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Forget About Natural Gas, Oil Field Services Sector Shows More Promise

The current pricing and glut is a result of the intensive search for gas that has been going on for the past several years. The gas plays going on throughout the USA was sparked by good gas pricing. Now that there is an over abundance of the stuff the companies involved with drilling and production will cut back on their activity. Why sell their product at $3.50 today when they can get $12 next quarter or next year?

How Increased Rig Count Could Affect the Rest of the Energy Sector

respected rig pig...
I agree with all that you have said. My comments were just aimed to the reality of what rig count means in the media. In addition, rig count starts with someone (i.e. geologist or reservoir engineer) who recommends a well or series of wells to be drilled. Without a drilling budget, no well is drilled. Even when moneys are available to drill a well, you have to get the regulatory agency to approve it, you have to have a location staked (surveyed), location built (contract a crew to build the site), contract a drilling company to drill the well. Often, in order to get a company to drill the well, a contract will consist of a series of wells. Many contractors won't drill just one well. They would like to drill perhaps 20 or 30 wells. I have contracted a driller to drill all of our wells for the whole year. That process starts a year in advance. Beyond what you say about on the ground people there are many people in the "main" office who take care of the bills (accounting), updating production, etc. It goes on and on.

How Increased Rig Count Could Affect the Rest of the Energy Sector

Rig count changes daily. Even a weekly rig count is just a best guess. The reason being is that rigs vary in size and restricted to depths they can drill. Some take a week to ten days to drill and complete because they drill to shallow objectives. Others may take months to drill and complete because they are larger and drill to deep objectives. To make a long story short, the rig count is more like a moving average. By-the-way, every rig in operation has about 20 people working. When the rig count dropped by 1007 that means over 20,000 people unemployed.

Schlumberger, Core Laboratories: What's Up with Downhole Measurement?

And the wedge of declining productivity continues. Improvements in technology has done little to help. I've used all of the FWE's you mentioned and have halted the decline of fields I worked on. For a while they helped but eventually the decline continued. It is too bad most of these great technologies came along at the tail end of a dynamic oil and gas industry.

What’s the Right Price for Oil?

Kiwichick
I stand corrected on my estimates. My numbers are a few months old and from a different source which makes your numbers even more troubling. I like this quote from Niels Bohr (Noble Prize Physicist) "Predictiion is very difficult - especially if it is about the future". Major oil companies have merged because they can't find enough oil themselves. Why? It costs less to buy reserves than to go looking for it. With todays low oil costs we may see more mergers and less drilling. More layoffs, fewer university graduates, fewer employees and fewer new development. Oil, we all know, is a non-renewable resource and we may well be near an economic "tipping point" where companies will just stop looking for domestic oil. There will still be "mom and pop" operators but no more "Big" domestic oil companies. Regardless of the percent decline or supply. The end result will be the same. So how much do you want to pay for it? I write this blog on my Dell which is made with oil. My ceramic coffee cup was made with energy derived from oil. The coffee came in a plastic bag made from oil. The coffee itself was transported to my home on ships, trucks and a car that runs on oil (and electric..a hybrid). Energy drives civilization. Are you ready for a future civilization without oil?

What’s the Right Price for Oil?

Back to your question..what is the right price of oil? Does it not depend on what you want it to be? For the companies that drill and produce it is expensive so they would like the price to be high. Perhaps in the $70 to $85 dollar range. They would be happy with that. But those that use the end products derived from oil they would like to be as low as possible. Perhaps in the the $20 to $30 dollar range. They would be happy with that. So what should the price of oil be? Depends on your point of view, right? If I were a betting man, which I am apt to be. I would bet on the oil companies eventually controlling the price of oil. Granted, the supply of oil is up and demand is down. That is short-sighted. Global DEMAND is INCREASING at an ANNUAL rate of 1.8% and PRODUCTION is DECLINING at an ANNUAL rate of 3% (some say 4 to 5%). Take off your financial blinders and look at the big picture. The price of oil has to go up. Daily reckoning does not apply to oil.