htxag09 said:

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Farmer1906 said:

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BiochemAg97 said:

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htxag09 said:

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I just got off a call with a supplier and their solution to the supply chain issues is to buy more and buy it earlier. And this isn't a small company, it was a top 5 frac company in the US.

I understand real world is different than textbooks we read in college, but a lot of this across the industry and it's not hard to fathom the other side of these supply chain shortages holding a lot of surpluses and companies in trouble because of too much inventory.

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Also extends the supply chain issues as everyone buys more than they need.

Certainly take good management to transition from that strategy to a more normal strategy. Although, I would guess we see businesses (in all sectors) shy away from just-in-time for a while even after the supply chain issues are resolved.

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This.

Bullwhip effect. Every level through the supply chain buys just a little more and by the time you get to the end of it we end up with entirely too much *****

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Yeah, Bullwhip effect was precisely what I was talking about when I said studying in school is different than real world. But it's getting bad. Buying more than you need and buying more often is a ****ty ass plan, no matter how you look at it.

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100% agree with your last point. We're doing it, but we're trying to do it with some logic behind it. We're attempting to forecast further out, share more information from sales, narrowing our flavors of tools, and put contracts with suppliers to hold some stock and pricing.

It is not entirely different from food shortages. My kids eat only a few things (they are still babies\toddlers) and some of the things they eat are still hard to come by so I buy enough to always ensure that I have enough to keep them fed. I don't think that strategically purchasing equipment and materials that you need in order to keep your business going is hoarding but I'm sure you get the companies that buy 40 packages of toilet paper. There has to be an inbetween.

One interesting aspect of the current supply chain situation, as it pertains to o&g, is that in many sectors the solution can't be money whipped due to lack of basic inputs. In the past if we needed tubing, we'd ask the mill what it would cost to expedite all our orders and without hesitation we'd pay it to get things going. Currently, steel mills are struggling to get basic raw materials so expedite is not an option. The panic buying kicked off last year, but it's yet to be seen how long the shortages will last. One thing for certain is that it'll be exponentially more difficult for companies to throw money at problems looking for a quick fix. It worked for so long that it will be interesting to watch unfold.

Food industry has been this way most of Covid. Production is limited, often controlled by 5 or less large companies.

Last year it was all just short. This year it is mostly short, but with random weeks of surplus. There is little ability to floor plan. Especially since most cold storage facilities are full.

Can one of you chemical guys explain to me like I'm 5 (and not one of the smart 5 year olds) why ethane isn't discussed as a potential fuel source? Either for cars or as a propane substitute (I know it won't be as efficient as propane, but it is ~33% of the price of propane and significantly less expensive than methane)? Ethane prices are ridiculously low even with many plants operating in rejection mode, and the strip takes them even lower for the next 5 years - must be something other than economics holding it back from wider use.

Not an expert but there are transport issues with ethane being a liquid above 600+ psi and propane being a liquid above 100+ psi. Propane also has a higher heating value. A chemical person can get you the exact numbers.

The percentages in the gas compared to methane and the heating value doesn't make since to capture when the chemical feedstock price isn't there.

ChemAg15 said:

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Ive never thought about this but heres my guess.

The critical temperature of ethane is around 90 degrees which means it won't liquefy above 90 degrees no matter how high the pressure gets. Propane condenses well at ambient temperature and relatively low pressures (120 psi).
It's easier to transport and store liquids.

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Probably this and it's kind of a swing molecule (see ethane rejection).

Yup, ethane requires high pressures and moderate to low temperatures to keep it in the liquid phase. But even a fairly small amount of propane (80/20 E/P mix) added to the ethane significantly lowers the vapor pressure.

But I think you'd also need to retool your equipment to handle the different fuel (like you can't run propane in a natural gas burner tube).

We also have an entire infrastructure system and industry built around propane as a fuel. That doesn't exist for ethane or EP blends.

Did the EIA natural gas report leak or something?

On to $88. Is the thread finally coming full circle and we are officially back?

AustinAg008 said:

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On to $88. Is the thread finally coming full circle and we are officially back?

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Still no money flowing into O&G. Very few projects ongoing.

Only have one rig planned for the year, we presented an above minimum development to our board, they shot it down. Sad day.....

There are alot of cold-stacked rigs that are ready for reactivation. With <100MM in reactivation costs and upgrades per rig, I would expect those to be done first before new investment is needed for fleet expansions or replacement MODUs.

BlackGoldAg2011 said:

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AustinAg008 said:

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On to $88. Is the thread finally coming full circle and we are officially back?

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Not quite but moving that way. Highest WTI has been during this thread was $94.90 on 9/30/2014 (4 days into this thread). I'd say we've come full circle and are officially back when we start seeing investment capital reenter the space in significant ways. But i realize that:

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Once capital reenters the market, this whole cycle starts over again. At that point we 'aren't back' we're back to $50.

All the inertia in the system makes for interesting dynamics. And the goal isn't to tune the system to control and stabilize it, but to maximize profit. So you overshoot on your highs and lows.

one MEEN Ag said:

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BlackGoldAg2011 said:

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AustinAg008 said:

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On to $88. Is the thread finally coming full circle and we are officially back?

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Not quite but moving that way. Highest WTI has been during this thread was $94.90 on 9/30/2014 (4 days into this thread). I'd say we've come full circle and are officially back when we start seeing investment capital reenter the space in significant ways. But i realize that:

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Once capital reenters the market, this whole cycle starts over again. At that point we 'aren't back' we're back to $50.

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not immediately. it will take some time between capital reentry and the next crash. how long is anyone's guess. but you do highlight the point that asking when "we are back" in a cyclical market is a bit like asking where the beginning of a circle is.

Nat gas touching $7 this afternoon

Yeah it wasn't long but looked at lunch and thought I was seeing things

jetch17 said:

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Yeah it wasn't long but looked at lunch and thought I was seeing things

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"All the signs of a short squeeze'.

Super low gas volume. Not sure I buy that price sticking. Probably some shorts or options forced to cover positions in an illiquid market at the end of the month.

Winner.

Full blown Russian invasion of Ukraine.

Prepare yourselves.















****Tinfoil Hat****

This is my first time in OFS sales where we are turning down work. It's nice to finally be on this side of it.

Oh we're definitely not naming our price yet. They are slowly creeping up, single digit percent increases. No where near where they were a few years ago.

OFS is actually going to help keep the price in check this time. They're gouging too hard, keeping producers drilling within cash flow. Obviously the cycle will continue, but it may take longer than usual now.

https://www.reuters.com/world/us/us-judge-annuls-gulf-mexico-oil-lease-sale-over-climate-impact-2022-01-28/

Federal judge decides to cancel the November lease sale in the GOM. Any lawyer types care to share some insight on how that would be within his bounds?

slavy06 said:

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https://www.reuters.com/world/us/us-judge-annuls-gulf-mexico-oil-lease-sale-over-climate-impact-2022-01-28/

Federal judge decides to cancel the November lease sale in the GOM. Any lawyer types care to share some insight on how that would be within his bounds?

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The claim by the environmentalists is that the govt didn't do all it needed to do regarding consideration of environmental impact. Standard claim in these types of cases. Judge agreed and said the sale was invalid. Also, the govt hasn't activated the leases yet, so it isn't like anyone has been "working" them. (I'm sure time has been spent planning on working them). Not sure if "not activating" is a standard processing delay or an intentional delay tactic by the Biden administration who was basically told by the court that they couldn't halt the sale.

It is likely going to be appealed before all is said and done, so they just sit there.

I'm curious when a company has to pay for the lease. Is it upon completion of the auction or upon activation of the lease? Assuming the leases involve upfront cash and not just bidding on what % of barrels produced.

BiochemAg97 said:

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slavy06 said:

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https://www.reuters.com/world/us/us-judge-annuls-gulf-mexico-oil-lease-sale-over-climate-impact-2022-01-28/

Federal judge decides to cancel the November lease sale in the GOM. Any lawyer types care to share some insight on how that would be within his bounds?

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The claim by the environmentalists is that the govt didn't do all it needed to do regarding consideration of environmental impact. Standard claim in these types of cases. Judge agreed and said the sale was invalid. Also, the govt hasn't activated the leases yet, so it isn't like anyone has been "working" them. (I'm sure time has been spent planning on working them). Not sure if "not activating" is a standard processing delay or an intentional delay tactic by the Biden administration who was basically told by the court that they couldn't halt the sale.

It is likely going to be appealed before all is said and done, so they just sit there.

I'm curious when a company has to pay for the lease. Is it upon completion of the auction or upon activation of the lease? Assuming the leases involve upfront cash and not just bidding on what % of barrels produced.

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I think it is both. There is upfront cash and then a defined cut as the well produces.

There was a controversy where a front for an environmentalist group won the auction, and then declared they had to intention of developing the lease. The government reneged their winning bid since they purposefully wouldn't be upholding the production cut part of the contract.