Replies to This Discussion

Permalink Reply by GoshDarn on June 22, 2012 at 7:28

I see an "oil" downdraft due to the world markets.  The contrarians and short sellers are driving the hedge.

NG has based (but it's still at a slight risk due to the iffy uncertainty coming out of the world markets, yet NG seems to have some safety per the new clean-air EPA regs and the grid conversions, etc.).

So, the smart money is going to safe harbors to wait it out.  The aggressive speculators are taking advantage of the short side.

And depending on world events and some unknown factors -- this worldwide downdraft could have real legs.  Maybe 6 months, maybe a year or longer.

Choppy seas.

Then again, with yet another fed QE and with support from the Euro Banks, if the Chinese and mideast money tycoon/managers calm down and if they don't get too skittish and protective of their vast capital . . . fresh funds could come in to certain markets per a desire to lock in superior returns on the short-term risk and mollify this downdraft.

Ergo, the cards might flip over on the casino table by Oct. (we can only hope).

 

 

Permalink Reply by North LA on June 22, 2012 at 14:44

These new fields are really a drop in the bucket compared to total US use.

 

http://www.indexmundi.com/energy.aspx?country=us

 

Oil price is based on the world market unlike NG which is domestic. The market is down because of a worldwide economic downturn.  If it gets too low then the Arabs will cut supply and prices will go up.  The Saudis have been noted to say that $80 is their target price and most unconventionals are economic at that number.

Permalink Reply by Keith on June 22, 2012 at 16:17

North La, I agree, heck the Bakken for all the sound and fury hasn't even recouped what was lost since North Slope production peaked. Our problem with energy prices going down (and I don't think it's a big problem) is that the worlds economy is recognizing that bailouts aren't the cure they are the desease. America was built with cheap fuel maybe we can rebuild it with some!

Permalink Reply by North LA on June 23, 2012 at 2:18

 "My point is that the oil price is NOT controlled totally by the world market anymore."

 

I see what you're saying, but we are part of the world market of oil. We will never have complete energy independence through oil unless there is a law that doesn't allow the oil companies to sell the oil in the world markets. I wouldn't want that BTW because we would end up like the 70s price fixing ordeal.

 NG on the other hand is a different story. We keep it here so it's only ours and it's plentiful. I think NG will eventually move to a transportation fuel but right now everyone wants to make sure that supply remains constant and this isn't a flash.

Permalink Reply by GoshDarn on June 23, 2012 at 7:06

Mr. Broadbent, your pondering outside of the proverbial box and your insightful questioning of conventional assumptions is quite refreshing, to say the least.

Excellent analysis.

Indeed, those who are true visionaries know to always question the frequently repeated pablum that many times turns out to be completely wrong.

In other words, most conformist only rely on what they've been told by those who are simply regurgitating back the facts from the most recent past (and the easily charted predictions from).

But the wise know that the advances in science and the collateral economics of change (and associated efficiencies) -- per the evolving of more profitable markets -- is never static.  What was an indisputable fact only ten years ago (e.g., that the U.S. was running out of NG and would thus need to import LNG and that the associated NG future prices would skyrocket up) --  turned out to be completely wrong.

And wrongheaded, too. 

Yet, that's what the facts showed not that many years ago.

And that's an undeniable talking point. 

Of course, science and new technologies trumped that false thinking, did it not?

Ergo, the energy target is always moving.  What has been preached by certain quarters will not be legit dogma until the future proves it to be.

The wise know to question and stay nimble. 

Like they say, it's best to always keep an open mind.

Note:  Some may not believe this, but it is possible that the Saudi's (and some of the South Americans) are possibly much more savvy to lower oil prices than many pundits could imagine.  And if the Saudi money mangers are gaming it, they'll make beaucoup money on the down side via playing the shorts.  

Saudi money can, in fact, make money many ways, not just by pumping oil.

Always a pleasure, Ray.  Your thinking is worth reading, that's for sure. 

 

 

 

Permalink Reply by rasputin on July 1, 2012 at 4:31

Do you know anyone who might have a handle on lease operating expenses for the new long lateral Tuscaloosa Shale wells operated by Encana and Devon in Mississippi and Louisiana.  I am trying to complete an economic analysis of these wells but am missing some data.  You may use a private reply if you do not consider this subject to be of interest to this board.

Permalink Reply by GoshDarn on July 1, 2012 at 7:03

rasputin:

Good question.

Certain members who track the intel via the TMS, AC, etc. -- e.g., Steve and Joe Alridge -- might could point you in the right direction.

Also, the very best for honest straight-up insider "truth" is Les B. (i.e., the gold-standard on GHS per his many decades in the O&G biz; and known for his exceptional expertise and helpfulness); yet unsure if his focus includes that data (or not) per it being S. La. and oil.

Finally, there's yet another certain insider who might know, but he might be reluctant to advise.

That's JMan.  Yet he hasn't been posting recently (or maybe I missed it, if he has).

Good luck.   

Permalink Reply by Steve on July 1, 2012 at 8:08

I would check their website for an explanation of their LOE. At least if you pulled a couple of examples from different operators you might come up with a good range. It should be a part of their quarterly financials...

Permalink Reply by Lerret on July 12, 2012 at 8:36

The unconventional plays have a long term chronic problem. They are not economic when exploitation is not systematic and measured.  "Boom & Bust" has always been the bane of the business.  WIth the huge amount of associated gases being producted in the "liquids rich" plays you can expect Nat gas prices to stay WELL BELOW the cost of leasing, drilling, and producing.  If the well is producing it is economic to cash flow it...but it will not pay back the cost of leasing and drilling...

The "conventional" plays have always been economic and could be yet. The issue is land.  If a player with a conventional idea buys 1 acre in say the bootheel of Missouri...then the next thing you know someone has leased huge swaths across the own region and holds it hostage at high prices.  The conventional prospect might only have 1,000 acres and anticipate a trap of a few hundred acres.  Holding more than 10,000 - 15,000 acres is not practical.  Today companies won't even look at positions less than 25,000 for their unconventional plays. They are driving the shallow players out of business because they cannot afford the lease cost for a well that cannot produce but limited quantities of oil or gas.

So those with shallow or conventional prospects cannot accumulate enough acres cheaply enough to attempt a conventional sand trap or strat test.  The conventional investors are there. Many are on the sidelines and complain they cannot get enough acres to drill them because someone is piling in and gobbling up acres indiscriminately. 

Look at the Fayetteville play when Chesapeake went into Lee and Monroe counties and bought the county up. Cooler heads were saying it wasn't rational to pay $300 for land there.  An outfit named Texas Crude had a deep conventional prospect that they tried to peddle to a partner for 20 years. They gave $10 an acre or less for leases. When Chesapeake came along, Texas Crude was called crooks, weasels, etc. Their 80 year old geologist was called a liar and cursed.  So what happened?  CHK drilled wells that were complete busts..as predicted. Maverick drank the kool-Aid and was poisoned by it. They went under.  Hallwood went under. Some landowners bought stock in Maverick after leasing to them.  Boy...how did that turn out?  I personally was accused of being an idiot and "out of touch" with "modern" oil and gas. One banker even went so far as to call me up and threaten me with a suit.  Seems he was funding a bunch of leases with an outfit run by an ex con promoter who left hundreds of people with unpaid drafts...drafts folks wasted fees on trying to collect....and the con was still trying to peddle those SIGNED leases long after the drafts had expired.

Look for gas prices to be chronically low for a decade or more.

 

Permalink Reply by ALongview on July 12, 2012 at 8:43

Lerret,

Could you clarify your opinion of chronically low?  Also, I am curious to hear your opinion on the gas factory concept and the breakeven prices on them going below $3.00(per Encana).  What kind of returns are the big E&P's needing before moving back into dry gas only plays?

Permalink Reply by North LA on July 12, 2012 at 10:09

Lerret,

I see why you don't like SWN now. Things change.