Wow! Man, they hit a lick on reserves with the Endeavor acquisition. Hee hee. I'd heard that Endeavor had a big inventory of DUC's (PUD?) and FANG essenitally shut down Endeavor drlg. rigs and just completed DUC's the last half of 2024.

56 cents for natgas.

$58 is $54 and its net back on $54 is $20, no more. $21, maybe, at 56 cents per MMBTU.

People are actually quite illiterate about oil and gas. Berman is at least correct about that. 18 years ago my finding costs were 60% less than they are today, my OPEX costs about 50% less than they are today. Yet my product prices are the same as they were in 2007. How does anybody survive that? Who wants to "invest" in that sort of business model?

People whine and throw a fit over oil prices, but they have no clue what it takes, what it WILL take, to ensure they have enough oil to piss away like it was nothing. We use more of the stuff today than ever. Nobody remotely thinks about conservation, and what tomorrow is going to be like. They were getting smarter about it, then shale oil came along in 2008-2009 and everybody got really stupid again.

Indeed it is stupid. I was reading somewhere lately that the average weight of automobile sold, is now as heavy or more than the autos just prior to the 70s oil crisis. They didn't think anything could change cheap at the pump then either.

5 1/2 In. OD production casing from surface to the toe of a lateral represents about 5.5% of total wells costs and a 30% increase in production casing would equal about a 1.4% increase in well costs. But all tubulars, including surface casing, intermediate casing strings and production tubing probably represent 11-12% of total well costs, so yeah, it hurts. 30% for production casing at $58 net at the well head means the well has to produce 7,000 more barrels of oil just to pay for the increase. All tubulars, same 30% increase, 20,000 more BO. Just to cover cost increases. Steel for rods, flowlines, treatment vessels, heater treaters, water tanks and oil storage tanks, PU's, etc. etc. probably means well costs just went up close to $1MM and that will require 50,000 BO of additional EUR to pay. Midland Basin wells make 435-450 K BO EUR's over their entire life (Novi).

The plan always was financial oppression to get oil prices down. Bessent crashing the world for a quarter point lower rates will go down in history.

Have a good weekend, thanks for playing.

So shale oil opertors have to drill shale oil wells are they are dead ducks. The weighted annual decline rate across all linage wells, whatever the basin is something like 38-41%, new longer lateral wells decline 74% the first year of production, terminal decline rates for older legacy wells making 50 BOPD or less can run from 20% annually in the Eagle Ford to 12% in the Permian.

You set aside a portion of your projected revenue based on oil prices (futures), make a drilling budget and stick by it. Most lenders expect a minimum debt to asset ratio, so you have to keep adding assets that are going out the back door at roughly 40% per year. Screw long term debt, you are not thinking about paying that down until its due; in fact you have to borrow money to pay dividends. Your debt keeps going higher as wells get worse productivily, gas is now 40-50% of yout production stream and is not worth squat unless you are Exxon. Fang is the 2nd largest producer in the Permian and it gets jack shit for its gas, soooooo, its also the biggest flarer at 1/2 BCFGPD. Exxon, for all its no flaring bullshit is flaring away in the Midland Basin. See below, hot off the press from Novi.

You've got rigs under contract, frac spreads under contract and lenders breathing down your neck. Back in September and October of last year you drilled wells, set pipe on them and got 'em on schedule to frac. By February of 2025 they on line at whopper IP's (for increased cash flow)... BAMM!!! oil prices fall 10% in two days. You are loosing millions a day in revenue and your new wells are at their finest moment in life producing like hell, for much less money than you need.

What do you do now? At $58 net at the well head you make no profit for 5 years, until the new $11 MM well pays-out. You'll be lucky to pay interest on debt. If this goes on another 90-120 days you will have to suspend dividends and likely re-finance debt. Do you keep drilling wells thru April and May that won't come on line until October and November and what will the price be then. More, or less? If its less you look like a dumb bastard.

The American shale oil industry belly ached for the past two years about Biden's lack of support, anti-oil stance...that he intended to eliminate fossil fuels. They whined like little girls about how that was holding them back and keeping oil prices high (?!). Now they hired a new prez and he's worse than the last one. He doesn't care whether you drill yourself out of business or not. All of a sudden a few less regulations about methane emissions, or permitting export facilities faster doesn't seem very important at all. $50 oil is killing you. How do you feel about that drill baby, drill shit now? Both parties suck. Neither know come here from sic 'em about oil and natural gas. They use the oil industry like pawns.

And where is the rest of the domestic oil industry while this is all going on? The little guys, the big guys in the Gulf of Mexico? Its standing back watching the shale sector overproduce and eat their left arm plum off. It's right arm was eaten off at the shoulder 5 years ago. Nobody in America gives a rats ass about your little problems.

Welcome to the oil business. Everybody says if we don't get more investment, prices will rise, then they do stupid stuff to make the price fall and dry up investment money completely. All you internet experts out there predicting peak oil better get some new erasers, back up and start again. Good luck !

If you are young and thinking about becoming an oil man, or an oil woman, try landscaping instead. Or pet walking. Both are way easier, and less risky. Day trading for dividends in the shale biz is like playing with 440 w, 3 phase electricity.

One of these January's in the not very distant future U.S. production is going to drop and it will not be weather related. January was a bad month, even Texas had to shut in production a few days. 300K BOPD is a lot, too much, too fast, to be well productivity related, or fewer longer lateral wells related. We have to not forget that January production was realized for the first time from drilling activity in the field back in April, May and June of 2024. The cold likely delayed frac'ing (its expensive to heat gelled carrier fluids in the frac process in winter in N. Dakota/Colorado or maybe the cold delayed bringing post flow back wells on line, into the tanks, for the first time.

When we start down it will be in small increments... at first. Then it will pick up steam.

Thanks for your comments and your support, sir!

Hole in Head.

Most people have no idea what electricity even is and your comments are true. Electrical energy suffers from the inverse square law in physics and that is why the further you send it the higher the voltage that is required and the higher the cost. There are two parts of the power factor, active power and reactive power, the second one being very important for voltage control and although not charged to the consumer directly large power stations have to provide it to keep the system stable with the wave form of AC power.

Without it there would be no extra energy to activate the field windings in transformers and large electrical motors. Severe weather anywhere is always a problem with power transmission and trying to add solar and wind into the mix is total stupidity. Most people would not know that the average wind turbine suffers gear box or bearing problems within seven years across all types and makes. You cannot design a wind turbine that can withstand the forces underneath a thunderstorm cell as well as the damage from lightning and hail.

There is no alternative to a thermal power station whether it be powered by nuclear, hydro, gas or coal, if you want long term stable and economic power.

Push: I am always happy to hear from you. Its a bitch getting old, uh? I've wandered to Australia many times, I think I will be wandering there much more as my step daughter is moving to Sydney.

I agree with you 100%. Its interesting to me the reasons folks are so adamantly opposed to thermal power, the fear they have engrained in their cranial capacity about the stuff. I agree waste is a big problem. I think, which means nothing, we should be focused on waste, what to do with it, and less on fossil fuels. FF is a long term loser. The only hope we have for the world energy crisis is thermal/nuclear. I am with you 5x5.

I need to tell a story about a thermal well blowout in the Cooper Basin. Brother, there ain't shit out there. I loved it !!

Mike,

I don't think nuclear waste will be a problem as new reactors can reuse the fuel. Where nuclear will become critical is in making synthetic liquids to replace oil. The late Prof.George Olah from UCLA was a Nobel price winner in 1994 in chemistry and he and two other professors wrote an interesting book " Beyond Oil and Gas - The Methanol Economy" where they showed you could spit hydrogen from water thermally at high heat from a reactor and mix with CO2 from the air using other chemicals and produce methanol and di-methyl either from which diesel and jet fuel could be made.

It sure would not be as cheap but it would be a practical alternative and keep the important parts of an economy going. Please find time to write about the Cooper basin as a friend worked on oil rigs there many decades ago.

Regards

Dick

You are going to be spammed with charts made by the finest keyboard warriors. You can't publicly say the Permian is rolling over, that's not approved mantra. All jokes aside, we sure could use some grown adults working on energy security for all of North America, rather than burying head on sand. This blog is invaluable for several of us, but it sure gets the cheerleaders skirts in a bunch. So I can just imagine how many post you may have to delete on this one. Cheers

Thank you HIH. She is reading OSB. Thats good. There is a proximity caveat to the SEC 5 year PUD rule, by the way. Can't book a PUD unless its 3000 feet away from a mother PDP wells and you have 5 years to turn the PUD into a PDP well or its booked, fake reserves have to be written down, debooked.

I agree with here 5x5 on the Permian.

Can you link us up to that number, sir?

I follow this pretty closely...it's been 70% in the Delaware for the past several years. Operationally it is now so problematic that these new wells that are IP'ing for 900-1000 BOPD don't flow back post frac, they have to be lifted by gas and/or ESP straight away. These are big ESP's that flat eat up electricity. High WOR therefore, and the move to electric plug-in rigs, even HPP spreads, is putting a big strain on the grid in West Texas.

It must be getting worse in the Midland Basin also then. I don't doubt you I would just like to check it out.

We all know where this is going. There is NO place else to put produced water in the Permian. It is stuffed to the gill plates. A buddy operates a SWD in eastern Reeves and they shut down last week from the highest injection pressures he'd ever seen (40 years) or heard about. They are done there. No mas.

Linked the tweet Mike. Assuming the information is good but......

I think its close enough to say that we have a big problem, Houston. I know from my contacts its a big problem and seldom one you hear from data-sell companies, the EIA, Rystad, David Blackmon with Forbes, etc. or the DOE. I would say, from what little I know, that the drill baby, drill bullshit has been called out and is NEVER going to happen.

I cannot tell you how many times over the past 65 years I have seen the premature death of hundreds of billions of barrels of guranteed recoverable oil reserves DOA...because of water. It is where almost all ANALysts fail in their predictions. I have never seen a bigger problem for getting shed of produced water than the current state of the Permian Basin. It is literally going to split apart along I-20

Downtown Midland.

ha ha ha!

My sentiments exactly. I don't think anybody was buying their magic elixir anymore, so they are changing marketing ploys. It has been quite a while since R&G used any of its data, or much of it, for instance.