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What are the real forecasters stating on this oil crunch we are in. Do we see it continue to fall, has it bottomed out, and is there any hope for a recovery in the next 6 months?

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The EIA in their July STEO, is projecting $55 for 2015 and $62 for 2016. They are 95% confident it'll be between $41 and $85. LOL

They expect Nat Gas to average $2.97 in 2015 and $3.31 in 2016.

At FID, Gorgon was supposed to have a 2ish year payback IIRC. But that was before the costs skyrocketed, schedule delays and the LNG market dropped substantially.

Here's an interesting take

http://www.breitbart.com/big-government/2015/07/08/second-wave-of-u-s-oil-boom-will-bankrupt-opec/

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Here's an interesting take

http://www.breitbart.com/big-government/2015/07/08/second-wave-of-u-s-oil-boom-will-bankrupt-opec/

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By continuously keeping the price oil above $70 a barrel since 2009, OPEC realized by June of 2014 that it was encouraging U.S. competition. The cartel assumed that if it pushed prices down to $50 a barrel for a while, the U.S. boom would quickly implode.

OPEC began its "bear raid" on the week of July 4, 2014. The active US drilling oil-rig count at the time had just hit a multi-decade high of 1873. By knocking the price down to under $60 a barrel over the next 12 months, OPEC was able to shrink the active U.S. oil-rig count down to 628 by late June 2015, the lowest since August 6, 2010.

But to OPEC's shock, U.S. oil production, rather than falling from 8.6 million barrels a day (bpd), actually rose by April to 9.7 million bpd. OPEC's exports of Middle East "light sweet crude" to U.S. refineries on the Gulf Coast decreased by 45%,

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Wow. Looks like OPEC & Saudi Arabia are only hurting themselves by keeping the price of oil low.

American Ingenuity

I honestly think US companies are winning. While our lifting costs are much higher... We don't have to find an entire national government on the profits of our company. And with demand starting to increase things are starting to look up as long as China doesn't fall off the deep end. At least today was good news on that front.

I'm not sure who is winning. Their production (for new and existing wells I think )are lower than ours and they have a lower break even cost. I'm not sure what their actual break even costs are on new drilling, though I recognize they need a lot higher price to balance their countries budgets.They are going to produce their oil no matter what, it's just a question of how much of the profit will go towards social programs rather than new drilling. There is a point where the amount of money taken away from getting more oil affects their overall production due to the decline of fields and not bringing new production online.

The question is going to be - Can the U.S. Companies hold out until production decline and demand increase result in higher prices?

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The question is going to be - Can the U.S. Companies hold out until production decline and demand increase result in higher prices?

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Looks like they may be able to go for a while at even lower prices.

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The U.S. "fully burdened exploration and production "break-even" cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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My opinion:

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Do we see it continue to fall,

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Not by much, but there might be some hiccups.

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has it bottomed out,

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Mostly

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and is there any hope for a recovery in the next 6 months?

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Of course it depends on your definition of recovery, but mainly no. I think it will be largely around $55 to $65 through this time next year. I think we could see it in the $70s come the end of 2016. We were in a boom and it historically takes two years to recover.

Interesting take on OPEC.

The real measure is what is the cost that not only makes the well profitable but also makeups for all the corporate expenses. I don't want to lose my pension

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The real measure is what is the cost that not only makes the well profitable but also makeups for all the corporate expenses. I don't want to lose my pension

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Isn't that the 9% they're talking about?

I don't know if debt was included in that 9% either. Some of these shale companies have pretty hefty debt loads.

U.S. Production is fast becoming extremely efficient. My company has dropped our break even number significantly. Not to where the price is now but close.

We used to drill wells for over a month, flow back through temp equipment for weeks, etc. now we drill a well with twice the horizontal length in less than 30 days and completely eliminated flow backs through temp equipment. We go to sales lines almost immediately.

If and when the price comes back we have the knowledge and experience (my company chose to mostly retain) to blow it out of the water. Hopefully, sooner rather than later.

This is why The articles about previous OPEC market share runs indicate it always backfires on them. They are producing flat out right now and drilling like crazy to remain flat on production.

There are lots of forces that come into play but from a Permian prospective production should start decreasing by late 2015/early 2016...I think thats when prices will go up. Until that point..I have no idea what the bottom will be.

For some of the more experienced guys around here... You think that article is close to accurate? Obviously there's been a lot of leaning out that has occurred over the last 7 months or so, but is it as drastic as that article says?

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The U.S. "fully burdened exploration and production "break-even" cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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Just the cost to produce an already completed well? Not sure that is the issue - the issue is if/when drilling activity declined further.

That's not what was meant by that. They mean including or excluding the cost of lease acquisition.

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The U.S. "fully burdened exploration and production "break-even" cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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Just the cost to produce an already completed well? Not sure that is the issue - the issue is if/when drilling activity declined further.

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Our lifting costs (Permian operator) over the previous 2 years have been $13.11-$30.25. We're currently at $14.77/barrel. We tend to push some of the fungible ACP items to LOE for the tax benefits, so those numbers could be slightly inflated.

In my opinion the rig count fell below the level to maintain US crude production flat sometime in March/April (with the exception of any ramp up of major offshore developments which I don't follow closely). In 3-6 months I think we will see the results of the lower rig activity level in the EIA monthly crude production data which runs about 60-90 days late - so it may be as late as October to get confirmation? However, I don't believe the decline will be significant enough for another 6-18 months to really move prices from pure supply/demand perspective. OPEC has already ramped production higher than the decline shortfall. The wall street/psychological factor of seeing production peak and then decline will probably add some price support, but we won't be anywhere near the Benjamin per Barrel level.

OPEC and the market's reaction to the collapse of Venezuela and possibly Nigeria will be interesting to follow from a geopolitics/industry perspective (not so amusing for people you know that live there). I wish the US was smart enough to capitalize on the potential here, but it will probably be the Chinese.

Also, no one of significance is going to try and grow production with the drill bit with oil in the $30's for any sustained period. There will be significant money spent in O&G at that level, but it will be mostly M&A activity. Who thinks Exxon would just go back to calling themselves Standard Oil when they buy CVX?

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The U.S. "fully burdened exploration and production "break-even" cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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Just the cost to produce an already completed well? Not sure that is the issue - the issue is if/when drilling activity declined further.

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Our lifting costs (Permian operator) over the previous 2 years have been $13.11-$30.25. We're currently at $14.77/barrel. We tend to push some of the fungible ACP items to LOE for the tax benefits, so those numbers could be slightly inflated.

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Does that include corporate G&A or strictly direct LOE? We operate in the Permian and consider our lifting costs to be very low. We are under $1600/well/month at the direct.

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The U.S. "fully burdened exploration and production "break-even" cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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Just the cost to produce an already completed well? Not sure that is the issue - the issue is if/when drilling activity declined further.

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Our lifting costs (Permian operator) over the previous 2 years have been $13.11-$30.25. We're currently at $14.77/barrel. We tend to push some of the fungible ACP items to LOE for the tax benefits, so those numbers could be slightly inflated.

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That does seemba bit high. Do you have any idea why it has gone up?

Includes the COPAS G&A charges, but not back office G&A.
We currently operate ~55 wells. Have 11 more on the drilling schedule for this year and 35 next year. ~45 of our operated wells have been drilled in the last 18 months. We've had 3 liquidity events in 3 years which we sold almost all of our older production which makes our average well age pretty young and new wells cost quite a bit more to operate in our experience. For forecasting, we use $4,000 per month plus $4 per barrel for LOE.

We also tend to put all we can on LOE if it's questionable whether it's tangible or leasehold or LOE. Obvious items like acreage bonus and pumping units go to leasehold and tangible. I don't want to get too descriptive here, but something like title curative after completion will go to LOE rather than leasehold.

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Talk about a culture clash if Exxon bought Chevron!

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You're not kidding. I actually like going into work every day.

It looks like deal will be announced tomorrow. Oil trading down 1.5%

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It looks like deal will be announced tomorrow. Oil trading down 1.5%

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Are you saying CVX will be bought by XOM?

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It looks like deal will be announced tomorrow. Oil trading down 1.5%

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Iran deal?

Iran Deal

Sanctions lifted will be good for companies like XOM and HAL. It's a market with proven reserves that won't in a war zone. The increased production will hurt prices in the short-term but should help in the long-term. I'm going Rex is on a plane to Tehran as soon as he legally can to talk business.

Thanks Dan for your responses.

So your take on this Iran deal is that we could see an oil price dip for how long? When do you expect to see it go the other direction?

I wonder what this does to the forecasts you spoke of at the top of this page as well.

WPX acquires RKI

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So your take on this Iran deal is that we could see an oil price dip for how long? When do you expect to see it go the other direction?

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I'm not sure we'll see a huge dip. The Iranian sanctions are flouted by the Chinese and Indians, their crude is already being purchased by someone. The IOC's are going to need a few years to develop Iranian fields, the long term is anyone's guess.

If we do see ad dip, I say it lasts until the Iranians piss of the US again and we re-sanction them... or when the Israelis decide to bomb Iran's nuke facilities, running the risk of sparking a regional war.

There's always a ship sinking in the Strait of Hormuz or Strait of Malacca to look forward to.