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Richard Zeits

 
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  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    jackmaster20,

    No doubt. But how quickly (and how economically)? They say there is a lot of hydrocarbon under Paris, for example (the Paris Basin). Technology or no technology, it's easier to drill in Oklahoma.
    Dec 16, 2014. 04:48 PM | 1 Like Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    BaysideDave,

    Thank you for the perspective, most appreciated. I fully agree, the U.S. oil production would not have been growing at the pace it has been if it were the marginal source of supply in terms of full cycle cost. Does not make the shake-out any less painful, but I also think of the future for the U.S. oil and gas industry as a very bright one.
    Dec 16, 2014. 01:36 PM | Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    freed0m,

    So if there is nothing to worry about, as you seem to suggest, the exchange rate should bounce back relatively soon? (once the transitory process is over?)
    Dec 16, 2014. 08:32 AM | 1 Like Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    freed0m,

    You are probably more knowledgeable in things Russia than I am. But here's a quote from Bloomberg's article that came across my screen today:

    "...Rosneft raised $10.8 billion on the local market this week in an operation financed by the central bank." Is Bloomberg's information inaccurate?

    If it is accurate, it appears that the central bank is effectively backing hundreds of billions of potential liabilities that are not on its balance sheet. It will similarly back the budget deficit that will inevitably gap wider. Is it a surprise that the currency is in a free fall? Or is it just my macro thinking that got rusty?
    Dec 16, 2014. 12:44 AM | 2 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    BJA-2,

    Very valid point. However, it would be incorrect to think of the shale revolution as just geology + technology. It is also availability of skilled people, oil services, capital, property rights, mineral rights laws, established practices, entrepreneurial culture, transportation infrastructure, etc, etc. The U.S. and Canada happen to have all that. So the business prospers. As you point out, there is no shortage of potentially productive shale formations around the world. However, North America is already a decade ahead in its discovery, delineation and optimization of shale production. And it still struggles with high full-cycle cost. The current downturn is an additional delay factor for shale development outside of the U.S. and Canada, whereas the latter two are already "over the hump."
    Dec 16, 2014. 12:02 AM | 5 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Wdchil,

    Very valid points.
    Dec 15, 2014. 11:50 PM | 1 Like Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    IncomeYield,

    How do you define "doing fine?" The right question to ask is why is the currency in a free fall first place. And the answer is probably very simple - the market is anticipating a huge budget deficit and a huge new supply of money to be printed by the central bank to cover the gap. The outcome - a deep recession coupled with a galloping inflation, which in turn leads to an even greater decline of the internal revenue. By the way, the worst thing one can do in this situation is to hike the interest rate. And that is what their central bank did today, in my understanding. This "doing fine" is actually a risk factor for the S&P 500, the same way it was back in 1998 with LTCM.
    Dec 15, 2014. 11:21 PM | 11 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Hi Rob,

    My crystal ball is just as good as anyone's. I would be very surprised if oil price stayed below $60 for three years (or even one year from now, for that matter). I just don't think that the industry has sufficient economically viable capacity to satisfy demand at $60, even if costs decline. Can I see prices at $75 in 2016? Actually I would not rule that scenario out. But I think with the correction we are currently experiencing increases the likelihood of a stronger recovery.
    Dec 15, 2014. 10:39 PM | 5 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Alex,

    I agree, these are very valid points. I think this already defines a good set of topics to discuss in a separate post. On my to do list.
    Dec 15, 2014. 09:08 PM | 4 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Gladtidings,

    As it comes to oil economics and price formation, I am not a big believer in "geo-political factors" (I simply do not know what that means). I am more of a believer in the finite storage concept.

    "Not too long ago, the experts were saying that there is no longer cheap oil - why the drastic mis-prognosis? IS this for real ?"

    I would distinquish the price of oil from the cost to produce it. Which of the two were those experts talking about?
    Dec 15, 2014. 08:37 PM | 1 Like Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Alex,

    It is indeed an interesting topic. On my to do list.

    Sand volumes will suffer like everything on the Oil Service side in 2015. However, I hope the recovery will be strong going into 2016 and sand volumes will be very strong again.

    The tricky part is asset valuation. There is really no shortage of sand out there. Barriers to entry are not all that high. So in addition to looking at a multiple of run rate EBITDA, I would look at the multiple of the asset replacement cost.
    Dec 15, 2014. 08:07 PM | 1 Like Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Ericfp,

    Great point. In fact this is on my to do list - I should post some data, for everyone to interpret. Hopefully in a day or two.
    Dec 15, 2014. 07:55 PM | 7 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Farmed out my savings,

    LINE is a topic for a separate post (I wrote recently on them). In my view, the units' previously overly optimistic valuation has been the source of the under-performance. As the market is re-pricing the assets for a new oil price deck, equity is being compressed by the leverage.

    http://seekingalpha.co...
    Dec 15, 2014. 07:39 PM | 4 Likes Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    RomanFK,

    That might be a bit challenging - would require to stop printing paper money and stop drawing down on gold reserves. Works well when there is no budget deficit. Works well when there is no liquidity problem related to debt refinancings. Works well when the economy's cost structure is competitive.
    Dec 15, 2014. 06:51 PM | 1 Like Like |Link to Comment
  • Oil & Gas Stocks: Pain, Then More Pain... When Is The Gain? [View article]
    Mirekw,

    May I add, it's typically re-filled by from the U.S. government's share in offshore production.
    Dec 15, 2014. 05:31 PM | Likes Like |Link to Comment
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