In the last few days I’ve noticed a plethora of news stories from the usual suspects in the corporate mainstream media about how shale oil producers can still make a profit with oil selling for $66 a barrel. All of a sudden their breakeven costs are supposedly $40 per barrel or lower. That’s funny, because every legitimate estimate prior to this year was that oil needed to stay above $80 per barrel just so they could breakeven. When you see the new propaganda, you realize the entire shale miracle is nothing more than a Wall Street hyped debt financed Ponzi scheme. The Wall Street shysters are sending out their mouthpieces to lie, obfuscate, and mislead the public into thinking this fraud is still legitimate. The MSM pundits don’t even question the lies because their living depends upon perpetuating the lies.
The truth is revealed by the actions of the participants in the shale boom. The companies whose existence depends upon generating profits and cash flow will always take actions that will be in their own self interest. No company purposely takes actions to lose more money. All of the happy talk was just revealed to be false.
New shale oil wells are expensive to begin and are 90% depleted after 2 years. Those are facts. Permits for new wells absolutely COLLAPSED in November. A 40% decline in one month is an epic collapse. If the Wall Street shysters were telling the truth and breakeven costs are really $40 per barrel, why would drillers stop drilling new wells when oil prices are $66? They wouldn’t.
The shale oil boom is only sustainable at $100 a barrel oil. The Arabs know it. The big oil companies know it. The drillers know it. And the Wall Street shysters know it. The peak in U.S. oil production has arrived again, until prices go back up to $100 a barrel.
Facts don’t cease to be facts because they are ignored. Reality really is a bitch.
Exclusive: New U.S. oil and gas well November permits tumble nearly 40 percent
By Kristen Hays
HOUSTON (Reuters) – Plunging oil prices sparked a drop of almost 40 percent in new well permits issued across the United States in November, in a sudden pause in the growth of the U.S. shale oil and gas boom that started around 2007.
Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.
The pullback was a “very quick response” to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info.
New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota’s Bakken shale.
The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.
That slide came in the same month U.S. crude oil futures fell 17 percent to $66.17 on Nov. 28 from $80.54 on Oct. 31. Prices are down about 40 percent since June.
U.S. prices fell below $70 a barrel last week after the Organization of Petroleum Exporting Countries agreed to maintain output of 30 million barrels per day. Analysts said the cartel is trying to squeeze U.S. shale oil producers out of the market.
Total U.S. production reached an average of 8.9 million barrels per day in October, and is expected to surpass 9 million bpd in December, the highest in decades, according to the U.S. Energy Information Administration.
Gilmer said last month’s pullback in permits was more about holding off on drilling good locations in a low-price environment than breaking even on well economics.
“I think in this case this was just a quick response, saying ‘there are enough drill sites in the inventory, let’s sit back, take a look and see what happens with prices,'” he said.
In addition to the Permian, Eagle Ford and Bakken, about 10 other regions tracked in Drilling Info’s data showed declines as well. The Niobrara shale in Colorado and Wyoming saw a 32 percent decline in new permits, while the Granite Wash in Oklahoma and Texas and Mississippian Lime in Oklahoma and Kansas retreated 30 percent and 27 percent, respectively.
Gilmer said the pullback in new permits is a precursor to a decline in rigs. The U.S. land rig count has been largely flat since September, hovering around 1,860 oil and gas rigs, according to Baker Hughes Inc (BHI.N: Quote, Profile, Research, Stock Buzz).
“This will show up,” he said. “I expect we’ll start seeing rig impact in a couple of months.”
Share prices of drillers including Patterson UTI Energy Inc (PTEN.O: Quote, Profile, Research, Stock Buzz), Helmerich & Payne Inc (HP.N: Quote, Profile, Research, Stock Buzz) and Nabors (NBR.N: Quote, Profile, Research, Stock Buzz) were slightly lower on Tuesday.
(Reporting By Kristen Hays; Editing by Terry Wade and Alan Crosby)
Thanks, Admin, I have to say I’ve been pretty confused about the story (truth) behind the story.
Thanks as card said. After reading my daily dose of propaganda yesterday I was somewhat confused, but as you see the tremendous slide in the value of oil company stocks and related companies such as Halliburton it became quite evident that the propagandists were out in force slinging their usual bullshit, which you cut through quite nicely.
Bob.
By April 2015 you will see those 5,000 new R.R. tank cars sitting on R.R. sidings all across the nation. Shale oil is like a feeding frenzy, you have to keep drilling at a fast pace, as the wells peak out very quickly. With the debt load the shale industry is carrying, makes me wonder it they will be able to jump start production anytime soon if oil prices start improving.
Is it true that the last time oil prices collapsed this drastically was around the time of the Lehman’s brother’s demise?
From Wikipedia:
“The financial institution crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG.”
Oil was priced at a high of $145.69 in June of 2008 and dropped to a low of $43.93 in February of 2009.
I’m just a poor, dumb retired truck driver, but I’m thinking that this doesn’t bode well for the economy in 2015. Or maybe other factor’s were more dominant, such as the sub-prime housing scheme failing. IDK
Maybe 2015 is the year the SHTF for real. I just hope it’s not until spring….I hate being cold.
Maybe our earthquake count will be dropping as well.
Ever since I had a closer look at fracking a few years ago I became convinced that this was going to be a dead end in the near future. And not just because oil prices have plummeted recently. That added to the woes. But from what my research tells me, while a normal industry, after the initial phase of exploring and tweaking the underlying invention sees a phase of diminishing cost, here I see increasing cost with every field that gets prospected and exploited. If there was no stable upward price trajectory that rose faster than this scenario, then fracking gets doomed every step of the way.
I figured the Saudis were trying to put some of the competition out of business.
I experienced this myself. I worked with a paper mill.Their competition bought them out and then closed the factory and 1200 people lost their jobs.
but..but..just last evening CBS reporter Anthony (shill) Mason told us that by next year the US will become the world’s biggest oil producer.
I’m gonna bookmark this one Admin…can’t wait to see how it all plays out. I know you’ll stay on it.
Hubby has worked in the oil and gas industry for almost 35 years. Lots of ups and downs during that time.
That is how the collapse of the oil field usually is. Balls to the wall then nothing. Time for nothing out here in west texas. This is nothing new. Unemployment will sky rocket. Crime will increase as well as fires in homes and some business. Some of the hidden crimes money brings will surface. The streets will be empty and shops will close. Then a boom will come along in 10 years the difference will be we will be a completely different country by then. Working for a goverment run oilfield who gets their marching orders from. Who knows. Sorry to the generation coming up. We screwed the pooch.
Oil shale mining absolutely trashes the environment. “Jobs” shouldn’t b used to justify whatever some politician owning corporation wants to do.
When the great collapse happens due to the trillions in debt then we will have an environmental disaster like know before. All the checks and balances Toledo Haz materials contained will fail. No one will care. They will be just trying to survive. We are trapped in a modern civilization. Face it deal with it plan for it. Yes we are losing fresh water to HYD fracing. But what do the majority of the people want? To go back to horse and buggy. No they want it all and they want it now. FUBAR
Freaken spell check
New US Oil Well Permits Collapse 40% In November, Fed Still “Not Worried”?
Submitted by Tyler Durden on 12/03/2014 12:01 -0500
Houston, we have a problem-er. With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the US oil-producers is critical as they have been gung-ho “unequivocally good” expanders even as oil prices began to fall. So, when Reuters reports a drop of almost 40 percent in new well permits issued across the United States in November, even The Fed’s Stan Fischer might start to question his lower oil prices are “a phenomenon that’s making everybody better off,” may warrant a rethink.
As Reuters reports,
Data provided exclusively to Reuters on Tuesday by industry data firm Drilling Info Inc showed 4,520 new well permits were approved last month, down from 7,227 in October.
The pullback was a “very quick response” to U.S. crude prices, which settled on Tuesday at $66.88 CLc1, said Allen Gilmer, chief executive officer of Drilling Info.
New permits, which indicate what drilling rigs will be doing 60-90 days in the future, showed steep declines for the first time this year across the top three U.S. onshore fields: the Permian Basin and Eagle Ford in Texas and North Dakota’s Bakken shale.
Gilmer said last month’s pullback in permits was more about holding off on drilling good locations in a low-price environment than breaking even on well economics.
“I think in this case this was just a quick response, saying ‘there are enough drill sites in the inventory, let’s sit back, take a look and see what happens with prices,'” he said.
The specifics are intriguing given the cost curves…
The Permian Basin in West Texas and New Mexico showed a 38 percent decline in new oil and gas well permits last month, while the Eagle Ford and Bakken permit counts fell 28 percent and 29 percent, respectively, the data showed.
In addition to the Permian, Eagle Ford and Bakken, about 10 other regions tracked in Drilling Info’s data showed declines as well. The Niobrara shale in Colorado and Wyoming saw a 32 percent decline in new permits, while the Granite Wash in Oklahoma and Texas and Mississippian Lime in Oklahoma and Kansas retreated 30 percent and 27 percent, respectively.
* * *
This is a precursor to more pain…
Gilmer said the pullback in new permits is a precursor to a decline in rigs. The U.S. land rig count has been largely flat since September, hovering around 1,860 oil and gas rigs, according to Baker Hughes Inc.
“This will show up,” he said. “I expect we’ll start seeing rig impact in a couple of months.”
* * *
Of course, this should all be ignored because – like the NRF’s reporting of a double-digit decline in Black Friday sales and slowing Cyber Monday – it would break the narrative for the US economic recovery, lower oil prices are “unequiviocally good” narrative!
Those who want it all and now! are gonna get bitch slapped some day…
I think I’d like to be here to see it but it’s sure taking a long time.
Classic Austrian Boom: Funded by the central bank ZIRP. Shale oil is a real business, and profitable, but not when you overdrill and disregard proper planning and cost controls. Here’s some ballpark numbers for the Bakken:
BBLs produced in 5 years: 200,000 bbls for a well.
Cost: $10,000,000
Gross capital recovery price: $50/bbl.
Operating expense: $5/bbl.
Transportation: $12/bbl. on Uncle Warren’s trains
Break even before royalties and taxes: $67
Royalties @ 15%: $10.50 (not exact)
Total break even before taxes: $77.50
I’d say $80 is minimum to drill, and closer to $85. I don’t know how taxes work, so that’s an unknown. Clearly below $70, and Bakken is not profitable. Some wells probably are much higher, close to 500,000 bbls. recovered, plus the rich gas you get helps.
Eagle Ford has lower costs and pipelines. The $100 minimum mentioned is too high. $80 is probably a good ball park cut off for Bakken, say $70 for Eagle Ford.
The Bakken shale is a widely deposed formation. Shale is impermeable rock. The pore spaces or voids in the rock that contain hydrocarbons are not connected. No matter how much or how often you frack it you can only get the oil close to the well bore and not even close to all of it. Shale is crap. It’s been promoted since the 1950’s as finally profitable using some some new angle or technology. It’s a great way to sell crap sure hit no miss expensive puffed up drilling deals to investors, bankers and institutions. It’s nothing new. Same old scam only bigger these days. Some of the oil promoters and Bankers make fortunes but no one else does. Show me an investor who made a reasonable profit in the Barnettt Shale. The Bakken Shale, The Eagle Ford ( well maybe a very few) or any other shale. Please note that some Bakken Shale wells don’t count as crap shale wellls be cause they do not produce out of shale. Those Big cumulative production wells up there produce from dolomite (a very porous and permeable type of dolomitic lime. This formation of “productive” dolomite is not so widely deposed and is found sandwiched between the upper and lower Bakken. Hit the sweet spot and you have one hell of a well. Some people have and will get rich off a few of these barn burners but there will never be enough of them to make a significant long term addition to the truly recoverable national oil reserves. Smart people do not invest in shale wells but they might promote them to others.
Bakken is not crap. I work up there. Some wells come online over 2500 bpd. They also produce a lot of rich gas, around 1000 scf/bbl. Typical well comes online at 1,000 bpd. At $100/bbl, that was $100,000 a day, or $3 million the first month. It depletes after that, but the well is paid for in less than a year. At $80, it is probably break even.
The key is multi-zonal fracking. The wells I work on have 28 stages. Also pad drilling to reduce costs. You can get 16 wells right next to each other. A rig can do 4 wells at a time.
If natural gas was priced at the world price, Barnett would be highly profitable. And Barnett is a gas play, not oil. Anyhow, if they could get $10 a dekatherm, they’d be making some big bucks.
JamesD,
Some of those wells might pay back their cost in a year but not the cost to the investors. Not after the operators and bankers get done with them. My old partner drilled up there and had some really impressive early production too. Hardly anyone will be working up there in the not too distant future. The boom will bust for the Bakken as it has for everything. The Bakken is a suckers paradise . Your company might make tons of money but whoever funds the projects won’t unless of course you all are using debt or your own money. In that case the oil business itself will break your ass. Save the hype for the investors.
No hype. But if your point is that the Bakken money side was a con game, no argument. Again the ultra low rates by the Fed led to over-drilling, minimal planning, and poor cost control. The search for yield led people to buy the junk bonds.
Classic Austrian boom.
Shale Liquidations Begin? Sub-$50 Oil Appears In North Dakota
Submitted by Tyler Durden on 12/04/2014 09:42 -0500
When ISIS dared to steal and sell oil at below market rates, they were dire pirates that needed to be destroyed (and anyone who dared to buy it was pariah). So when, as Bloomberg reports, crude sold at the wellhead in the Bakken shale region in North Dakota fell to $49.69 a barrel on Nov. 28 (according to the marketing arm of Plains All American Pipeline), you know there is an issue in the US Shale industry. As one analyst notes, “to a producer in Wyoming, if Brent’s $70 then I’m at $50, then I have to start asking does it economically make sense to keep drilling, they might start reallocating capital, you might see projects slowed or shut down.”
As Bloomberg reports,
Oil market analysts are debating if oil will fall to $50. In North Dakota, prices are already there.
…
The cheaper price for North Dakota crude underscores how geographic and logistical hurdles can amplify the stress that plunging futures prices have put on drillers in new shale plays that have helped push U.S. oil production to the highest level in 31 years. Other booming areas such as the Niobrara in Colorado and the Permian in Texas have also seen large discounts to Brent and U.S. benchmark West Texas Intermediate.
“You have gathering fees, trucking, terminaling, pipeline and rail fees,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said Dec. 2. “If you’re selling at the wellhead, you’re getting a very low number relative to WTI.”
Discounts are not that unusual due to location or quality…
Discounts for all crudes are based on two things, location and quality, according to John Auers, executive vice president at Dallas-based energy consulting firm Turner Mason & Co.
Most U.S. refiners are along the coasts, which gives them a choice between oil pumped from wells in the middle of the country or foreign crude that can be delivered to the plant on a tanker.
That means the producer has to charge less, to make up for whatever it costs to transport it to the plant. In the Eagle Ford, that just means a few dollars to get to a pipeline that can cheaply push it 100 miles or so to Corpus Christi, Texas.
It’s more complicated in places like North Dakota, Colorado or Wyoming, where there is limited pipeline capacity. Producers have to fill rail cars with crude and pay $10 to $15 a barrel for them to be pulled a thousand miles or more to the coasts.
But this massive discount signals something different as cash liquidity becomes crucial and every shale oil driller is pumping like crazy to get their revenues…
“To a producer in Wyoming, if Brent’s $70 then I’m at $50, then I have to start asking does it economically make sense to keep drilling,” Auers said yesterday. “They might start reallocating capital, you might see projects slowed or shut down.”
…
“Places that are just starting to build up are going to be hit the worst,” Larry said by phone yesterday. “They’re going to get hit the hardest because it’s harder to get the oil out. Not out of ground, but out of the area.”
* * *
So with every expert in financial media clinging to some hope that oil prices can’t go down any more surely right? The answer is yes… and have already broken below $50… something that may indicate not just transportation issues, but desparation for crucial liquidity needs.