United States shale oil is NOT profitable at $65 WTI NYMEX. At that price it takes 3 plus years and 80% of a Permian Basin's type curve EUR to reach payout. That leaves a 20% margin, realized over 12 more years, give or take, to accumulate enough to be able to keep drilling $10MM wells, pay 5-7% dividends, pay long term debt back (still over $100B in the Permian Basin alone, and growing) and to rack back enough for retirement of wells and decommissioning of infrastructure. Forget the $500B the shale oil sector has already lost, $65 oil is not enough for shale oil to pay all of its current liabilities. Making pizzas, changing truck tires, producing oil and natural gas...liabilities have to all be paid. Until they are, you are never truly profitable, nor is there such a thing as "free" cash flow, is there?
U.S. shale oil production in the Permian Basin is still holding its own, barely, because of super long laterals being squeezed in between 55,000 legacy tight oil wells already drilled on less than 800 foot spacing in the Permian. That cannot continue before the sector is forced to move out into goat pasture where wells will cost more, make even more gas and less liquids, where profits will be worse.
Trump wants prices even lower than $65. He promised to cut gasoline prices in America by half.
Mike Sommers is NOT telling the truth. Chris Wright is NOT telling the truth; we cannot grow U.S. shale oil or U.S. shale gas when product prices are headed lower and costs are headed higher.
I love my country, I love my industry, but I am up to my hard hat in lies. It is getting harder and harder to be a Republican these days...because of this dumb shit above. Did anybody in this meeting have the cajones to tell Trump the truth? Or do you stand up to a fella who told you to your face he did not care if you drilled yourself out of business?
Well, Hamm got close with his comments about $80 WTI NYMEX and Sheffield got close with 8 more years of profitable locations in the Permian (if you whack that by half)...who else? Diamondback has $18 B of long term debt to pay back, and 8,000 HZ and vertical wells to plug in the Permian. How much of that sort of stuff got discussed at the pow-wow yesterday?
Not much, I'll bet. Best not cross the man that controls LOTSA other people's money.
Mikey S.
Toasty!
Thanks for sharing Nate's podcast. It's good to know there are some decent people out there.
The Exxon Petroleum Institute (API) pays Mike Sommers over $2.5MM a year to get on CNBC, Fox Business, etc. and look us in the eye to say exporting shale oil to China, for instance, is good for our future. 100 years of natural gas resources, Real Clear Energy is paid to say. More pipe, more export facilities, fewer regulations is all we need to dominate the world with American energy, they need desperately for us to all believe.
What else can we expect ?
Pour yourself a drink, peferably stout, and watch this.
We lie to ourselves here in America every minute of every hour about energy and our nation's long term energy security...to avoid discomfort. And not have to face fear.
There are likely people that understand this theory more than we think, that is why so many tell so many lies while...making so much money from telling those lies. Exporting our last remaining oil and natural gas resources, for instance. They think the more money they have the better their advantage will be over others. In other words, they're getting ready. At other people's expense.
The Exxon Petroleum Institute (API) pays Mike Sommers over $2.5MM a year to get on CNBC, Fox Business, etc. and look us in the eye to say exporting shale oil to China, for instance, is good for our future. 100 years of natural gas resources, Real Clear Energy is paid to say. More pipe, more export facilities, fewer regulations is all we need to dominate the world with American energy, they need desperately for us to all believe.
This is pretty good, above. You won't like hearing much of it, betcha.