I've been working in the "Oil Patch" for 35 years and there is an old saying. "The cure for high oil prices are high oil prices and the cure for low oil prices are low oil prices". We are in a period of world over supply and these conditions can take years (not months) to correct, but they will correct if Skip is mistaken in his last post. I for one believe Skip is probably right. I think mineral owners need to factor in the changing world landscape of energy. This means the sooner you can incentivize someone to produce your minerals the better IMO. The good news for the TMS is that it is no longer a Wildcat play (the oil is there), but as Skip said it is not a low cost shale play and therefore at today's prices the development investment has dried up.
I have a question for the TMS group. At one time there were over 1 million acres under lease in the TMS. How many acres are under lease now and how much time is left on undeveloped leases in general?
The following may not be a popular suggestion with all members, but if I had an expiring lease in the TMS in this economic environment, I would work with the Oil Co to extend the lease at terms that reflect economic realities. Most companies that drop all their leases in a particular trend never come back even when prices recover.
Once bitten twice shy comes to mind.
Tom, I don't think you can equate the TMS to other shale plays and you can't even compare one tract in the Bakken to another tract in the Bakken.
What makes much of the shale plays different to other oil fields that just needed high oil prices in order to get back going is that 90% of the shale (oil) E&P companies never made a profit even at $100 a bbl. The shale plays were fueled more as a equity play and not a pure energy play.
Next time around the smart money won't make the same mistake just as they won't re-visit the dotcom bubble anytime soon.
I predict that the shale companies in trouble will be forced to sell out cheap (some already are) or they will go bankrupt as soon as their financiers quit restructuring the bad debt. I also believe that some of the sweet spots will sustain a level of drilling and production, but as for as a erratic boom where profit is overlooked due to an investing mania, I don't think so.
Also to go a little deeper on that last thought. The only reason the bankruptcies have not been worse in the sector is because the banks, hedge funds and other institutions refuse to write down the loss on their books so they restructure the loans. They are hiding the bad bet to their investors. Make you feel good for you 401k and or mutual funds huh?
So I don't think the TMS rebound will happen along side the conventional oil industry. I will happen but not anytime soon.