[Plantagenet]

$this->bbcode_second_pass_quote('Observerbrb', '
')
It seems that we just found another winner, Mr. Skrebowski
http://www.zdnet.com/article/the-cost-o ... il-supply/

[Observerbrb]

I was just reading the discussion above between SumYunGai and ennui2, and I just want to add one thing:

Low oil prices are good for the economy if Oil production costs are low.

Low oil prices are not good for the economy if more than 50% of the world's Oil production is sold below its production cost. If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil.

Source: Financial Times


PS: Plantagenet, the volumetric analysis is irrelevant. If I use 11 barrels of oil to put 10 barrels of oil in the market, I'm fooling myself. However, it will look great in the Oil production statistics.

[Plantagenet]

$this->bbcode_second_pass_quote('Observerbrb', 'P')lantagenet, the volumetric analysis is irrelevant.

[ennui2]

"If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil."

If no one produces it, prices will go up until they do.

Hence, the cure for cheap oil is cheap oil.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'L')ow oil prices are not good for the economy if more than 50% of the world's Oil production is sold below its production cost. If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil.

[SumYunGai]

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'L')ow oil prices are not good for the economy if more than 50% of the world's Oil production is sold below its production cost. If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'N')ot by a long shot, huh? WTIC is $43.60/barrel right now. That's pretty low. Are you saying the current oil price is sufficient to support tight oil production? It sure seems like it isn't. If it is, why all the oil patch bankruptcies, then?

[ROCKMAN]

"If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil." I wish folks would learn to use the terminology correctly so I wouldn't have to interrupt the conversation flow. Oil wells PRODUCE. And thus the term PRODUCTION. Thus "losing production" means losing EXISTING WELLS. Not drilling new wells does not represent "losing production". The term is not GENERATING new prospects to drill.

Which takes me to the point I brought up earlier in the thread. I posted about the Anadarko acquisition of $2 BILLION of offshore reserves. More details:

"Anadarko Petroleum Corp. agreed to buy Gulf of Mexico assets from Freeport-McMoRan Inc. for $2 billion and said revenue from offshore wells will help accelerate onshore development.

The deal doubles Anadarko’s existing stake in oil wells in the deepwater Lucius development to approximately 49 percent, adding the equivalent of about 80,000 net barrels of crude a day, the producer said Monday in a statement. Some investors may question Anadarko’s increasing exposure in the Deepwater Gulf at the expense of onshore assets, Pearce Hammond, an analyst at Piper Jaffray, said in a research note.

The purchase is another sign that U.S. drillers that have survived two years of upheaval in oil prices are returning to deal-making. EOG Resources Inc. last week announced a $2.5 billion purchase to expand in the Delaware, one of the hottest areas for acquisitions. The next day, Apache Corp. said it had quietly amassed 350,000 acres in the region where it had found “massive” new quantities of oil and gas.

The Gulf acquisition “is a catalyst for the company’s oil-growth objectives, with quality assets being acquired at an attractive price to create significant value,” Anadarko Chief Executive Officer Al Walker said in the statement.

The offshore assets will generate $3 billion of additional free cash flow over the next five years that will help boost production in West Texas’ Delaware Basin and the DJ Basin centered in Colorado, Anadarko said."

The Rockman made a bad assumption: that most here understand the ENTIRE dynamic in the oil patch these days. Yes, lots of companies filing bankruptcy. And lots liquidating assets to avoid filling bankruptcy. And other companies that although they are still viable have seen revenue decrease significantly.

Now the good news: it's boom time for a number of companies. Companies that are acquiring proved producing oil reserves at a very low price...probably around $15/bbl. Company X might have spent $60+/bbl to develop their shale reserves. Perhaps borrowing much of the capex. But that is not relevant when it comes to selling assets today. First, it should be obvious that no one is paying $45/bbl for X million bbls of Eagle Ford or Bakken oil reserves. Not when it's selling for $45/bbl. And not $35/bbl. I can just offer a generalization (since $/bbl isn't actually a metric used in production acquisitions) but $15 to $20 per bbl is realistic.

So think about: if companies were actually spending $60+/bbl to develop shale wells and those same bbls are being acquired for $18/bbl then these PROVED RESERVE ADDITIONS are being bought for 30% or less then what they cost 3 years ago TO DRILL. And what if new shale wells could develop production for $30/bbl why would you drill unproven reserves for that price when you could buy PROVED PRODUCING reserves for about half that price?

Bottom line: lots of companies failing; lots of lenders losing big time; lots of companies struggling with reduced revenue.

And lots of companies adding PROVED PRODUCING OIL RESERVES at a price not seen in more then a decade. Anadarko just added $2 BILLION in PROVED PRODUCING that might have cost them $6 to $8 BILLION to drill up several years ago. And did it in ONE DAY compared to taking a couple of years of drilling. As I pointed out in a previous post: we are in the middle of the biggest fossil fuel wealth transfer we've seen in probably 30 years. So for SOME companies times have never been better.

As I've pointed out the "oil developed at $X per bbl" is a rather meaningless term. In 41 years I've never seen it used by a company. Not that it couldn't be done but it has no utility. But there's one very quick and easy metric that gives us a ballpark evaluation of acquisitions: $'s per barrel-day of production. It doesn't require believing any reserve number tossed out: if the wells are producing 1,000 bopd then they are making1,000 bopd. So Anadarko buying 80,000 bopd for $2 billion? They paid $25,000 per bbl-day. That number probably means nothing to anyone here beside Doc and the Rockman. But understand that a few years ago production was being purchased for $100,000 per bbl-day...and more. IOW just 3 or 4 years ago a company would have paid $8 billion for the field Anadarko just bought for only $2 billion. Depending on where a company sits in the food chain these are VERY GOOD TIMES in the oil patch.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'R')egardless: this is about New Oil Reserves . . . of which there are essentially NONE.

Certainly not in significant amounts, and not since the (cough cough cough) discovery (actually a misnomer) of tight shale. As the tight-shale plays have been known for decades, are not a discovery per se, but rather a reworking of an old plays, really source rock

[StarvingLion]

You're all screwed without the massive reserves of Natural Gas Hydrates. The Oil INdustry is completely incompetent in mining those huge resources.

The Shitties full of worthless eaters are begging for the financial catastrophe that is called Nukular Energy to replace the Shale Gas Scam. They're so retarded they don't shit from shinola.

Without Natural Gas Hydrates the CURRENCY IS WORTHLESS. BATTERIES ARE WORTHLESS. EV's ARE WORTHLESS.

Thats it, thats the last hope.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Observerbrb', 'I') was just reading the discussion above between SumYunGai and ennui2, and I just want to add one thing:

Low oil prices are good for the economy if Oil production costs are low.

Low oil prices are not good for the economy if more than 50% of the world's Oil production is sold below its production cost. If Oil turns into a losing proposition, no one will want to produce it - and we still need lots of oil.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'C')ome on rock, you're grasping here. BBO(E)quivlent, as in Barrels Of Oil Equivalent includes natural gas and hot air lol. At best it refers to reserve additions, a function of price. You guys have almost given up your desperate searchin for New Resources, converted into P95 reserves after DUE DILIGENCE. Not searching for hot air lol

[rockdoc123]

$this->bbcode_second_pass_quote('', 'I')t was posted by the TheDude (may he rest in good times lol) Mon May 26, 2008 6:59 pm. And we are still stuck in this idiot Hall of Mirrors. God, are we ever f#cked

[rockdoc123]

$this->bbcode_second_pass_quote('', ' ')You know that BO(E)quivlent, as in Barrels Of Oil Equivalent, includes corn liquor.

[ennui2]

The absurdity of trying to fearmonger about discoveries evaporating is that the end product of such a narrative should be a supply shortfall and prices rising. And yet this is being trotted out simultaneously with advocacy for ETP, suggesting that prices will stay low or go lower. It simply does not compute.

If we just erase the ETP nonsense then maybe we could have a consistent debate about peak-oil doom on the basis of classic supply/demand dynamics, but add ETP into the mix and the logic makes no sense at all.

I'm pretty sure at this point that if I were to clock out of this site and return back in a year or so that the site will have become all-ETP all-the-time. The ETP zealots here are equivalent to squatters. They've staked their claim and they will just keep shouting down their opponents until they are the last men standing in order to enjoy their circle-jerk echo-chamber.

It kind of reminds me of the vibe at Malthusia the brief time I was there. The people there had a virulent anti-civ mindset and it just was too hostile to be there if you didn't tow the party-line.

[AdamB]

$this->bbcode_second_pass_quote('Observerbrb', '')$this->bbcode_second_pass_quote('AdamB', '')$this->bbcode_second_pass_quote('Observerbrb', 'Y')ou need high Oil prices to expand your Oil resource base, because this same resource is increasingly expensive to get.