Looks like the consensus is China's economy is dying and stimulus won't help, which is killing oil price. Will be interesting to see how it develops as Saudi and the US scale back production. What's your bet? Oil up or down at the end of the year?

That's the reason the WSJ is claiming speculators are betting against oil prices.

https://www.wsj.com/livecoverage/stock-market-today-dow-jones-06-27-2023/card/investors-pile-into-bets-against-oil-87AOB0CTfzL138CdkwS0

Nah, L48 bois drilling ****ty wells in tier 2/3 rock need to lay down rigs.

I would settle for $80

The US letting Iran drain storage and ramp exports didnt help things.

Nice draw, need 3-4 more weeks of consistent draws to get us back to high 70s/low 80s.

I still content shale is largely uneconomical at current strip and interest costs.

At this point I'm not convinced shale is anything other than financial fraud in the grand scheme of things regardless. Spend always seems to oustrip revenue.

Has anyone been successful long term with it?

And I'm not talking pump and dump or buying distressed assets. Some of the majors are claiming profits, but I have a hard time believing the most inefficient over administered groups are able to turn a profit when smaller, more efficient organizations can't. Makes me wonder if that's not just accounting games as it is the opposite every other part of the industry in that regard.

Guys like Mewbourne have done well and retained assets and built value.

Over time, shale is not a durable business model imo. Especially if you try to meet hurdles under PE backed context.

Cyp0111 said:

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Guys like Mewbourne have done well and retained assets and built value.

Over time, shale is not a durable business model imo. Especially if you try to meet hurdles under PE backed context.

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And I know the post perceives I want it to fail. I don't. I think the concept in interesting and like technology innovation. I've just never seen it be successful. It's got to or at some point money wouldn't' be available. It just appears even management teams with historical success are failing at Shale.

My frustration is it appears Shale has basically destroyed subsea investment and drastically changed conventional investment and is ultimately really hurting the industry far worse than government sabotage to "Green".

Comeby! said:

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I wouldn't say shale is uneconomic. Im working with a group bringing on some tier 2+ wells in many basins that are still paying out in under 2 years. This is especially meaningful since they paid discounted PDP for production and nothing for the acreage and upside. Even fully baked, the economics are still way over cost of capital and very attractive.

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Would the economics be the same if they paid normal PDP and normal pricing for the acreage?

There are many shale wells that by themselves generate more cash than they cost to drill, complete, and operate. When you add the cost of capital + cost structure of operators, the game changes a lot, not to mention the cost incurred to learn how to drill a good well and effectively stimulate it.

I think if you were to compare our current situation to one where shale drilling was never discovered, obviously the supply side of the equation would be vastly different. I'm not convinced we would be in a better place as an overall economy without shale drilling. Seems like we would be more reliant on ME oil. I think commodity prices for Oil and NatGas would be higher than they have been since the mid-2000's, resulting in electrification being more competitive on cost. If shale drilling hadn't been discovered when it was, it could have hastened the death of the industry IMO. Keeping oil cheap is a significant factor in what is keeping the industry alive.

AgLA06 said:

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Comeby! said:

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I wouldn't say shale is uneconomic. Im working with a group bringing on some tier 2+ wells in many basins that are still paying out in under 2 years. This is especially meaningful since they paid discounted PDP for production and nothing for the acreage and upside. Even fully baked, the economics are still way over cost of capital and very attractive.

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Would the economics be the same if they paid normal PDP and normal pricing for the acreage?

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I think you underestimate how prolific some of these wells can be for much less capital and much less time until revenue than say offshore. The problem for shale companies if they aren't balanced is the decline curves when prices fall off make it hard at the corporate level. When prices drop your cash flow shrinks substantially and your production starts going on a steep decline. Companies with more balanced production sources are much better equiped to handle commodity cycles, in my opinion. It's also a problem for offshore. It would suck to spend a ton of capital in say 2017-2019 only to have your multi hundred million dollar project come online in 2020.

Gordo14 said:

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AgLA06 said:

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Comeby! said:

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I wouldn't say shale is uneconomic. Im working with a group bringing on some tier 2+ wells in many basins that are still paying out in under 2 years. This is especially meaningful since they paid discounted PDP for production and nothing for the acreage and upside. Even fully baked, the economics are still way over cost of capital and very attractive.

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Would the economics be the same if they paid normal PDP and normal pricing for the acreage?

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I think you underestimate how prolific some of these wells can be for much less capital and much less time until revenue than say offshore. The problem for shale companies if they aren't balanced is the decline curves when prices fall off make it hard at the corporate level. When prices drop your cash flow shrinks substantially and your production starts going on a steep decline. Companies with more balanced production sources are much better equiped to handle commodity cycles, in my opinion. It's also a problem for offshore. It would suck to spend a ton of capital in say 2017-2019 only to have your multi hundred million dollar project come online in 2020.

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The difference is that subsea project coming online in 2020 would most likely still be producing in 2030. Not to mention tie backs or additional expansion.

100% correct on less capital and less time until operational.

I guess the new normal is PDP PV20 or cheaper and $0 for acreage (for everything other than Tier 1 Delaware) .
The name of the game is scale. This doesn't work unless you are a large independent or bigger operator -> 30,000 BOEPD (which greater than 70% being oil, my metrics). Also you have to be ultra lean on overhead and single digit interest/pref rates. Just my opinion based on what I'm seeing.

GarlandAg2012 said:

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There are many shale wells that by themselves generate more cash than they cost to drill, complete, and operate. When you add the cost of capital + cost structure of operators, the game changes a lot, not to mention the cost incurred to learn how to drill a good well and effectively stimulate it.

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That's like saying if I didn't have to pay my mortgage, school tuition, car loans, or any other debts I could retire.

It's just not reflective of reality. All 3 posts in response so far have indicated it's only viable in isolated wells or if you get extreme discounts on acreage or operations costs compared to conventional.

Comeby! said:

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I guess the new normal is PDP PV20 or cheaper and $0 for acreage (for everything other than Tier 1 Delaware) .
The name of the game is scale. This doesn't work unless you are a large independent or bigger operator -> 30,000 BOEPD (which greater than 70% being oil, my metrics). Also you have to be ultra lean on overhead and single digit interest/pref rates. Just my opinion based on what I'm seeing.

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That's good info.

I guess I don't get the strategy behind a large independent or big operator going shale verses subsea. Very few are seen as being ultra lean. Bigger return and more proven reserves in subsea.

I thought this article was super interesting as I've been thinking about how to play the CCS opportunity from a land and mineral perspective. I used to flip leases and minerals in the eagleford.

https://www.wsj.com/articles/new-land-grab-by-oil-giants-is-deep-underground-34cd5e97

Not sure what they are actually leasing though and how the economics work.

one MEEN Ag said:

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There are two steps to successfully investing in shale.

Buy EOG when its below $70.
Sell when its above $100.

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They've always been friendly to me in Karnes County

Any landmen on here who have dealt with leasing or acquiring subsurface rights - separate from the surface and not minerals? Would love to connect if so.

Feel free to send me a DM.

Interesting username

Patterson buying Ulterra

https://finance.yahoo.com/news/patterson-uti-energy-announces-agreement-100000148.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAE4CA4UP2zWKnPpZqzcTJtzYdbIpM_u4XtaUPyeYOwCvIjrJ-JcHBFOXMm7Lgsw0rwhu1mkmT-pazHd4KPJmRrqp_PKCjReiMCUgt1qPPRiqiWKa6ktr_OblygTQ1MErjXzEZLPlzbbLosbvdYq6VWvMDcVih3rfhTigbE5aN9En

OFS still worst business on earth.

treyyates said:

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one MEEN Ag said:

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There are two steps to successfully investing in shale.

Buy EOG when its below $70.
Sell when its above $100.

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Thankful they bought us at $88

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This is a really interesting perspective from the same report on the dual modes of the oil market. Oil prices tend to hover near demand destruction pricing levels or supply destruction pricing levels. The current price is near average for supply destruction levels. pic.twitter.com/Zpce7tL9bI

— Josh Young (@Josh_Young_1) July 5, 2023

Thought this was a good chart. Given the capital discipline focus of US oil companies, that may increase the rate at which we hit the inflection point of S&D balance relative to the recent past.

treyyates said:

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one MEEN Ag said:

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There are two steps to successfully investing in shale.

Buy EOG when its below $70.
Sell when its above $100.

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Thankful they bought us at $88

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