$6.66/$4.44 barrel oil?

[ExtraSlow]

DRW's current thoughts about oil price recovery, and why it probably "shouldn't".
If you don't follow this dude on linkedin, you are missing out on some of the better analysis out there.

[schurchill39]

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DRW's current thoughts about oil price recovery, and why it probably "shouldn't".
If you don't follow this dude on linkedin, you are missing out on some of the better analysis out there.

Going to follow him now. That pretty much echos my thoughts on current prices.

[ExtraSlow]

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US declines are going to be big next year...DUCs won’t save it.

Hah when does this kick in man? production is very sticky at current levels. Last week was 10.9, which is insanely stable. What are you and I missing here that's holding production up? It's not new drilling, and I don't think it's DUCs. EIA charts and ARC financial graph of same data.



Speaking of DUCs, a customer of mine had 2 wells sitting for 18 months that they fractured this week. Yes my tools worked flawlessly (thanks for asking @kilramos), but it's interesting to think about these wells a bit. They were in a play that was out of favor with management, but one that's been pretty steady for them. Just standard development wells in the heart of a mature play. These would be in "basket #3" that I was grumbling about before Christmas. Now how they got into that basket, from 18 months ago, is not clear.

[killramos]

Amazing how economic c rate wells are when your incremental opex is 0 ( owned facilities ) and tport is sunk and you can’t mitigate.

Your mention game is weak this morning.

[ExtraSlow]

Yeah, what's crazy (or not) is that these wells, with EVERY advantage, still ended up having an 18 month lag from D to C. This cannot be happening to a large volume of wells, can it? Should we start the betting on how low USA oil production can go this year?

[killramos]

I honestly don’t pretend to have much of a pulse on the dynamics that drive the US war machine.

[ExtraSlow]

I always assume that smart people can predict the actions of a group of rational businesses. But seems like I'm wrong with some part of that.

[killramos]

I think that current face value prices are not really indicative of long term project economics, sure we are 56-58 next month but the market doesn’t see that holding in much north of 50 long term if at all. Companies are willing to drill low hanging fruit to hold flat and hopefully throw off some FCF but pretty tough to grow into the current forward curve.



Not a great time to sell tools, no one is trying anything new and even fewer are interested in paying full price for services the next guy is willing to take a haircut on to keep his crew working.

[ExtraSlow]

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I think that current face value prices are not really indicative of long term project economics, sure we are 56-58 next month but the market doesn’t see that holding in much north of 50 long term if at all. Companies are willing to drill low hanging fruit to hold flat and hopefully throw off some FCF but pretty tough to grow into the current forward curve.



Not a great time to sell tools, no one is trying anything new and even fewer are interested in paying full price for services the next guy is willing to take a haircut on to keep his crew working.

Yeah, the 12-month WTI contacts are pretty unappealing. As for selling tools, environment is fine.

[killramos]

I guess I’m just speaking for myself.

[ExtraSlow]

prettier WTI chart showing the backwardation. Plus we all love comic sans.

[ExtraSlow]

One of my favourite industry commentators: https://www.oilystuffblog.com/chart-stuff
He's bearish on the ability of most shale producers to survive, and bullish on long term price of oil because of it.

[Darkane]

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One of my favourite industry commentators: https://www.oilystuffblog.com/chart-stuff
He's bearish on the ability of most shale producers to survive, and bullish on long term price of oil because of it.

Oil’s been on a tear lately.

At these prices I don’t foresee a lot of the lay offs forecasted, some still however.

[ExtraSlow]

In Alberta? Oil could be $90 and we'd still see significant layoffs.

[Darkane]

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In Alberta? Oil could be $90 and we'd still see significant layoffs.

What’re your thoughts? Our export capacity is good right now, and we’re well under our emissions cap. We could technically grow the sands and conventional if an approval or two go through.

For example - Suncor meadow creek.

[ExtraSlow]

My thoughts are projects like (Any oilsands mine or major SAGD) that need 10+ years of oil prices, and probably significant hedges to lock those in. The futures curve for oil is not nearly as bullish as the near term pricing.
As for Montney/Duvernay or other oil and gas projects that just need a rig and some pipe, the companies with the money to execute those already have very close to enough staff to do so without growing headcount in the head office. even at my notional $90, there are companies that are capital and opportunity constrained, and they will disappear through consolidation, and maybe 50% of thier head office staff will be retained by whoever buys them.

The smaller niche players may keep going, any possible even grow, but they are not moving the needle on industry wide employment.

I think total oil and gas employment in Canada in 2022 will be less than today in ANY price environment.

[killramos]

Agree with extra slow. A near term oil bull run will benefit shareholders far more than Calgary or employment. Shareholders who haven’t had much luck in a LONG time.

It’s a nice boon to near term cash flow not a sign of systemic change.

[Buster]

Sounds like market forces and driving towards efficiency to me.

[ExtraSlow]

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Sounds like market forces and driving towards efficiency to me.

Totally agree. A lot of my friends have a very inflated view of how many employees it takes to produce a barrel of oil.

[Buster]

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Totally agree. A lot of my friends have a very inflated view of how many employees it takes to produce a barrel of oil.

As an outsider to the oil industry, the use of the word "produce" presents an inflated view of what is actually occurring. But I digress.