The debt is certain a big shadow but in the end the independent shale producers can simply react s much faster than the big boys both in terms of shutting down and cranking back up. In the end their nimbleness will make them winners.
A popular notion is that the Saudis want to deal a fatal blow to the uninvited warriors into this market – those pesky horizontal drillers in North America that indiscriminately shatter rocks; those brazen producers that have marched in with 1,600 rigs and taken 4 per cent of the world’s oil market over the past half dozen years.
Yes, there will be some high-cost, overleveraged North American companies that will be put out of business. But don’t confuse that with winning the price war. Companies can be put out of business, but the business can’t be stopped. The novel process of horizontal drilling and hydraulic fracturing won’t go bankrupt, and the oil-bearing rocks won’t go away. So, the belief that North America’s burgeoning tight oil industry will be defeated is misguided. To the contrary, new-age U.S. and Canadian wildcatters will be among the biggest beneficiaries of Russell’s “who is left” group.
But maybe that’s not obvious until you start thinking like a battle-hardened commander fighting a war for market share.
Imagine that you’re leaning forward in the war room with knuckles down over the strategy table. Nimble rigs that come and go are not your high-value targets in this global theatre. No, it’s the big guns that you want to take out – the megaprojects that cost tens of billions of dollars. These are the assets that take many years to create, but produce for decades once drilled. And they keep pumping out product whether the price is $40 or $140.
You scan the table and think to yourself: Who is butting into my future market as global demand moderates? You point to new offshore oil platforms from Africa to the Arctic; potentially prolific onshore projects in Iraq, Iran, Russia and Mexico; and early-stage oil sands projects in Canada. All are examples of durable, long-life projects that must be pre-empted if your long-run strategy is to preserve market share and regain high price.
You smile. So far, so good. You used the element of surprise. You forced
Zeits has a seeking Alpha article out by this title for a couple days ago.
I would HIGHLY recommend everyone take a look at it. He makes a very strong case that the independent shale producers cash net backs blow away the majors by close to a 2 to 1 ratio. They are simply more profitable
The shale producers hold a winning hand and this is highlighted by Shell cutting capital outlays by 15 billion today
An Interesting side note on the news. A director from Triangle TPLM was added to the board. Triangle has the Rockpile sub that does pressure completion work. They have committed to a couple extra pumping spreads to move from 3 to 5 spreads. They have top notch technology. Could be a good fit for both to work a deal to send one of those spreads to Argentina.
Maybe we can send one of those spare pressure pumping crews to Argentina
Mr. Halas, an independent director, is currently a director of Triangle Petroleum Corporation (NYSE MKT:TPLM) and has significant experience in the energy industry and in public companies in both an executive and board role, including his roles as President, Chief Executive Officer, Director and/or Chairman of Central Garden & Pet Company, T-3 Energy Services, Inc., Ingersoll Dresser's Pump Services Group and Aquilex Corporation. Mr. Halas has also held a leadership position at Sulzer Industries, Inc. and is currently a Member of the Advisory Board of White Deer Energy, a Houston based private equity firm. Mr. Halas received a BS in both Physics and Economics from Virginia Tech. With Mr. Halas' background and skills, Madalena and Maglan believe that Mr. Halas will be an excellent contributor to the success of Madalena.
I do agree with Management that the price drop will be shorter lived than the market is currently pricing in. The surplus is just not that large
I think you are mistaken on the hedges. Remember the current quarter is their 2015 fiscal 4th quarter. Next quarter is 2016 1st quarter for Triangle.
Need to realize those 2016 1 st quarter hedges only take them thru June
Not saying low oil prices aren't a problem but the author just doesn't understand the di#ferences between now and a couple or even one year back. Whiting/Kodiak can now take section to full development/production. 20 some wells per drilling unit in the heart of the productive area really lowers the cost per well. Can't say how low but we will find out.
Also being to ship via pipeline vs rails makes large difference in what the drillers receive. Whiting sends a lot of oil via pipeline
$29.19 now for Bakken oil
NORTH DAKOTA ` 0
Williston Basin Sweet................................................................................................................… 29.19 * ..................... 40.0-44.9 ....................1
Williston Basin Sour......................................................................................… 20.08 * ..................... 40.0-44.9 ....................6
This is the wellhead price and is about right when you consider 15 plus per barrel for rail shipment to east and west coast.
Help coming with greatly expanded pipeline capacity by the of 2016
By the end of 2016 pipeline capacity should far outstrip oil production capacity. Pipeline capacity should be close to triple current capability.
Good time for Buffet to sell that railroad
Not out of the GROUND but out of the Bakken. There is a very significant cost difference between shipping via pipeline or via, rail, truck etc.
Investment is going to go where the most services are available. water supply and disposal, oil pipelines and gas lines. Caliber will be ramping up folks
The ultra low price per barrel also forces companies to watch every penny. That means controlling cost and not wasting NG, e.i. no more flaring. Look for growth in the pipeline system
Prince is trying hard to talk down oil.....
Thing is the spread between supply and demand is simply not THAT large and the rest of the world is having trouble maintaining production at current rates
For a good article on world oil google World Oil Production at 3/31/2014–Where are We Headed? Quite informative
Below is an article from Forbes written 2 years ago. Pretty much hits on the nail.
The last ten years have brought a structural change to the world oil market, with changes in demand increasingly playing a role in maintaining the supply/demand balance. These changes will come at an increasingly onerous cost to our economy unless we take steps to make our demand for oil more flexible.
We’re not running out of oil. There’s still plenty of oil still in the ground. Oil which was previously too expensive to exploit becomes economic with a rising oil price. To the uncritical observer, it might seem as if there is nothing to worry about in the oil market.
Unfortunately, there is something to worry about, at least if we want a healthy economy. The new oil reserves we’re now exploiting are not only more expensive to develop, but they also take much longer between the time the first well is drilled and the when the first oil is produced. That means it takes longer for oil supply to respond to changes in price.
In economic terms, the oil supply is becoming less elastic as new oil supplies come increasingly from unconventional oil. Elasticity is the term economists use to describe how much supply or demand responds to changes in price. If a small change in price produces a large change in demand, demand is said to be elastic. If a large change in price produces a small change in supply, then supply is said to be inelastic.
Elasticity of Demand
On the demand side, the elasticity of our demand for oil reflects the options we have to using oil for our daily needs. At a personal level, we can quickly cut our demand for oil a little bit by combining car trips, keeping our tires properly inflated, etc. But the ability to make such reductions is often limited, and even such simple measures come at a cost of time or convenience, which is why we’re not doing them already. If we live in an area without good public transport (as most of us do) we can’t stop driving to work without losing our job, so we keep driving to work, and paying more for the gas to get there.
Over the longer term, our personal options to cut oil consumption increase. We can move closer to work, or to somewhere where we can walk or use public transport to get to our job. This is why the most fuel-efficient vehicle is a moving van.