Thanks, I read it. Don't understand why they are giving the impression they are going to drive prices down. Seems they would want to keep prices high if additional reserves are relatively high priced. Seems OPEC and SA are paper tigers. The market should set the price. The marginal barrel to meet demand. $90 Brent still seems realistic. The next few weeks to the OPEC meeting should be interesting. I do think they will cut supply, will see.
If you look at Brent futures, they end up at around $90 next year and the same for the next few years, so the futures aren't buying a long term decline in price. The Saudis are producing somewhat less than 10mmb/d, out of 93, that's not enough to affect price longer term. And their excess supply capacity is questionable. And the rest of OPEC needs all of the oil revenue they can generate, plus the Russians. I'm guessing this is maybe the last hoorah for OPEC. Will be interesting to see how it plays out. As for WTI, if we don't get exports, the diff could expand, but over time the price should be close to Brent. Bottom line, I don't think the Saudis can do much longer term, hopefully the worst is over, but could bottom with the OPEC meeting. Today, seems this is a buying opp longer term if you can ignore the short term risk. Might retest the recent lows. The biggest fear is like the nat gas market, the e and ps keep producing as they lower the breakeven cost. If you make money at $40, you will keep drilling as long as the cash lasts. Just read the SWN cc transcript, the Fayetteville upper is profitable at $3.50 and would guess that the NE is profitable at $2. If we don't get oil exports, could get ugly, like nat gas. Bottom line, buy the best geology and low debt. And the broken record answer, the infrastructure cos do well at $100 or $80 or maybe even lower.
Bison, curious about your media comment, what do you mean. Have to be honest that I tend to not believe much of anything anymore. Try to sift through the bs for a few useable facts. And I am fed up with CO political ads, they are worthless, and I can't vote here anyway.
Guess you vote for the lesser of two evils.
Goldman cut oil price to $75 from $90 in first quarter, not sure what their long term call is. The futures are $79 for the first quarter so seems they were behind the curve. They thought the 10 yr T yield was going up too. Seems we are in one of the those periods where it's hard to stabilize the price short term, the OPEC mtg in a month. Have to figure out the long term price to make a good bet now. Seems the co stock declines are overdone but could go lower in the short term.
Williams completed its ACMP deal, with the oil weakness, seems a good buy op today. Reaffirmed the div increases for the next few years, plus $100mm of free cash in 15 and 16 over and above the div.
Goldman forecast $75 for 15 q1, was at $90. They do seem to move markets st even if they are usually just as wrong as everyone else. The strip is at $79 for 15 q1 so only $4 off. My conclusions are as erratic as Goldman's, but today, I suspect SA orchestrated this move down with pronouncements to pressure other OPEC members the end of November. Trying to stop the US shale boom is going to take much lower sustained prices. And if they can do it, the marginal supply growth is in the US so the price would have to bounce back quickly.
Futures, WTI is $80 +- a dollar out to 22 and Brent is $90 +- a dollar from 9/15 to 22. And with infrastructure and exports, WTI should get close to the $90 price. Is the long term strip wrong? Seems e and p stock price are saying yes?
Just read an aritcle that SA, OPEC have lost their power, Goldman comments, makes sense. The price will the price of the marginal barrel produced here the US shale plays. Not sure exactly where that price is, as we've seen in the Bakken, breakeven is from the high $20s to $70s. The TMS maybe at $80. The Permian at $70 but again it varies in diff areas. Downside is the $100 SA put is gone and upside is SA can't drive the price down too much. The market will prevail, could be more volatility but not as severe???
Have mentioned this before, Credit Suisse shows a 16% upside at $70 oil and 99% at $90 oil for DNR. That's the challenge with e and p cos, you can get the co right and the macro crumbles. Seems the conclusion that spare global capacity is now in the US, not Saudi Arabia or OPEC, the equilibrium price will be the highest cost shale to balance supply and demand. Do think OPEC will help in a few weeks with a cut and we get a rebound, seems the rational thing to do, but who knows. I would bet we have bottomed for now unless the Saudis are bent on driving price lower for whatever reason they might have, doesn't make sense, but a lot of things don't seem rational at any point in time. DNR does seem a good bet at $12.
Anadarko release today, the Wattenberg continues to look like a world class play, with their 100% mineral interests, their wells have 100%+ IRRs. Bodes well for BCEI and PDCE to have one of the best operators in the business leading the way, Noble as well. Still can't see the long term equilibrium price being much less than $90. Would think the deep water and oil sand need at least that and the shales maybe $80.
"The impressive results from our operating activities enable us to increase our 2014 full-year sales-volume expectations for the third time this year, to a new range of 304 to 306 million BOE. The significant liquids sales-volume growth was primarily driven by the excellent results of our Wattenberg horizontal program, where oil volumes doubled relative to the third quarter of last year.
Noble's release. 32 wells per section seems to be matching the type curve. BCEI 70,000 acres would give you 3500 wells to drill, PV10 value $4.2mm per well, almost $15 billion of value, for a $2.3 billion EV co.
Included in the wells brought online in the quarter were 23 wells from the Wells Ranch 30 Section, with six of the wells developed at 16 wells per section spacing and seventeen wells developed on a 32 well per section spacing pattern. The downspaced wells include wells in each of the Niobrara benches. On average, the downspace wells are performing in line with standard spacing wells on the pad and slightly better than the Wells Ranch type curve after more than 30 days on production.
Good thoughts. The oil shale boom feels like the nat gas explosion of a few years ago and we will have $4 gas for several years. If OPEC keeps oil at $100, not sure they can, but if they do and we don't export something, the WTI price could be $80 or lower. We have seen with gas the e and ps can make money at $2 and they haven't let up on drilling. Same could happen with oil. Seems we need exports until we can get the infrastructure, refining in place to use the North American production. We should try to be NA self sufficient, pipelines from Canada to the GC, exports too. Our politicians aren't bright enough to see the long term picture, still too fixated on green stuff.
As for SA, think you are right, will see how effective they are, probably ends up where SA cuts most and small ones from other members. I still think we end up with a $90 Brent price longer term, could be $80, but won't stop the shale activity, and the infrastructure cos do well at either price. Seems now is the time to buy the e and p s you want to own for a few years, buy the best geology and lower debt. Utica, Wattenberg, Permian....
And maybe a gas producer in the NE. Interesting and maybe historic times.
WTI showing $81 price and Brent, $91, still fairly healthy prices. Couple of comments interesting, treshold well profitability 10 to 20%, public cos on the low end vs private cos. But moving from low to high adds $15 to oil price. Seems many basins can make a 10% profit in the $50 top $60 range, but they won't have as much cash flow to reinvest. Would be interesting to see a study of activity, production at $60 long term. At $80, seems the returns are in the 20%+ range. At $90, seems the US still adds a million bs/d per year. Demand, saw a 600m number, typical is 1.5%, 1.5mm b/d range. With normal global growth, seems the US can continue to grow at the current pace and make a bunch of money. If OPEC doesn't cut volumes, could get ugly before we get back on a normal track. Still feels like $90 is a good midpoint, at $80, feels like the shales would be the only growth.
Thinking through the energy sector, the easy bet is buy the infrastructure cos for the longer term, will do relatively well whether oil settles at $75 or $90. The nat gas infrastructure cos are booming with $4 gas, although they have more growth with oil at $90, associated gas. Do think the e and ps are good value now if OPEC comes through, if not could get ugly short term.
As Saudi Arabia tolerates lower prices to protect its market share, the kingdom is also testing the level at which higher-cost U.S. production remains profitable, according to the IEA. As much as 50 percent of shale oil is uneconomic at current prices, El-Badri said. New York-based Sanford C. Bernstein & Co. estimates about a third of U.S. production from shale loses money at $80 a barrel.
“We think there’s a lot of economic oil at $75, economic meaning we earn 15 percent, 16 percent, 17 percent returns,” Stephen Chazen, chief executive officer of Houston-based Occidental Petroleum Corp. (OXY), said during a conference call with analysts Oct. 23.
Seems they are indicating the guidance is a minimum. 4% yield plus 15% growth, probably more, is 20% annual appreciation for the next three years. Hardpressed to find much better. Most pundits expect high single digit market returns at best.
Williams' current guidance for earnings, cash flow and capital expenditures are unchanged from guidance issued in July 2014; however, this guidance does not reflect the effects of the merger agreement announced Oct. 26, 2014.
Thinking about SA and their production. If we have normal 1.5 mm bs of demand growth annually and the US increase prod is a million. Call on OPEC would be 500k bs/d. Problem is demand is now 500mm more with the global slowdown. So the Saudis, OPEC, needs to reduce prod by 500mm b/d. SA revenue at $100 and 9.5mm/d, $347 billion revenue. 10mmb/d at $90, $329 billion. Assumptions are pure guesses, but seems this SA tactic is to get more cooperation out of OPEC members. Still don't see the Saudis driving prices to the extreme.
GDP up 3.5% in q3. Inflation continues to be subdued.
The GDP figures are adjusted for inflation. The price index for personal consumption expenditures-the Fed’s preferred measure for inflation-rose at a 1.2% annual rate in the third quarter, down from the 2.3% annualized increase during the second quarter and below the Fed’s 2% inflation target. The core inflation rate--which excludes volatile moves in food and energy prices--was up 1.4% versus a 2.0% gain the prior quarter.
Good piece by Ron Insana on the Fed, thinks it doesn't raise in 15. Gives reasons, strong dollar, rest of globe is weak, China has given up on 7.5% growth target, commodities weak in response. The US could have growth stronger the rest of the world without inflation. The discount rate for stocks, the 10 yr T note may stay in the 2 range. As for oil, SA needs to cut with the weak global picture. The world gets stronger and we get back to $90+ oil.