Oil Prices Plunge

[DocHoliday]

I know a lot of you birthers and sisters are in the energy industry, especially in Houston. Oil prices have plunged to 40 year lows today. This oil war between Saudi and Russia is not helping the Houston economy. Coupled with the Coronavirus crap, Houston is in for a rough ride.

https://oilprice.com/

[Ben Rhimene]

Thanks Doc.

To be clear, those headlines are a bit misleading. The May contracts expire tomorrow and there is zero demand for them and drives what is called the "prompt" price so far down. June contracts were $22 on the screen just before lunch.

Having said that, the markets are in the shitter...

[Guest 081220-1]

Thanks Doc.

To be clear, those headlines are a bit misleading. The May contracts expire tomorrow and there is zero demand for them and drives what is called the "prompt" price so far down. June contracts were $22 on the screen just before lunch.

Having said that, the markets are in the shitter...

Perfect time to buy...and hold.

[Ben Rhimene]

Ha. As long as you weren't buying May contracts-closed at MINUS $37.63.

[DocHoliday]

Trump being the sharp business man announced the US is buying 750 billion barrels of oil for the strategic oil reserve since it’s essentially free oil. Whether you hate or love the guy, you must admit he is a slick businessman.

[Jefferson Starfish]

Trump being the sharp business man announced the US is buying 750 billion barrels of oil for the strategic oil reserve since it’s essentially free oil. Whether you hate or love the guy, you must admit he is a slick businessman.

Trump is buying 75 million barrels to top off the SPR. So, you're only off by a factor of 10,000.

I doubt that 750 billion barrels of oil even exist. I reckon proven reserves are at max 50 billion barrels, if not significantly less. Someone else more knowledgeable than me, please weigh in.

Regardless, Houston - we have a problem.

Peace, Love, and #BHILF

JS

PS Buying the oil right now for the SPR is indeed a smart move. In contrast, GWB was buying oil at record highs and goosing prices prior to the 2008 financial crash. The oil price spike had a lot to do with the consumer side of the economy rolling over back then.

[Ben Rhimene]

Trump is buying 75 million barrels to top off the SPR. So, you're only off by a factor of 10,000.

I doubt that 750 billion barrels of oil even exist. I reckon proven reserves are at max 50 billion barrels, if not significantly less. Someone else more knowledgeable than me, please weigh in.

I am afraid you are wrong, Mr. Starfish-Aramco itself has 270 billion barrels.

https://worldpopulationreview.com/co...es-by-country/

And let's be clear about the SPR issue-there WAS a storage auction 2 weeks ago, or well before things got worse. That WAS a bright idea because the cost to play was payment in kind. That is, you bid to store 10 million barrels and when you take it out you get less than 10 million...Uncle Sam keeps the "interest."

Over the weekend the president made another comment about a potential SPR deal. As of now no specifics have been announced. More importantly, to access the SPR you have to transport the oil. Pipelines are full, leaving you the option of ships, trucks, and wheelbarrows. AND, it's not like you can just dump the oil in a hole...each SPR site has maximum injection rates. It simply isn't enough to overcome demand destruction. More shut-ins coming. Supposedly Aramco has NOT had a couple of VLCCs leave the Red Sea...we can only hope...

[DocHoliday]

Trump is buying 75 million barrels to top off the SPR.

Sorry about the auto correct SF. You are correct, it’s 75.000,000. Maybe it won’t auto correct now. Damn phone!!!

https://news.cgtn.com/news/2020-04-2...sxG/index.html

[Jefferson Starfish]

Sorry about the auto correct SF. You are correct, it’s 75.000,000. Maybe it won’t auto correct now. Damn phone!!!

https://news.cgtn.com/news/2020-04-2...sxG/index.html

No worries, Bubba! We always good. Just keepin' Ol' Doc on his toes.



Peace, Love, and #BHILF

JS

[Powerdrive]

This will be an ongoing issue for quite sometime. Aside from the market being flooded with crude and there being fuck all for demand, there is something else folks need to realize. You can’t walk up to a producing well and just shut it off. If it’s a rod pump well with a pump jack, yes. But there is far more involved depending on the type of well that’s producing. It could take six months just to slow production from wells, because stopping production will damage the well...Permanently. Operators are not going to shut wells down that they know will ruin the ROI in the long term for them. Also, we were already running into an infrastructure issue in the Permian basin with regards to transporting of oil. Not enough pipelines or trucks to haul the oil away fast enough.

This is just a crash course as it is far more complicated for a myriad of reasons, just throwing some of knowledge out there.

[Rustyshackleford112]

This will be an ongoing issue for quite sometime. Aside from the market being flooded with crude and there being fuck all for demand, there is something else folks need to realize. You can’t walk up to a producing well and just shut it off. If it’s a rod pump well with a pump jack, yes. But there is far more involved depending on the type of well that’s producing. It could take six months just to slow production from wells, because stopping production will damage the well...Permanently. Operators are not going to shut wells down that they know will ruin the ROI in the long term for them. Also, we were already running into an infrastructure issue in the Permian basin with regards to transporting of oil. Not enough pipelines or trucks to haul the oil away fast enough.

This is just a crash course as it is far more complicated for a myriad of reasons, just throwing some of knowledge out there.

So frac'd wells in the US have a fairly short production life so the slowdown can happen fairly quickly. And for those who are familiar, we will see a spike in DUCs as we did in 2015(Drilled UnCompleted) so even newly drilled wells can be capped until the proper time. But yes, for us in upstream or downstream side of the business, we are fucked for the foreseeable future...

[Ben Rhimene]

But yes, for us in upstream or downstream side of the business, we are fucked for the foreseeable future...

That really depends on your cost to produce...everyone's cost structure is different, from how you're drilling and where, to your G&A cost structure. Also at play is the credit quality of your purchasers, and how strong your hedge book is.

I suspect there will be rationalization, which will make those who survive stronger. Sucks for the rest, to be sure.

[Powerdrive]

I’m finishing up drilling my last well in the Delaware basin, for probably 12-18 months. I’m fortunate enough that the background I’ve acquired in drilling/completions in the last 17 years that I’m headed back to drilling gas wells seamlessly. You’re right Rusty, every well I’ve drilled in the last six months for COG is a DUC, and will be for quite sometime.

The plus side to much of this crash, I’ve invested around $80K in various E&P companies and have already doubled my ROI. Some of these companies I’m looking to get 300-500% return when this all bounces back.