[Subjectivist]

$this->bbcode_second_pass_quote('Plantagenet', '')$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('sparky', 'L')uckily a little blip of expensive new oil has come online. I say luckily because it allows folks a little time to change habits - those who get the message that the decline of cheap oil could be much closer than it appears...,.

[Pops]

Just came across this (while avoiding the -20º windchill) h/t Tom Whipple/ASPO/Resilience

Wall Street Journal (Yeah, I know, scary right?)
For U.S. Drillers, the Days of Easy Money End
Oil and Gas Companies Slash Spending as Foreign Investment Dries Up

$this->bbcode_second_pass_quote('', 'S')ince 2008, deep-pocketed foreign investors have subsidized the U.S. energy boom, as oil and gas companies spent far more money on leasing and drilling than they made selling crude and natural gas.

But the rivers of foreign cash are running dry for U.S. drillers. In 2013, international companies spent $3.4 billion for stakes in U.S. shale-rock formations, less than half of what they invested in 2012 and a tenth of their spending in 2011, according to data from IHS Herold, a research and consulting firm.

It is a sign of leaner times for the cash-hungry companies that have revived American energy output. The value of deals involving U.S. energy producers plunged 48% this year from 2012, to $47 billion, the first annual decline since 2008, according to an IHS report to be published Thursday.

So U.S. oil and gas producers have started to slash spending. "The days of easy money are over," said Amy Myers Jaffe, executive director of energy and sustainability at the University of California-Davis. "The emphasis is going to be on lowering costs."

Foreign cash helped cover the cost of the deep wells and heavy horsepower required to unlock oil and gas from shale and other dense rock in the U.S. The need for it has been acute: Last year, 80 big energy companies in North America spent a combined $50.6 billion more than they brought in from their operations, according to data from S&P Capital IQ. That deficit was twice as high as in 2011, and four times as high as in 2010.

The same producers have dialed back through the first nine months of 2013, though they still spent about $18.7 billion more than their cash flow.

[Loki]

$this->bbcode_second_pass_quote('Pops', 'J')ust came across this (while avoiding the -20º windchill) h/t Tom Whipple/ASPO/Resilience

Wall Street Journal (Yeah, I know, scary right?)
For U.S. Drillers, the Days of Easy Money End
Oil and Gas Companies Slash Spending as Foreign Investment Dries Up

[Subjectivist]

I have a very bad feeling about future US oil production, but the last time I had this feeling they fracked North Dakota and raised production. My track record is pretty horrible, but this time lots of people agree with me.

[Mesuge]

Haven't posted for a few years, this and the plateau thread made me come back. Given the international fiat print fest ongoing on massive scale, asking why some of this can't be redirected be it indirectly via proxy investment houses towards funding tight-oils is a fair question. I guess we are headed into some head on collision first. Or are just the people in the know beyond that, currently preoccupied with looting the treasure before sailing off into the sunshine, private compound retreat.

For me it has been great experience, but it takes on very different track for sure, once you peak ever so slightly beyond the curtain, sooner or later you have to see it all, dig deeper. I'm now as many of you slightly different person, everybody ages but now the view of the world is more mature, in the sense to be less combatative for your own ego, judgments on your peers, survival, what ever might come ahead.

[Pops]

I've read that very low interest rates and returns post-recession may have already have driven investment in oil/gas E&P (and especially LTO) that normally would have stuck to more conservative bets. But even at low rates it looks like some OilCos can't make a profit. So unless the government is actually increasing subsidies and/or lowering royalties the cost of money doesn't seem to be doing any good.

David Hughes says the Frackers are actually living on investment dollars because LTO will not be profitable in the "long" run, we'll have to wait and see about that.

[Mesuge]

Yep, I'd see it in similar way.

[ROCKMAN]

Pops – The feds don’t collect royalties on the Eagle Ford production and just a little on the Bakken. Texas collects severance taxes and those haven’t gone down. As far as getting subsidies I’ve never worked for a company that received a $ from the feds. I’ve worked for companies that haven’t paid as much taxes as they would have if it weren’t for the various write-offs the tax code allows. But every company and person in the US has some write-offs…including you. Do you consider yourself subsidized by the feds? At the very least the feds “subsidize” you with your personal deduction on your tax returns. So are you on the take? LOL.

The great majority of Eagle Ford players I know are public companies and thus aren’t taking in any investor money. They drill from their loan basis and cash flow. There are a few promoters in the trend that raise investor cash to drill but very few of the wells fall into this category.

Are the shales profitable? Yes…some of the wells are. Some aren’t. A few are very profitable. Many will never turn a $ of profit. There is no generalization that works IMHO. As you know we don’t drill the shales not because they aren’t profitable but because their ROR isn’t high enough to attract our owner. And not being a public company we don’t have the pressure of adding reserves y-o-y. All we care about is ROR.

[AndyA]

All in all, I'm still comfortable planning for a slow decline. There is a plausible (not imo probable) case to be made for a fast decline, and I do take that into consideration. There is likely to be still be drilling on the downslope, not enough to make up for the decline rates, but enough to rule out a fast decline 4-6%

[Plantagenet]

Oil production in the US isn't declining. It's actually increasing due to shale fracking.

Given the extent of shales in the US, including the Monterey in California and extensive shales in alaska that aren't yet in production, US oil production may continue to increase for a few more years

[Synapsid]

Hi Plantagenet.

I'd like to know about any LTO shales in Alaska; I've never given that topic a thought.

There've been quite a few posts on PO about the Monterey shale, part of the Monterey Formation in California. Even the EIA has backed off on the happy. There's a lot of oil there, I guess, but the Monterey Fm isn't like the Bakken or the Eagle Ford. They both sit out in the middle of a continental plate in rocks that are only slightly deformed, but the Monterey is not only at an active plate margin (the San Andreas fault), it actually straddles it. The stratigraphy in the Monterey is, one might say, challenging to work in. Or one might say "a nightmare." The Bakken and the EFS follow the rules; the Monterey laughs at them.

[Plantagenet]

$this->bbcode_second_pass_quote('Synapsid', 'H')i Plantagenet.

I'd like to know about any LTO shales in Alaska; I've never given that topic a thought.

[godq3]

Japan, and Ireland are doing OK with reduced oil consumption, because some other countries increased their's consumption, so they could do more exports there. When consumption will be down globally, it won't be that nice.
And about the price. Some people would still drive their SUVs when oil would be at $300 per barrel, and they would still compete for the same oil with farming industry, mining industry, shipping industry, etc. In my country (Poland) average worker has to work 80 minutes for a gallon of gasoline, and we still have traffic jams every morning, and afternoon in every bigger city, because many people are willing to pay that price instead of commute by bus, tram. So it isn't like when oil price is too high, we will just drive less or buy smaller cars. Some will, but only after other oil consuming parts of the economy are damaged by higher prices. Unless some government restrictions on private driving, but that would hurt auto industry.