...And Shale Oil 'Breakevens' (ug!) Goin' Up !
This is the first time I've seen a major data-sell outfit include dividend obligations and the incremental cost per BO for servicing debt in the same "breakeven" package. I find it rather remarkable, actually. It should have ALWAYS been applicable. I am unclear of Rystad's parameters for these exact costs, but I am buying into the $62 big time, save to say its actually about $30 higher than that.
Next thing to hope for from the MSM is an open admission of how much actually paying down debt adds to the breakeven calculation...AND the cost of well retirement. There is still $140 plus billion of outstanding long term debt in the Permian Basin alone, public and private, including outfits like Devon ($6B), FANG ($13B); $5B here, 3B over there x 15 different companies and pretty soon you are talking real bucks. Exxon, Chevron, Oxy, Conoco; all the big boys in the Permian have BIG debt. And for the record, their "assets" covering that debt are taking a big hit.
The real price of oil needed by the U.S, shale oil sector to carry on, keep drilling wells, pay investors, pay long term debt completely off and pay for plugging, abandonment and decommissioning is over $90. Sustained. That is the cold, hard truth that nobody will say...except here on oilystuff.com.
I always get a kick of out of the breakeven prices applied to the KSA for maintaining its society, and environment, when American ANALysts ignore ours completely.
Look at GOR in Reeves County and the portion of associated gas that now makes up the production stream from HZ wells in that county in the mighty Delaware Basin. Wow! Maybe the U.S. shale oil industry needs much higher natgas prices more than higher oil prices.
The sooner this all sinks in the sooner we can get past this stupid drill baby, drill plan, realize how little affordable oil (and natural gas) we have left in the United States and stop exports...start racking back for our own long term hydrocarbon savings. For our kids. At the moment the cyotes are managing the chicken coop and they are lying to you every chance they can. YOU are allowing them to get away with it when you vote.
I am pleased to see this, above, from Rystad. The last five posts we've made on Forum Stuff, about Berman changing course, goat pasture, green chickens, APP Basin natural gas, etc. have received 9,000 views, some requests for podcasts and an interview with a MSM big dog. Declined, of course. All. I can't talk about American energy policy without saying bad words; its just the sumbitch I am.
Not exactly oil related but still important . What does the capitulation of tariffs on computers , chips etc means for the USA ? A view
'' This is a curious way to 1. undermining U.S. manufacturing and 2. to increase the trade imbalance.
High price, high technology products can now be imported from China with low tariffs applied to them while low tech intermediate goods from China, which U.S. producers need for their products, will have super high tariffs on them.
If this stands it will lead to more low tech production of intermediate goods within the U.S. while the high tech production will stay and expand in China.
China had retaliated to the U.S. tariffs by applying a 125% tariff on all U.S. products. It is unlikely to exempt specific categories from that. At rates above 100% trade between China and the U.S. will within a short timeframe come to a complete halt.
The U.S. has now exempted some 22% in value of its previous imports from China from tariffs while China keeps tariffs on all U.S. products high. The trade between the two countries will thereby become more unbalanced than ever before.
The U.S. will continue to import 22% of its previous imports from China while its exports to China will shrink to zero. The absolute trade imbalance will thereby be higher than it was before Trump started his tariff war.
All this is a curious way of acknowledging defeat in the war. The rolling of heads will start tomorrow. ''
This poor grammar is brought to you by CNBC.
If this comment by the Secretary of Energy actually comes to fruition with oil at $50 or less it will be a miracle and the first time, EVER, the shale industry has "thrived" in its existence, oil or gas. The Secreatary is bullish because he was hired to be bullish.
To make his point, Wright referenced the 2014 to 2016 period, during which a boom in shale production coincided with lower global demand and brought oil prices down 70%. The industry was forced to grapple with a tidal wave of bankruptcies. But the energy secretary took an optimistic angle.
With respect to the Secretary, this is not what happened at all.
From 2010 to late 2014 the U.S. shale oil sector added 4.5 MM BOPD of LTO to a balanced world oil market and the price fell from the mid $90's to the high $30's. It grew all of that production on borrowed capital, on debt, and it has been proven at least $200b of that debt was never paid back; the shale industry shot itself in the foot and caused its own bankruptcies. Demand was consistent in 2014, overproduction brought the price down. He knows that. The falling demand thing is NOT the truth.
In 2016, when OPEC cut its production quotas, the price of oil went up into the mid $50's. U.S. shale borrowed more money, created more debt (still outstanding) and added another 4.5 MM BOPD of LTO to the world market that was ALL exported. That all happened on debt, not innovation, or by driving costs down. It added another $300B of ADDITIONAL debt that has not been paid back either. Costs are not going down, they are going up. Steel tariffs are causing oilfield tubulars to go up 40%. Produced water costs are skyrocketing everywhere. Below $68 a barrel the shale oil sector cannot make money, not ENOUGH money to pay dividends to investors, drill wells, pay down long term debt [STILL upwards of $150B after $130B of backrupticies (2017 to 2021 )], and set aside retirement costs for P&A, etc.
Statements like these do our nation no good whatsoever. They create false security about our future and are not realistic. Hydrocarbon exports from the U.S. should cease immediately and conservation be implemented across the entire nation to preserve our natural resources. We are going to leave our kids with no hydrocarbons and nothing but massive debt.
In a move that stunned traders, analysts and policymakers alike, China has just announced a complete halt on all liquefied natural gas imports from the United States. A decision made abruptly with no prior indication, no phased reduction and no explanation beyond a terse statement from Beijing.
https://www.dailykos.com/stories/2025/4/9/2315581/-China-ban-on-LNG-imports-shows-they-have-studied-and-understand-US-vulnerabilities
Talking of paradox . Trump wants low prices but low prices means the shutdown of shale = trade deficit increases . Shale exports is 4mbpd = 4x$ 50 = $ 200 million per day = $ 6 billion per month = $ 72 billion per year . Trump is applying tariffs to lower the trade deficit . Caught between a rock and a hard place .
George Kaplan needs no intro , so just a copy/paste .
George Kaplan on April 11, 2025 at 1:22 pm
This site shows drill pipe imports to the USA. From a quick look it seems at least half comes from China. With the dollar dropping in value and the oil price down a lot the light tight oil producers profits are going to be suffering , they might even be in difficulties in maintaining day to day operations. Note that even last year when things were much more propitious a couple of the largest independents still made slight losses and three got bought or merged.
https://www.volza.com/p/drill-pipe/import/import-in-united-states/
I wiite about a lot of stuff in the oilfield too...
What kind of sorcery is this?
https://www.reuters.com/business/energy/chevron-triple-frac-half-permian-oil-wells-2025-cut-costs-time-2025-04-09/
A lot of people will try to assign market reasons for today’s wild moves in markets. But in truth this is what happens when the UST and Trump take over the role nature meant for price discovery.
Buckle up Buttercup.
Courtesy Rystad
A good chart showing the downside of the U.S. shale oil phenomena, which in 2014, and the lifting of the U.S. oil export ban, went on a drilling binge and by 2019 added 4.4 MM BOPD to the world oil market, all exported to foreign countries.
Thank God for shale oil, people say. Well, it sucked all the investment capital out of the world conventional explortion sector and cost the U.S. some $500 B of lost capital. Shale oil quality does U.S. refineries no good whatsoever, that is why it is exported; shale stuff declines 85% the first 32 months of production life and requires one $10MM well after another to maintain, at 450K BO per well EUR, give or take.
The Permian HZ play has produced 14 B BO in 12 years, from 60,000 wells. Guyana, for instance, will ultimately produce 14 G BO once Exxon's block is delineated vertically and horizontally, of good oil, with fewer than 100 wells and for 25% of the total well costs in the Permian HZ play. Guyana will likely produce 35 years before EOR; if we stop drilling HZ wells in the Permian half of its production would be completely gone in 15 months from decline.
There will come a time, soon, when affordable shale oil is depleted and we're going to wish we had invested more in conventional exploration and production that declines <5% per year and lasts 30-40 years, whose oil quality is generally suited better for American refineries and that is by far more profitable, with much higher rates of return on capital invested than shale.
I suspect some smart folks in the world already see that coming and is why conventional investment has been creeping up since 2022.
I am a political atheist , live in Europe , aware that Mike does not like political posts . However this was too good for the USA visitors to shed a light on what is happening . A view from Sri Lanka ( no chance of war) . Mike is free to delete . However then
USA = United States of Amnesia .--- Gore Vidal .
Disclaimer ; I have read a lot classic authors like Vidal , Steinbeck , Miller , Capote , Hemingway etc
and some new IYI (Intelligent Yet Idiot) like Thomas Friedman , Ray Kurzweil etc .
https://indi.ca/trumps-tariff-theory-the-miran-mirage/
When I was young I saw a movie '' Where were you when the lights went out '' . Starring Doris Day . So my question '' Where were you when Mike S was warning you '' . Hey , we were all young once .😢
https://x.com/chigrl/status/1909995715947884685/photo/1
Good post (per usual) Mike.
What could possibly happen if men set $Oil prices behind close doors Vs. Price Discovery?
We're about to find out.
If FANG 1. Has invested $82 Billion in the Permian
2. If $20 Billion of that is in Unproved Properties
3. Of the Remaining $62 Billion, $22 Billion has been depleted or written off as losses
4. The Remaining Net Investment in Proved Properties is $62-$22= $40 Billion
5. An appraisal of the Proved Properties is run on 12/31/24 with an Oil Price of $76.15
6. This appraisal results in a Present Worth at a 10% DCF of $39.6 Billion
7. Why isn't the breakeven price $77?????
8. I would guess that the debt would have to be subracted from that- so why isnt it $100??
9. How much better can the Dallas Fed be at figuring break-even???
 '' The last five posts we've made on Forum Stuff, about Berman changing course, goat pasture, green chickens, APP Basin natural gas, etc. have received 9,000 views, some requests for podcasts and an interview with a MSM big dog. Declined, of course. All. I can't talk about American energy policy without saying bad words; its just the sumbitch I am. ''
>> start racking back for our own long term hydrocarbon savings. For our kids
This country, boomers especially, don't give a flying f*** about their kids or the future. It's all about high asset prices for these folks, future generations be damned.
>> Or what; we just leave it, and hundreds of billions of dollars of debt, for our kids to deal with?
That is exactly the plan.
Anyone who has worked p and a jobs knows just how quick a simple "cheap" job can go sideways. Adds up real fast. I do not think for 1 second rystad had a handle on the true cost of cleaning up the shale mess. I doubt that it can even be done at this point. Once the patch rolls over and reclaiming begins, where do they think the cash will come from? Windmills?