Open Thread for petroleum (oil and natural gas) discussion and news.
121 thoughts to “Open Thread -Petroleum July 30, 2016”
As opposed to Chevron, who seem to report oil, not BOE. Or more likely the reporter got it wrong.
“Chevron produced 2.53 million barrels of oil during the second quarter, down 2.7 percent from the 2.6 million barrels the company produced a year ago.”
And:
“Kazakhstan and a group of oil companies led by Chevron CVX 0.68% have approved a $36.8 billion plan to boost production at the Central Asian country’s Tengiz field, a rare major investment in an industry hit by low prices and a boost to the local economy.”
My recall is 37B is nowhere near what was in the original plan.
The reporter got it wrong.
This is directly from Chevron’s press release.
____________________________________
Worldwide net oil-equivalent production was 2.53 million barrels per day in second quarter 2016, compared with 2.60 million barrels per day from a year ago.
____________________________________
Many reporters, unfortunately, don’t know the difference between barrels and BOEs, reserves and resources, rigs and platforms, etc, etc. Sometimes drive me crazy!
OTOH, the reporter’s Tengiz estimate is not too far off.
You may be confusing Tengiz with some of Chevron’s mega-NGL projects off NW Australia – especially Gorgon, where project costs have exceeded $50 billion.
I’m glad you included gas in this – it’s starting to get interesting. The cornucopians insist that gas production can be ramped up rather quickly, but I’m not so sure that that’s true 12 months of the year.
If supplies did get low in any particular region in the middle of a bad winter (like upper Midwest), can new supplies be brought online? In January? Can surplus be redirected via pipelines?
I remember a few winters back when it seemed like “national supply” was fine but the utility companies in Wisconsin and Massachusetts were panicking.
Disclosure: In addition to investments in gas and oil, I heat my home with gas!!!! I keep the thermostat low (63F) but below about 59F I run out of clothes to put on. I suspect the risk of shortages is exacerbated more by the McMansions keeping theirs at 75F than an unavoidable shortage (at least for the next 10 years) but as long as the media insist that there’s centuries worth of gas they’re not going to turn them down.
Anyone have any more info on how the net exports to Mexico are affecting the injection shortfall in the West regions??
The IEA OMR for this month is open access now. Euan Mearns usually does an update summary about now. Trends are pretty much as expected. The thing I found quite interesting is that they are predicting a clear peak for Canada in August / September 2017. New tar sands production is balanced by declining conventional oil. I don’t think the peak would hold as there are two tar sands project (Horizon and Fort Hills) and offshore Hebron due to ramp up through 2018 and 2019, but I doubt if it will be beaten by much, and interruptions like this year might again be possible. After these three projects there is nothing in construction phase to come on line. Rystad indicated new tar sands projects have break even at $125 for mining and $85 for in-situ. I think it might be higher than that and may also depend on agreements on increasing pipeline capacity and expected gas prices, and possibly with borrowing issues and increasing GHG limitations impacting as well. So assuming (say) 3 years for prices to rise and stabilise enough for investment decisions to be made and 4 to 5 years for a project to be completed and on-line there could be significant decline overall, from conventional oil, before production could pick up again. At some point the oldest tar sand mining projects will start to decline significantly but the more recent ones will remain on plateau for at least 10 years yet.
Folks persist in making unlikely presumptions.
Russia wants to win, people. They were humiliated in the 80’s and sanctioned after Ukraine, and demonized for not acquiescing to regime change in Syria. They have every reason to seek to win, and victory won’t be measured in printed pieces of paper.
It will be measured in raw, explicit power.
They have the power to destroy the US oil industry, and they have no reason to sell oil at a higher price (even if a higher price is offered) until they achieve the objective.
The Russians may or may not have the production capacity to keep the oil market glutted with cheap oil. I am agnostic when it comes to Russian intentions in this respect. Personally I think they are more interested in putting a hurting on the Saudis, economically, for “great game” power reasons than they are in “destroying ” the American oil industry. Of course the Saudis are in Uncle Sam’s vest pocket peeking out like one of Paris Hilton’s little doggies peeking out of her purse, lol.
So they can hurt the USA to some minor extent in terms of relationships with countries near Russian borders.
BUT BUT BUT
First off, nobody can actually destroy the American oil industry. At best, from their own pov, the Russians ALONG WITH OTHER EXPORTERS have forced the industry into a deep recession, but that won’t last forever. Once the price of oil goes up again, and it will, barring the entire world economy going to hell in a hand basket, the American industry will recover. This may take quite some time, I won’t argue that it will happen overnight or next year. Actually , it might be more accurate to say the American oil industry forced the rest of the world oil industry into recession, lol, and that the American industry is responsible for the low price of oil. Or maybe we should say the low price is mostly the result of improving efficiency and a sick world economy.
We can say all these things, and justify all of them.
Second, in general terms, the USA in general is the culprit in Russian eyes, rather than the American oil industry. Russia cannot harm the USA as a whole by targeting our domestic oil industry with cheap oil.
THINK a minute. WHO in DC really gives a flying xxxx at a rolling donut about the oil industry, excepting a few oil state congress critters, and maybe a few other congress critters who are heavily dependent on oil industry contributions to their election campaigns?
Cheap oil is a shot of whiskey and sugar and adrenalin for the American economy and anybody with a LICK of sense must understand that the large majority of politicians, including the prez, etc, are VERY happy with cheap oil, and perfectly willing to let the people in the industry rot like left over fish bait.
Any body who responds with the question ” Then why isn’t the economy going like a house afire?” is simply to dumb to answer, but I will answer any way.
There are MANY influences holding back the economy, as well as many helping it grow.
The factors holding the economy back at this time are more numerous and more serious. So the economy is not exactly growing like a weed.
Putin and his buddies no doubt would like to restore Russian power and influence to the extent they can, but they aren’t STUPID.
The Russians have a long record of being reliable suppliers to their WESTERN customers, and will continue to match the prices offered by the Saudis, etc, in order to maintain that reputation.
WITHOUT CHEAP OIL, THE ECONOMY WOULD BE A LOT WORSE.
Not as many people would be buying oversized vehicles for instance. Not as many people would be flying. Hotels in resorts would have fewer customers. People would be spending a lot more on gasoline, and less on movies, groceries, clothing, furniture. Etc, etc, etc.
Misundestood. Don’t have to cause a glut to keep the price down. Need only sell for low price.
The Saudis, taking them at their word, must protect market share and so they must compete on price. They have to sell at or under the Russian price to do that. Then you have about 25% of global supply at that price. Quite a lot.
Only impediment would be Russian oil executives, but they may indeed be patriots and have signed on to the rationale.
It’s brilliant. It should succeed. It either destroys US oil or it destroys US capitalism by revealing eventually the central bank backstop of shale lending.
(Maybe Total’s CEO had learned too much)
It wouldn’t work. The Soviet Union collapsed for something like that. It is in Russia’s best interest to have high oil prices. All the rest is secondary.
The Soviet central bank did not have a monetary policy. It functioned as instrumentality of GosPlan. If the plan said someone should be given a loan, the loan was given. There was no monetary policy or discretion about money supply. GosBank was entirely passive and responded to plan requirements.
In contrast, Russia now has a central bank. They can create money as required . . . errr . . . as desired.
Be sensitive to propaganda. “Russia is on the verge of total collapse because of low oil prices.” Heard of anyone starving? I haven’t. Haven’t heard of them abandoning Syria, either. Low oil price will make them run a budget deficit? Oh the horror!
The US deficit the last three years has been 2.5ish% of GDP each year, and the really edgy thing about that is our central bank decided to create the money from thin air and lend it to the goverment and fund that deficit — and coolest of all when the gubmint (Treasury Dept) sends interest payments on those loans to the lender (central bank aka Federal Reserve) . . . they get trashed and never “collected”. The central bank returns the interest money. This is called genius, one supposes.
hahah even Russia isn’t doing that. Somehow in the view of the US media they are not properly capitalistic vs the US.
OFM – Thanks for answering the question. Obviously you put a lot of time, effort and life experience into your analysis. I, for one, certainly appreciate being enlightened. Prior to receiving your answer, I guess that I was one of those that was “to (sic) dumb” to answer the question.
For those who may have missed it above, I repeat it below so that everyone here can now have the benefit of your wisdom!
OFM says: “Any body who responds with the question ” Then why isn’t the economy going like a house afire?” is simply to dumb to answer, but I will answer any way.
There are MANY influences holding back the economy, as well as many helping it grow.
The factors holding the economy back at this time are more numerous and more serious. ”
LOL
“I am agnostic when it comes to Russian intentions in this respect”.
OFM, I have learned heaps from your posts. Thanks for that.
I don’t buy that the Russians don’t care (cue AlexS for an excuse).
Google Russia and Oil Exporting nations. You will find a hit on every one.
If you don’t think Putin is thinking strategically…you are crazy.
If you don’t think the Russians see fossil fuels as their advantage/disadvantage you are nuts.
The Russians (like the Yanks, The Brits, etc) will pump you up the Charlie if they can.
Hi, SBF
The Russians certainly DO care about everything we have mentioned, collectively, and Putin certainly IS thinking in strategic terms.
I totally agree with these two points.
What I am not so sure of is what Putin is hoping to accomplish,specifically, other than in general terms, he obviously would like to restore Russian power and influence to the highest possible level.
I should have said I am agnostic in respect to HOW he is or will be trying to accomplish this, in terms of the production and marketing of oil. He may really be trying to undersell everybody else, thereby keeping the price down deliberately, but otoh, his hands may be tied in this respect. Maybe he has no CHOICE as a practical matter , except to keep the production pedal to the metal, and take whatever the market is paying. Putin and his cronies have to keep a LOT of powerful people happy and among them are the folks in the domestic Russian oil industry. He has a big picture to look at, and we don’t know everything he sees in that picture, or how he will interpret it if we can see it.
Folks who have never PRODUCED AND SOLD in a competitive market, which is what farmers routinely do, seem to fall in love with the idea that one or another producer can control the price of a commodity simply by selling it CHEAP, but this is not necessarily true.
IF a given producer has sufficient capacity to supply the ENTIRE market, then that producer can set the price as LOW as desired, but there IS NO oil producer with this much capacity, or staying power.
Ordinarily, if a producer cuts his price, then he simply sells out, and HAS no excess production or capacity, in a competitive setting. Other producers customers buy from him to the limit of his production. Then other producers tend to reduce their prices to match.
Price wars are real, but in most industries, they play out pretty fast. The oil industry is different, it moves at a glacial pace under any circumstances, and beyond that, it is dominated on a world basis by governments, and governments make glaciers look like white water rapids.
Now I will not argue that the Saudis and the Russians are lovey dovey.
Each would like to see the other in hell. But they have near zero control over OTHER producers and neither can sell enough oil to force other producers out of the market over the short term, as proven by world production holding about steady.
In the longer term, some high cost production will be forced out, no question, but how long that will take is any body’s guess. It’s taking a lot longer than I thought it would.
My guess is that both Russia and Saudi Arabia would LOVE to get together and cut production, but that there is way too much bad blood between them for it to happen. Each is well aware that low oil prices reduce the power and influence of the other.
@OFM
RE: “the Saudis are in Uncle Sam’s vest pocket peeking out like one of Paris Hilton’s little doggies peeking out of her purse”
You obviously didn’t read the recently declassified 29 pages of the 9/11 report. It seems to from doing so that neither the KSA nor the House of Saud is not and never has been America’s little lap dog.
Is this a reply to my comment, which was about potential Canadian production increase (or lack of) over the next 5 to 10 years? Your comment is about Russia and USA oil production, and even knowing this I have no idea what you are talking about. Russian production is staying steady because of some projects that are coming on line that were started about 5 years ago – before Syria or Ukraine got really dirty. Rosneft, the largest oil producer, is about 1% down for the year, they are mostly a private company and I’m sure they would prefer more production at higher prices if possible.
“So assuming 3 yrs for prices to rise and stabilize”
Did you notice that oil price started to decrease was taken a few weeks after invasion of Crimea?
The weekly EIA report here http://www.eia.gov/petroleum/weekly/ is dedicated to effect of low oil prices to Russia economy. If this is true low prices impacted foreign money import, it is not exact to compare Russia GDP in dollars. For Russia, what is important is in RUB. Companies operating in Russia receive the same amount of RUB today for oil as three years ago when oil was at 100$. Notice that inflation from March 2014 to today is about 25% in Russia.
In term of GDP, Russia growth was negative last year and is recover quickly. They might have positive growth this year.
I think you are delusional about Russia. They are suffering from oil prices and their standard of living depends on oil prices as it is linked to the ruble exchange rate.
The people with the guns, meaning the cops and soldiers, in such a country, are always on the side of the government, because governments first and always take care of their own membership.
But before too long, I expect things to get bad enough that a lot of cops and soldiers are going to desert, hoping to find a way to eat and feed their dependents as members of the opposition.
Anybody who is of the opinion that Ann Rand didn’t know a few things about the way corrupt governments operate ought to read Atlas Shrugged. The people running Venezuela are so much like the bad characters in her novel that you would think the Maduro regime is the not real, but rather the creation of a hack copy cat novelist.
The reasons socialists have always hated her guts, and always will, is that she pointed out some extremely harsh truths about the shortcomings of authoritarian governments, and being a second generation refugee, she created her government villians on the socialist model. .
Lest we forget, the intelligentsia here in the USA used to defend the old USSR as a bastion of decency. Change in academia and the social sciences and the world of literature and books and political commentary comes only with funerals. It took until the nineties for the leftish element in this country to finally start seeing the reality of the old USSR.
For those who plan on accusing me of being a Trump chump, I recommend they read my comments about single payer Euro style health care, global warming, renewable energy, strong environmental legislation, etc.
Hi All,
Dean sent me his corrections for the most recent RRC data.
Data below is from July 2015 to May 2016 in kb/d for TX crude plus condensate (C+C)
Corrected, EIA
3465, 3452
3442, 3413
3442, 3415
3440, 3404
3435, 3409
3404, 3348
3459, 3361
3458, 3315
3454, 3295
3452, 3250
3375, 3199
Crude plus condensate chart is below for corrected (Dean’s estimate) and EIA estimate, chart is in barrels per day.
Texas (TX) natural gas chart from Dean below.
Thanks for this Dean & Dennis!
I’m acquiring the Texas data as well, for a US post on Friday.
Furthermore, I hope that in about 2 months or so, I have enough revision data in Texas, on lease level, to say something more about the underlying factors that cause these revisions.
“Texas shale oil has fought Saudi Arabia to a standstill”
“Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.”
This article appears to be an extension of PXD’s conference call.
That’s part of the genius of it all. KSA and Opec get blamed.
If I remember correctly, it was the the Saudis that left the Russians standing at the altar of one of those OPEC meetings.
Don’t recall that. Russia isn’t a member of OPEC.
Quit being obtuse, you know the Russians get invited to Doha.
Saudis are depleting their currency reserves. All this noise about converting the economy from oil dependency is just dog and pony show. In other words they are suicidal. If their currency reserves are gone they are doomed as an independent country (and they will deplete them in approximately five years of such prices). May be that what royal family decided to do, escaping to Europe.
Why they are helping to rob at day light other oil producing countries and Western oil industry (including the US LTO) is not clear to me. Their animosity with Iran can’t explain such a suicidal behavior.
So far we have almost two year of Saudi and USA induced cheap oil bonanza. But as Herbert Stein noted: “If a thing can’t go on forever, it will eventually stop. ”
Inertia is great thing. And the current slow slide of world production if still result of projects started during high oil prices and coming online now. But eventually all of them will be online and at this point depletion continue unabated.
It might be an interesting situation when the world oil production drops another 1 Mb/day or so.
I have read the conference call and have been looking at PXD’s wells, particularly those on the Sale Ranch lease that he mentioned.
Some very good wells, some very bad wells, mostly wells that will need to hang in over 200 bopd for three years to hit payout, including only LOE, not including G & A, post completion CAPEX and other expenses.
PXD CEO likes to make bold statements.
If he really has guts, he would release Hz well payout statements. I assume those would maybe take some wind out of the $2+ billion market cap kick they got from his CC comments.
WTI at $41.34 presently, which puts PXD un hedged at $37-$38. PXD posted a loss with un hedged oil at $41.13 last quarter, so presumably they post another loss in Q3 if there is no price improvement.
I will agree, they have some of the best Permian wells. I have done the math, the majority will only payout at current prices if they have figured out a way to stave off declines under 200 bopd.
Will agree that they bought Sale Ranch lease right, off of Merit Energy back in 2004.
Going to need some very high oil prices to get Permian to 5 million bopd, IMO.
I’m not surprised rigs are moving to the Permian. Stupid money. I am surprised we have not seen gas rigs added with this big move in price. Glad to see the producers are showing some discipline.
Reno: To drive home my point re PXD and Permian.
PXD has 628 Hz wells in Permian.
278 with first production 1/1/15 or later.
179 made over 200 bopd in May, 2016.
63 made 100-199 bopd.
36 made under 100 bopd
350 with first production before 1/1/2015.
11 200 or more
70 100-199
269 under 100 per day
If PXD has cracked the code on the quick decline under 100 barrels per day on these wells, that would be a big deal. We will soon see.
This company has the best acreage in the Permian? Shale, I guess you mean.
You used 200 BOPD as a threshold. To get 500,000 barrels of ultimate recovery you have to hold 200 bpd for about 7 yrs.
Watcher. 200 bopd in months 13+. The best wells produce 125-200K barrels in first 12 And that is gross oil, before deducting the part which goes to the royalty owners, which is 25% typically in the Permian. But, they never disclose that either. So the type curves, are gross oil, which is also deceiving.
It is very hard to find payout statements for LTO wells. But I have seen some.
What is see is a lot of oil in year one, with the well being about 1/2 paid out, followed by not nearly enough in years 2 and 3 to make a big enough dent. By year 4, the well is generating low to mid five figures per month, with $2-4 million still owed, depending on how good the well is.
Until I hear the companies’ management talk about well payout in real (not projected) numbers, I assume that most wells are like the one’s I have seen. In fact, I just looked at four of PXD’s on the Sale Ranch, which is their best Martin Co. lease by far. One of the wells, the best out of 53, will payout. One will not, the other two will need production to hold up at around 200 bopd IMO. Very few wells have been producing 200 bopd after month 12. But maybe they have figured something out?
It is also interesting on the few payout statements I have seen, that CAPEX seems to continue on for months after the well’s first production month. Only when the well is down to low volume, do we see the CAPEX stop. Not sure why that is.
So, if we have a well producing 50 bopd gross oil, with a 25% royalty, the monthly gross income at $40 oil (we are now below that BTW) is $45,000. Figure $10,000 of LOE, we are at $35,000. Knock of taxes, down to about $31,000.
Will take a long time to pay the remaining $2-$4 million left at $30,000 per month. Then, if we have a down hole failure, look at another $25-100K of expense.
The type curves these guys are coming up with are way off. Exaggerated by more than double.
Seems SEC should be involved, but who wants to stop the flow of cheap oil, which today translates to $1.77 per gallon at the pump just down the street from me?
There has been a lot of well economics analysis over the past X yrs. Usually they end with presumptions of higher oil price just in time to save the day.
What they don’t usually have is an assessment of not only high yield paper burden (annual interest expense on the loan PLUS principal repayment per year), nor anything about compliance with loan covenants which . . . pre Fed involvement one could presume would force some sort of ongoing production requirements lest there be LOCs (Lines of Credit) shut off, preventing more completions.
Really hard to see how the loans still flow, unless the lenders have been assured backstop.
300K additional would require 200 BOPD for 4.1 yrs.
Pretty sure standard hype is 800K EUR.
Art Berman doesn’t believe Scott Sheffield either. See his latest at link below.
For those in the industry, and others following the nat gas production activities in the US, the announcement by EQT, during their conference call this week, that they were pivoting BACK to Upper Devonian development – and away from the Deep Utica – caught many by surprise.
While the ongoing results from their 5/6 Deep Utica wells is somewhat mixed, (similar to other operators’ PA Uticas), their several dozen Upper Devonian wells have been ‘under the radar’ attention-wise.
I just did a quick check of Genesee and Middlesex wells as of May 2016 and was astounded at their prodigious output.
Not only had the vast majority of the 32 Genesee-sourced wells in Greene, Washington, Beaver, and Allegheny counties approached or exceeded a billion cubic feet, the wells online under a year show the most dramatic increases.
Putting aside the future potential of the Utica in Pennsylvania (well costs currently at $14 million per), the figure of 100 Tcf recoverable from the Upper Devonian formations as posited by Wrightstone Energy last year, seems to be on track to be on the low side.
A collection of oil news from around the world…
Nigerian government working on cease-fire agreement with militants in oil-producing region, oil minister Kachikwu
Nigeria oil production currently at 1.4mbpd – oil minister Kachikwu
Suspected militants have attacked an oil pipeline operated by a local affiliate of Shell in Nigeria’s restive southern Niger Delta region, locals and a community group said on Monday.
Militants have attacked oil and gas facilities in the OPEC member’s energy hub over the last few months, cutting the country’s crude production — which stood at 2.2 million barrels per day (bpd) at the start of the year — by around 700,000 bpd. http://www.reuters.com/article/us-nigeria-delta-idUSKCN10C204
Iraq set new oil prod. record in June at 4.549 mill b/d, according to data from oil ministry. Only 2nd time Iraq has passed 4.5 mill b/d
Iraq July crude oil exports 3.2mbd, up from 3.175mbd in June. Oil officials monday.
Iraq exports (non-KR) to remain ~3.2m b/d until year end, acting minister says.
Iraq, ISIS attacks Kurdistan’s Bai Hassan oil pumping station, suspending 55kbd of output. unclear when operations will resume.
Iraq: Kurdish forces say they have regained control over Bai Hassan oil field near Kirkuk after IS attack. 175k bpd production halted.
Libya: Ras Lanuf & Es Sider ports have combined export cap of 600kbd. But because of infrastructure damage, it’s likely to be ~100kbd
Sun Jul 31, 2016
Libya’s state oil company said on Sunday it welcomed the “unconditional” reopening of blockaded oil ports following a deal between the U.N.-backed government and an armed force which controls key facilities, saying it would begin work to restart exports from the terminals.
In a statement sent to journalists on Sunday, the NOC said the U.N.-backed Government of National Accord (GNA) had released money that would allow it to increase production by 150,000 barrels per day (bpd) within two weeks. The NOC said it aims to gradually increase output to 900,000 bpd by the end of the year.
Any recovery in production is expected to be gradual because of extensive damage to infrastructure, and continuing instability.
Sanalla also called on groups preventing oil production elsewhere in Libya to let it resume, including some 470,000 bpd shut in from the Elephant and Sharara fields in the south-west. http://www.reuters.com/article/us-libya-security-energy-idUSKCN10B0OZ
China: PlattsOil estimates July gasoline exports to reach ~369kbd, after customs data showed a record 312kbd exports in June
US May oil production (million bpd):
8,774 EIA weekly
8,894 EIA monthly
adjustment +120 000 bpd
US May gasoline demand (million bpd):
9,661 EIA weekly
9,436 EIA monthly
adjustment -225 000 bpd
US crude oil exports reach a new record high of 662kbpd in May – new export destinations for US crude: Colombia and Peru
Nigeria to resume amnesty stipends payment to ex-delta militants – starting from today to at least 30,000 ex-militants
Despite these figures Iraq seems to be limited by water injection. There was a plan around 2009 for a big centralized oil injection plant serving the southern fields with more than 12 mmbwpd capacity (that is a load of water in case anybody is wondering, and would probably need to be at 100 bar or more to get down the injection wells). ExxonMobil was to be the project manager, then they pulled out in 2012 and part of the Iranian National Oil Company took over. It was supposed to be on line in 2016, then 2018, and then 2019. Now I’m not sure if anything is happening. The IOCs with field operating agreements seem to have given up on it. Shell has down manned at Manjoon, Eni have recently placed a contract for local WI facilities at Zubair and BP have a local produced water reinjection facility being constructed for Rumaila. BP (and maybe some others) have ESPs in their wells. Normally installation of artificial lift and/or having produced water and WI issues in medium to light oil in fairly deep wells as in Iraq is a late life issue. I think any production increase from here in these very mature fields would be small and/or short lived, and wouldn’t be cheap oil given the extra injection and processing facilities required.
LOS ANGELES–(BUSINESS WIRE)–California Resources Corporation (NYSE: CRC) today announced the commencement of its offer to purchase (the “Tender Offers”), upon the terms and conditions set forth in the offer to purchase, dated August 1, 2016 (the “Offer to Purchase”), and the related letter of transmittal (“Letter of Transmittal”), up to a combined aggregate principal amount of its outstanding 5.0% Senior Notes due 2020, 5.5% Senior Notes due 2021, 6.0% Senior Notes due 2024 (together, the “Unsecured Notes”) and 8.00% Second Lien Secured Notes due 2022 (the “8% Notes” and, together with the Unsecured Notes, the “Outstanding Notes”) that can be purchased with $525 million in cash (the “Maximum Consideration Amount”) subject to the Acceptance Priority Levels and the 8% Tender Cap described below.
That doesn’t sound like a company to me that is going out of business. Next earning release 8/4/16
I disagree.
They are offering to pay a little more than half of par value for the notes.
So, if you bought $10,000 worth of notes at par, they are offering to pay you about $5,100-$6,600 (depending on which note you own).
Or you can take your chances they don’t BK.
Don’t kid yourself, almost all non integrated oil and gas companies in the US are in trouble.
Your right, I didn’t realize their only offering 50 cents on the dollar. Will be interesting to see how many takers they get. Thanks
Worse than that. Rates are lower than they were. Those bonds should be higher priced than par.
They are so low because of perceived worthlessness. The company is trying to dodge full retirement in just 5 yrs for some of them, but the marketplace judges they won’t be able to return principal then.
What is interesting with regard to CRC is that it is an OXY spinoff.
Good conventional assets in California that OXY saddled with $6 billion of debt.
One possible reason for spinning off assets besides dumping a lot of debt on them was likely an attempt to get separation from a tough state to operate in from a regulatory perspective.
Standard & Poor’s Ratings Services said today it lowered its corporate credit rating on California Resources (NYSE: CRC) (CRC) to ‘BB-‘ from ‘BB+’. The outlook is negative.
At the same time, we lowered the rating on CRC’s senior unsecured debt to ‘BB-‘ from ‘BB’, and revised the recovery rating to ‘3’ from ‘5’. The ‘3’ indicates expectations for meaningful recovery (50% to 70%; upper half of range). Finally, we lowered the ratings on CRC’s term loan and credit facility to ‘BB+’ from ‘BBB’. The ‘1’ recovery rating on this debt is unchanged.
1+ A recovery rating of ‘1+’ denotes the highest expectation of full recovery in the event of default.
1 A recovery rating of ‘1’ denotes an expectation of very high (i.e., 90%-100%) recovery in the event of default.
2 A recovery rating of ‘2’ denotes an expectation of substantial (i.e., 70%-90%) recovery in the event of default.
3 A recovery rating of ‘3’ denotes an expectation of meaningful (i.e., 50%-70%) recovery in the event of default.
4 A recovery rating of ‘4’ denotes an expectation of average (i.e., 30%-50%) recovery in the event of default.
5 A recovery rating of ‘5’ denotes an expectation of modest (i.e., 10%-30%) recovery in the event of default.
6 A recovery rating of ‘6’ denotes an expectation of negligible (i.e., 0-10%) recovery in the event of default.
33. Recovery ratings focus solely on expected recovery in the event of a payment default of a specific issue, and utilize a numerical scale that runs from 1+ to 6. The recovery rating is not linked to, or limited by, the Issuer Credit Rating or any other rating, and provides a specific opinion about the expected recovery.
Shallow, are they saying there is less chance of BK if they default ?
Unforgettable scene from The Big Short – Rating Agencies
“Hey! You can’t expect us to do our jobs. We’d lose business.” https://www.youtube.com/watch?v=9xZx1lf2tvs
Who you going to call?
Any body interested in what’s going on in Venezuela can find some good articles at Fox News Latino, where the coverage is far more extensive than any other mainstream media I know of.
Has any body run across any figures on what it costs to build a new crude oil storage facility?
You have to give us an idea how big you want it and where. Is it for your farm or the US navy? And, are you talking surface, underground or floating? My understanding is floating is cheapest, underground next, surface worst. You can have a brand-new double bottom ocean tanker for about $4 million bucks (about 4,000 cubic metres). A 500 million cubic metre crude oil tank farm (with a gazillion variables) is going to cost you about $200,000,000. Site costs would be a big part of this. For some reason some people don’t want a bunch of crude oil tanks across the street. 🙂
Thanks Doug,
I have been thinking all along that various somebodies with TONS of money, and few restraints on their actions when it comes to doing as they please, might be making some very big bets on buying and storing oil for later use or sale while the price is down.
Without looking it up, it appears that there are roughly five to six barrels of oil in a cubic meter, and the price of a big tank farm is trivial on a per barrel basis, according to your answer. So lets say you build a good sized tank farm, and put twenty times what it cost to build it into filling her up with crude. Let’s not forget that if business is slow, you can use any existing refinery capacity to process some of it while waiting for the price to go up.
Now who would be in a position to make such a bet?
The Chinese have TONS of money , money that is earning them next to nothing in interest, and beyond that, money that might actually become worthless to them in the event the world goes to hell in a hand basket. It’s just electrons and pieces of paper, and nobody will want it if UNCLE SAM refuses to honor it, which could happen.
The Russians could probably afford to build such tank farms as well, since they are also organized on a mostly ” top down” basis when it comes to making big decisions.
Of course it can be argued that leaving it in the ground and pumping it later is cheaper, but this might not be so. It might cost MORE to shut in the production , in terms of letting the men and machinery sit idle, plus the hands on guys tell us that shutting in an oil well can damage the well and reduce the total ultimate recovery.
Plus shutting in wells and putting them back into production is an expensive proposition in and of itself.
There has been plenty of excess capacity in the concrete and steel industries in recent years. There has been plenty of available skilled labor as well. There has been plenty of money looking for a home.
There just might be a lot more oil in storage than we know about.
I am personally of the opinion that the price of oil will go up before long. Doubling your money in three to five years is a pretty good deal, if you have your own tank farm and money to fill’er up. If you are a sovereign government with the job of making sure the wheels keep turning, the more oil you have on hand, the better, in the event of wars, embargoes, etc.
The big question, in my opinion , is not the risk of losing on the bet, but rather the opportunity cost of the money. There are plenty of other ways a country such as China or Russia could invest any spare change.
And of course some people are convinced the price of oil will WON’T go up again. My opinion is that this is within the realm of the possible, but damned unlikely.
And even if the price stays where it is, in terms of fiat money, the long term trend is up in terms of price inflation, when it comes to most purchases.
So cash money in the bank , or mattress , right now, is probably going to be worth LESS five years from now that it is today, even including the trivial interest earned at present, unless the world economy gets worse instead of better.
Thanks Doug,
Your answer confirms my opinion that there is reason to believe that a hell of a lot of oil could be going into storage on the basis of betting that the price will be going up.
The price of a large tank farm is according to your answer almost trivial in comparison to the cost of filling her up.
haha after 2 yrs
Two years is a trivial amount of time when placing a bet on the price of a piece of property, or a stock, or art work, or collectible car, or OIL, going up substantially, assuming you have money enough to play the game.
But that’s not how one would speculate.
There are futures contracts. If the intention is to make money on an oil price rise you don’t buy tanks and deal with regulatory impediments for storage. You just make a phone call and take a position.
Nobody is sitting on oil in their backyard tanks for 2 yrs.
Watcher,
You are about the most deliberately obtuse person who posts here, with the possible exception of Caelan.
An individual can’t build a tank farm in his back yard, true enough.
The people who can build them in places such as China, Mexico, and Russia don’t have any problems with regulations, because they ARE the regulators.
Even here in the USA, I expect it would not be much of a problem to get a new tank farm permitted in a LOT of places with access to pipelines carrying crude, but construction costs and property taxes and environmental regulations are MUCH higher or tougher here than in the places I mention.
For a person who talks about gotta have it, will do any thing to get it frequently , you sure do display a lot of faith in the financial market place, where it bears mentioning that you seem to believe that production costs and prices don’t matter.
Personally I believe in financial turmoil, pain, and trouble of every sort being a very real possibility, being PROBABLE, within the next few years.
So if I were an oil producer, with the chance to build storage and pump oil NOW while the cost of doing so is very low, due to the contractors and suppliers all being in a bind, I would consider doing so.
And if I were a reasonably rational politician hoping to stay in power, in an oil importing country, I would be thinking two or three times as hard about stocking up.
Now note that I have not said anybody has actually BUILT any new tank farms to store crude, but rather just pointed out that it would be a good thing to do, IF the builder is flush with cash, and believes the price of oil will go up substantially within the next few years.
Any body with money can most assuredly buy a contract for oil dated out two or more years, but that does not guarantee the contract will be honored.
Physical possession of oil and other depleting imported easily storable resource is the gold standard when it comes to dealing with any of the many possible emergency situations that might develop over the next few years.
The tankers won’t leave port except under naval escort,in the event of war, because offensive weaponry is so good nowadays that anybody who can get hold of an old obsolete fighter, or even an airliner, can sink a tanker as easily as drowning a kitten, maybe even out in mid ocean.
Missiles can be fired from airliners. Some of the ones used to take out tanks are quite capable of setting a ship on fire beyond any hope of putting it out, and mounting a couple of heavy machine guns to take out the bridge controls, and officers, etc, well that would be a piece of cake.
For now, and for the next few years, Uncle Sam will decide which countries can load and unload tankers in the event of a hot war. One sortie by a fighter or even a helicopter off a modern navy ship is adequate to sink two or three or maybe even more tankers, according to my retired military friends.
They aren’t armored, and they have small crews, and the firefighting apparatus on board is designed to only to fight accidental fires, rather than multiple fires deliberately started, not to mention half the crew might be dead from getting hit by a missile, etc.
THERE ARE REASONS to store oil in ADDITION to the bet that the price will be going up.
Japan paid 25,620 yen for a metric ton of oil today, was at 26,000 this morning, topped out at 26,250, 101.15 yen for a dollar, a barrel of oil goes for $34.69 at the end of the day’s bidness.
The yen was at 122 for a dollar back a few months ago, sometime near that time period, it has gained twenty percent in value.
Dollar loses strength, yen gains, Japan’s cash does what it has to do.
R Walter asks: “What’s time to a hog?”
A new farmer shows up after buying a farm in the area. The neighbors can’t help but notice that every morning he walks his hogs about a mile down the road to a field. Late afternoon, he walks them the mile back to his farm. Nobody knows what is going on. So, one day, one of the neighbors asks him why he is doing that. The new farmer replies: Oh that’s easy. The hogs prefer the corn in that field.” The neighbor asks: “But, isn’t that a tremendous waste of time?” The new farmer responds: “Shucks, hogs can’t tell time.”
Am i the crazy one??
Nearly every opec country has a drop in production according to bloomberg, but they have an extra member so production overall is up (wow, what a shocker)… and the oilprice tanks
Oh there is better news than that. There is the splashed KSA price cut to Asia. As if they just did this with no cause.
BTW, who is the threat to their Asian market share?
Russia, anybody who reads this site knows that.
Maybe the Russians offered them a lower price, and the Saudis went them one better, lol.
There ARE such things as price wars, and both the Saudis and the Russians have what it takes to play the price war game a LONG time.
A lot of observers of international politics believe that that each country is trying to bleed the other out, in an economic war of attrition. I am sympathetic to this view myself, although it is not necessary to explain the low price of oil.
So long as production is what it is, and the economy is what it is, the price will stay about where it is. If either production falls, or the economy world wide picks up some steam, with production holding steady, then the price will go up, once some of the stored oil is cleared out.
Either country could force the price up quite a bit by holding back a couple of million barrels a day, but I am of the opinion with Ron P that neither of them has the capacity to increase production very much for very long.
Price crashes happen in many industries when all the players combined production exceeds what the market will buy at a former higher price. This happens to farmers about every two or three years, depending on the crop or kind of livestock in question.
Most people do not understand that oil is a commodity that displays extreme price inelasticity. What this means is that a minor oversupply crashes the price, and that a minor shortage spikes the price.
The oversupply can come about via producers raising production, or by strapped consumers cutting back somewhat on their purchases.
The large majority of buyers of gasoline and many many buyers of diesel fuel are compelled to buy about the same amount day after day, because they MUST have it to get to work, or keep their business open.
But strapped consumers can cut back on unnecessary trips and this alone is enough to cut significantly into gasoline sales. Cheaper gas doesn’t mean people will buy a lot more, short to medium term, because most people don’t have time enough, and money enough, to do much extra driving. A couple of cheap tankfuls may get you to the beach and back, but you still have to rent rooms, pay for meals, etc.
Watcher,
Who is the threat to their (Saudi Arabia’s) market share?
Iran.
Things are really getting out of hand in Venezuela. The odds of a civil war erupting there are getting higher by the day. Maduro has apparently decreed that anybody and every body is now subject to forced labor on the farms, which hardly even exist as working businesses these days.
It looks more and more like the collapse of oil production in Venezuela is a “when” rather than an “if” question.
It’s simply amazing how quiet the leftish leaning elements in the media have gotten to be when it comes to bragging about the success of Venezuelan socialism. A half a dozen people murdered any where in Sand Country gets a headline, day after day, although this has been going on regularly for years now.
The likely implosion of a major country in our own backyard, which is incidentally also a major oil producer, hardly rates a paragraph or two once a week or so.
It’s impossible for me as a layman to estimate how long they can keep the oil coming, but there must be PLENTY of oil field equipment on its last legs, ready to fail due to lack of replacement parts, etc by now.
US Net imports of crude as of July 29th at 8.06MMBB highest since April 11, 2014 of 8.2MMBB amid our glut? of inventory. Smells bad!
And US oil production down 1 million barrels since a year ago, with lower 48 at the same level as last week. Imports up 2.1 MMBB and storage up 1.5MMBB on the week.
Just bought gasoline at 1.759 a gallon. Lower production hasn’t affected the markets yet.
U.S. refiners bought and refined too much crude ending up with gasoline stocks too high. Will they lose money on that cheaper gasoline and build on that by buying even more imported crude the last few weeks? Is the crude being stockpiled here just to push up our stock levels up for some other reason? Americans are definitely taking advantage of the cheaper gasoline. Yellowstone Park visitors up 7-14% this summer vs 2015.
Just bought gasoline at 1.759 a gallon. Lower production hasn’t affected the markets yet.
From CLR earnings:
SCOOP Woodford net production averaged 56,511 Boe per day in second quarter 2016, compared with SCOOP Springer net production of 8,158 Boe per day.
The Company announced it has increased the EUR for 2-mile wells drilled in the SCOOP Woodford oil window by approximately 30% to 1.3 MMBoe per well, with 62% of production being crude oil. The increase in EUR was based on the results of 22 enhanced completions conducted over the past two years in the SCOOP Woodford oil window and assumes an average 9,800-foot lateral per well. Results show that 180-day production rates are on average 25%-to-30% higher than offsetting legacy wells. At a targeted completed well cost of $9.8 million per well, a 1.3 MMBoe EUR SCOOP Woodford oil well should yield a 32% rate of return at $45 per barrel WTI and $2.50 per Mcf of gas. http://investors.clr.com/phoenix.zhtml?c=197380&p=irol-newsArticle&ID=2192641
Yes, this development caused CLR to just report 18 cents/share loss for Q2. Miraculous. vs 13 cents/sh gain in 2015.
BOE.
CLR has 417 active Hz wells in OK.
56 have passed 100K cumulative oil.
11 have passed 200K cumulative oil.
0 have hit 300K cumulative oil.
They are now claiming EUR of 1.3 million BOE, 62% oil, which would be 806K BO.
I assume the claim is the average well, re EUR.
SEC?
1.3 mmboe reserves, they should have absolutely ZERO problem with drilling out of cash flow once they get enough of them under their belt. My guess is they won’t, but we will see.
From Mro earnings:
“Within six weeks of announcing our acquisition of high-quality assets in the STACK oil window, we’ve already closed the transaction and will accelerate an additional rig on this acreage in the third quarter while still decreasing our 2016 capital budget. This deal expands our inventory and further positions Marathon Oil for growth in Oklahoma at a competitive valuation. Coupled with recent non-core divestitures, we’re delivering on our objective to further concentrate our capital allocation to the lower cost, higher margin U.S. resource plays,” said Marathon Oil President and CEO Lee Tillman.
MRO reported a loss of $170 million , or .20 per share. Loss would have been much worse but for the $294 million gain from asset sales.
MRO stock is at $13.42, after trading as low as $6.52, but off of the $40+ prices in summer of 2014.
I looked at the wells they bought from Pay Rock in the oil window, 75% gas.
Woodford is a gas play, for the one stinking millionth time. “Oil window” is purely marketing IMO.
Apache reporting loss today (they recently changed their accounting method in some way that significantly reduces reported net losses for the quarter):
“Successful-efforts-based financial results were:
» Net loss of $244 million, or $0.65 per share, » Adjusted net loss of $99 million, or $0.26 per share, and » Net cash from operating activities of $744 million.
Results under the full-cost method would have been: » Net loss of $601 million, or $1.58 per share, » Adjusted earnings of $20 million, or $0.05 per share, and » Net cash from operating activities of $781 million.”
Oasis reporting loss (compared to profit 2q last year):
“For the second quarter of 2016, the Company reported a net loss of $89.9 million, or $0.51 per diluted share, as compared to a net loss of $53.2 million, or $0.39 per diluted share, for the second quarter of 2015. Excluding certain non-cash and non-recurring items and their tax effect, Adjusted Net Loss (non-GAAP) was $19.4 million, or $0.11 per diluted share, in the second quarter of 2016, compared to Adjusted Net Income of $52.0 million, or $0.38 per diluted share, in the second quarter of 2015. .”
SS, i just love this. I say this as respectfully as I know how, you are just plain wrong. It is none of my business of course, but telling us how much money the oil and gas industry is losing, with the focus on LTO is akin to spending time proving to us that the sun is hot and that “firm feeling women” are good. We know this, there is very little dispute that under $50 the “for profit” oil industry is in trouble. The takeaway is this, there is NOT enough NON-profit oil to supply the world demand. Prices will go up, certain LTO plays risk weighted are “more economic” than most other sources of that oil and nat gas. And again for the one stinking millionth and one time the oil window is real, it is a fact, it is proven, it is producing in the rough equivalent that CLR presents, 60% crude oil (46 api). That is not to say, the wood ford also has a gas condensate window and a dry gas window. I have a number of wells in the play and I have WI and RI interest in “oil window” wells with 1 year production history, CUM:~100,000 BO and 1 BGFG production steady for the last 8 months after clean up, with two more being completed as we speak. Just the facts. The good news for most of us is CLR says they will not add rigs until $60, the market continues to like that message. ??
How the Anadarko basin will rank relative to the Eagle ford and Bakken in terms of ultimate “oil” recovery can be a subject to debate. The fact that the Anadarko and Permian basins will produce a great deal of LT oil is no longer conjecture as they both are more economic than their peers. Geez it is really not that hard, personal growth comes from learning not from banging the drum on out dated information and conclusions?
You can’t seem to make a point, whatever that is, without being offensive to folks; is there any chance I can talk you out of taking the Texas off the Tea?
“More economic” is not economic and there are few stinking shale oil wells being drilled in America, at these price levels, that stand a snowball’s chance in hell of paying out, much less making a profit. In the Permian, for instance, 7 million dollar wells are currently requiring over 500,000 BO to payout. Its just arithmetic. Don’t believe everything you read on the internet, go to Enno Peter’s website and see if you can figure out how many PB HZ wells are going to make 500,000 BO. I think all you are going to need is your fingers and your toes.
Hope for higher oil prices is not a plan in the oil business, pardnor. Don’t let free royalty cloud your judgment. Besides, if being a working interest partner with CLR or MRO is that a big a lick for you (based on 2Q2016 loses thus far, you are the ONLY one in America hitting a lick), you should be laying on a beach in the south of France and not on the internet imposing your idea of “personal growth” on good guys trying to uncover the truth, like Shallow Sand.
Have a nice day.
Mike
On most sites. SEeking alpha, oilpro, etc, the shale believers all share one common thread. Lack of any concern with making a profit.
They discuss reserves, IP rates, decline rates, rig efficiencies, but never discuss how these companies are all losing money every day they operate and with every well they drill.
it seems that some industry observers agree with my post above:
“As Bloomberg reports, despite what Hall called a “miserable month” for oil in July, supplies are still shrinking, he said in his letter, setting up prices to reverse themselves. “Prices are now back at levels that would ensure the eventual bankruptcy of most of the oil industry”, hammering both private oil companies and producing countries like Iraq, Nigeria and Venezuela, Hall said. “Prices at current levels are just not sustainable.”” http://oilprice.com/Energy/Oil-Prices/Oil-Soars-6-As-Andy-Hall-Warns-Of-A-Violent-Reversal.html
well now who is going to look foolish when they find out there is no oil there (sarc).
Phillips 66 And Plains Unite To Build Pipeline In STACK Play
As reported in Oil and Gas Investor, the Texan-based companies will equally split control over ownership and operation of the conduit that transports crude from northwestern Oklahoma to Cushing in that same state.
I am just going by what I am reading on a subscription site that I pay for. Maybe it is wrong?
Every one of the leases I own an interest in is always correct. The data always matches ND, which has good data. It matches TX when TX reports individual wells. It matches WY, CO, KS, NM.
I guess when CLR states their average well will cumulative 806,000 BO, I would think I would see some evidence of that showing up, instead of what I posted above.
I think you also have to understand why those of us who own working interests question you. We have seen our income fall from a lot to practically nothing, I talk to many producers, all the same. Worst time since 1998-1999. Some think worst they have ever been through.
I look at Energynet auction quite often. There are a lot of WI for sale. The collapse of income since 2014, not just from the price crash, but from LTO well decline, takes your breath away.
Saw an EFS package on there this week. 3/15 income was $1.1 million from 9 wells. 12/15 income was $240K from same 9 wells. I figure they have $45 million plus sunk into those.
I’m just repeating $$ and cents and production info I see.
For example, all we hear about PXD is Permian. Yet they operate more EFS wells than Permian, 70 of which have cumulative oil of 300K, v 1 Permian well with cumulative of 300K. Yet, somehow Permian is more economic, even though EFS wells generally cost less than Permian to D & C.
Just stating facts I pull off the net. If you think I’m wrong, let me know. I don’t want to be putting out wrong info.
To clarify, PXD operates more Hz EFS wells than Permian Hz wells.
PXD operates over 6000 vertical wells in Permian.
Where is the pipeline for the gas?
Texas Tea.
My reading of your STACK pipeline story is there is an existing 55 mile line into Cushing that has capacity of “about” 100,000 barrels per day. It appears the project includes extending the line 12 miles north from the existing line, and building a another dump station, along with building another 100,000 barrels of storage.
So, doesn’t appear capacity is being added at this time, instead that the line is being extended, plus another 100K of storage being added.
Again, I have never said the OK resource plays produce no oil, just that the majority of the production is wet gas, and most wells cease producing significant liquids after 12-24 months.
The companies operating in the OK resource plays are representing the wells will produce more oil over their lives than Middle Bakken and Three Forks wells. At least CLR appears to be.
I am not seeing that in the data I am reviewing. Since you own an interest in some of these wells, let me know the names/operators and I will look them up. That would confirm whether or not the data I am looking at is accurate.
It is my understanding OK data is not the best, so maybe that is the explanation?
Texas Tea.
I have been looking at CLR OK wells and comparing with their conference call.
Hardly any of the OK wells they mention show up, I do see the Ludwig well and the Boden well. The production showing for those is not the same as stated in the conference call. It is less. I note they say Ludwig was not always produced due to low oil prices, and now shut in for completion of density wells around it.
I did look at the Good Martin and Honeycutt density projects which have been discussed in previous conference calls. 8 Good Martin wells, 10 Honeycutt wells. No mention of them this quarter, don’t look like they are doing too well. Assume $10 million or so on those, each.
Maybe OK data on my subscription site (IHS) is not as accurate as other states? It just has production thru April, so maybe this is why the new wells they mention dont show up yet.
One thing that I think is interesting is there is no mention of these density projects after they are initially brought up. I recall Poteet, Good Martin and Honeycutt all being discussed before, but not brought up in subsequent calls.
I’ll keep looking at this stuff, and any guidance you can give is appreciated.
Shallow sand, please keep posting your analyses (those and the posta by a handfull of others are the only reason i read through thecomment section)
I have noticed this elsewhere.
There are folks around with a strong capitalism optimism pre-disposition. They are going to find articles that are consistent with their predisposition.
When these are found they are embraced. They are considered truth and they are also considered some sort of rebuttal. It’s not foolish. It’s just that the info seems more correct, especially when it comes from a CEO.
you can not survive in the oil and gas business without “a strong capitalism optimism pre-disposition” but that does not preclude having a understanding of geology, engineering and oil and gas finance. After 30 years of being self employed who knows, maybe one day I will have to pimp myself out to someone for pay, but that day is not yet on the horizon?
SS, see page 30 of 2nd 1/4 presentation for update on Woodford Density projects, which includes Honeycut 30% oil, Vanarkel 26% oil, Newy 16% oil, Poteet 8% oil. I do not see any mention of the Good Martin Density unit or either of the Springer density units. With regards to the GoodMartin unit i have that production, this is a guess on my part as I do not have the engineering data but only the production, I think they are disappointed. ON the May unit, I did note they intend to use the “enhanced completions” and it is my understanding that the wells are being completed at this time. If you look at the Marathon presentation, you can see the wells currently being competed, we are in both. Both of these wells are adjacent to Woodford oil production (50% oil). I will make no attempt to prove what the EUR will be, I have no clue, but these units were HPB, so unless Marathon has nothing better to do with their money( these well were permitted last winter) I assume they think either prices will rise or they can get some kind of return with current prices. Someone had to sign off on the expenditure.
I looked at those. Newy has just one well with production history of over a month, a well completed in 2013 which has less than 100K oil cumulative but over 3 million gas cumulative.
Poteet has many 3 million plus gas cumulatives
Of all those density units, I see one well with a 200K+ oil cumulative. The rest are pretty much under 100K, most under 50K
I looked at Newfield, Devon and Marathon wells in OK with first production starting in 2012 thru present. I see the same thing, no 300K cumulative, a handful of 200K, about 7% have over 100K. Over 1000 wells in that sample.
Again, just going by my source, which I have found extremely accurate and which I highly would recommend to anyone interested. I would note I compare Enno’s data with it, and find the numbers to jive.
I would note the oil/gas mix for CLR is moving much more towards gas.
TT,
For how many wells in the Woodford do you have production data, and would you be willing to share this data? In return I wouldn’t mind to create some graphs to enlighten everybody.
JODI-Oil World Database – Crude Oil Closing Stocks
I’m only looking at this data out of curiousity. I don’t know how accurate the data is.
I’ve included everything that looked alright, both producers and consumers (last time I only included producers).
The chart is mostly the USA, Japan, KSA and Germany as they have the largest stockpiles.
Chart Monkey: Do you have any ideas why we, the U.S. (producing 1mmbb/day less than last year), appear to be the recipient of all excess as the rest of countries draw down their stockpiles?
Yeah I do keep wondering why things turn out the way they do. Apart from the large amount of storage capacity available and a long history of oil use. I guess that, low interest rates and the number of oil buying speculators must have something to do with it.
The natural gas storage report is out this morning. Nat gas had it’s first summer draw since I can remember (+10 years).
This week the EIA weekly natgas reports are particulary contradictory. In their Natural Gas Weekly Update released later, they report BAU , as last year in this period: http://www.eia.gov/naturalgas/weekly/#tabs-supply-1
Total supply 81.4 bcf/d vs. 80.0 bcf/d last year http://www.eia.gov/naturalgas/weekly/#tabs-supply-2
Total demand 75.5 bcf/d vs. 73.1 bcf/d last year
This would suggest a buildup in storage of 5.9bcf/d last week , not unlikely 6.9bcf/d last year in this period. For a week, these would be a buildup of 41.3 bcf last week vs.48.3 bcf last year.
However, the reported buildup was 38bcf last year ( this period ) and -6bcf last week ! http://americanoilman.homestead.com/GasStorage.html
Where are hiding those 47 bcf not accounted for last week?
Could have been dry production only 67bcf/d and not 74bcf/d as reported?
Or there is some LNG export not yet accounted for?
“Consumption of natural gas for power generation (power burn), which has been very high throughout 2016, recently hit its highest daily level on record on July 21, reaching 40.9 billion cubic feet per day (Bcf/d). Power burn surpassed the 40 Bcf/d threshold on three separate days in late July as widespread hot weather led to strong demand for air conditioning. According to PointLogic data, nine of the ten highest power burn days on record occurred in July 2016, and one was in July 2015. Natural gas consumption for power generation in July averaged 36.1 Bcf/d, according to PointLogic data. This is 2.7 Bcf/d higher than July 2015 and 1.5 Bcf/d higher than the previous high from July 2012.
Storage:
U.S. posts first summertime weekly net withdrawal since 2006. Net withdrawals from storage totaled 6 Bcf, compared with the five-year (2011-15) average net injection of 54 Bcf and last year’s net injections of 41 Bcf during the same week. This is only the third time ever that net withdrawals from working gas stocks were reported on a national basis during the summer months. The two other summertime withdrawals both occurred in 2006 (July 21 and August 4), which predates the new five-region format of EIA’s WNGSR that was introduced in 2015.”
I’m taking China, who overwhelms Australia in all categories and then seizes their massive coal, natural gas, farming, seafood, and mineral resources which they EXPONENTIALLY need.
Oh wait….I live in Australia…/sarc
USA! USA! USA! (in Australian accent)
Right, sure, just what they need, another giant uninhabitable desert region with weird animals to boot. They can get all the coal, LNG and iron ore they want from Australia paid for by the Americans and Europeans. The Chinese are so wealthy they build cities that they don’t even use. Now that is flaunting it. So for now they make the Aussies do the work, no need to lift a finger on their part.
I am sure they have better real estate in mind.
LOL..implausible…probably..
Australia is extremely resource rich ( HUGE coal and Natural gas resources…what planet do you live on?).
and a very small population with a small military.
exactly what a country like CHINA will need…SOON!
Do your exponential math!
just thinking out loud!
China doesn’t need more room, they just stack them in giant block tower apartments. They have their own deserts to expand into anyway.
that what the equities market is for:
see announc’s from:
REY
OBL
ANQ (poetry …..vai a convertible !!!)
and many many many more ……
“Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week – with some poetic licence – claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.”
and
“The ‘decline rate’ of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more.”
To my non-expert eyes this appears to be one of those articles which has a tiny grain of truth (yes, frackers have cut costs somewhat and gotten a bit more productive) with an awful lot of utter PR spin, BS and nonsense.
I would be interested to hear some more expert analysis of the article.
Thanks
Hugh
As long as they don’t break SEC rules the CEO’s can say whatever they like to make money, and usually do.
I’ve a new update on shale oil & gas production in the US, here.
The Woodford is not what they are drilling currently. Past data on the Woodford will tell you very little. They are drilling Mississipian or Meramec wells (NFX, DVN, CLR, MRO) These have much higher cuts of ~46API oil (at least for the first year). One of the wells I have interest on had the attached initial 3 month payout. I’m interested to see the decline over the next 12-18 months but @ well cost ~5 million to drill, I can see it being profitable (and no it wasn’t highlighted on any presentations).
GJ. Thanks for the information.
Where do you arrive at $5 million? Is that to drill, complete and equip?
Seems like CLR is referring to $9-$10 million.
I am taking it from the Newfield presentation. They quote $6.8 M for gross drilling, completion, artificial lift and facilities costs (10,000′ Lateral). This was a 4900′ Lateral so I just guessed. I noticed as you go from east to west across the play you have to go much deeper and into the over pressured area which requires stronger pipe? (more expense?) . This is in Kingfisher county so more to the east. CLR is mostly west (Blaine County) Devon and Marathon in the middle (Kingfisher, Blain and Canadian Counties) and Newfield toward the East (Kingfisher and Canadian).
according to the CC they have 6 rigs drilling Meramec and 5 rigs drilling in woodford in the stack area.?
The US needs to produce more oil, what there is available for consumption, the supply, isn’t enough.
If there were more fuels available for dispensation, the numbers of automobiles could increase. America needs more drivers behind the wheel on America’s highways and byways, there should be more traffic in every city, more fun for everyone. Road Rage, the sport of enraged drivers, needs more airtime.
It is too bad that there only 260 million vehicles turning and swerving everywhere you go, a new goal of 323,000,000 million can be reached. One for every person fogging mirrors here in the Land of the free.
Just not enough numbers to analyse, definitely need more numbers.
All we need is to have just 32,000,000 car owners sell their cars, then go out and buy a new car. Another giant step for mankind. The number of cars can increase 64,000,000 in less than a week.
One more achievement to meet the goal. More of more, we need more more. Helps the numbers.
The price of rock oil should really be a higher number.
More cow bell.
Enno, to your question above. We are in 10 Woodford wells to date. Production history ranges from 5 years to not yet completed. As I have mentioned numerous time on this blog. Since the “discovery” of the Woodford industry has concentrated its efforts within condensate window that varies from 10% oil to 30% oil with 25-40% NGL and the remainder being nat gas. To the west and down dip into the basin the Woodford produces dry gas, as you move to the east up dip out of the basin the Woodford produces higher-levels of oil (46api) with oil being 60%, NGL 15% and the remainder nat gas. The ratio can change as you move either up-dip or down-dip.
Our oldest well was drilled by Marathon has produced ~5BCFG, 235,895BNGL and 45000BO, and is near the down dip limits of the condensate window still producing 2000CFGD + 80BNGL +10BO. We have 3 other wells in that area that are younger but have similar production profiles. When the units are full development we will have 30 wells in this area. We are watching with interest the density units CLR is producing to help determine what will be the best profile for development.
With respect to the oil window, we have one well with a production history of one year. It has produced 100,000BO and 1BCFG and is producing at a “constant” rate for the last 8 months of 200BOPD and 2oooCFGPD. I have no idea what this well will produce in cumulative production, it is to early. What I can say is that we will make money as long as we do not have some type of engineering failure. Marathon has offset this well in two directions.
I will also note CLR announced a acreage sale of 29,500 acres for $9500per acre which is up dip woodford, “oil window”. It looks to me that they sold acreage that was outside of the up dip limit of the springer so based on my info of the area the sole objective in the acreage they sold would be Woodford oil. In the area down dip, we have WOODFORD, Springer and Hoxbar stacked up. That is all I can share at this point.
Thanks for the response TT. It’s a pity it’s so hard to get comprehensive OK production data. According to the pitches, there’s a lot going on there.
As opposed to Chevron, who seem to report oil, not BOE. Or more likely the reporter got it wrong.
“Chevron produced 2.53 million barrels of oil during the second quarter, down 2.7 percent from the 2.6 million barrels the company produced a year ago.”
And:
“Kazakhstan and a group of oil companies led by Chevron CVX 0.68% have approved a $36.8 billion plan to boost production at the Central Asian country’s Tengiz field, a rare major investment in an industry hit by low prices and a boost to the local economy.”
My recall is 37B is nowhere near what was in the original plan.
The reporter got it wrong.
This is directly from Chevron’s press release.
____________________________________
Worldwide net oil-equivalent production was 2.53 million barrels per day in second quarter 2016, compared with 2.60 million barrels per day from a year ago.
____________________________________
Many reporters, unfortunately, don’t know the difference between barrels and BOEs, reserves and resources, rigs and platforms, etc, etc. Sometimes drive me crazy!
OTOH, the reporter’s Tengiz estimate is not too far off.
You may be confusing Tengiz with some of Chevron’s mega-NGL projects off NW Australia – especially Gorgon, where project costs have exceeded $50 billion.
I’m glad you included gas in this – it’s starting to get interesting. The cornucopians insist that gas production can be ramped up rather quickly, but I’m not so sure that that’s true 12 months of the year.
If supplies did get low in any particular region in the middle of a bad winter (like upper Midwest), can new supplies be brought online? In January? Can surplus be redirected via pipelines?
I remember a few winters back when it seemed like “national supply” was fine but the utility companies in Wisconsin and Massachusetts were panicking.
Disclosure: In addition to investments in gas and oil, I heat my home with gas!!!! I keep the thermostat low (63F) but below about 59F I run out of clothes to put on. I suspect the risk of shortages is exacerbated more by the McMansions keeping theirs at 75F than an unavoidable shortage (at least for the next 10 years) but as long as the media insist that there’s centuries worth of gas they’re not going to turn them down.
Anyone have any more info on how the net exports to Mexico are affecting the injection shortfall in the West regions??
The IEA OMR for this month is open access now. Euan Mearns usually does an update summary about now. Trends are pretty much as expected. The thing I found quite interesting is that they are predicting a clear peak for Canada in August / September 2017. New tar sands production is balanced by declining conventional oil. I don’t think the peak would hold as there are two tar sands project (Horizon and Fort Hills) and offshore Hebron due to ramp up through 2018 and 2019, but I doubt if it will be beaten by much, and interruptions like this year might again be possible. After these three projects there is nothing in construction phase to come on line. Rystad indicated new tar sands projects have break even at $125 for mining and $85 for in-situ. I think it might be higher than that and may also depend on agreements on increasing pipeline capacity and expected gas prices, and possibly with borrowing issues and increasing GHG limitations impacting as well. So assuming (say) 3 years for prices to rise and stabilise enough for investment decisions to be made and 4 to 5 years for a project to be completed and on-line there could be significant decline overall, from conventional oil, before production could pick up again. At some point the oldest tar sand mining projects will start to decline significantly but the more recent ones will remain on plateau for at least 10 years yet.
Folks persist in making unlikely presumptions.
Russia wants to win, people. They were humiliated in the 80’s and sanctioned after Ukraine, and demonized for not acquiescing to regime change in Syria. They have every reason to seek to win, and victory won’t be measured in printed pieces of paper.
It will be measured in raw, explicit power.
They have the power to destroy the US oil industry, and they have no reason to sell oil at a higher price (even if a higher price is offered) until they achieve the objective.
The Russians may or may not have the production capacity to keep the oil market glutted with cheap oil. I am agnostic when it comes to Russian intentions in this respect. Personally I think they are more interested in putting a hurting on the Saudis, economically, for “great game” power reasons than they are in “destroying ” the American oil industry. Of course the Saudis are in Uncle Sam’s vest pocket peeking out like one of Paris Hilton’s little doggies peeking out of her purse, lol.
So they can hurt the USA to some minor extent in terms of relationships with countries near Russian borders.
BUT BUT BUT
First off, nobody can actually destroy the American oil industry. At best, from their own pov, the Russians ALONG WITH OTHER EXPORTERS have forced the industry into a deep recession, but that won’t last forever. Once the price of oil goes up again, and it will, barring the entire world economy going to hell in a hand basket, the American industry will recover. This may take quite some time, I won’t argue that it will happen overnight or next year. Actually , it might be more accurate to say the American oil industry forced the rest of the world oil industry into recession, lol, and that the American industry is responsible for the low price of oil. Or maybe we should say the low price is mostly the result of improving efficiency and a sick world economy.
We can say all these things, and justify all of them.
Second, in general terms, the USA in general is the culprit in Russian eyes, rather than the American oil industry. Russia cannot harm the USA as a whole by targeting our domestic oil industry with cheap oil.
THINK a minute. WHO in DC really gives a flying xxxx at a rolling donut about the oil industry, excepting a few oil state congress critters, and maybe a few other congress critters who are heavily dependent on oil industry contributions to their election campaigns?
Cheap oil is a shot of whiskey and sugar and adrenalin for the American economy and anybody with a LICK of sense must understand that the large majority of politicians, including the prez, etc, are VERY happy with cheap oil, and perfectly willing to let the people in the industry rot like left over fish bait.
Any body who responds with the question ” Then why isn’t the economy going like a house afire?” is simply to dumb to answer, but I will answer any way.
There are MANY influences holding back the economy, as well as many helping it grow.
The factors holding the economy back at this time are more numerous and more serious. So the economy is not exactly growing like a weed.
Putin and his buddies no doubt would like to restore Russian power and influence to the extent they can, but they aren’t STUPID.
The Russians have a long record of being reliable suppliers to their WESTERN customers, and will continue to match the prices offered by the Saudis, etc, in order to maintain that reputation.
WITHOUT CHEAP OIL, THE ECONOMY WOULD BE A LOT WORSE.
Not as many people would be buying oversized vehicles for instance. Not as many people would be flying. Hotels in resorts would have fewer customers. People would be spending a lot more on gasoline, and less on movies, groceries, clothing, furniture. Etc, etc, etc.
Misundestood. Don’t have to cause a glut to keep the price down. Need only sell for low price.
The Saudis, taking them at their word, must protect market share and so they must compete on price. They have to sell at or under the Russian price to do that. Then you have about 25% of global supply at that price. Quite a lot.
Only impediment would be Russian oil executives, but they may indeed be patriots and have signed on to the rationale.
It’s brilliant. It should succeed. It either destroys US oil or it destroys US capitalism by revealing eventually the central bank backstop of shale lending.
(Maybe Total’s CEO had learned too much)
It wouldn’t work. The Soviet Union collapsed for something like that. It is in Russia’s best interest to have high oil prices. All the rest is secondary.
The Soviet central bank did not have a monetary policy. It functioned as instrumentality of GosPlan. If the plan said someone should be given a loan, the loan was given. There was no monetary policy or discretion about money supply. GosBank was entirely passive and responded to plan requirements.
In contrast, Russia now has a central bank. They can create money as required . . . errr . . . as desired.
Be sensitive to propaganda. “Russia is on the verge of total collapse because of low oil prices.” Heard of anyone starving? I haven’t. Haven’t heard of them abandoning Syria, either. Low oil price will make them run a budget deficit? Oh the horror!
The US deficit the last three years has been 2.5ish% of GDP each year, and the really edgy thing about that is our central bank decided to create the money from thin air and lend it to the goverment and fund that deficit — and coolest of all when the gubmint (Treasury Dept) sends interest payments on those loans to the lender (central bank aka Federal Reserve) . . . they get trashed and never “collected”. The central bank returns the interest money. This is called genius, one supposes.
hahah even Russia isn’t doing that. Somehow in the view of the US media they are not properly capitalistic vs the US.
OFM – Thanks for answering the question. Obviously you put a lot of time, effort and life experience into your analysis. I, for one, certainly appreciate being enlightened. Prior to receiving your answer, I guess that I was one of those that was “to (sic) dumb” to answer the question.
For those who may have missed it above, I repeat it below so that everyone here can now have the benefit of your wisdom!
OFM says: “Any body who responds with the question ” Then why isn’t the economy going like a house afire?” is simply to dumb to answer, but I will answer any way.
There are MANY influences holding back the economy, as well as many helping it grow.
The factors holding the economy back at this time are more numerous and more serious. ”
LOL
“I am agnostic when it comes to Russian intentions in this respect”.
OFM, I have learned heaps from your posts. Thanks for that.
I don’t buy that the Russians don’t care (cue AlexS for an excuse).
Google Russia and Oil Exporting nations. You will find a hit on every one.
If you don’t think Putin is thinking strategically…you are crazy.
If you don’t think the Russians see fossil fuels as their advantage/disadvantage you are nuts.
The Russians (like the Yanks, The Brits, etc) will pump you up the Charlie if they can.
Hi, SBF
The Russians certainly DO care about everything we have mentioned, collectively, and Putin certainly IS thinking in strategic terms.
I totally agree with these two points.
What I am not so sure of is what Putin is hoping to accomplish,specifically, other than in general terms, he obviously would like to restore Russian power and influence to the highest possible level.
I should have said I am agnostic in respect to HOW he is or will be trying to accomplish this, in terms of the production and marketing of oil. He may really be trying to undersell everybody else, thereby keeping the price down deliberately, but otoh, his hands may be tied in this respect. Maybe he has no CHOICE as a practical matter , except to keep the production pedal to the metal, and take whatever the market is paying. Putin and his cronies have to keep a LOT of powerful people happy and among them are the folks in the domestic Russian oil industry. He has a big picture to look at, and we don’t know everything he sees in that picture, or how he will interpret it if we can see it.
Folks who have never PRODUCED AND SOLD in a competitive market, which is what farmers routinely do, seem to fall in love with the idea that one or another producer can control the price of a commodity simply by selling it CHEAP, but this is not necessarily true.
IF a given producer has sufficient capacity to supply the ENTIRE market, then that producer can set the price as LOW as desired, but there IS NO oil producer with this much capacity, or staying power.
Ordinarily, if a producer cuts his price, then he simply sells out, and HAS no excess production or capacity, in a competitive setting. Other producers customers buy from him to the limit of his production. Then other producers tend to reduce their prices to match.
Price wars are real, but in most industries, they play out pretty fast. The oil industry is different, it moves at a glacial pace under any circumstances, and beyond that, it is dominated on a world basis by governments, and governments make glaciers look like white water rapids.
Now I will not argue that the Saudis and the Russians are lovey dovey.
Each would like to see the other in hell. But they have near zero control over OTHER producers and neither can sell enough oil to force other producers out of the market over the short term, as proven by world production holding about steady.
In the longer term, some high cost production will be forced out, no question, but how long that will take is any body’s guess. It’s taking a lot longer than I thought it would.
My guess is that both Russia and Saudi Arabia would LOVE to get together and cut production, but that there is way too much bad blood between them for it to happen. Each is well aware that low oil prices reduce the power and influence of the other.
@OFM
RE: “the Saudis are in Uncle Sam’s vest pocket peeking out like one of Paris Hilton’s little doggies peeking out of her purse”
You obviously didn’t read the recently declassified 29 pages of the 9/11 report. It seems to from doing so that neither the KSA nor the House of Saud is not and never has been America’s little lap dog.
Is this a reply to my comment, which was about potential Canadian production increase (or lack of) over the next 5 to 10 years? Your comment is about Russia and USA oil production, and even knowing this I have no idea what you are talking about. Russian production is staying steady because of some projects that are coming on line that were started about 5 years ago – before Syria or Ukraine got really dirty. Rosneft, the largest oil producer, is about 1% down for the year, they are mostly a private company and I’m sure they would prefer more production at higher prices if possible.
“So assuming 3 yrs for prices to rise and stabilize”
Did you notice that oil price started to decrease was taken a few weeks after invasion of Crimea?
The weekly EIA report here http://www.eia.gov/petroleum/weekly/ is dedicated to effect of low oil prices to Russia economy. If this is true low prices impacted foreign money import, it is not exact to compare Russia GDP in dollars. For Russia, what is important is in RUB. Companies operating in Russia receive the same amount of RUB today for oil as three years ago when oil was at 100$. Notice that inflation from March 2014 to today is about 25% in Russia.
In term of GDP, Russia growth was negative last year and is recover quickly. They might have positive growth this year.
I think you are delusional about Russia. They are suffering from oil prices and their standard of living depends on oil prices as it is linked to the ruble exchange rate.
ISIS now targeting oil and gas facilities.
http://www.bloomberg.com/news/articles/2016-07-31/iraqi-kurdish-forces-retake-oil-field-after-islamic-state-attack
Things are getting really bad in Venezuela.
http://www.bbc.com/news/magazine-36913991
The people with the guns, meaning the cops and soldiers, in such a country, are always on the side of the government, because governments first and always take care of their own membership.
But before too long, I expect things to get bad enough that a lot of cops and soldiers are going to desert, hoping to find a way to eat and feed their dependents as members of the opposition.
Anybody who is of the opinion that Ann Rand didn’t know a few things about the way corrupt governments operate ought to read Atlas Shrugged. The people running Venezuela are so much like the bad characters in her novel that you would think the Maduro regime is the not real, but rather the creation of a hack copy cat novelist.
The reasons socialists have always hated her guts, and always will, is that she pointed out some extremely harsh truths about the shortcomings of authoritarian governments, and being a second generation refugee, she created her government villians on the socialist model. .
Lest we forget, the intelligentsia here in the USA used to defend the old USSR as a bastion of decency. Change in academia and the social sciences and the world of literature and books and political commentary comes only with funerals. It took until the nineties for the leftish element in this country to finally start seeing the reality of the old USSR.
For those who plan on accusing me of being a Trump chump, I recommend they read my comments about single payer Euro style health care, global warming, renewable energy, strong environmental legislation, etc.
Hi All,
Dean sent me his corrections for the most recent RRC data.
Data below is from July 2015 to May 2016 in kb/d for TX crude plus condensate (C+C)
Corrected, EIA
3465, 3452
3442, 3413
3442, 3415
3440, 3404
3435, 3409
3404, 3348
3459, 3361
3458, 3315
3454, 3295
3452, 3250
3375, 3199
Crude plus condensate chart is below for corrected (Dean’s estimate) and EIA estimate, chart is in barrels per day.
Texas (TX) natural gas chart from Dean below.
Thanks for this Dean & Dennis!
I’m acquiring the Texas data as well, for a US post on Friday.
Furthermore, I hope that in about 2 months or so, I have enough revision data in Texas, on lease level, to say something more about the underlying factors that cause these revisions.
“Texas shale oil has fought Saudi Arabia to a standstill”
http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-standstill/
“Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.”
This article appears to be an extension of PXD’s conference call.
That’s part of the genius of it all. KSA and Opec get blamed.
If I remember correctly, it was the the Saudis that left the Russians standing at the altar of one of those OPEC meetings.
Don’t recall that. Russia isn’t a member of OPEC.
Quit being obtuse, you know the Russians get invited to Doha.
Saudis are depleting their currency reserves. All this noise about converting the economy from oil dependency is just dog and pony show. In other words they are suicidal. If their currency reserves are gone they are doomed as an independent country (and they will deplete them in approximately five years of such prices). May be that what royal family decided to do, escaping to Europe.
Why they are helping to rob at day light other oil producing countries and Western oil industry (including the US LTO) is not clear to me. Their animosity with Iran can’t explain such a suicidal behavior.
So far we have almost two year of Saudi and USA induced cheap oil bonanza. But as Herbert Stein noted: “If a thing can’t go on forever, it will eventually stop. ”
Inertia is great thing. And the current slow slide of world production if still result of projects started during high oil prices and coming online now. But eventually all of them will be online and at this point depletion continue unabated.
It might be an interesting situation when the world oil production drops another 1 Mb/day or so.
I have read the conference call and have been looking at PXD’s wells, particularly those on the Sale Ranch lease that he mentioned.
Some very good wells, some very bad wells, mostly wells that will need to hang in over 200 bopd for three years to hit payout, including only LOE, not including G & A, post completion CAPEX and other expenses.
PXD CEO likes to make bold statements.
If he really has guts, he would release Hz well payout statements. I assume those would maybe take some wind out of the $2+ billion market cap kick they got from his CC comments.
WTI at $41.34 presently, which puts PXD un hedged at $37-$38. PXD posted a loss with un hedged oil at $41.13 last quarter, so presumably they post another loss in Q3 if there is no price improvement.
I will agree, they have some of the best Permian wells. I have done the math, the majority will only payout at current prices if they have figured out a way to stave off declines under 200 bopd.
Will agree that they bought Sale Ranch lease right, off of Merit Energy back in 2004.
Going to need some very high oil prices to get Permian to 5 million bopd, IMO.
I’m not surprised rigs are moving to the Permian. Stupid money. I am surprised we have not seen gas rigs added with this big move in price. Glad to see the producers are showing some discipline.
Reno: To drive home my point re PXD and Permian.
PXD has 628 Hz wells in Permian.
278 with first production 1/1/15 or later.
179 made over 200 bopd in May, 2016.
63 made 100-199 bopd.
36 made under 100 bopd
350 with first production before 1/1/2015.
11 200 or more
70 100-199
269 under 100 per day
If PXD has cracked the code on the quick decline under 100 barrels per day on these wells, that would be a big deal. We will soon see.
This company has the best acreage in the Permian? Shale, I guess you mean.
You used 200 BOPD as a threshold. To get 500,000 barrels of ultimate recovery you have to hold 200 bpd for about 7 yrs.
Watcher. 200 bopd in months 13+. The best wells produce 125-200K barrels in first 12 And that is gross oil, before deducting the part which goes to the royalty owners, which is 25% typically in the Permian. But, they never disclose that either. So the type curves, are gross oil, which is also deceiving.
It is very hard to find payout statements for LTO wells. But I have seen some.
What is see is a lot of oil in year one, with the well being about 1/2 paid out, followed by not nearly enough in years 2 and 3 to make a big enough dent. By year 4, the well is generating low to mid five figures per month, with $2-4 million still owed, depending on how good the well is.
Until I hear the companies’ management talk about well payout in real (not projected) numbers, I assume that most wells are like the one’s I have seen. In fact, I just looked at four of PXD’s on the Sale Ranch, which is their best Martin Co. lease by far. One of the wells, the best out of 53, will payout. One will not, the other two will need production to hold up at around 200 bopd IMO. Very few wells have been producing 200 bopd after month 12. But maybe they have figured something out?
It is also interesting on the few payout statements I have seen, that CAPEX seems to continue on for months after the well’s first production month. Only when the well is down to low volume, do we see the CAPEX stop. Not sure why that is.
So, if we have a well producing 50 bopd gross oil, with a 25% royalty, the monthly gross income at $40 oil (we are now below that BTW) is $45,000. Figure $10,000 of LOE, we are at $35,000. Knock of taxes, down to about $31,000.
Will take a long time to pay the remaining $2-$4 million left at $30,000 per month. Then, if we have a down hole failure, look at another $25-100K of expense.
The type curves these guys are coming up with are way off. Exaggerated by more than double.
Seems SEC should be involved, but who wants to stop the flow of cheap oil, which today translates to $1.77 per gallon at the pump just down the street from me?
There has been a lot of well economics analysis over the past X yrs. Usually they end with presumptions of higher oil price just in time to save the day.
What they don’t usually have is an assessment of not only high yield paper burden (annual interest expense on the loan PLUS principal repayment per year), nor anything about compliance with loan covenants which . . . pre Fed involvement one could presume would force some sort of ongoing production requirements lest there be LOCs (Lines of Credit) shut off, preventing more completions.
Really hard to see how the loans still flow, unless the lenders have been assured backstop.
300K additional would require 200 BOPD for 4.1 yrs.
Pretty sure standard hype is 800K EUR.
Art Berman doesn’t believe Scott Sheffield either. See his latest at link below.
http://oilprice.com/Energy/Energy-General/Pioneers-2-Operating-Costs-Fact-Or-Fiction.html
For those in the industry, and others following the nat gas production activities in the US, the announcement by EQT, during their conference call this week, that they were pivoting BACK to Upper Devonian development – and away from the Deep Utica – caught many by surprise.
While the ongoing results from their 5/6 Deep Utica wells is somewhat mixed, (similar to other operators’ PA Uticas), their several dozen Upper Devonian wells have been ‘under the radar’ attention-wise.
I just did a quick check of Genesee and Middlesex wells as of May 2016 and was astounded at their prodigious output.
Not only had the vast majority of the 32 Genesee-sourced wells in Greene, Washington, Beaver, and Allegheny counties approached or exceeded a billion cubic feet, the wells online under a year show the most dramatic increases.
Putting aside the future potential of the Utica in Pennsylvania (well costs currently at $14 million per), the figure of 100 Tcf recoverable from the Upper Devonian formations as posited by Wrightstone Energy last year, seems to be on track to be on the low side.
A collection of oil news from around the world…
Nigerian government working on cease-fire agreement with militants in oil-producing region, oil minister Kachikwu
Nigeria oil production currently at 1.4mbpd – oil minister Kachikwu
Suspected militants have attacked an oil pipeline operated by a local affiliate of Shell in Nigeria’s restive southern Niger Delta region, locals and a community group said on Monday.
Militants have attacked oil and gas facilities in the OPEC member’s energy hub over the last few months, cutting the country’s crude production — which stood at 2.2 million barrels per day (bpd) at the start of the year — by around 700,000 bpd.
http://www.reuters.com/article/us-nigeria-delta-idUSKCN10C204
Iraq set new oil prod. record in June at 4.549 mill b/d, according to data from oil ministry. Only 2nd time Iraq has passed 4.5 mill b/d
Iraq July crude oil exports 3.2mbd, up from 3.175mbd in June. Oil officials monday.
Iraq exports (non-KR) to remain ~3.2m b/d until year end, acting minister says.
Iraq, ISIS attacks Kurdistan’s Bai Hassan oil pumping station, suspending 55kbd of output. unclear when operations will resume.
Iraq: Kurdish forces say they have regained control over Bai Hassan oil field near Kirkuk after IS attack. 175k bpd production halted.
Libya: Ras Lanuf & Es Sider ports have combined export cap of 600kbd. But because of infrastructure damage, it’s likely to be ~100kbd
Sun Jul 31, 2016
Libya’s state oil company said on Sunday it welcomed the “unconditional” reopening of blockaded oil ports following a deal between the U.N.-backed government and an armed force which controls key facilities, saying it would begin work to restart exports from the terminals.
In a statement sent to journalists on Sunday, the NOC said the U.N.-backed Government of National Accord (GNA) had released money that would allow it to increase production by 150,000 barrels per day (bpd) within two weeks. The NOC said it aims to gradually increase output to 900,000 bpd by the end of the year.
Any recovery in production is expected to be gradual because of extensive damage to infrastructure, and continuing instability.
Sanalla also called on groups preventing oil production elsewhere in Libya to let it resume, including some 470,000 bpd shut in from the Elephant and Sharara fields in the south-west.
http://www.reuters.com/article/us-libya-security-energy-idUSKCN10B0OZ
China: PlattsOil estimates July gasoline exports to reach ~369kbd, after customs data showed a record 312kbd exports in June
US May oil production (million bpd):
8,774 EIA weekly
8,894 EIA monthly
adjustment +120 000 bpd
US May gasoline demand (million bpd):
9,661 EIA weekly
9,436 EIA monthly
adjustment -225 000 bpd
US crude oil exports reach a new record high of 662kbpd in May – new export destinations for US crude: Colombia and Peru
Nigeria to resume amnesty stipends payment to ex-delta militants – starting from today to at least 30,000 ex-militants
Despite these figures Iraq seems to be limited by water injection. There was a plan around 2009 for a big centralized oil injection plant serving the southern fields with more than 12 mmbwpd capacity (that is a load of water in case anybody is wondering, and would probably need to be at 100 bar or more to get down the injection wells). ExxonMobil was to be the project manager, then they pulled out in 2012 and part of the Iranian National Oil Company took over. It was supposed to be on line in 2016, then 2018, and then 2019. Now I’m not sure if anything is happening. The IOCs with field operating agreements seem to have given up on it. Shell has down manned at Manjoon, Eni have recently placed a contract for local WI facilities at Zubair and BP have a local produced water reinjection facility being constructed for Rumaila. BP (and maybe some others) have ESPs in their wells. Normally installation of artificial lift and/or having produced water and WI issues in medium to light oil in fairly deep wells as in Iraq is a late life issue. I think any production increase from here in these very mature fields would be small and/or short lived, and wouldn’t be cheap oil given the extra injection and processing facilities required.
LOS ANGELES–(BUSINESS WIRE)–California Resources Corporation (NYSE: CRC) today announced the commencement of its offer to purchase (the “Tender Offers”), upon the terms and conditions set forth in the offer to purchase, dated August 1, 2016 (the “Offer to Purchase”), and the related letter of transmittal (“Letter of Transmittal”), up to a combined aggregate principal amount of its outstanding 5.0% Senior Notes due 2020, 5.5% Senior Notes due 2021, 6.0% Senior Notes due 2024 (together, the “Unsecured Notes”) and 8.00% Second Lien Secured Notes due 2022 (the “8% Notes” and, together with the Unsecured Notes, the “Outstanding Notes”) that can be purchased with $525 million in cash (the “Maximum Consideration Amount”) subject to the Acceptance Priority Levels and the 8% Tender Cap described below.
http://news.crc.com/press-release/2016/california-resources-corporation-announces-offer-purchase-outstanding-notes-cash
That doesn’t sound like a company to me that is going out of business. Next earning release 8/4/16
I disagree.
They are offering to pay a little more than half of par value for the notes.
So, if you bought $10,000 worth of notes at par, they are offering to pay you about $5,100-$6,600 (depending on which note you own).
Or you can take your chances they don’t BK.
Don’t kid yourself, almost all non integrated oil and gas companies in the US are in trouble.
Your right, I didn’t realize their only offering 50 cents on the dollar. Will be interesting to see how many takers they get. Thanks
Worse than that. Rates are lower than they were. Those bonds should be higher priced than par.
They are so low because of perceived worthlessness. The company is trying to dodge full retirement in just 5 yrs for some of them, but the marketplace judges they won’t be able to return principal then.
What is interesting with regard to CRC is that it is an OXY spinoff.
Good conventional assets in California that OXY saddled with $6 billion of debt.
One possible reason for spinning off assets besides dumping a lot of debt on them was likely an attempt to get separation from a tough state to operate in from a regulatory perspective.
Standard & Poor’s Ratings Services said today it lowered its corporate credit rating on California Resources (NYSE: CRC) (CRC) to ‘BB-‘ from ‘BB+’. The outlook is negative.
At the same time, we lowered the rating on CRC’s senior unsecured debt to ‘BB-‘ from ‘BB’, and revised the recovery rating to ‘3’ from ‘5’. The ‘3’ indicates expectations for meaningful recovery (50% to 70%; upper half of range). Finally, we lowered the ratings on CRC’s term loan and credit facility to ‘BB+’ from ‘BBB’. The ‘1’ recovery rating on this debt is unchanged.
http://www.streetinsider.com/Credit+Ratings/S%26P+Downgrades+California+Resources+(CRC)+to+BB-%3B+Financial+Risk+Profile+Moved+to+Highly+Leveraged/10927292.html
1+ A recovery rating of ‘1+’ denotes the highest expectation of full recovery in the event of default.
1 A recovery rating of ‘1’ denotes an expectation of very high (i.e., 90%-100%) recovery in the event of default.
2 A recovery rating of ‘2’ denotes an expectation of substantial (i.e., 70%-90%) recovery in the event of default.
3 A recovery rating of ‘3’ denotes an expectation of meaningful (i.e., 50%-70%) recovery in the event of default.
4 A recovery rating of ‘4’ denotes an expectation of average (i.e., 30%-50%) recovery in the event of default.
5 A recovery rating of ‘5’ denotes an expectation of modest (i.e., 10%-30%) recovery in the event of default.
6 A recovery rating of ‘6’ denotes an expectation of negligible (i.e., 0-10%) recovery in the event of default.
33. Recovery ratings focus solely on expected recovery in the event of a payment default of a specific issue, and utilize a numerical scale that runs from 1+ to 6. The recovery rating is not linked to, or limited by, the Issuer Credit Rating or any other rating, and provides a specific opinion about the expected recovery.
Shallow, are they saying there is less chance of BK if they default ?
Unforgettable scene from The Big Short – Rating Agencies
“Hey! You can’t expect us to do our jobs. We’d lose business.”
https://www.youtube.com/watch?v=9xZx1lf2tvs
Who you going to call?
http://seekingalpha.com/symbol/CRC
Head Scratch.. “Hotel California” .. Never Check Out..
Must have failed the Buffet Test..
” The Organization of the Petroleum Exporting Countries’ (OPEC) reference daily crude oil basket price fell below $39 a barrel for the first time since November 2004, OPEC said on Monday.”
http://sputniknews.com/business/20160801/1043823979/opec-daily-crude-39.html
Result of KSA?
http://www.zerohedge.com/news/2016-08-01/saudis-slash-oil-prices-asian-markets
Any body interested in what’s going on in Venezuela can find some good articles at Fox News Latino, where the coverage is far more extensive than any other mainstream media I know of.
Has any body run across any figures on what it costs to build a new crude oil storage facility?
You have to give us an idea how big you want it and where. Is it for your farm or the US navy? And, are you talking surface, underground or floating? My understanding is floating is cheapest, underground next, surface worst. You can have a brand-new double bottom ocean tanker for about $4 million bucks (about 4,000 cubic metres). A 500 million cubic metre crude oil tank farm (with a gazillion variables) is going to cost you about $200,000,000. Site costs would be a big part of this. For some reason some people don’t want a bunch of crude oil tanks across the street. 🙂
Thanks Doug,
I have been thinking all along that various somebodies with TONS of money, and few restraints on their actions when it comes to doing as they please, might be making some very big bets on buying and storing oil for later use or sale while the price is down.
Without looking it up, it appears that there are roughly five to six barrels of oil in a cubic meter, and the price of a big tank farm is trivial on a per barrel basis, according to your answer. So lets say you build a good sized tank farm, and put twenty times what it cost to build it into filling her up with crude. Let’s not forget that if business is slow, you can use any existing refinery capacity to process some of it while waiting for the price to go up.
Now who would be in a position to make such a bet?
The Chinese have TONS of money , money that is earning them next to nothing in interest, and beyond that, money that might actually become worthless to them in the event the world goes to hell in a hand basket. It’s just electrons and pieces of paper, and nobody will want it if UNCLE SAM refuses to honor it, which could happen.
The Russians could probably afford to build such tank farms as well, since they are also organized on a mostly ” top down” basis when it comes to making big decisions.
Of course it can be argued that leaving it in the ground and pumping it later is cheaper, but this might not be so. It might cost MORE to shut in the production , in terms of letting the men and machinery sit idle, plus the hands on guys tell us that shutting in an oil well can damage the well and reduce the total ultimate recovery.
Plus shutting in wells and putting them back into production is an expensive proposition in and of itself.
There has been plenty of excess capacity in the concrete and steel industries in recent years. There has been plenty of available skilled labor as well. There has been plenty of money looking for a home.
There just might be a lot more oil in storage than we know about.
I am personally of the opinion that the price of oil will go up before long. Doubling your money in three to five years is a pretty good deal, if you have your own tank farm and money to fill’er up. If you are a sovereign government with the job of making sure the wheels keep turning, the more oil you have on hand, the better, in the event of wars, embargoes, etc.
The big question, in my opinion , is not the risk of losing on the bet, but rather the opportunity cost of the money. There are plenty of other ways a country such as China or Russia could invest any spare change.
And of course some people are convinced the price of oil will WON’T go up again. My opinion is that this is within the realm of the possible, but damned unlikely.
And even if the price stays where it is, in terms of fiat money, the long term trend is up in terms of price inflation, when it comes to most purchases.
So cash money in the bank , or mattress , right now, is probably going to be worth LESS five years from now that it is today, even including the trivial interest earned at present, unless the world economy gets worse instead of better.
Thanks Doug,
Your answer confirms my opinion that there is reason to believe that a hell of a lot of oil could be going into storage on the basis of betting that the price will be going up.
The price of a large tank farm is according to your answer almost trivial in comparison to the cost of filling her up.
haha after 2 yrs
Two years is a trivial amount of time when placing a bet on the price of a piece of property, or a stock, or art work, or collectible car, or OIL, going up substantially, assuming you have money enough to play the game.
But that’s not how one would speculate.
There are futures contracts. If the intention is to make money on an oil price rise you don’t buy tanks and deal with regulatory impediments for storage. You just make a phone call and take a position.
Nobody is sitting on oil in their backyard tanks for 2 yrs.
Watcher,
You are about the most deliberately obtuse person who posts here, with the possible exception of Caelan.
An individual can’t build a tank farm in his back yard, true enough.
The people who can build them in places such as China, Mexico, and Russia don’t have any problems with regulations, because they ARE the regulators.
Even here in the USA, I expect it would not be much of a problem to get a new tank farm permitted in a LOT of places with access to pipelines carrying crude, but construction costs and property taxes and environmental regulations are MUCH higher or tougher here than in the places I mention.
For a person who talks about gotta have it, will do any thing to get it frequently , you sure do display a lot of faith in the financial market place, where it bears mentioning that you seem to believe that production costs and prices don’t matter.
Personally I believe in financial turmoil, pain, and trouble of every sort being a very real possibility, being PROBABLE, within the next few years.
So if I were an oil producer, with the chance to build storage and pump oil NOW while the cost of doing so is very low, due to the contractors and suppliers all being in a bind, I would consider doing so.
And if I were a reasonably rational politician hoping to stay in power, in an oil importing country, I would be thinking two or three times as hard about stocking up.
Now note that I have not said anybody has actually BUILT any new tank farms to store crude, but rather just pointed out that it would be a good thing to do, IF the builder is flush with cash, and believes the price of oil will go up substantially within the next few years.
Any body with money can most assuredly buy a contract for oil dated out two or more years, but that does not guarantee the contract will be honored.
Physical possession of oil and other depleting imported easily storable resource is the gold standard when it comes to dealing with any of the many possible emergency situations that might develop over the next few years.
The tankers won’t leave port except under naval escort,in the event of war, because offensive weaponry is so good nowadays that anybody who can get hold of an old obsolete fighter, or even an airliner, can sink a tanker as easily as drowning a kitten, maybe even out in mid ocean.
Missiles can be fired from airliners. Some of the ones used to take out tanks are quite capable of setting a ship on fire beyond any hope of putting it out, and mounting a couple of heavy machine guns to take out the bridge controls, and officers, etc, well that would be a piece of cake.
For now, and for the next few years, Uncle Sam will decide which countries can load and unload tankers in the event of a hot war. One sortie by a fighter or even a helicopter off a modern navy ship is adequate to sink two or three or maybe even more tankers, according to my retired military friends.
They aren’t armored, and they have small crews, and the firefighting apparatus on board is designed to only to fight accidental fires, rather than multiple fires deliberately started, not to mention half the crew might be dead from getting hit by a missile, etc.
THERE ARE REASONS to store oil in ADDITION to the bet that the price will be going up.
Mac,
I just happened to read a comment on an old thread, and commented here: http://peakoilbarrel.com/open-thread-non-petroleum-4/#comment-577709
http://www.bbc.com/news/world-latin-america-36949875
The last open topic thread is still functioning but nobody is posting anything there.
Hi Old Farmer Mac,
Consider “The Energy Transition” as a place to post non-Petroleum stuff.
Generally there will be two posts, if one is labelled Petroleum (or non-Petroleum) then the other can be considered non-Petroluem (or Petroleum).
That’s clear as mud. 🙂
What’s time to a hog?
https://m.youtube.com/watch?v=uIDQnuE8EB8
Japan paid 25,620 yen for a metric ton of oil today, was at 26,000 this morning, topped out at 26,250, 101.15 yen for a dollar, a barrel of oil goes for $34.69 at the end of the day’s bidness.
The yen was at 122 for a dollar back a few months ago, sometime near that time period, it has gained twenty percent in value.
Dollar loses strength, yen gains, Japan’s cash does what it has to do.
R Walter asks: “What’s time to a hog?”
A new farmer shows up after buying a farm in the area. The neighbors can’t help but notice that every morning he walks his hogs about a mile down the road to a field. Late afternoon, he walks them the mile back to his farm. Nobody knows what is going on. So, one day, one of the neighbors asks him why he is doing that. The new farmer replies: Oh that’s easy. The hogs prefer the corn in that field.” The neighbor asks: “But, isn’t that a tremendous waste of time?” The new farmer responds: “Shucks, hogs can’t tell time.”
Am i the crazy one??
Nearly every opec country has a drop in production according to bloomberg, but they have an extra member so production overall is up (wow, what a shocker)… and the oilprice tanks
Oh there is better news than that. There is the splashed KSA price cut to Asia. As if they just did this with no cause.
BTW, who is the threat to their Asian market share?
Russia, anybody who reads this site knows that.
Maybe the Russians offered them a lower price, and the Saudis went them one better, lol.
There ARE such things as price wars, and both the Saudis and the Russians have what it takes to play the price war game a LONG time.
A lot of observers of international politics believe that that each country is trying to bleed the other out, in an economic war of attrition. I am sympathetic to this view myself, although it is not necessary to explain the low price of oil.
So long as production is what it is, and the economy is what it is, the price will stay about where it is. If either production falls, or the economy world wide picks up some steam, with production holding steady, then the price will go up, once some of the stored oil is cleared out.
Either country could force the price up quite a bit by holding back a couple of million barrels a day, but I am of the opinion with Ron P that neither of them has the capacity to increase production very much for very long.
Price crashes happen in many industries when all the players combined production exceeds what the market will buy at a former higher price. This happens to farmers about every two or three years, depending on the crop or kind of livestock in question.
Most people do not understand that oil is a commodity that displays extreme price inelasticity. What this means is that a minor oversupply crashes the price, and that a minor shortage spikes the price.
The oversupply can come about via producers raising production, or by strapped consumers cutting back somewhat on their purchases.
The large majority of buyers of gasoline and many many buyers of diesel fuel are compelled to buy about the same amount day after day, because they MUST have it to get to work, or keep their business open.
But strapped consumers can cut back on unnecessary trips and this alone is enough to cut significantly into gasoline sales. Cheaper gas doesn’t mean people will buy a lot more, short to medium term, because most people don’t have time enough, and money enough, to do much extra driving. A couple of cheap tankfuls may get you to the beach and back, but you still have to rent rooms, pay for meals, etc.
Watcher,
Who is the threat to their (Saudi Arabia’s) market share?
Iran.
Things are really getting out of hand in Venezuela. The odds of a civil war erupting there are getting higher by the day. Maduro has apparently decreed that anybody and every body is now subject to forced labor on the farms, which hardly even exist as working businesses these days.
It looks more and more like the collapse of oil production in Venezuela is a “when” rather than an “if” question.
http://reason.com/blog/2016/08/02/venezuelas-maduro-decrees-all-workers-su
It’s simply amazing how quiet the leftish leaning elements in the media have gotten to be when it comes to bragging about the success of Venezuelan socialism. A half a dozen people murdered any where in Sand Country gets a headline, day after day, although this has been going on regularly for years now.
The likely implosion of a major country in our own backyard, which is incidentally also a major oil producer, hardly rates a paragraph or two once a week or so.
It’s impossible for me as a layman to estimate how long they can keep the oil coming, but there must be PLENTY of oil field equipment on its last legs, ready to fail due to lack of replacement parts, etc by now.
US Net imports of crude as of July 29th at 8.06MMBB highest since April 11, 2014 of 8.2MMBB amid our glut? of inventory. Smells bad!
And US oil production down 1 million barrels since a year ago, with lower 48 at the same level as last week. Imports up 2.1 MMBB and storage up 1.5MMBB on the week.
Just bought gasoline at 1.759 a gallon. Lower production hasn’t affected the markets yet.
U.S. refiners bought and refined too much crude ending up with gasoline stocks too high. Will they lose money on that cheaper gasoline and build on that by buying even more imported crude the last few weeks? Is the crude being stockpiled here just to push up our stock levels up for some other reason? Americans are definitely taking advantage of the cheaper gasoline. Yellowstone Park visitors up 7-14% this summer vs 2015.
Just bought gasoline at 1.759 a gallon. Lower production hasn’t affected the markets yet.
From CLR earnings:
SCOOP Woodford net production averaged 56,511 Boe per day in second quarter 2016, compared with SCOOP Springer net production of 8,158 Boe per day.
The Company announced it has increased the EUR for 2-mile wells drilled in the SCOOP Woodford oil window by approximately 30% to 1.3 MMBoe per well, with 62% of production being crude oil. The increase in EUR was based on the results of 22 enhanced completions conducted over the past two years in the SCOOP Woodford oil window and assumes an average 9,800-foot lateral per well. Results show that 180-day production rates are on average 25%-to-30% higher than offsetting legacy wells. At a targeted completed well cost of $9.8 million per well, a 1.3 MMBoe EUR SCOOP Woodford oil well should yield a 32% rate of return at $45 per barrel WTI and $2.50 per Mcf of gas.
http://investors.clr.com/phoenix.zhtml?c=197380&p=irol-newsArticle&ID=2192641
Yes, this development caused CLR to just report 18 cents/share loss for Q2. Miraculous. vs 13 cents/sh gain in 2015.
BOE.
CLR has 417 active Hz wells in OK.
56 have passed 100K cumulative oil.
11 have passed 200K cumulative oil.
0 have hit 300K cumulative oil.
They are now claiming EUR of 1.3 million BOE, 62% oil, which would be 806K BO.
I assume the claim is the average well, re EUR.
SEC?
1.3 mmboe reserves, they should have absolutely ZERO problem with drilling out of cash flow once they get enough of them under their belt. My guess is they won’t, but we will see.
From Mro earnings:
“Within six weeks of announcing our acquisition of high-quality assets in the STACK oil window, we’ve already closed the transaction and will accelerate an additional rig on this acreage in the third quarter while still decreasing our 2016 capital budget. This deal expands our inventory and further positions Marathon Oil for growth in Oklahoma at a competitive valuation. Coupled with recent non-core divestitures, we’re delivering on our objective to further concentrate our capital allocation to the lower cost, higher margin U.S. resource plays,” said Marathon Oil President and CEO Lee Tillman.
http://ir.marathonoil.com/releases.cfm
MRO reported a loss of $170 million , or .20 per share. Loss would have been much worse but for the $294 million gain from asset sales.
MRO stock is at $13.42, after trading as low as $6.52, but off of the $40+ prices in summer of 2014.
I looked at the wells they bought from Pay Rock in the oil window, 75% gas.
Woodford is a gas play, for the one stinking millionth time. “Oil window” is purely marketing IMO.
Apache reporting loss today (they recently changed their accounting method in some way that significantly reduces reported net losses for the quarter):
“Successful-efforts-based financial results were:
» Net loss of $244 million, or $0.65 per share, » Adjusted net loss of $99 million, or $0.26 per share, and » Net cash from operating activities of $744 million.
Results under the full-cost method would have been: » Net loss of $601 million, or $1.58 per share, » Adjusted earnings of $20 million, or $0.05 per share, and » Net cash from operating activities of $781 million.”
Oasis reporting loss (compared to profit 2q last year):
“For the second quarter of 2016, the Company reported a net loss of $89.9 million, or $0.51 per diluted share, as compared to a net loss of $53.2 million, or $0.39 per diluted share, for the second quarter of 2015. Excluding certain non-cash and non-recurring items and their tax effect, Adjusted Net Loss (non-GAAP) was $19.4 million, or $0.11 per diluted share, in the second quarter of 2016, compared to Adjusted Net Income of $52.0 million, or $0.38 per diluted share, in the second quarter of 2015. .”
SS, i just love this. I say this as respectfully as I know how, you are just plain wrong. It is none of my business of course, but telling us how much money the oil and gas industry is losing, with the focus on LTO is akin to spending time proving to us that the sun is hot and that “firm feeling women” are good. We know this, there is very little dispute that under $50 the “for profit” oil industry is in trouble. The takeaway is this, there is NOT enough NON-profit oil to supply the world demand. Prices will go up, certain LTO plays risk weighted are “more economic” than most other sources of that oil and nat gas. And again for the one stinking millionth and one time the oil window is real, it is a fact, it is proven, it is producing in the rough equivalent that CLR presents, 60% crude oil (46 api). That is not to say, the wood ford also has a gas condensate window and a dry gas window. I have a number of wells in the play and I have WI and RI interest in “oil window” wells with 1 year production history, CUM:~100,000 BO and 1 BGFG production steady for the last 8 months after clean up, with two more being completed as we speak. Just the facts. The good news for most of us is CLR says they will not add rigs until $60, the market continues to like that message. ??
How the Anadarko basin will rank relative to the Eagle ford and Bakken in terms of ultimate “oil” recovery can be a subject to debate. The fact that the Anadarko and Permian basins will produce a great deal of LT oil is no longer conjecture as they both are more economic than their peers. Geez it is really not that hard, personal growth comes from learning not from banging the drum on out dated information and conclusions?
You can’t seem to make a point, whatever that is, without being offensive to folks; is there any chance I can talk you out of taking the Texas off the Tea?
“More economic” is not economic and there are few stinking shale oil wells being drilled in America, at these price levels, that stand a snowball’s chance in hell of paying out, much less making a profit. In the Permian, for instance, 7 million dollar wells are currently requiring over 500,000 BO to payout. Its just arithmetic. Don’t believe everything you read on the internet, go to Enno Peter’s website and see if you can figure out how many PB HZ wells are going to make 500,000 BO. I think all you are going to need is your fingers and your toes.
Hope for higher oil prices is not a plan in the oil business, pardnor. Don’t let free royalty cloud your judgment. Besides, if being a working interest partner with CLR or MRO is that a big a lick for you (based on 2Q2016 loses thus far, you are the ONLY one in America hitting a lick), you should be laying on a beach in the south of France and not on the internet imposing your idea of “personal growth” on good guys trying to uncover the truth, like Shallow Sand.
Have a nice day.
Mike
On most sites. SEeking alpha, oilpro, etc, the shale believers all share one common thread. Lack of any concern with making a profit.
They discuss reserves, IP rates, decline rates, rig efficiencies, but never discuss how these companies are all losing money every day they operate and with every well they drill.
it seems that some industry observers agree with my post above:
“As Bloomberg reports, despite what Hall called a “miserable month” for oil in July, supplies are still shrinking, he said in his letter, setting up prices to reverse themselves. “Prices are now back at levels that would ensure the eventual bankruptcy of most of the oil industry”, hammering both private oil companies and producing countries like Iraq, Nigeria and Venezuela, Hall said. “Prices at current levels are just not sustainable.””
http://oilprice.com/Energy/Oil-Prices/Oil-Soars-6-As-Andy-Hall-Warns-Of-A-Violent-Reversal.html
well now who is going to look foolish when they find out there is no oil there (sarc).
Phillips 66 And Plains Unite To Build Pipeline In STACK Play
As reported in Oil and Gas Investor, the Texan-based companies will equally split control over ownership and operation of the conduit that transports crude from northwestern Oklahoma to Cushing in that same state.
I wonder if they just read the companies public “marketing” or if they confirmed that the oil is actually there, there seems to some “real” doubt about that oil being there(sarc) good grief?
http://oilprice.com/Latest-Energy-News/World-News/Phillips-66-And-Plains-Unite-To-Build-Pipeline-In-STACK-Play.html
Texas Tea.
I am just going by what I am reading on a subscription site that I pay for. Maybe it is wrong?
Every one of the leases I own an interest in is always correct. The data always matches ND, which has good data. It matches TX when TX reports individual wells. It matches WY, CO, KS, NM.
I guess when CLR states their average well will cumulative 806,000 BO, I would think I would see some evidence of that showing up, instead of what I posted above.
I think you also have to understand why those of us who own working interests question you. We have seen our income fall from a lot to practically nothing, I talk to many producers, all the same. Worst time since 1998-1999. Some think worst they have ever been through.
I look at Energynet auction quite often. There are a lot of WI for sale. The collapse of income since 2014, not just from the price crash, but from LTO well decline, takes your breath away.
Saw an EFS package on there this week. 3/15 income was $1.1 million from 9 wells. 12/15 income was $240K from same 9 wells. I figure they have $45 million plus sunk into those.
I’m just repeating $$ and cents and production info I see.
For example, all we hear about PXD is Permian. Yet they operate more EFS wells than Permian, 70 of which have cumulative oil of 300K, v 1 Permian well with cumulative of 300K. Yet, somehow Permian is more economic, even though EFS wells generally cost less than Permian to D & C.
Just stating facts I pull off the net. If you think I’m wrong, let me know. I don’t want to be putting out wrong info.
To clarify, PXD operates more Hz EFS wells than Permian Hz wells.
PXD operates over 6000 vertical wells in Permian.
Where is the pipeline for the gas?
Texas Tea.
My reading of your STACK pipeline story is there is an existing 55 mile line into Cushing that has capacity of “about” 100,000 barrels per day. It appears the project includes extending the line 12 miles north from the existing line, and building a another dump station, along with building another 100,000 barrels of storage.
So, doesn’t appear capacity is being added at this time, instead that the line is being extended, plus another 100K of storage being added.
Again, I have never said the OK resource plays produce no oil, just that the majority of the production is wet gas, and most wells cease producing significant liquids after 12-24 months.
The companies operating in the OK resource plays are representing the wells will produce more oil over their lives than Middle Bakken and Three Forks wells. At least CLR appears to be.
I am not seeing that in the data I am reviewing. Since you own an interest in some of these wells, let me know the names/operators and I will look them up. That would confirm whether or not the data I am looking at is accurate.
It is my understanding OK data is not the best, so maybe that is the explanation?
Texas Tea.
I have been looking at CLR OK wells and comparing with their conference call.
Hardly any of the OK wells they mention show up, I do see the Ludwig well and the Boden well. The production showing for those is not the same as stated in the conference call. It is less. I note they say Ludwig was not always produced due to low oil prices, and now shut in for completion of density wells around it.
I did look at the Good Martin and Honeycutt density projects which have been discussed in previous conference calls. 8 Good Martin wells, 10 Honeycutt wells. No mention of them this quarter, don’t look like they are doing too well. Assume $10 million or so on those, each.
Maybe OK data on my subscription site (IHS) is not as accurate as other states? It just has production thru April, so maybe this is why the new wells they mention dont show up yet.
One thing that I think is interesting is there is no mention of these density projects after they are initially brought up. I recall Poteet, Good Martin and Honeycutt all being discussed before, but not brought up in subsequent calls.
I’ll keep looking at this stuff, and any guidance you can give is appreciated.
Shallow sand, please keep posting your analyses (those and the posta by a handfull of others are the only reason i read through thecomment section)
I have noticed this elsewhere.
There are folks around with a strong capitalism optimism pre-disposition. They are going to find articles that are consistent with their predisposition.
When these are found they are embraced. They are considered truth and they are also considered some sort of rebuttal. It’s not foolish. It’s just that the info seems more correct, especially when it comes from a CEO.
you can not survive in the oil and gas business without “a strong capitalism optimism pre-disposition” but that does not preclude having a understanding of geology, engineering and oil and gas finance. After 30 years of being self employed who knows, maybe one day I will have to pimp myself out to someone for pay, but that day is not yet on the horizon?
SS, see page 30 of 2nd 1/4 presentation for update on Woodford Density projects, which includes Honeycut 30% oil, Vanarkel 26% oil, Newy 16% oil, Poteet 8% oil. I do not see any mention of the Good Martin Density unit or either of the Springer density units. With regards to the GoodMartin unit i have that production, this is a guess on my part as I do not have the engineering data but only the production, I think they are disappointed. ON the May unit, I did note they intend to use the “enhanced completions” and it is my understanding that the wells are being completed at this time. If you look at the Marathon presentation, you can see the wells currently being competed, we are in both. Both of these wells are adjacent to Woodford oil production (50% oil). I will make no attempt to prove what the EUR will be, I have no clue, but these units were HPB, so unless Marathon has nothing better to do with their money( these well were permitted last winter) I assume they think either prices will rise or they can get some kind of return with current prices. Someone had to sign off on the expenditure.
I looked at those. Newy has just one well with production history of over a month, a well completed in 2013 which has less than 100K oil cumulative but over 3 million gas cumulative.
Poteet has many 3 million plus gas cumulatives
Of all those density units, I see one well with a 200K+ oil cumulative. The rest are pretty much under 100K, most under 50K
I looked at Newfield, Devon and Marathon wells in OK with first production starting in 2012 thru present. I see the same thing, no 300K cumulative, a handful of 200K, about 7% have over 100K. Over 1000 wells in that sample.
Again, just going by my source, which I have found extremely accurate and which I highly would recommend to anyone interested. I would note I compare Enno’s data with it, and find the numbers to jive.
I would note the oil/gas mix for CLR is moving much more towards gas.
TT,
For how many wells in the Woodford do you have production data, and would you be willing to share this data? In return I wouldn’t mind to create some graphs to enlighten everybody.
JODI-Oil World Database – Crude Oil Closing Stocks
I’m only looking at this data out of curiousity. I don’t know how accurate the data is.
I’ve included everything that looked alright, both producers and consumers (last time I only included producers).
The chart is mostly the USA, Japan, KSA and Germany as they have the largest stockpiles.
For comparison, the chart without the US figures:
https://s31.postimg.org/z76kwuzaz/JODI_closing_stocks_all_non_zero_exp_USA_April_2.png
Chart Monkey: Do you have any ideas why we, the U.S. (producing 1mmbb/day less than last year), appear to be the recipient of all excess as the rest of countries draw down their stockpiles?
Yeah I do keep wondering why things turn out the way they do. Apart from the large amount of storage capacity available and a long history of oil use. I guess that, low interest rates and the number of oil buying speculators must have something to do with it.
The natural gas storage report is out this morning. Nat gas had it’s first summer draw since I can remember (+10 years).
http://ir.eia.gov/ngs/ngs.html
Very lonely -6. http://americanoilman.homestead.com/GasStorage.html
http://www.oilandgas360.com/natural-gas-delivers-surprise/
This week the EIA weekly natgas reports are particulary contradictory. In their Natural Gas Weekly Update released later, they report BAU , as last year in this period:
http://www.eia.gov/naturalgas/weekly/#tabs-supply-1
Total supply 81.4 bcf/d vs. 80.0 bcf/d last year
http://www.eia.gov/naturalgas/weekly/#tabs-supply-2
Total demand 75.5 bcf/d vs. 73.1 bcf/d last year
This would suggest a buildup in storage of 5.9bcf/d last week , not unlikely 6.9bcf/d last year in this period. For a week, these would be a buildup of 41.3 bcf last week vs.48.3 bcf last year.
However, the reported buildup was 38bcf last year ( this period ) and -6bcf last week !
http://americanoilman.homestead.com/GasStorage.html
Where are hiding those 47 bcf not accounted for last week?
Could have been dry production only 67bcf/d and not 74bcf/d as reported?
Or there is some LNG export not yet accounted for?
http://www.eia.gov/naturalgas/weekly/#tabs-prices-2
Use of natural gas for power generation hits record highs
“Consumption of natural gas for power generation (power burn), which has been very high throughout 2016, recently hit its highest daily level on record on July 21, reaching 40.9 billion cubic feet per day (Bcf/d). Power burn surpassed the 40 Bcf/d threshold on three separate days in late July as widespread hot weather led to strong demand for air conditioning. According to PointLogic data, nine of the ten highest power burn days on record occurred in July 2016, and one was in July 2015. Natural gas consumption for power generation in July averaged 36.1 Bcf/d, according to PointLogic data. This is 2.7 Bcf/d higher than July 2015 and 1.5 Bcf/d higher than the previous high from July 2012.
Storage:
U.S. posts first summertime weekly net withdrawal since 2006. Net withdrawals from storage totaled 6 Bcf, compared with the five-year (2011-15) average net injection of 54 Bcf and last year’s net injections of 41 Bcf during the same week. This is only the third time ever that net withdrawals from working gas stocks were reported on a national basis during the summer months. The two other summertime withdrawals both occurred in 2006 (July 21 and August 4), which predates the new five-region format of EIA’s WNGSR that was introduced in 2015.”
http://www.dailymail.co.uk/news/article-3722685/Why-China-threatening-revenge-against-Australia-South-China-Sea.html
place your bets.
I’m taking China, who overwhelms Australia in all categories and then seizes their massive coal, natural gas, farming, seafood, and mineral resources which they EXPONENTIALLY need.
Oh wait….I live in Australia…/sarc
USA! USA! USA! (in Australian accent)
Right, sure, just what they need, another giant uninhabitable desert region with weird animals to boot. They can get all the coal, LNG and iron ore they want from Australia paid for by the Americans and Europeans. The Chinese are so wealthy they build cities that they don’t even use. Now that is flaunting it. So for now they make the Aussies do the work, no need to lift a finger on their part.
I am sure they have better real estate in mind.
LOL..implausible…probably..
Australia is extremely resource rich ( HUGE coal and Natural gas resources…what planet do you live on?).
and a very small population with a small military.
exactly what a country like CHINA will need…SOON!
Do your exponential math!
just thinking out loud!
China doesn’t need more room, they just stack them in giant block tower apartments. They have their own deserts to expand into anyway.
that what the equities market is for:
see announc’s from:
REY
OBL
ANQ (poetry …..vai a convertible !!!)
and many many many more ……
rgds
simon
Hi all
I wonder what people make of this article:
http://www.telegraph.co.uk/business/2016/07/31/texas-shale-oil-has-fought-saudi-arabia-to-a-standstill/
In particular these two nuggets:
“Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week – with some poetic licence – claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel.”
and
“The ‘decline rate’ of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more.”
To my non-expert eyes this appears to be one of those articles which has a tiny grain of truth (yes, frackers have cut costs somewhat and gotten a bit more productive) with an awful lot of utter PR spin, BS and nonsense.
I would be interested to hear some more expert analysis of the article.
Thanks
Hugh
See above for previous comments on this, and:
http://oilprice.com/Energy/Energy-General/Pioneers-2-Operating-Costs-Fact-Or-Fiction.html
As long as they don’t break SEC rules the CEO’s can say whatever they like to make money, and usually do.
I’ve a new update on shale oil & gas production in the US, here.
The Woodford is not what they are drilling currently. Past data on the Woodford will tell you very little. They are drilling Mississipian or Meramec wells (NFX, DVN, CLR, MRO) These have much higher cuts of ~46API oil (at least for the first year). One of the wells I have interest on had the attached initial 3 month payout. I’m interested to see the decline over the next 12-18 months but @ well cost ~5 million to drill, I can see it being profitable (and no it wasn’t highlighted on any presentations).
GJ. Thanks for the information.
Where do you arrive at $5 million? Is that to drill, complete and equip?
Seems like CLR is referring to $9-$10 million.
I am taking it from the Newfield presentation. They quote $6.8 M for gross drilling, completion, artificial lift and facilities costs (10,000′ Lateral). This was a 4900′ Lateral so I just guessed. I noticed as you go from east to west across the play you have to go much deeper and into the over pressured area which requires stronger pipe? (more expense?) . This is in Kingfisher county so more to the east. CLR is mostly west (Blaine County) Devon and Marathon in the middle (Kingfisher, Blain and Canadian Counties) and Newfield toward the East (Kingfisher and Canadian).
according to the CC they have 6 rigs drilling Meramec and 5 rigs drilling in woodford in the stack area.?
The US needs to produce more oil, what there is available for consumption, the supply, isn’t enough.
If there were more fuels available for dispensation, the numbers of automobiles could increase. America needs more drivers behind the wheel on America’s highways and byways, there should be more traffic in every city, more fun for everyone. Road Rage, the sport of enraged drivers, needs more airtime.
It is too bad that there only 260 million vehicles turning and swerving everywhere you go, a new goal of 323,000,000 million can be reached. One for every person fogging mirrors here in the Land of the free.
Just not enough numbers to analyse, definitely need more numbers.
All we need is to have just 32,000,000 car owners sell their cars, then go out and buy a new car. Another giant step for mankind. The number of cars can increase 64,000,000 in less than a week.
One more achievement to meet the goal. More of more, we need more more. Helps the numbers.
The price of rock oil should really be a higher number.
More cow bell.
Enno, to your question above. We are in 10 Woodford wells to date. Production history ranges from 5 years to not yet completed. As I have mentioned numerous time on this blog. Since the “discovery” of the Woodford industry has concentrated its efforts within condensate window that varies from 10% oil to 30% oil with 25-40% NGL and the remainder being nat gas. To the west and down dip into the basin the Woodford produces dry gas, as you move to the east up dip out of the basin the Woodford produces higher-levels of oil (46api) with oil being 60%, NGL 15% and the remainder nat gas. The ratio can change as you move either up-dip or down-dip.
Our oldest well was drilled by Marathon has produced ~5BCFG, 235,895BNGL and 45000BO, and is near the down dip limits of the condensate window still producing 2000CFGD + 80BNGL +10BO. We have 3 other wells in that area that are younger but have similar production profiles. When the units are full development we will have 30 wells in this area. We are watching with interest the density units CLR is producing to help determine what will be the best profile for development.
With respect to the oil window, we have one well with a production history of one year. It has produced 100,000BO and 1BCFG and is producing at a “constant” rate for the last 8 months of 200BOPD and 2oooCFGPD. I have no idea what this well will produce in cumulative production, it is to early. What I can say is that we will make money as long as we do not have some type of engineering failure. Marathon has offset this well in two directions.
I will also note CLR announced a acreage sale of 29,500 acres for $9500per acre which is up dip woodford, “oil window”. It looks to me that they sold acreage that was outside of the up dip limit of the springer so based on my info of the area the sole objective in the acreage they sold would be Woodford oil. In the area down dip, we have WOODFORD, Springer and Hoxbar stacked up. That is all I can share at this point.
Thanks for the response TT. It’s a pity it’s so hard to get comprehensive OK production data. According to the pitches, there’s a lot going on there.