since 2014… or they increased the rates….

          Anyway, I am glad you are enjoying life and please do not leave the net and POB…

          Be well,


          • shallow sand says:


            Scott S at Pioneer Natural Resources says they are now competitive with Saudi.

            His company’s market value increased $1.2 billion as a result of this statement.

            His company lost $3 million per day in Q2.

            This kind of BS actually draws me nearer to your line of thinking.

            Take care.

            • Petro says:

              It’s called “Forward Guidance” in my line of job SS, and is the main (and probably only) tool of FED (CB) in today’s world.

              You might know it as Draghi’s “whatever it takes” comment, or the “deal” Russia and Opec (KSA) made when oil went on the $20s…

              It works wanders with both “make America great” RNC herd and ” United we are stronger” DNC herd….

              I wish you and your colleagues produce as much as you can and for as long as you can…..
              What you do (oil and gas) literally means EVERYTHING for our society and our way of life !
              Who does not grasp that has no clue of how things REALLY work.

              I am glad I helped and I am looking forward to your post here at POB.

              Be well,


  39. GJ says:

    EIA Natural Gas Storage report is out.


    Lowest summer weekly build in over 5 years. We may see a tight market this winter after all.

    • robert wilson says:

      For about four months, build has been less than last year, every week.

      • GoneFishing says:

        Maybe I am looking in the wrong place, but the EIA shows storage levels at or above the five year maximum storage values since November of 2015. That would mean that stocks are at their highest level now, so how can we have a tight market?

        • GoneFishing says:

          Chart of Natural Gas Storage

          • Stu from New Jersey says:

            They’re referring to the comparison of year-over-year and vs the 5-yr average. At the beginning of the injection season, the amount stored was *way* over history, but the difference has sunk every week since then.
            (Of course, keep in mind that large changes in percentages are easy at the end of April, when the *amount* is small, but that’s not true in July.)

            For instance, at the beginning of May, the stored gas was almost 50% higher than year before, and about 45% higher than 5-yr-avg. Today those figures are +15% and +19%. A significant erosion.

            Some writers have attributed this to the increase in net exports to Mexico, which is not covered very much in the additional report that comes out at 430pm Eastern time.

            If this heat continues and *then* we get a cold winter, the storage levels could easily be negative vs. history at the end of the winter.

            • GJ says:

              Also, the GOM has been awfully quiet the last couple of years and peak hurricane season is still a little more than a month away. (Although the GOM doesn’t produce the % of US production it use to)

          • texas tea says:

            Gone fishing, you need to look at this chart.
            as mentioned below, storage injection this summer are at rates (low) rarely seen. You have a couple of trends that are now baked in. Retiring nuclear plants and coal plants being replaced by nat gas, along with the largest component of nat gas supply, associated natural gas produced with oil going down, while at the same time nat gas prices are too low to encourage drilling for nat gas alone. These factors have been in place for some time now and there is no end in site. If we have a normal winter (2016-2017) and a normal summer 2017 we will may not have the necessary supplies to fill storage for the winter of 2017-2018. The markets needs a least a year to respond to price signals. That is why some here have been correct in pointing to a potential price spike in nat gas. The industry needs $4 nat gas to hold supply steady and higher to grow production without growth in associated gas that will not happened under $75 oil in my view. As many in our business look at the trends and future requirements this may also be part of the reason we see rigs being added, they may be classified as oil but may also produce a great deal of nat gas, just a hunch😊

            • Reno Hightower says:

              Associated gas accounts for about 20% I believe. And the rig count in the shale gas plays has not been increasing. I think it has bottomed but it is certainly not increasing. And I am pretty skeptical that even the best plays make money at these prices.

              So all that said I agree, could get a big move next year in prices.

            • GoneFishing says:

              Thanks tea, that makes sense. I do wonder why during the higher production time 14-15, there was less storage of natural gas than there is now.

            • Petro says:

              Agreed TT,
              when that consumption/demand miss-match with actual supply/production will happen (as watcher says: “when somebody will not get the oil they paid for”) then we will have those spikes I am talking about for…. oh, forever….
              and then, heaven help us all…

              Be well,


  40. Chart Monkey says:

    Any views on oil field decline rates?

    Rystad – ‘Brownfield’ investments needed to slow the decline rate
    While massive capex cuts are choking off future supply growth, what’s also important is accelerated decline rates at existing fields now that prices have remained low. Typically, companies need “brownfield” capex investments in mature wells in order to slow declines. But low prices and deferred outlays can push mature well decline rates from 5-6 percent to “the natural, underlying decline rate” of 10-12 percent in a short amount of time, Nicolaisen said, making the supply situation even more urgent. “Decline rates can’t be taken for granted,” he said.

    BofAML – Non-Opec oil field decline rates have accelerated to 5 per cent as a result of the impact on output from a 41 per cent or $285 billion reduction in global oil & gas capex from the 2014 peak, a Bank of America Merrill Lynch report said.

    • George Kaplan says:

      I had a rambling post, partly on this, in reply to Dennis, above. I don’t think it’s just the price although that is why things are happening earlier than they might. In fill drilling to push out the peak is going to inevitably mean a steeper decline once it comes. In addition deep water production is making up an increasing proportion of total production and has very high decline rates when it comes of plateau. There is also a limit to how much in-fill drilling is possible offshore as the drill slots are limited. On shore, especially with the big ME reservoirs, then wells can be drilled as they are required, and even in shallow water new well head platforms can be added at low cost. Also with more horizontal wells in water or gas flood reservoirs the production can be kept at peak but once the water (or gas) contact reaches the wells declines are fast, generally much more than 10%, for a couple of years. That is really the main impact of technology – production is accelerated at the expense of fast decline. In Mexico Cantarell crashed like this some years back, KMZ might do the same fairly soon as it has been developed similarly with nitrogen and and gas injection used to keep rates high, and cumulative production is well past 50% of EUR now.

    • MBP says:

      Outside of infill drilling, simply not having the OPEX to repair down wells is important. It isn’t something that can be seen from this year’s production numbers, but the change in decline from the loss of wellbores in mature fields will be something that will be basically impossible to overcome even if price does recover.

      • shallow sand says:

        One thing I think is interesting is that IHS Energy has over 10% of the wells in the Eagle Ford Shale listed as inactive.

        What this means to me is that the wells at one time produced oil, but have had no reported production for in excess of one year.

        Assuming my interpretation is correct, this seems to be a very high number for a play that started in 2009.

        • MBP says:

          That’s interesting. I don’t work the area so I have no firsthand knowledge of any stated reasons, so my guess would be he wells were badly cashflow negative and they were shut-in on purpose or something to that extent. But no one is really doing that here so I’m not sure why that would be the case there.

        • AlexS says:

          shallow sand,

          Maybe IHS is accounting the DUCs as inactive wells?
          If not, and if “inactive” means shut-in wells that were producing in the past, that could explain a much higher decline in EFS production compared with the Bakken

          • Coffeeguyzz says:

            Shallow, MBP, Alex

            The 6/262016 presentation from ND’s DMR made a somewhat curious description of ND’s Inactive Wells in that it very prominately said there were about 1,500 inactive wells in the state (over 10%) and that they might be economically brought online at $45 WTI. They are definitely not DUCS.

            In my random ‘halo hunting’, I was surprised to continuously encounter these IA wells as there seemed no obvious reason for the temporary shutdown.

            • Reno Hightower says:

              My guess is alternate unit wells that could not cover their monthly operating expenses. So they shut them in. No reason to keep producing them.

              • shallow sand says:

                I didn’t date restrict it. That does make a big difference.

                In EFS, for wells which started production 1/1/09 or later, about 4.5% are listed as inactive.

                For the Permian Basin, for all horizontal wells with first production 1/1/09 or later, about 4% are listed as inactive. Most of those are Bone Spring or Wolfcamp, with very few Spraberry, and also there are many other zones, including Wichita, Devonian, San Andreas, Grayburg, Abo, Tubb, etc.

                For the North Dakota horizontal wells, with first production 1/1/06 or later, about 2% are listed as inactive. However, .75% are Bakken/TFS, while the rest are Madison or other formations. I think most of the ones Coffee refers to are pre 2006.

  41. Chart Monkey says:

    Moody’s say they’re going to be looking at CEO compensation (This might have been posted before?)

    Is This A Game Changer For The US Oil Industry?
    By Dave Forest – Jul 25, 2016
    Moody’s particularly took issue with the fact that many U.S. E&Ps link CEO compensation to reserves and production targets. With execs often getting million-dollar bonuses only if they drill to find new petroleum pools each year.

    The ratings agency says this often encourages management to “drill at all costs”. Even when new reserves and production don’t add to overall corporate profitability — in fact, sometimes when more production actually loses money for the company.

    And Moody’s isn’t going to stand for such practices anymore. With the agency saying it is considering lowering debt ratings for companies that overly tie compensation to drilling.
    oilprice http://oilprice.com/Energy/Crude-Oil/Is-This-A-Game-Changer-For-The-US-Oil-Industry.html

    • texas tea says:

      i hope they do👍dividends baby

      • JN2 says:

        tt, that was cryptic. Please explain.

        • texas tea says:

          If Moody’s downgrades certain companies due to excessive compensation or compensation tied to the growth of production over “profits” two things may happen. The cost of carrying debt will rise and the BOD’s may begin to refocus and re-prioratize the industry, one company at a time, to the historic business model, where profits do matter and investors buy the stock because of the safe and predicable dividend yield instead of “growth”.

          • JN2 says:

            Thanks for replying tt. I think you’re saying that LTO companies are over-extended and if only their BODs would let them (or Moody’s forces them to) be normal companies again (and make money) then they might pay dividends. And this is the triumph of American capitalism???

  42. daniel says:

    This might be off topic here but does anybody know why the gasoline inventories are increasing so much in pad1. All over pads appear to be more “normal”

  43. Duncan Idaho says:

    Husky shuts pipeline indefinitely after Canadian oil spill


  44. George Kaplan says:

    Shell had a big drop in profits for second quarter

    “Royal Dutch Shell’s second quarter 2016 CCS earnings attributable to shareholders were $0.2 billion compared with $3.4 billion for the same quarter a year ago.
    Second quarter 2016 CCS earnings attributable to shareholders excluding identified items were $1.0 billion compared with $3.8 billion for the second quarter 2015, a decrease of 72%.”

    Highlight news was being able to find a “major” oil field of just over 100 mmbbls. Upstream activities lost over $1 billion.

    Eni follows Statoil in posting a loss for second quarter according to Upstream Online:

    “Italian giant Eni posted a loss for the first half of the year as lower prices affected the performance of its exploration and production division despite a rise in output.”

    It seems to me that upstream operations in posted companies are averaging losses of $7 to $20 per barrel produced, and that is after the industry has cut $1 trillion in E&P costs. This can only happen in the oil industry I’d have thought – it would be difficult to see every car manufacturer, or every retailer losing money every quarter and being given ever more money to pay dividends and CEO bonuses – or am I wrong? What is the end game for this from the view point of the companies and lenders – I just don’t get it, and I don’t think many of the financial pundits do either given their seemingly random and ever changing predictions?

    • Doug Leighton says:

      Looking around the places I worked, what I see is fields of highly depleted reservoirs, all punctured with in-fill holes, barely maintaining semi-decent production rates and no significant new discoveries (or even reasonable places to look). Meanwhile, the (few) oil guys I still keep in touch with are ALL saying the same thing: “Thank God I got out when I did”.

      • George Kaplan says:

        Doug – I agree on some levels, the trouble is I think if the oil industry goes down quickly so does industrial civilization as we know it, and lots of people pretending everything is just great and the markets will sort it out is probably not going to help. Whether there is any good path I don’t know, but the opaqueness and actual misrepresentation, and wilful acceptance by so many, of so much of the oil and gas data is what annoys me the most.

        • shallow sand says:

          George. I appreciate your comments on this site very much.

          Like you, I am astonished at the amount of misinformation being spun.
          What makes it more frustrating is that anyone can get data online that directly contradicts the claims, yet the companies still make them. And few in the business media make the effort to check the claims for accuracy, despite the readily available data.

  45. HR says:

    The shale oil chairmen are all on Bloomberg this morning saying that they won’t really start drilling until WTI in the sixties.
    At least they’re not beating their chests and claiming their new technologies allow them to make money even if WTI is at five dollars a barrel, and that they’re about to flood the market with millions more barrels a day.
    Hopefully somebody sat them down and explained how businesses work.

  46. Nathanael says:

    Chevron declares a quarterly loss. Exxon declares its lowest profit since before the merger with Mobil.


    I am *so* glad I am out of these stocks. I am on record as predicting that ExxonMobil will declare bankruptcy before the end of 2030 (though I actually think it’ll happen earlier than that).

    Fadel Gheit an analyst, says “The industry cannot survive at current oil prices”. But they can’t make oil prices go up, either, because *even at this price* they are seeing massive fuel-switching. Cars (and soon, trucks) switch to electricity whenever the “price per mile” for oil is higher or equal to the “price per mile” for electricity, and the upfront purchase price is comparable (which is happening in China already, and in the luxury market worldwide, and will happen in the rest of the markets in 2018-2020). Electricity prices can’t go up for very long, either, because they’re capped by the price of solar panels. Utility solar is already ridiculously cheap and dropping. Residential solar is approaching price parity with utility solar in Australia, and if Australia is doing this, the rest of the world can’t maintain the disparity for too long.

    This is a lot of moving parts, but it’s necessary to look at all of them to project the oil price. Basically my thesis here is that oil prices from now on will be determined primarily by the *price of substitutes*; the oil price has to sit at or below the price of subsitutes, with the exception of short (a few month) excursions above due to speculation. The thing which will kill the oil industry is that the price of substitutes keeps dropping.

    Luckily for the oil industry there aren’t any substitutes for aircraft fuel yet. There seem to be substitutes for everything else petroleum is used for.

    The volume of oil produced has to head to towards the production capacity of the producers who can produce at below the cost of substitutes. However, in the medium run, all the producers will irrationally overproduce even though they’re losing money, so the volumes will be higher than that.

    • HuntingtonBeach says:

      Hi Nathanael

      Toyota’s zero emission vehicle
      Eligible for CA White HOV carpool sticker
      3 years worth of complimentary fuel1
      EPA rated 312 mile range2, refuels in about 5 minutes2
      It’s automotive history. Be a part of it.


      The California Economy is Booming because it moving into the Future


      • Longtimber says:

        Fuels cells.. BAH.. no 400+ V to run business, home, mill, etc. SOL next close election, hurricane, earthquake, EMP event, tree falling, Economic term-oil, etc.. Fuel cells lack the ability to power critical loads. Even looks like we shall soon be finally rid of the next to worthless automotive 12 V electrical architectures. It’s possible to Unify the Starter and Alternator into and have it drive the vehicle when you can reduce I squared R losses.

      • Duncan Idaho says:

        You know, I lived in Huntington Beach in 1967.
        It was a very good year.
        Golden Bear.

        • HuntingtonBeach says:

          Most of today’s HB was first developed in the mid 60’s. The Golden Bear was a nightclub from 1923 to 1986. Hosted artists Janis Joplin, Arlo Guthrie, Hoyt Axton, Jackson Browne, Jimi Hendrix, Dave Mason, Tower of Power, The Chambers Brothers and Jerry Garcia.

          As of 2000, Huntington Beach had produced over a billion barrels of oil and 845 billion cf of natural gas. In 2013, the USGS estimated that the Huntington Beach oilfield could produce an additional 117 to 866 million barrels of oil, with their best estimate being 370 million barrels.

    • clueless says:

      Nathanael – You have lost your mind. Please seek help. Exxon bankrupt by 2030? If that happens, that means that they all are gone, since Exxon is almost as much of a downstream company as an upstream company.

      Below is a list of 144 out of 6000 common products that require oil. I am proud to give you this list so that you can start stocking up on supplies prior to them becoming unavailable.


      • Longtimber says:

        Think wez all agree that these moving pieces are holding up beyond expectation so far under such stress … reasons? effective lubrication, inertia, resiliency, time-delay ? Situation as-is can’t be / quarterly results unacceptable. That word from the Hirsch report comes to mind. – Unprecedented – Time to call in the parapsychology professors?

        • Incognito says:

          Unprecedented Longtimber lubrication holding up beyond expectation comes to mind. Time to call results unacceptable.

      • Nathanael says:

        Nonresponsive, clueless. Your chosen name is excellent since you didn’t understand what I actually said. Of course refineries will still exist and operate, but *Exxon will go bankrupt*.

        Percentage of the oil column used in non-transportation fuel: less than 33%. Even jet fuel is only 9%. Losing the high profit margins of the current gasoline and diesel markets is financially disastrous. Downstream is watching its profits crash at Exxon, Chevron, and Shell, already.

        The overcapacity is killer, financially. Lots and lots of refineries will close. Suriving refineries will have to retool to produce less and less gasoline; more jet fuel, and more gases, and more petrochemicals. This will be very expensive, since most of the refining processes were optimized for gasoline production.

        Some company, probably still named Exxon, will still be operating (a lot fewer) refineries to make jet fuel, petrochemicals, asphalt, and gases. But that will be post-bankruptcy. This is specifically a financial prediction. Exxon and Chevron are now isusing debt in order to pay their dividends, which is a sure sign of a company in financial trouble which has decided to make the financial trouble *worse*.

        GM is still making and selling lots of cars. But it did go bankrupt.

        • Watcher says:

          You seem to have this perspective which suggests to you that if people are starving then oil still can’t come out of the ground just because it’s uneconomical.

          Saudi Arabia is the #5 oil consumer in the world and will likely be #4 next year. If their people were starving for lack of food transport, the oil WILL flow regardless of if Saudi Aramco can make a profit.

          When you HAVE to have it, you WILL get it. One does wonder if the Federal Reserve has realized this and put the word out to the lenders to be sure it flows, as various ZH articles recently suggested.

          Used to be huge oil imports were a bad thing from a trade deficit frame of thought. Now, they could be a matter of national security. If they got cut off, people starve.

          • Fred Magyar says:

            When you HAVE to have it, you WILL get it.

            What happens when you no longer HAVE to have it?

            Why Solar PV Power Plants Will Fundamentally Change the Way We Power the Planet


            At 4:10 of talk a most astounding statement!

            “All planned future gas powered electricity plants are being scraped in Texas because they can no longer compete with large scale unsubsidized PV generation.” Solar is killing them and they can no longer make money.

            That is a heck of a lot of potential demand destruction!

  47. Caelan MacIntyre, (Off Topic) Regarding CRISPR/Cas9 says:

    Don’t edit the human germ line

    “Heritable human genetic modifications pose serious risks, and the therapeutic benefits are tenuous, warn Edward Lanphier, Fyodor Urnov and colleagues.”

    There are grave concerns regarding the ethical and safety implications of this research. There is also fear of the negative impact it could have on important work involving the use of genome-editing techniques in somatic (non-reproductive) cells…

    In our view, genome editing in human embryos using current technologies could have unpredictable effects on future generations. This makes it dangerous and ethically unacceptable. Such research could be exploited for non-therapeutic modifications. We are concerned that a public outcry about such an ethical breach could hinder a promising area of therapeutic development, namely making genetic changes that cannot be inherited…

    The CRISPR technique has dramatically expanded research on genome editing. But we cannot imagine a situation in which its use in human embryos would offer a therapeutic benefit over existing and developing methods. It would be difficult to control exactly how many cells are modified. Increasing the dose of nuclease used would increase the likelihood that the mutated gene will be corrected, but also raise the risk of cuts being made elsewhere in the genome…

    Patient safety is paramount among the arguments against modifying the human germ line (egg and sperm cells). If a mosaic embryo is created, the embryo’s germ line may or may not carry the genetic alteration. But the use of CRISPR/Cas9 in human embryos certainly makes onward human germline modification a possibility. Philosophically or ethically justifiable applications for this technology — should any ever exist — are moot until it becomes possible to demonstrate safe outcomes and obtain reproducible data over multiple generations

    Key to all discussion and future research is making a clear distinction between genome editing in somatic cells and in germ cells. A voluntary moratorium in the scientific community could be an effective way to discourage human germline modification and raise public awareness of the difference between these two techniques.” ~ Edward Lanphier, Fyodor Urnov, Sarah Ehlen Haecker, Michael Werner & Joanna Smolenski

    My apologies for the off-topic post, but I wanted to keep this serious issue previously-raised here in this thread, here, such as for ease-of-reference.

    • Fred Magyar says:

      My apologies for the off-topic post, but I wanted to keep this serious issue previously-raised here in this thread, here, such as for ease-of-reference.

      This issue was absolutely NOT raised here! If you want to discuss non petroleum topics all you have to do is give a brief mention and say you are taking it to the non petroleum thread.

      Clarification: The original conversation was about EVs and demand destruction of fossil fuels and a reference was made to disruption. Talking about CRISPR was an example of a technology that was experiencing an extremely fast disruption. No mention was made about human germ lines and not even was a mention made as to whether or not CRISPR was a technology that was good, bad or indifferent!

      • Caelan MacIntyre says:

        “This issue was absolutely NOT raised here!” ~ Fred Magyar

        CRISPR/Cas9 was mentioned by you under this article and in other threads, including when POB was (assuming it still isn’t) maybe playing a little loose with subject demarcation.

        I think it’s an important enough issue (as it is imagined you do too LOL)– and seeing as you keep, as you might write, ‘harping/babbling’ on/about it, including in this thread– to take the liberty to post it in this thread.

        If this helps, consider it like a car that goes through the yellow light. ‘u’
        As you can see, I’ve also made the effort to clearly-place ‘off topic’ in my header.

        If Dennis wants to move the comment, that’s his prerogative, but I would advise against it, at least this time, while maybe keeping a fair eye, if/when possible, on your own commentary as well, which has included copy/pasting a relatively-misleading quote about permaculture; attributing the wrong quote to Nicole Foss; and calling (hypocritically as well) TechGuy an asshole, and so forth, not to mention taking swipes at me.
        At your apparent age (~ 63?) one would think you should know better, yes?

        See also:
        CRISPR germline engineering—the community speaks

        Your quote, BTW:

        “My point is that in his talk he mentions the development and the implications of CRISPR/Cas9 Gene editing and Gene Drive technology and the fact that this technology wasn’t available at all just a few years ago. Those are examples of massively disruptive technologies that literally no was expecting to become so cheap and ubiquitous in such an incredibly short time. It happened almost literally from one day to the next.” ~ Fred Magyar

        • Fred Magyar says:

          Caelan, do you have a reading comprehension problem?!

          What part of ‘My point was:’ in the quote you highlight above, do you not understand?! Please read it again. Where do I say anything about human germ lines! I’m giving an example of a massively disruptive technology to underscore my original point that disruption happens and generally speaking it takes the experts by surprise! That’s all I’m saying here!

          For the purpose of making my point about disruption, I really don’t give a flying fuck whether or not it is ethical to use this technology to edit human germ lines! It may or may not be, but it has absolutely nothing to do with my original point!

          That is a completely separate issue, discussion, dissertation, etc… Do you really not get that?! Are you that fucking dense or are you being deliberately obtuse!?

          As I said before I’m done with responding to you this is really my last response ever to you!

          • Stilgar Wilcox says:

            Wow, don’t give yourself a stroke!

            • Fred Magyar says:

              No worries! I’m not even slightly upset, I’m enjoying a nice Malbec at this very moment. 🙂
              I’m just trying to explain my point. I tend not to suffer fools gladly!

            • Caelan MacIntyre says:

              “The French paradox is a catchphrase, first used in the late 1980s, which summarizes the apparently paradoxical epidemiological observation that French people have a relatively low incidence of coronary heart disease (CHD), while having a diet relatively rich in saturated fats.” ~ Wikipedia

              Ahh, Malbec… ‘u^

          • Caelan MacIntyre says:

            That all seems more or less irrelevant to my comment’s intent. I don’t care how or why per se you mentioned CRISPR, just that it was, and has been, mentioned before here and elsewhere. Simple.

            “As I said before I’m done with responding to you this is really my last response ever to you!” ~ Fred Magyar

            As you said before? LOL

            See also.

  48. Oldfarmermac says:

    I just copied this from the Miami Herald.

    It is written by an old Bush appointee, but he WAS an important player in Latin American affairs.

    Some former high ranking Chavistas are joining the opposition as noted in this quote.

    Fernando is not the only one who says the Cubans are exerting undue influence on the Maduro regime.

    “The united opposition has rallied behind a constitutional path to remove Maduro from power through a popular referendum, followed by a snap election to choose a new president who will restore Venezuela’s economy and democracy. One recent poll found that, among likely voters, a staggering 88 percent would vote to oust Maduro.

    Retired major general Cliver Alcalá is one of several prominent chavistas who has endorsed this strategy to overcome what he called, “anarchy.” According to sources within chavismo, many question Maduro’s capability and dependence on Cuban handlers who are more concerned with their allotment of free oil than Venezuelan blood. Among these chavista chieftains, few believe that saving Maduro is worth doing more damage to the country and their movement.”

    Read more here: http://www.miamiherald.com/opinion/op-ed/article92575107.html#storylink=cpy

    With Maduro out, and hopefully a government that is at least minimally functional in, Venezuela probably get the national oil game together again in a year or two.

    My guess is that Maduro will HAVE to go, because the country will simply REBEL against his regime sooner or later, and probably sooner.

    • Greenbub says:

      THIS should really get Fernando going:


      “A new decree by Venezuela’s government could make its citizens work on farms to tackle the country’s severe food shortages.

      That “effectively amounts to forced labor,” according to Amnesty International, which derided the decree as “unlawful.”

      In a vaguely-worded decree, Venezuelan officials indicated that public and private sector employees could be forced to work in the country’s fields for at least 60-day periods, which may be extended “if circumstances merit.”

      • Greenbub says:

        YOU probably like the idea of forced farm labor, Old F. M.! (yes, kidding)

        • Oldfarmermac says:

          Shades of Red Chinese reeducation !

          Ann Rand wrote about government taken over by corrupt socialists pulling similar tricks in Atlas Shrugged, which is a horrible novel in some respects, but still one everybody ought to read.

          Maduro is not only grossly incompetent, he is also grossly corrupt.

          I am not philosophically opposed to socialism, but corruption is corruption, whether at the hands of fascists or communists.

          She got a lot of stuff RIGHT, not to mention having the primary character being a woman who was not only culturally and socially liberated but one who busted right thru the glass ceiling to become the most powerful business person of her time, as the manager of the family rail road company.

  49. Heinrich Leopold says:

    Exxon came out with its quarterly numbers yesterday.

    It is interesting, that Exxon breaks out its US and Non-US business. As the US business makes a loss of USD 500 mill per quarter, the international business is still highly profitable (see below chart). In short, Exxon makes a loss of USD 10 per barrel in its US operations. As this figure includes the numbers for conventional oil production, the loss for unconventional oil and gas production stands at 15 USD per barrel – minimum. And this despite the fact that Exxon has some premium acreage and oil prices have been reasonabe high during 2q16. As oil prices tanked in July and will very unlikely recover very much until the end of the year, the losses can be only higher. The company has already reacted and cut US capex by – 60% and spends now more than three times in its international operations than in the US (see yellow line in below chart).

    The recent trend in oil prices and earning trend for US operators turns forecasts for a higher US unconventional oil production in the future increasingly irrational. Who will actually finance a production at a loss in the hundreds of billions per year? How many naive investors will stay invested during the current massacre in oil stocks and bonds and take losses of up to 20% per week?

  50. Longtimber says:

    With the carnage of the 1016Q2 results from Independents, Investors just can’t get enough pain.

    “Even with the recent commodity price correction, the US remains on the path of being a dominant global energy exporter, thanks in part to its relatively recent ability to stay cost-competitive with OPEC. I believe this trend should continue to provide investors with many opportunities across the energy and infrastructure spectrum.” Anyone have YTD US NG net flows? Perhaps Mexico is now a wild card.


    • clueless says:

      Regarding the seeking alpha article – as usual, I am clueless. Unless there is a lot more definitional information, I have no idea what they are talking about. They appear to be talking about oil, but when they show the resource numbers, and the breakeven costs, are they showing oil only? What API gravity ranges? If natural gas, NGL’s, etc. are mixed in, on a BOE [energy] basis then the numbers are meaningless. But, if not, then how did they split costs between oil & gas? BOE energy equivalent or some other way? If they did a survey of operators, did they specifically tell them how to report? If so, tell us. If not – well garbage.

      If Exxon cannot make money in the US [up-thread and down-thread comments] [if it were profitable, their production would be increasing], that is more meaningful to me.

  51. Watcher says:

    Dug a little into Exxon’s report.

    Production down. They quote it always as BOE and you have to dig.

    Absolute level of upstream production is 3.957 mbpd.

    Previous quarter. 4.325 mbpd. Loss split was 164K bpd nat gas equiv. And 154K bpd liquids.

    Which really does camouflage the level of production of the good stuff.

  52. Oldfarmermac says:

    Here’s somebody willing to cherry pick the facts, and present them in the worst possible light in respect to renewables, not to mention just outright getting some basic indisputable facts dead wrong.


  53. shallow sand says:

    Anyone interested in LTO should read the transcript of the PXD conference call.

    First off, the competitve w Saudi on cost comment that was repeated by the media was taken out of context. It referred to LOE only on a select group of wells. We have a few wells, that if they do not have a down hole failure, likewise have very low cost.

    What struck me more was discussion of facilities. PXD is now using a tremendous amount of water on their fracs. Their 30 day oil IP are in the 35-50K BO levels on their strongest leases, plus about double that in water.

    Within two years, those volumes drop to about 1,000 BO and about 2,000 BW per month, generally speaking.

    So, PXD is choking back wells, primarily so they do not have to over build facilities.

    There is a huge difference in necessary facilities for handling 150K BOF per month v 3K BOF per month, per well, especially as they run several wells into common tank batteries.

    Finally, PXD discusses growth thru 2020. In doing so, they are assuming $55-$60 oil, which is much higher than has been the reality since 12/14, and in particular since 7/15.

    They have some very strong wells, but even those will struggle at sub $40 WTI.

  54. Longtimber says:

    40K/day times $40 is 1.6 million revenue flow .. All the other costs must be Hugh..

    • clueless says:

      “Their 30 day oil IP are in the 35-50K BO levels on their strongest leases, plus about double that in water.”

      “40K/day times $40 is 1.6 million revenue flow.” Should be 40K/month?

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