[Lore]

$this->bbcode_second_pass_quote('Plantagenet', '')$this->bbcode_second_pass_quote('Lore', 'I')'m sure the California gold rush produced lots of jobs at the time and then lots of ghost towns.

[rockdoc123]

Oh my gosh...the sky is falling, the sky is falling. What a load of bollicks. I'm sorry but the author of this article seems to think this is all new information, that somehow he found out some dirty secret or better yet it is something that the oil industry doesn't know. Nothing could be further from the truth. This is part of shale gas/oil/liquids 101, the introductory course. It has been talked about at oil and gas conferences for the past decade. It is the basis by which oil companies plan their budgets.
The decline is not surprising...most of the declines actually sit fairly well in the envelope that is used to understand EUR in the Bakken and for that matter every other shale. It is predictable and there is not a single company working in this business that has claimed otherwise. There is nothing shown here that is unusual or that worrying. Ever oil company in this business knows it is capital intensive, much more so than conventional drilling but that is offset by the predictability. The question for most of these companies is what makes more sense investing say $200 MM to get a 20% IRR at a chance of success of around 95% versus investing say $20 MM to get a 20% IRR at a chance of success of around 20%. If you have access to the capital (which the big shale players do) then the answer is pretty obvious, you take the low risk bet. Being a capital intensive business it is also important that costs are controlled as that is what speaks to return margins.

The economic analysis in this paper is by the way quite flawed. You can not mix up a bunch of wells that have different drill depths, number of fracs, type of fracs etc and quote one well cost. The $10 MM number is high and is more like what is associated with the deeper wells in other plays. It also ignores the cost control synergies that are achieved by multi-well programs and completions. The breakeven costs he comes up with of $80 - $90/bbl are quite a bit higher than the industry has been talking about. As an example Bernstein Research not that long ago quoted a value of $55 - $70/bbl as breakeven for the Bakken.

[Plantagenet]

Thanks, Rocdoc, for bringing your experience and knowledge on the oil biz to us here.

[TheAntiDoomer]

Thanks Rocdoc, you da man.

[Pops]

$this->bbcode_second_pass_quote('rockdoc123', 'I')'m sorry but the author of this article seems to think this is all new information, that somehow he found out some dirty secret or better yet it is something that the oil industry doesn't know. Nothing could be further from the truth. This is part of shale gas/oil/liquids 101, the introductory course. It has been talked about at oil and gas conferences for the past decade. It is the basis by which oil companies plan their budgets.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'I') have no idea what your point is? Other than flat our wrong.

[ian807]

The fact of the matter is that oil shale or not, we're in a position of running as hard as we can just to stay in place.

Remember, it's all about net energy. If you're not getting more energy from the oil, than it takes to extract the oil, what's the point? And you have to get a lot more. It has to be enough to support extraction, refining and distribution PLUS the economic activities for which it's intended, mostly transportation.

The first Pennsylvania oil wells were getting estimated energy returns of 1000:1. In West Texas in the 1960s, estimates ran to 100:1. These days, even the Saudi's are only getting estimates of 30:1 and oil sands in Canada have nice low returns of 4:1.

Bottom line? The total net energy in first half of the conventional oil (energy return x quantity) was much greater than the total net energy remaining in the second half of the conventional oil.

Imagine a battery that lasted 10 hours, but on the first hour, you got 1000 watts, the 5th hour, you got 100 watts, and at the 10th hour, you're pulling barely a watt. That's roughly analogous to our situation with oil.

The oil is there, for sure, but we got the high net energy stuff first (i.e. light sweet crude, close to the surface). What's left is, for lack of a better word, crud. Yes, we can get it. Yes, it'll work, but it just takes more energy to get it out and refined than it used to, increasing the price and decreasing the utility forevermore. There will be price fluctuations as with any commodity, but the long term price trend-line goes up from here on out.

[kublikhan]

$this->bbcode_second_pass_quote('rockdoc123', 'I')'m sorry but the author of this article seems to think this is all new information, that somehow he found out some dirty secret or better yet it is something that the oil industry doesn't know. Nothing could be further from the truth. This is part of shale gas/oil/liquids 101, the introductory course. It has been talked about at oil and gas conferences for the past decade. It is the basis by which oil companies plan their budgets.

[Plantagenet]

$this->bbcode_second_pass_quote('kublikhan', '
')
The author's analogy to the red queen does seem rather fitting in this context, even if the industry can still turn a profit on the wells. Or maybe like a swarm of locusts. They swarm in, drill like crazy, then move onto the next patch to keep the swarm going. Yes, perhaps the better predictability vs conventional drilling makes it profitable. But all of it seems to be a far cry from the days of yore when we were finding Ghawars and Cantarells.

[Outcast_Searcher]

Re: Recent "shale oil is all an evil investor scam" posts.

Oh I see. So that's how the doomer crowd keeps their dream of imminent collapse alive. Cover their eyes when the evidence of lots of new supply is abundant, and convince themselves that it MUST be a scam or a conspiracy.

How has that worked for you for the last few years? How has it worked for your bearish market stance?

I thought this site was about trying to actually understand what is going on re oil and related energy, so one could learn, prepare, profit (i.e. to help be prepared to have the resources you need) -- you know, that kind of productive thing.

I guess that's all far too hum-drum. Well have fun with the doom. Meanwhile the "evil" MSM makes it more and more clear that the net energy production in the U.S. is looking more and more surprisingly bullish, compared to what was expected just several years ago.

[Lore]

$this->bbcode_second_pass_quote('Outcast_Searcher', 'R')e: Recent "shale oil is all an evil investor scam" posts.

Oh I see. So that's how the doomer crowd keeps their dream of imminent collapse alive. Cover their eyes when the evidence of lots of new supply is abundant, and convince themselves that it MUST be a scam or a conspiracy.

How has that worked for you for the last few years? How has it worked for your bearish market stance?

I thought this site was about trying to actually understand what is going on re oil and related energy, so one could learn, prepare, profit (i.e. to help be prepared to have the resources you need) -- you know, that kind of productive thing.

I guess that's all far too hum-drum. Well have fun with the doom. Meanwhile the "evil" MSM makes it more and more clear that the net energy production in the U.S. is looking more and more surprisingly bullish, compared to what was expected just several years ago.

[ian807]

$this->bbcode_second_pass_quote('Outcast_Searcher', 'R')e: Recent "shale oil is all an evil investor scam" posts.

Oh I see. So that's how the doomer crowd keeps their dream of imminent collapse alive. Cover their eyes when the evidence of lots of new supply is abundant, and convince themselves that it MUST be a scam or a conspiracy.

[AirlinePilot]

Read the article mentioned. Read all the posts here...rocdoc, I think you are missing the gist of what Rune was driving at. As we have a few years of data now on actual production, things just dont seem quite as rosy as the oilco's/investment pumpers seem to have touted a few years back. Sounds kind of familiar. I think his main point is..sure you guys can make money..provide a few jobs..but how long does this go on? At what point do we start realizing that each time we do one of these booms..Bakken, Eagle Ford, ANWR, offshore..etc......that we move further and further into the pardigm he is showing us. That paradigm is an acknowledgement that no matter how many resources we throw at oil production..manpower, capital, equipment, rigs, etc.....we seem to be running into the wall quicker each time.

It sure doesn't mean we should not do it, nor that the companies doing it wont make a whole bunch of money at it. The issue at hand is when do we wake up and realize its not going to matter how hard we try we wont be growing oil production anymore. For me this is the crux of a large problem the western economies are grappling with. Growth is impossible without cheap energy. We are screwing the pooch by not being a whole lot more aggressive in moving towards something NOT so dependent on fossil fuels and crude.

The article is simply pointing out the facts of decline in these well/resource types. We need more of this and less investment pumping. As someone else said here, there will be no limit to the shenanigans perpetrated on unwary investors as long as that is possible. The hype surrounding this resource has been nothing less than monumental...at least acknowledge that.

I see this article as "some" proof we continue looking for a dwindling supply of stepping stones on a desperate journey for BAU.

[Plantagenet]

We are going to have to use fossil fuel resources to transition to non-fossil fuel energy sources.

Its good that Bakken and other shale oil sites and the new abundance of NG is providing us with a last chance to get at more fossil fuels.

Its bad that there still is no credible plan from Obama or the other people in DC to use this opportunity to transition to non-fossil fuel energy sources.