[Simon_R]

Lurker, coming out of the shadows.

Got to say, loving the personal abuse

Not a Doomer or a cornucopian, somewhere in between.

however, where I live I have seen two farmers ploughing with horses this year, and several local authorities are changeing from bus to horse and cart ....... I am not interested in why (people get very excited about this), just the fact that they are, is enough.

I find it hard to argue against peak oil if the price of oil has increased to the % it has. It seems that we simply move the goal posts as to the definition of peak oil, and definition of 'crisis', to suite the argument of the protagonist.

Personally I am interested in hearing both sides of the argument to try to make informed decisions for my families future.

[dsula]

$this->bbcode_second_pass_quote('Beery1', '')$this->bbcode_second_pass_quote('TheAntiDoomer', 'I')t's run by Furher Leanan.

[dinopello]

$this->bbcode_second_pass_quote('Simon_R', 'L')urker, coming out of the shadows.

[Pops]

$this->bbcode_second_pass_quote('Simon_R', 'L')urker, coming out of the shadows.

Got to say, loving the personal abuse

Not a Doomer or a cornucopian, somewhere in between.

[dolanbaker]

$this->bbcode_second_pass_quote('Simon_R', 'L')urker, coming out of the shadows.

Got to say, loving the personal abuse

Not a Doomer or a cornucopian, somewhere in between.

however, where I live I have seen two farmers ploughing with horses this year, and several local authorities are changeing from bus to horse and cart ....... I am not interested in why (people get very excited about this), just the fact that they are, is enough.

I find it hard to argue against peak oil if the price of oil has increased to the % it has. It seems that we simply move the goal posts as to the definition of peak oil, and definition of 'crisis', to suite the argument of the protagonist.

Personally I am interested in hearing both sides of the argument to try to make informed decisions for my families future.

[C8]

The problem when people insult each other is that debates become more about "heat" than "light". The internet is vast and you can find almost any source to back up any insane idea. When people flame each other they just resort to pulling out questionable sources, using rhetorical devices, and manipulate emotions though propagandistic devices. Listen, if you just want fighting entertainment, one of those trash talk shows on TV is more fun by far.

I don't want flames, I want to learn something and work with people to discover answers. I value people who are civil and willing to question their beliefs- Plangenet impressed me with this quality recently. It seems that we are talking about PO and AGW, etc. but a big contributor to those problems is the human tendency to attack those who hold different views- it interferes with change. I switched from Oil Drum to here because I was hoping talking to a smaller circle of people would be more like a small town and engender civility. I also like the fact that a thread can be worked on for weeks (Drumbeat always starts over again every 2 days and this makes longer discussions hard).

The internet is filled with rudeness, flaming, misrepresenting facts, etc. - this is the easiest commodity to find when people are anonymous- like the rude driving on highways. It would be awful if PO.com went this way.

[SeaGypsy]

We have had our moments C8. A few years ago there was a lot of vitriol on here; the site is relatively very tame these days. I'm with you on your perception of TOD, which is less of a community site than a platform for certain VIP types and their cheer squads.

[Ferretlover]

lololololololol Things never change, do they?

[Simon_R]

$this->bbcode_second_pass_quote('', 'J')ust out of curiosity, where is "here" as a transition from motorised traction to horse is a major step down!

[Matt979]

Long time reader about this subject and many others. Generally interested in all perspective on things and my favorite topic is to study capitalism with the framework of history / social change and greed, its a very interesting topic and has always caused "interesting" events. Naturally since high oil prices in 2008 the topic of energy and economy is very interesting, and add that currently one of Wall Street reasons to run up the stock market and make a lot of money is the whole story about US energy independence.

Reading all the different articles on this subject and the checking facts its obvious they are hyping something again to make money, just like in 1999, 2008. So my cautious predicting is that one of the next catalysts for a new recession will be oil. Not because it will run out or anything, but because wall street and the financial system will stretch the rubber band with capital into expensive oil extraction again and it will snap back at one point causing lots of investment and capital being destroyed.

I don't see the end of things due to Oil and energy but definitely a very bumpy road, the main reason as always is that the great public seem mostly unaware of Wall Streets deeper motives and frankly like what they say just like 1999 and 2008. I personally is slowly changing my life style just like I did prior to 1999 and 2008 to be prepared for a new recession and one that might be bad if coupled with high energy prices. So I moved to town where I can walk to most things and large south facing roof for solar panels in the future, good size yard with room for garden, and a when I was getting a new car I compromised just a little and got a Chevy volt. Wife is also aware so the family is getting ready.

But my stance is more related to the economic cycles to the fact that again I see a lot of smart people not questioning the good news from wall street which always ends in disaster. That said Peak Oil will happen at one point but I think the main event is more hard to predict and hard to know how it will unfold due to lots of variables. I also believe climate change will be dramatic and much more dangerous for the social fabric of the world and Wall Street. But thats down the line.

Btw, special thanks to Rockman for great posts here and on theoildrum in the past.

[ROCKMAN]

Matt – “but because wall street and the financial system will stretch the rubber band with capital into expensive oil extraction again and it will snap back at one point causing lots of investment and capital being destroyed.”

A very good analogy IMHO. The system is stretched towards a breaking point but the feedback loops prevent breakage (so far) and we just get a nasty sting. Don’t have to go far back for a good example. The shale gas boom that began about 7 or 8 years ago and then snapped back with a vengeance by the end of ’08. Wall Street was all in stretching the hype as far as it could. And it’s good to remember that “Peak Natural Gas” wasn’t even a concept being pushed. Public companies couldn’t develop enough oil reserves on the books to keep WS happy but the anticipated rise in NG prices and the development of NG fractured reservoirs allowed companies to play the ole “barrel of oil EQUIVALENT” switcheroo game. IOW let’s find a lot of NG and give folks the impression we’re finding oil.

And then the economy takes a bit of a hit as companies are developing a lot of expensive NG and then …SNAP! LOL. I was right in the middle of the pop at Devon, one of the very heavily committed companies in the play. And that snap nearly destroyed a couple of the largest independent US companies and did destroy many smaller operations. Devon had to liquidate almost every asset of value they had. Ironicaly one was probably the last DW Brazil oil leases that would ever be owned by a foreign company. An asset that would have served them well today.

And now the rubber band is being stretched in the oily shale plays. Will it snap like the shale gas plays? I don’t know but many don’t think so. In fact just as many don’t see that possibility coming as there were folks who didn’t see the NG snap coming.

[Econ101]

You should be required to thank all taxpayers for paying you to own the chevy volt.

Moving over to a lifestyle that depends on others to pick up a substantial protion of your costs is not a green lifestyle. We used to call it welfare, or tax loopholes like the mtg interest deduction. Now its green?

I dont resent you making any of those changes but I do object to vilification of the sources of wealth subsidizing you and the generalizations made concerning the justifications for such parisitic systems.

[Oily Stuff]

Matt, I would welcome you but I am just as new as you are and am not on that committee. Howdy, anyway.

You have broached an interesting part of the tight oil equation for me and that is "financing" the drilling treadmill. Many very smart folks have now determined that for tight oil companies to stay at the party 40% of the wells they drill each and every year going forward simply replaces the decline from production they had the previous year. To grow and impress Wall Street these guys must still be borrowing tons of money and I would love to know the total indebtedness of the big tight oil companies and if their internal rate of return criteria includes debt service, etc. In any case, as you say, how long can that go on before the rubber band snaps. It tis a very good question. As our friend Rockman likes to say, the tight oil party is in full swing because of high oil prices and favorable economics that has not otherwise existed before now. I would add that it happened at a time too when American financiers had lots of money to loan to these guys, at very cheap rates.

Its a precarious situation to be in, to me, as the whole gig clearly depends of the volatility of world crude oil prices. Once these tight oil players get off the drilling treadmill they better be out of debt completely, for both grantee and grantors sake, IMDAO. The slide down the hill at that point will be very fast. And then of course one only has to imagine the ramifications that will have on shareholder equity, similar to the tight gas gig, I guess.

[Econ101]

Oil extraction is very cheap. Around $2/brl in the Middle East right now. Very cheap in North Dakota as well. As you pump more oil the cost of each barrel goes down. After costs are recovered, current models are 3 yr to recover drilling costs and 15 yr production horizon, the stuff is almost free.

Our energy systems are in great shape now considering interest rates and the huge inventories ready for development. 10s of billions are being invested in production and infrastructure as we speak. The shale gas boom snaped back because of over supply causing low prices. They were also drilling on borrowed money to lock up leases so they would control future supplies, the only way they could hope to get back to profitibility. Some didnt make it. The supplies are still there.

Energy equivilancy is a legitimate concept because it is fungable. It didnt make the obscene quantities of natural gas that were discovered any less. Oil is experiencing the same phenomena. Ever see the straight up production charts for North Dakota? Close to a million brls/day now. Thats today and every day and its rising fast.

The companies that fell in the gas boom were not positioned correctly for the inevitable consolidation. Companies coming and going does not imply shortages, it's simply the way business works. Some of the faltering companies may have been poorly managed and/or undercapitalized.

That was a vicious drilling boom complicated by expiring leases and surplus supply coupled with full storage, inadequate infrastructure and no place to export The gas is still there in copious quantities but it will be brought to market in quanties in-line with aggregate demand. Price will be held in check to normal profit margins because of the vast, easily delivered supplies.

The folks that didint see the NG snap coming were not positioned correctly. There may be a price collapse in oil as well. Why? Obscene oil supplies are now being developed that are shaking up world markets and changing Americas import/export equation to the benefit of all. That is a one reason why the dollar is strengthing.

Right now, price and production in North Dakota are in sink. One is dependent on the other but production is no longer driven by price. Production is pushing price down. Tax impacts have as much or more influence on production as price, but of course that is not always true, just as its not always true price is the only consideration.

[ROCKMAN]

OS – It may have happened but I’ve never seen a company drill themselves out of debt. I’ve seen them sell assets to eliminate some debt but never 100%. I’ve seen many companies swap their stock in exchange for some cash, acquisition company stock and, most importantly, the acquiring company assuming their debt. I once acquired a small public company for $42 million: $6 million cash, $8 million in stock (which eventually became worthless) and took over the $28 million in debt. The company’s reserves were worth $16 million by my evaluation…which was rather generous on my part. The numbers probably don’t make sense, eh? My management didn’t care about the debt: they were going to make their money on their stock options and bail. The debt was going to be the problem for the shareholders and bankers. And it worked: I drilled some horizontal holes that increased the company’s production rate, increased their debt by $18 million and didn’t add one $ worth of value for the company. The investors lost $45 million of their $100 million bond. And no one broke a single law or violated an SEC reg. The investors just bought into it out of pure ignorant greed.


From what I’ve seen few in the public seems to understand much of what’s really going on behind the scenes of the current boom. And those that do aren’t writing the press releases. And here is more in profits being made on stock moves than being made with the drill bit in my humble estimation. Exactly as happened in the shale gas boom a while back. The dynamcis ain't rocket science and sure as heck ain't new.

[Econ101]

The tight oil party is in full swing because the risk factors are low - almost no dry holes, the available production inventory huge (recently tripled by conservative estimates), government intervention low, rapidly improving infrastructure and good prices. However, the price is not the driving factor, production is. Price is not pushing production up, production is pushing price down.

Price is less important today than yesterday because of rapidly decreasing drilling costs. Improved infrastructure to ship the oil has added at least $10 net at the well head from the 70s to the 80s because there is no longer a discount for expensive shipping.

Depletion in the Williston basin is being offset by two powerful factors: 1) Improving recovery techniques (astounding technologies doubling recovery rates from 5 yrs ago) 2) expansion of known reserves most notably horizontal stacking right now. We are also seeing the fields expand beyond tradition borders in the future.

This is a good time for stockholders of the right companies. In the Bakken you have Hess, Hielis, OCR, Kodiak, Whiting, Marathon and some others. None of the majors are there in name.

The drilling treadmill is simply a production line. Its no different than a manufacturing company. Wells are works in progress. Drilling costs are falling as efficiencies are introduced and technologies improve. The drilling process is not chaotic. It is well organized like a production line and efficiencies are improving daily. They dont even look at it by the well, they look at it by the acre.

The way they are impressing wall street is by producing tons of money over and above what they spend. Thats called profits. Investors are getting rich because companies are.

Many companies have drilled horizontal holes. To say they dont produce value is absurd. All of those companies mentioned above are creating tremendous value with horizontal drilling. Glad Im invested in winners, not losers.

Sounds like RM had the wrong number of frack zones set up, or set-up wrong to max his EUR or the reserves were never fully understood and the oil wasnt there? Maybe his bore size was wrong or his proppant mix off? Maybe his costs got out of control? Maybe a little of everything?

I think one failed project (we still got the oil, unfortunately the investors subsidized it) compared to the straight up production line in North Dakota does not dim the future prospects, does it?

[Econ101]

Ps. Not trying to convince anyone either. Just putting up facts disproving many of the assumptions and supposed truths and myths of peak oil and climate change. The reason many of these peak oil/climate folks get angry and resort to ah homiinen or otherwise infitial name calling is because peak oil/climate change issues are political issues challenging their political beliefs.

A world full of oil should be a chance to celebrate not continually search for spin that devalues what is actually happening. How can anyone find fault in the straight up production charts for North Dakota that increased by 250,000 barrles/day from 2011-2012 and continue on that same trajectory. Its about 35-40,000 barrels/hour right now and growing.

[Oily Stuff]

Rock, I believe the current fearless approach to leveraging in these tight oil plays will work once again and history, very recent at that, will repeat itself. Shareholder equity will suffer, I only hope it won't be so bad that banks will have to be bailed out at taxpayers expense. Such overleveraging disasters have never happened before, right? After all, it sounds like there might be more Bakken wells in N. Dakota someday than there are homes.

I don't know how to better make people understand well economics. I fail miserably in my attempts. I for instance can prove that at 50 dollar net oil it takes 200,000 BOE just to pay a typical Bakken well out and that 500,000 BOE EUR's these shale dudes brag about (over 20 years!!) is really not that great...but, as you can see above, if I had to take freshmen economics again I would bust the course, clearly.

I drilled my way out of debt once. One well, heads up, in an abandoned field 50 years old; I hung it off one afternoon and sat up with it all night. By daylight it was making 75 BOPD and no water. I slept in my pickup for 2 more nights, afraid to leave it. The price of oil at the time was 11 bucks. When I plugged it 25 years later, at 25:1, I asked the surface owner if I could put a little granite marker over the casing cap. It was divine intervention that well at that time in my career; I kept my word and never borrowed money again to drill another stinking oil well.

[Plantagenet]

Good story, Oilystuff.

I spent a few years in the oil biz before I moved to the university here in Alaska. I worked for one of the oil majors and mostly spent my time in a huge urban corporate office building as a part of a team of scientists and engineers tasked with evaluating and planning and carrying out mega-projects costing billions of dollars.

When I was in the oil biz it was pretty low stress---- I was always playing with company money-----Your story about personally borrowing money to wildcat a single well in an old Texas oil field and then sitting there in your pickup truck watching your well come in was great!!!.

[ROCKMAN]

P - Yep...most folks can't picture that side of the oil patch. The guys that keep a couple of hundred thousand wells making less than 10 bopd. Very exciting life. LOL. Like sitting in a logging truck at 2 am last Friday morning eating Kellogs Frosted Mini Wheats while I logged my well. About 20 years ago it would have been Vienna sausages, saltines and too much coffee. But my wife won't let me do that anymore. LOL