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Richard Zeits  

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  • Crude Oil Topping Units: A Trend In The U.S. Refining? [View article]
    Pablomike,

    Those are some of Valero's most complex refineries (NCI of 15.4 for the Houston refinery and 19.9 for Corpus Christi). They take multiple feedstocks of which crude oil is just one of several, hence the difference.
    Apr 16, 2015. 04:06 PM | 2 Likes Like |Link to Comment
  • At What Oil Price Do U.S. Shales No Longer 'Work?' [View article]
    BobJanajou,

    Obviously, this will be a very painful quarter for the industry. A more important question, however, is what does the future look like. Many operators can probably weather few (and even several) quarters of weak cash flows, but the longer-term price deck for oil (and natural gas) is an uncertainty. A topic for another post I guess.
    Apr 13, 2015. 05:48 AM | 2 Likes Like |Link to Comment
  • Halcon Resources - Economics Of A Shale Well [View article]
    Zoltan,

    My point was not to "haggle" about your conclusions - my point was that it may be precarious to post on topics that are not even remotely familiar.
    Apr 9, 2015. 03:34 PM | 10 Likes Like |Link to Comment
  • Halcon Resources - Economics Of A Shale Well [View article]
    Zoltan,

    You wrote: "In addition to that, there is the cost of acreage per well, which is about $2 million, given that its current well spacing strategy is for about one well per a minimum of 660 acres."

    The typical "section" in the U.S. is 640 acres, not 660 acres. In the Bakken, in the deep basin, companies often intend to drill 10-12 wells per drilling unit (and sometimes even more). Drilling "one well per a minimum of 660 acres" is certainly not how Halcon plans its wells. Obviously, you are confusing per-unit density with 660-foot spacing.

    You also wrote: "I am assuming a cost of only $3,000 per acre, which is very conservative." $3,000 per acre in Dunn County? Really?

    You also wrote: "Halcon Resources - Economics Of A Shale Well." Would not basic economics suggest that the cost of land is a sunk cost for HBP acreage and is really not relevant to the framework you are using?

    You also wrote: "If we recall, Reuters reported that Halcon can break even at $40 WTI in the Bakken. That price will translate into a wellhead price of no more than $30/barrel due to transport issues. Then we have to keep in mind that there are other costs involved, including taxes of 11.5% in North Dakota, and a 20% royalty on the wellhead value, and there are other costs such as administrative and so on. It is therefore fair to assume that 40% of the revenue will go to cover these costs. That leaves about $18/barrel to cover the costs of the well. With a cumulative production of about 560,000 barrels over a ten year period, we are looking at $10 million dollars in revenue, which means that about $4 million would still be left over in debt on the well."

    -- I am afraid you are completely missing lease operating costs.

    -- North Dakota taxes are not 11.5% at $30 price realization.

    -- I am not sure your "interest on the well cost" math works - shouldn't one use discounted cash flows?

    What can I say. Wow!!!
    Apr 9, 2015. 02:33 PM | 7 Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Auto44,

    Great point. I will try to cover in another post.
    Apr 2, 2015. 12:21 PM | 1 Like Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Steve,

    Thank you for the link and interesting thoughts as always. Also, thank you for highlighting the long-term natural gas price which is indeed quite a departure from the recent paradigm.

    I will have to study David Hughes' post in some detail. One thing that of course comes to mind - in order to judge about well productivity, one needs to introduce some measure of well cost (SM Energy, for example, has highlighted $4.1 per well in Divide County vs. twice as much in the deep basin typically seen by other operators). Completion cost has also been a changing variable. And that is something that DrillingInfo's compillation of state well data cannot do easily.

    In my experience, progress in well productivity in the Bakken has been real and tangible, albeit often at the price of more expensive wells. So intuitively, I have to be skeptical about the article's implication. But this is just my very initial gut reaction, I need to look at it more closely.
    Apr 2, 2015. 10:07 AM | Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Dave,

    Now I understand. TXRRC's data for recent months will likely get updated continuously. I side with EIA's estimate in this specific case.
    Apr 2, 2015. 09:33 AM | 1 Like Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Dave Shafer,

    Good point - EIA's estimates are indeed only a "best effort." But when you say "Actual data for January shows 11% drop in Texas production...," I am not sure what you mean.
    Apr 2, 2015. 09:16 AM | 1 Like Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Hi Pablomike,

    No vacation yet. Just some housekeeping and projects (industry databases, analytics, that sort of thing). Tedious work and still far from being complete, but it should yield good results.
    Apr 1, 2015. 06:00 PM | 2 Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Rawenergy,

    Good point. But the presumption is that the recovery will be relatively quick and steep. What if the recovery is WTI at $65 by year end? Hedges will have rolled and debt ratios will look very uncomfortable. Banks will be asking for action. Not sure much outspending will be possible.
    Apr 1, 2015. 05:57 PM | 3 Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Rawenergy,

    I will post at some point what year-on-year growth guidance by various companies translates into in terms of production trajectory throughout 2015. You will see production declines implied by a majority of operators.

    Also, I have to disagree that CAPEX can be raised easily. A lot of companies are issuing equity, not because of good life.
    Apr 1, 2015. 05:41 PM | 6 Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Rawenergy,

    I think what you are suggesting is already happening. The massive reduction in capital budgets has been impressive in the past three months (although th sluggish wait-and-see posture during the entire Q4 2014 seemed like will power paralized). This is a huge industry. Bringing the entire supply chain to a halt is quite a task and quite a pain.
    Apr 1, 2015. 05:14 PM | 5 Likes Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    GGG,

    I agree on Iran negotiations - the next 48 hours will be interesting.

    I would argue, however, that the deal may be viewed as a potential risk factor by producers. Iran certainly has a resource base to ramp up production significantly. It may add even more barrels to the already oversupplied market while putting upward pressure on oil service pricing in the region.
    Apr 1, 2015. 05:02 PM | 1 Like Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    Firsttracks,

    Cold winter could be a driver, but I am not convinced this is really the case this year. Sharply reduced budgets are, on the other hand, in my opinion.

    The carry over of capital and supply chain commitments from last year will certainly help initially, but then a decline will be difficult to avoid.

    Monitoring via production guidance by individual companies and via aggregate reporting by states is probably the easiest way of figuring out if production is growing or declining. Watching well inventories appears too labor intensive and less real time/precise.
    Apr 1, 2015. 05:00 PM | 1 Like Like |Link to Comment
  • Is U.S. Shale Oil Production Already Declining? [View article]
    GGG, If everyone wants peace, why isn't there a peace deal?
    Apr 1, 2015. 04:24 PM | 7 Likes Like |Link to Comment
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