[Subjectivist]

At this point I fully support finding more cheap oil, it certainly improves my standard of living.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('ROCKMAN', '
')As a seller of petroleum I fully support your efforts. But you should try to drive more. LOL.

[ROCKMAN]

Eliminating poverty in India? No. But oil at $15 or $20 per bbl would improve the lives of billions around the planet, wouldn't it? Of course, only for so long as consumption would easily outpace reserve replacement. Which is the obvious benefit of the very uneven ability for different economies to handle higher oil prices.

IOW if folks have caught the subtle point: the ability of the US and other countries to grow at higher oil prices (and thus consume a disproportionate share of production) is what insures the continued development of that resource. A lesson confirmed by every failed communist/socialist govt. With Venezuela being the most recent example of how 25¢ per gallon motor fuel can destroy a country's economy.

[ralfy]

$this->bbcode_second_pass_quote('ROCKMAN', 'l')ooker - Which is my point about my MADOR protocol: Mutually Assured Distribution Of Resources. Just like the MAD protocol of the potential nuclear war days. Those economies that have the financial ability to dominate the ff market will do just that. But it does not serve their mutual interest to battle (either financially or militarily) each other: like MAD there's really no winner. Those powerful economies will instead take an even larger portion of future energy resources...to the detriment of weaker economies. Just as it happens today...just as it always has.

One can judge that situation as unfair but short of a truly effective communistic designed global commerce how can it be otherwise? Those strong economies might try to offer some minimal assistance to the weaker. But the obligation of each govt is to conduct iitself primarily for the benefit of its citizens. In a democracy a govt will have to do so or suffer being replaced by its voters. Venezuela is a good example of that NOT HAPPENING.

But consider the current US export profile. And not focusing on oil exports which have never actually been banned. Those are relatively small compared to refinery products. Products made from almost 5 million bopd. A fact many Americans are unaware of. The US has become THE refinery for the world. Which is OK with the voters...today thanks to relatively low motor fuel prices.

But what when those prices double...or triple? Given such a potential political weapon it's difficult to imagine politicians not using a potential ban (or at least limits) of such exports. The same can be said for any country exporting products. Consider the top 5 countries that account for more then 40% of those exports:

United States: $64.1 billion (12.7% of total refined oil exports)
Russia: $46 billion (9.1%)
Netherlands: $37.4 billion (7.4%)
Singapore: $36.1 billion (7.2%)
India: $27 billion (5.3%)

Not only will those exports become political issues they'll also become potential leverage to use against importing nations. Consider the EU which has been losing refinery capacity for years. Folks can appreciate oil embargoes but I don't many have contemplated product embargoes...and which countries, like the US, that would have the upper hand in such a dynamic.

And here's an indication of how little anyone is paying attention to potential product embargoes compared to restrictions of oil imports: while there are dozens of compilations of oil imports by country on the web I could not find a single one for refinery products. IOW which are the top 5 importers? And how susceptible are they to future restricted US exports? Sure, one could search each country individually. But interesting that perhaps no one has thought that to be worthwhile. And not just the big importers are of interest: what about small countries that import 70% or more of the products the consume? Countries that product exporters, like the US, would see little value in supplying during a future crunch time.

BTW: In 2015 the UK’s reliance on imported oil products reached its highest level in 32 years as rising demand for fuels continued to outstrip what domestic refineries produce.

[onlooker]

But that is the point Ralfy, these growth trajectories cannot continue. Given that as the competition for limited resources continues it makes sense what Rockman is saying that the focus will be on eliminating competition and that means the lesser modern economies to just leave the most potent standing. Of course to me this is just rearranging chairs on the Titanic as the whole Industrial civilization endeavor is compromised from lack of cheap energy going forward and from overpopulation relative to resources.

[AdamB]

$this->bbcode_second_pass_quote('Subjectivist', 'A')t this point I fully support finding more cheap oil, it certainly improves my standard of living.

[ROCKMAN]

"As a consumer of oil, and not a producer..." First, there is (and never has been) "cheap" oil. There is economic and uneconomic oil. For the last couple of years the Rockman et al have been busting their asses looking for conventional oil shore oil prospects to drill. And $50/bbl is a good enough price to make such prospects economics...even if they have only 50,000 bbls of net recoverable reserves. That would be $2.5 million in revenue vs a $750,000 +/- total well cost.

The problem isn't the price of oil: it's the lack of prospects left to drill.

[AdamB]

$this->bbcode_second_pass_quote('ROCKMAN', '&')quot;As a consumer of oil, and not a producer..." First, there is (and never has been) "cheap" oil.

[ROCKMAN]

Adam - So what is the price range of "cheap oil"?
From 1980 the price of oil dropped from $37.42/bbl to
$29.02/bbl in 1983. And at that lower price it still wasn't "cheap oil" as indicated by the fact that the world consumed 1.4 BILLION bbls less in 1983 then in 1980 when the price was 25% higher. Same thing happened in 2009 when the world consumed less $60/bbl oil then it consumed of much higher priced oil in 2008.

Also I think you missed my point: I was referring to exploration of conventional oil prospects. Developing resources that were known decades ago due to CURRENT HIGH oil prices is a very different dynamic. That's a RELATIVELY high oil price, of course. LOL.

"It was your industry that destroyed the credibility of peak oilers (again)." A different perspective: it was my industry that confirmed the credibility of peak oil: it took much higher oil prices to increase US oil production from resources that were known to contain recoverable oil decades ago. Had we seen US oil production surge with $35/bbl oil it would have given your perspective much more credibility. Or do you want to present a case that the US would have seen the same oil boom had oil stayed at $35/bbl?

Of course there's also the vastly different production profile of a well in a large conventional oil reservoir then that of a well in a fractured shale reservoir that has a much higher decline rate that also needs to be considered.

[ralfy]

$this->bbcode_second_pass_quote('onlooker', 'B')ut that is the point Ralfy, these growth trajectories cannot continue. Given that as the competition for limited resources continues it makes sense what Rockman is saying that the focus will be on eliminating competition and that means the lesser modern economies to just leave the most potent standing. Of course to me this is just rearranging chairs on the Titanic as the whole Industrial civilization endeavor is compromised from lack of cheap energy going forward and from overpopulation relative to resources.

[ROCKMAN]

"...it's just like rearranging chairs on the Titanic" I think a better analogy would be rearranging the life boat assignments on the Titanic: that determined who survived and who died. It might be difficult to envision but one day when global oil production drops 50% there may be some companies (my bet ExxonMobil and/or Shell Oil) could be making a very nice profit. Remember the Rockman made a huge ROR drilling NG wells iin the late 80's when prices were the lowest the had been in 15 years. Profitability is never determined by the price of oil/NG. It's determined by the difference between the price and what it cost to get it out the ground. For instance that first NG field I discovered in the 80's: sold it for $0.90/MCF but got it developed for a total of $0.12/MCF.

And oddly enough the big oil price drop is fermenting a significant modification of lifeboat seating assignments as the business undergoes perhaps the largest petroleum wealth transfer in history. And oddly enough some of the new seats are being taken by creditors including bankers. This is happening thru Chapter 11 bankruptcy settlement. For instance the former Halcon creditors now own 96% of the company and the former owners only 4% of its reserves. And in the case the drilling contractor Ocean Rig the former shareholders now own less the 1% of a fleet of modern DW drill rigs. Without contracts those rigs are not generating much revenue today. But when drilling picks up again they could be generating $BILLIONS in annual revenue. From bust to boom I've seen those rates go from $250k/day to $800k/day in 2-3 years. That can add $180 MILLION/year in revenue PER RIG.

[ROCKMAN]

baha - "No one wants to buy and own these assets so the banks are stuck with them". Actually the banks et al aren't taking ownership of the reserves/operations. They are owning stock in those companies. And that stock can be sold at anytime they want to liquidate their position. The management/staff is still taking care of day to day operations. So it's no different then banks/hedge funds et al taking stock positions in other companies. Same situation with Halcon.

Consider how that's working out for the new stockholders of Ocean Rig: the price of their stock has doubled in the last 5 weeks since they received their positions. Granted that was because it jumped from 12¢/share to 24¢/share. But remember at its peak the company was selling for $18/share. So what happens if it increases to just $3/share in the next 2-3 years. Could easily happen if they start getting long term contracts for their rigs. Which is possible given they can be extremely competitive given they now have no debt to service every month. If that happens it will mean their stock would have increased about 16X from what it was worth when it was given to them.

So a 1,600% increase in value in just a few years if it goes to just $3/share in a few years.

BTW the Rockman is thinking about buying 1,000 shares of Ocean Rig...that would only cost $250. LOL

[AdamB]

$this->bbcode_second_pass_quote('ROCKMAN', 'A')dam - So what is the price range of "cheap oil"?
From 1980 the price of oil dropped from $37.42/bbl to
$29.02/bbl in 1983. And at that lower price it still wasn't "cheap oil" as indicated by the fact that the world consumed 1.4 BILLION bbls less in 1983 then in 1980 when the price was 25% higher. Same thing happened in 2009 when the world consumed less $60/bbl oil then it consumed of much higher priced oil in 2008.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('ROCKMAN', '
')From 1980 the price of oil dropped from $37.42/bbl to
$29.02/bbl in 1983. And at that lower price it still wasn't "cheap oil" as indicated by the fact that the world consumed 1.4 BILLION bbls less in 1983 then in 1980 when the price was 25% higher. Same thing happened in 2009 when the world consumed less $60/bbl oil then it consumed of much higher priced oil in 2008.

[ralfy]

$this->bbcode_second_pass_quote('ROCKMAN', '&')quot;...it's just like rearranging chairs on the Titanic" I think a better analogy would be rearranging the life boat assignments on the Titanic: that determined who survived and who died. It might be difficult to envision but one day when global oil production drops 50% there may be some companies (my bet ExxonMobil and/or Shell Oil) could be making a very nice profit. Remember the Rockman made a huge ROR drilling NG wells iin the late 80's when prices were the lowest the had been in 15 years. Profitability is never determined by the price of oil/NG. It's determined by the difference between the price and what it cost to get it out the ground. For instance that first NG field I discovered in the 80's: sold it for $0.90/MCF but got it developed for a total of $0.12/MCF.

And oddly enough the big oil price drop is fermenting a significant modification of lifeboat seating assignments as the business undergoes perhaps the largest petroleum wealth transfer in history. And oddly enough some of the new seats are being taken by creditors including bankers. This is happening thru Chapter 11 bankruptcy settlement. For instance the former Halcon creditors now own 96% of the company and the former owners only 4% of its reserves. And in the case the drilling contractor Ocean Rig the former shareholders now own less the 1% of a fleet of modern DW drill rigs. Without contracts those rigs are not generating much revenue today. But when drilling picks up again they could be generating $BILLIONS in annual revenue. From bust to boom I've seen those rates go from $250k/day to $800k/day in 2-3 years. That can add $180 MILLION/year in revenue PER RIG.

[ralfy]

$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('ROCKMAN', '
')From 1980 the price of oil dropped from $37.42/bbl to
$29.02/bbl in 1983. And at that lower price it still wasn't "cheap oil" as indicated by the fact that the world consumed 1.4 BILLION bbls less in 1983 then in 1980 when the price was 25% higher. Same thing happened in 2009 when the world consumed less $60/bbl oil then it consumed of much higher priced oil in 2008.

[kublikhan]

$this->bbcode_second_pass_quote('ROCKMAN', 'B')TW the Rockman is thinking about buying 1,000 shares of Ocean Rig...that would only cost $250. LOL

[ROCKMAN]

"Shares of Ocean Rig have recently been flat around 25 cents per share, but even this looks optimistic given the looming dilution"

Flat??? If you had bought $100,000 of Ocean Rig stock on July 13, 2017 it would have been worth $200,000 on Aug 1, just 2 weeks later.

Otherwise interesting update. Including "Given the situation in the UDW market, the post-split Ocean Rig may see downside again, but then may ultimately become an attractive bet should oil prices increase and make deepwater drilling attractive again."

As always timing is the key: like making 100% profit in just 2 weeks, selling the stock and then buying more after the reverse split and when the company starts signing long term drilling contracts.

[ROCKMAN]

ralfy - The difference, of course, is that in the Titanic analogy survivors generally found themselves in safe places where it was business as usual." Did you not see all the examples I gave of companies that once they cleared Chapter 11 "found themselves in safe places where it was business as usual."? In particular where the creditors ended up owning the company. Again consider Halcon: got rid of $billions in debt, got a $600 million line is asset based credit and is using that capex to drill big wells in the Permian Basin. IOW thanks to the federal bankruptcy law it is now a financially sound operation "carrying on business as usual."

Halcon creditors not only made it onto the lifeboats but got first class seating. LOL. Of course, the original shareholders were left on deck as the ship slipped beneath the waves.

Again folks should study the federal bankruptcy laws. Especially Cheaper 11: it is specifically designed to allow company in very bad financial condition to reorganize into companies that end up "in safe places where it was business as usual".

IOW the law is SPECIFICALLY written to allow severely damaged companies to prospers at the expense of the creditors or original owners. Essentially designed to allow those companies to not only survive but have the potential to prosper.