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Lionel Yeo  

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  • Continental Resources Capex Cut And What It Means [View article]
    Jury is still on on the whether shale has a recycle ratio above 1.8.
    Dec 29, 2014. 10:55 AM | 1 Like Like |Link to Comment
  • Continental Resources Capex Cut And What It Means [View article]
    "If Continental can pull of cutting capex by 41% and only removing eight percentage points of output growth, and at the same time become cash-flow neutral by mid-year, it will be a testament to just how flexible and resilient the shale players can be"

    2015's first 3Qs of production is due to 2014 capex not 2015 capex. Shale wells maintain high productions for about the first year. We'll see probably the 2nd half of 2015 where production will drop off. I reality you'll probably going to see a 25-35% drop in production with a 50% cut in capital expenditure.
    Dec 28, 2014. 10:53 PM | 1 Like Like |Link to Comment
  • Still No Reason To Buy The Dip In Natural Gas [View article]
    Again, still scratching my head on how NG production is rising while rig numbers are dropping.

    The only answer I came up with is associated gas, which while the NG rig number is at all time low, the total rig number is at a 22 year high. Could it be possible that many of the oily plays also produce lots of gas? Could drillers also be targeting liquids rich deposits with flow on gas? That could possibly explain the gas production.

    In any case, both oil and gas are now at record lows, so there's no real drilling to be done.
    Dec 27, 2014. 09:40 AM | 1 Like Like |Link to Comment
  • Is Saudi Arabia Targeting U.S. Shales? [View article]
    I highly doubt that Saudi is trying to do anything. All they did was nothing. They didn't even increase production! hello. They did nothing!!

    I agree with some of the comments that the author is light on specific numbers. IE Shale is non-capital intensive. On a minimum spend that is correct. You only need $15m to drill a well. But on a per barrel basis Shale comes in around $25 because the wells decline so fast. If oil isn't at prices where you recover your capital, you cannot recover your capital and drill another well since 70% of the production is in the first 2 years.
    Dec 26, 2014. 11:40 AM | 3 Likes Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? (Tight Oil, Part III) [View article]
    My opinion is this:

    Producers will continue producing from existing drilled wells. the drop is available cash for capital investment and lack of access to capital markets will reduce their cap-ex budgets by 50%. If investors get tough about returns they'll put more pressure on companies to only do projects that return > 25% ROI. That will drop their cap-ex down almost 75%.

    It's really about wall street shutting off the cheap financing. When you factor in that these companies have to pay 37% tax on top of returns, it's really not worth drilling at $55.
    Dec 25, 2014. 10:25 PM | 3 Likes Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? (Tight Oil, Part III) [View article]
    i think you need to factor a few more things.

    1) Royalty and Production Taxes; Approximately 8%- 22%.
    2) Lease holding cost.

    The average cash cost is about $8/boe for some amazing plays. But more towards $12-$15.

    3) Depreciation cost is the worst factor, because it's purely due to the decline curve. $22.50 a boe seems to be about right

    4) Then there's SGA which is about $5

    So you add it up. That's minimum $45 barrel. No exploration cost yet.
    Break even is about $65 barrel.
    Dec 24, 2014. 10:34 PM | 2 Likes Like |Link to Comment
  • Why Cheap Oil May Be Here To Stay [View article]
    One of the biggest factors that i have continued my bullish position in O&G is looking at world wide production. As the oil price has remained above $90 for 3 years, one would expect rampant production world wide. However, world wide oil production has remained fairly muted. Russia has only increased production from 8.5m to 9m in 4 years. While the Canadians have done about 300k. Everyone else has actually dropped production.

    If oil is so easy to produce, why has production decreased around the world at those prices?

    Another factor has been my disbelief that Shale oil is as economical as $50/bbl. Arthur Berman said it best that if this was indeed easy, why did we drill shale last after deep sea. I've gone through the top 3 companies in the space. EOG (bak/EF), Continental (bak), Pioneer (Permain). All of them are running above 100% of cash flow into cap ex. This was before prices collapsed. What would happen to their production growth if they ran at say 50% of Flow of Funds? At these prices they would hardly be able to reinvest the capital at rates before the collapse.

    I see the price of oil stabilizing in 1 or 2 qtrs. It's probably a great time to get into a great asset class, especially due to stupidity drilling by the US producers. We as investors can come in at low prices and scoop up their shares.
    Dec 22, 2014. 11:18 AM | 6 Likes Like |Link to Comment
  • Why Cheap Oil May Be Here To Stay [View article]
    Hi just want to point out that the Saudis are producing from what are known as Giant superfields. These are fields with more than 5Billion barrels with pressurized production, on shore with existing infrastructure.

    That's why they cost about $5/bbl.

    The average oil well around the world has about 15% of royalty, expensive rigs and poor quality basins so you're looking at operating cost around $35 ish factor in capex and royalities and it's more like $55.
    Dec 22, 2014. 12:19 AM | 9 Likes Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    The average fracked well drops production about 65% in the first year. So imagine what impact you're NPV will look like when you're dealing with low prices in the first year. For sure wells that have been drilled and are in production will stay open. But those requiring refracks or secondary recovery, new drills will stop.

    In a way, it's quite good that PWE dropped their production from 180k to 100k and focused on shutting in uneconomical production.
    Dec 22, 2014. 12:15 AM | 1 Like Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    I agree with that. haven't seen any oil coming in cheap elsewhere in the world.

    I'm going with River and Michael on the fundamentals. We work with clients on commercial of their project and there is NO way, they can make money at $55. the Bakkern is trading at $48/bbl. There's just no way.
    Dec 21, 2014. 11:09 AM | 1 Like Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    The cash cost of PWE is $32.60
    of which 20.74 is operating cost
    10.7 is royality
    1.2 is other

    of the 20.74 about $4 is finance cost. So it's about $16. They'll probably drop the cost to $12 in a few years. But it's only $4 we're talking about.
    Dec 19, 2014. 06:38 AM | 2 Likes Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    Just finished looking at costs across the sector. We're talking about $5/bbl between PWE ($15) vs Enerplus ($10).

    Nothing really significant. I think when the smoke clears you'll find shale costing about $90 given the questionable way they account for the decline curves and the different type of land leases that have been signed. Royalties for PWE and most of the candians are around 18%, while in the US it's only 6%, can't really understand why.

    heavy tax rate of 37% in the US might be the reason why companies prefer to borrow and drill. Easiest way is to let everything come out in the wash.
    Dec 18, 2014. 10:44 AM | 3 Likes Like |Link to Comment
  • Decisive Cuts In Dividends And Capital Outlays Make Washed Out Oil And Gas Producers A Good Bet [View article]
    Same here hendrick.

    As I tell my friends. I caught a falling knife. Am bloodied, but at least I have a knife.

    Have been shopping around adding to some position. I like PGH, and finally PWE gets their capex cut. would prefer to be about $350m cut, but it's okay.

    Mr. Market can go crazy and just because something is cheap doesn't mean it can't get cheaper. I did miss the big implosion on oil due to the US overproduction and got caught.

    When you invest like this, sometimes you'll eat well. but you're certainly not sleep well.
    Dec 18, 2014. 10:26 AM | 1 Like Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    If anyone has a spare $600M to lend me, I'll be happy to take penn west private and become the CEO of my own oil company.

    We've been running and re-running numbers here for clients and there's nobody on earth that can make a profit at oil $55. $70 wti is a if and a big if given all the risk.

    If you buy 20 years swaps of oil you can literally create your own oil company. Cheaper buying it out on the futures rather than drilling in the ground.

    If PWE doesn't go to $0. you'll probably make a reasonable buck. I think we need to flush out the shale and the US producers and their 'amazingly cheap oil'. I don't buy it for a minute that Pioneer and EOG have break evens in the $50s. It'll be interesting to see what happens to their production when they only spend 1x cash flow rather than 2.5x cash flow. The canadian's are spending about 0.7x cash flow.
    Dec 18, 2014. 10:09 AM | 3 Likes Like |Link to Comment
  • Penn West Cuts Dividend 80%, Now Yields 6% [View article]
    No surprise here. $85 vs $65 CAD/bbl.

    would love to see asset divestment and share repurchase. I'm a long term bull on oil, may have caught a falling knife. Can't do anything about it, have the cut, its bleeding, but I now have a knife.

    I'm amazed at the differentials vs the US companies given that the basins are almost the same. I reckon if we see 45% capex cut, we'll see oil at $80-$90 bbl. Doing some bottom fishing.
    Dec 18, 2014. 12:58 AM | 4 Likes Like |Link to Comment