Thank you. Must be a bean counter...
Houston..we have a problem....
7,350,865 Views |
28791 Replies |
Last: 3 days ago by one MEEN Ag
Proud Shale Boy here.
he's not a bean counter. but, he is a jaded finance guy. to be fair, he's right on a lot.nu awlins ag said:
Thank you. Must be a bean counter...
Cyp,Cyp0111 said:
I wouldnt overtly call what shale is doing as efficiency, drilling longer laterals...
On a dollar per dollar basis, making a single well longer (and thus more access to shale) is way more cost efficient than starting completely over on a new well.
The biggest innovations that allow this are:
-force pooled mineral rights that allow for longer contiguous properties to be drilled together.
-performance based contracts (hitting targets on time instead of just $/hour worked)
-drilling technology improvements that allow for deeper, longer wells
-putting formerly LWD technology on BHAs so drillers are able to monitor formation changes downhole and stay within the shale layer.
Wireline can always get more wire. Completions just becomes riskier but its just more of the same risk theyve always had.
I will give you this, everyone has about maxed out the performance capabilities of fracing. There isn't a step change in oil extracted per frac zone on any horizon that I've monitored.
Adding PXD and XOM together in that chart…going to be quite the monster.
Well he's wrong on this one. I do both now and research is key....Furlock Bones said:he's not a bean counter. but, he is a jaded finance guy. to be fair, he's right on a lot.nu awlins ag said:
Thank you. Must be a bean counter...
He also thinks mergers and consolidation will take production away when reality is often the opposite because of increased efficiencies, increased capital, or access to outlets.txaggie_08 said:
Yeah, Cyp been very negative on industry for a while.
The only thing it takes away are duplicate jobs. How could you even think that a merger will take away production? That's one of the main reasons for them, to ADD to your current and future production.AgLA06 said:He also thinks mergers and consolidation will take production away when reality is often the opposite because of increased efficiencies, increased capital, or access to outlets.txaggie_08 said:
Yeah, Cyp been very negative on industry for a while.
My pet peeve is finance guys complaining about onshore US producers not acting like a cartel. If the industry followed their wishes in the past we would be majorly screwed right now.
Maybe we're all misunderstanding, but when his response to too much production is more consolidation is needed, I'm not sure how else to take it.nu awlins ag said:The only thing it takes away are duplicate jobs. How could you even think that a merger will take away production? That's one of the main reasons for them, to ADD to your current and future production.AgLA06 said:He also thinks mergers and consolidation will take production away when reality is often the opposite because of increased efficiencies, increased capital, or access to outlets.txaggie_08 said:
Yeah, Cyp been very negative on industry for a while.
I do share his pessimism with shale in general though. Just seems like a shell money game where profits never keep up with cost / cash flow. I think the short term benefit it has brought the US harms our independence long term by minimizing deep water production and expertise.
Technology innovation and short term product can't be argued.
From the companies I just spoke with, all are projecting flat in 2024. The increases will come again from, efficiencies.AgLA06 said:Maybe we're all misunderstanding, but when his response to too much production is more consolidation is needed, I'm not sure how else to take it.nu awlins ag said:The only thing it takes away are duplicate jobs. How could you even think that a merger will take away production? That's one of the main reasons for them, to ADD to your current and future production.AgLA06 said:He also thinks mergers and consolidation will take production away when reality is often the opposite because of increased efficiencies, increased capital, or access to outlets.txaggie_08 said:
Yeah, Cyp been very negative on industry for a while.
I do share his pessimism with shale in general though. Just seems like a shell money game where profits never keep up with cost / cash flow. I think the short term benefit it has brought the US harms our independence long term by minimizing deep water production and expertise.
Technology innovation and short term product can't be argued.
Yeah, I don't think I believe that chart.
nu awlins ag said:
From the companies I just spoke with, all are projecting flat in 2024. The increases will come again from, efficiencies.
We're looking at a very large, unexpected RFQ from one of the names on the FT image on the previous page for 1H 2024. This is a long time customer so we're used to their purchasing habits. This doesn't scream flat 2024 to me. Anecdotal obviously but we're really excited about it.
Well, that's one client. In general the 6 companies I spoke with said their activity would be the same in 2024 as it was in 2023, which by definition is flat. Doesn't mean they won't do more work as some said it depends on market conditions etc.Sims said:nu awlins ag said:
From the companies I just spoke with, all are projecting flat in 2024. The increases will come again from, efficiencies.
We're looking at a very large, unexpected RFQ from one of the names on the FT image on the previous page for 1H 2024. This is a long time customer so we're used to their purchasing habits. This doesn't scream flat 2024 to me. Anecdotal obviously but we're really excited about it.
If you kept all current production and added another year's worth wouldn't that grow production overall?
Edit. NM I forgot the chart was showing annual production levels.
Edit. NM I forgot the chart was showing annual production levels.
Also the companies have now paid for a shiny new asset and the debt doesn't service itself.AgLA06 said:He also thinks mergers and consolidation will take production away when reality is often the opposite because of increased efficiencies, increased capital, or access to outlets.txaggie_08 said:
Yeah, Cyp been very negative on industry for a while.
Capital and debt provider, so I guess that is true.
I see all the talk on efficiency gains by every management team and prospect I come across, I also see breakeven closer to $70 bbl.
On the natural gas side, the carry in the market was too much of a carrot for many.
Time will tell but outside of larger well capitalized entities, a lot of donuts out there if prices do not recover (hint, slow drilling)
I see all the talk on efficiency gains by every management team and prospect I come across, I also see breakeven closer to $70 bbl.
On the natural gas side, the carry in the market was too much of a carrot for many.
Time will tell but outside of larger well capitalized entities, a lot of donuts out there if prices do not recover (hint, slow drilling)
Where are you seeing breakeven of $70 bbl?
Tuscaloosa Marine Shale
I generally do not look at well level economics. Once you fold everything in, take into account well performance and have honest EURs. You get pretty close.
I haven't looked at it on a basin level but Enverus has company overviews for nearly every shale company broken down by basin. The BE's mostly are in the $40-50 for the companies I saw.
On flush production, breakevens at those on a wellbore basis, maybe. I put that number closer to $50. Run $50 throug the model and curious what the IRR is...
I look at things at an enterprise levels, when factoring in SG&A, land acquisition costs, debt costs, capex to atleast maintain asset base.
What would one venture to say a baseline breakeven is ? It's pretty close to $70 as a negative cash flowing business in normal course is what value outside intrinsic ?
I look at things at an enterprise levels, when factoring in SG&A, land acquisition costs, debt costs, capex to atleast maintain asset base.
What would one venture to say a baseline breakeven is ? It's pretty close to $70 as a negative cash flowing business in normal course is what value outside intrinsic ?
Yep, there's a difference between BE for capex (or per well) and BE for operating a field (LOE). Then there's the fully baked in costs which include F&D.
Yes- and I'm in the business as should everyone in profitable, sustainable companies. I have a long list of people that filed Ch.11 drilling 50% IRR wells with sub 50 breakevens. There is a huge disconnect in running a sustainable business in shale.
So I always chuckle with the breakevens as justification.
So I always chuckle with the breakevens as justification.
I'm in shale and we never talk about breakevens. That's not how decisions are made.
I'm in shale and its all about ripping chokes, getting tubing and running GL.
Seems to be working so far
Seems to be working so far
I know, I'm talking about this board.
Somewhat related but it is wild that you can buy a gallon of gasoline for $2.50 or whatever it is with how much goes in to getting a bbl of oil out of the ground and refined, whether it comes from domestic or foreign production. I am pretty sure each VLCC that enters the GOM has to tack on about 200k +/- just for the service I provide in the supply chain. 5x that for doing the same thing in brazil or Uruguay. Currently posting from a suezmax DPST, for reference.
Unless you have 2% H2S with some CO2 as an injection gas.
You were the only one to bring breakevens up unless I missed a post?Cyp0111 said:
Yes- and I'm in the business as should everyone in profitable, sustainable companies. I have a long list of people that filed Ch.11 drilling 50% IRR wells with sub 50 breakevens. There is a huge disconnect in running a sustainable business in shale.
So I always chuckle with the breakevens as justification.
Most people were arguing with your assertion that consolidation would lead to decreased production, and your generally pessimistic outlook on the shale business.
Are you suggesting that perhaps Exxon is currently running 5 rigs, Pioneer is running 10 rigs, and the merged companies will only run 12? Cause I could see that being plausible, but not sure if that generally happens. You haven't explained how consolidation will lead to improved commodity pricing really.
Ill find the chart with production growth. Most of it is coming from the private side as they scale to be purchased as bankers were in mgmt team/sponsors ears a while back that the only valuation to consider was production.
My statement is that you will have less rigs focused on exit valuation which per my observation is not as market signal focused.
My statement is that you will have less rigs focused on exit valuation which per my observation is not as market signal focused.
Ok now that is a reasonable explanation. Interested to see the chart.Cyp0111 said:
Ill find the chart with production growth. Most of it is coming from the private side as they scale to be purchased as bankers were in mgmt team/sponsors ears a while back that the only valuation to consider was production.
My statement is that you will have less rigs focused on exit valuation which per my observation is not as market signal focused.
This plot shows the private vs public trend
From Novi Labs.
From Novi Labs.
thats it
Question for the thread - anyone seen mineral packages transacting lately? Any insight into what sort of discount rate is typical for upside? Main upside in a package I'm looking at is focused on a single large unit with a fairly strong commitment for continuous drilling in the near-mid term future, so it's not just a bunch of random sticks on a map, but there aren't rigs on location yet either. Bakken acreage.