AS CRUDE PRICE IMPROVES: CAN OPERATORS PRESERVE COST SAVINGS? - GoHaynesvilleShale.com2024-03-29T00:04:29Zhttps://gohaynesvilleshale.com/forum/topics/as-crude-price-improves-can-operators-preserve-cost-savings?commentId=2117179%3AComment%3A3622620&feed=yes&xn_auth=noI think there is an opportuni…tag:gohaynesvilleshale.com,2016-08-23:2117179:Comment:36226202016-08-23T13:51:58.877ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>I think there is an opportunity to take advantage of the production characteristics of unconventional reservoirs (high initial production, long decline tail) to maintain a more balanced supply/demand equation. Every energy company has its own Internal Rate of Return (IRR) targets and that is actually a more important metric than total production volume. As established basins are supported by adequate infrastructure particularly the connection to transportation options, the tendency to boom…</p>
<p>I think there is an opportunity to take advantage of the production characteristics of unconventional reservoirs (high initial production, long decline tail) to maintain a more balanced supply/demand equation. Every energy company has its own Internal Rate of Return (IRR) targets and that is actually a more important metric than total production volume. As established basins are supported by adequate infrastructure particularly the connection to transportation options, the tendency to boom and bust cycles should fade. I think "manage" is a better descriptive term than "restrict".</p> Do you think US drillers woul…tag:gohaynesvilleshale.com,2016-08-23:2117179:Comment:36226192016-08-23T13:43:16.157ZP.G.https://gohaynesvilleshale.com/profile/PG
<p>Do you think US drillers would restrict production to maintain higher prices?</p>
<p>I can see right now costs are an issue...but assuming it wasn't an issue.</p>
<p>Isn't that what they'd like to see OPEC do?</p>
<p>Do you think US drillers would restrict production to maintain higher prices?</p>
<p>I can see right now costs are an issue...but assuming it wasn't an issue.</p>
<p>Isn't that what they'd like to see OPEC do?</p> Supply greater than demand de…tag:gohaynesvilleshale.com,2016-08-20:2117179:Comment:36224682016-08-20T19:15:35.966ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>Supply greater than demand depresses prices. However a lower cost of production per unit increases profit but does not necessarily lead to greater production volume. Two factors served to wreck the supply/demand balance in the early days of the established economic unconventional basins. The requirement to drill wells to HBP leases and the requirement to maintain cash flow to service debt. The first basically no longer exists and the second is in the process of being mitigated by M&A…</p>
<p>Supply greater than demand depresses prices. However a lower cost of production per unit increases profit but does not necessarily lead to greater production volume. Two factors served to wreck the supply/demand balance in the early days of the established economic unconventional basins. The requirement to drill wells to HBP leases and the requirement to maintain cash flow to service debt. The first basically no longer exists and the second is in the process of being mitigated by M&A and bankruptcies. The industry will be better in the future at balancing the equation it just has to get over the lingering effects of the over-production price decline and the massive debt load many companies took on during the shale land rush.</p> The more efficient they becom…tag:gohaynesvilleshale.com,2016-08-20:2117179:Comment:36223662016-08-20T19:06:40.046ZP.G.https://gohaynesvilleshale.com/profile/PG
<p>The more efficient they become...the lower prices will go...<br/>More production = lower prices</p>
<p>The more efficient they become...the lower prices will go...<br/>More production = lower prices</p> Maintaining some significant…tag:gohaynesvilleshale.com,2016-08-20:2117179:Comment:36220582016-08-20T16:09:08.363ZSkip Peel - Mineral Consultanthttps://gohaynesvilleshale.com/profile/ilandman
<p>Maintaining some significant portion of the cost savings is critical to the future of higher cost basins such as the TMS. Many of the improvements in well design are associated with higher costs such as longer laterals, more water, more sand, etc. If those cost increases can not be offset with some meaningful long term savings the only other path to improved well economics is higher commodity prices. And that does not look to be in the cards for some time to come.</p>
<p>Maintaining some significant portion of the cost savings is critical to the future of higher cost basins such as the TMS. Many of the improvements in well design are associated with higher costs such as longer laterals, more water, more sand, etc. If those cost increases can not be offset with some meaningful long term savings the only other path to improved well economics is higher commodity prices. And that does not look to be in the cards for some time to come.</p>