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Tag: miracle
Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains
Shale oil trades at a $13 discount to WTI. I wonder how many frackers can stay in business getting $29 for a barrel of their oil? They weren’t making profits at $100 per barrel. This is going to be an epic collapse. Wall Street is about to take it up the yazoo. The defaults, bankruptcies, and layoffs will be huge. So solly. The shale oil miracle was nothing but a debt financed Ponzi scheme.
Submitted by Tyler Durden on 08/17/2015 09:58 -0400
Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. As Reuters reports, this has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks’ slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.
Credit risk has soared back to record levels…
As public market demand for this sector has collapsed…
Continue reading “Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains”
BAKKEN COLLAPSE HAS BEGUN
Here is a chart from the good old days of late 2013. Bakken oil production was soaring past 1 million barrels per day on their way to a peak of 1.33 million barrels per day in March of 2015. It’s amazing what junk bond debt and $100 a barrel oil prices can accomplish.
The number of rigs operating grew from 101 in April 2010 to 218 in June of 2012. What a spectacular display of American ingenuity. We were on our way to energy independence according the Wall Street shysters, moronic politicians, and oil industry lackeys.
But a funny thing happened on the way to energy independence. Oil prices collapsed to $50 per barrel. The honest analysts know that oil prices need to be in the range of $80 for shale oil rigs to breakeven. The shysters said not to worry. They could make a profit well below $80.
I wonder how they can explain the absolute collapse in rigs working in the Bakken fields from 194 in September of last year to 101 today. Do companies reduce the number of rigs by 48% in the space of a few months if they can make money at $50 per barrel (their oil actually sells at a $13 discount of $37 per barrel)?
Oil production has already fallen to 1.29 million barrels per day and is headed back down to 600,000 barrels per day at the current rig count. OPEC is pumping a record 31.5 million barrels per day and prices are headed even lower. The Bakken miracle is over. Stick a fork in it. You can check the data yourself at this link:
http://www.eia.gov/petroleum/drilling/#tabs-summary-2
FRACKED UP
There is no doubt that fracking stopped the long-term decline in U.S. oil output. Since the all-time low output in 2006, daily oil production has increased by 30%. Natural gas production has soared even higher, but seems to have leveled off. Ignoring the environmental impacts of fracking, just the economics alone show that shale oil and gas are not the miracle that will save us from the perils of peak cheap oil. Fracking extraction of oil is extremely expensive. If oil prices were to fall to $80 per barrel, there would be no profits for frackers. They would stop drilling wells. So don’t plan on ever paying less than $3 per gallon for gasoline ever again.
Other inconvenient truths about fracking are self evident, but covered up by the MSM and Wall Street shysters.
- To maintain production of 1 million barrels of oil a day from Iraq one needs to drill just 60 new wells a year. Extracting the same amount from the Bakken would require 2,500 new wells.
- A typical fracked well poked in the ground in Oklahoma in 2009 debuted with an output of about 1,200 barrels of oil per day. Just four years later, however, output from the same well has fallen to just 100 barrels of oil per day.
- To double that output from the Bakken, for instance, would require 5,200 new wells a year, and tripling it would require 7,800 and so on. Then, to the horror of all, less than a decade after all that was done, that additional million barrels of oil a day in production would be reduced to just 100,000, no matter what the oil companies do, because of the nature of the formation where the well was drilled.
- California’s Monterey Shale, which the U.S. Energy Information Agency thought contained 13.7 billion barrels of oil in 2011, came up a little light in the loafers. Closer examination revealed the formation to be much more broken up underground than previously thought — so much so that only around 600 million barrels may ultimately be recovered with current technology. That’s a 97 percent downgrade, and there is no guarantee that other rosy predictions of shale oil riches both in the U.S. and elsewhere won’t have similar outcomes.
The best fracking locations were selected first. As time goes on, the new locations will be less productive. The existing locations deplete rapidly. The shale oil and gas boom will be peaking out over the next few years. Don’t believe in miracles.
You will find more statistics at Statista