Saturday, August 19, 2017

Saturday, August 19, 2017

Active rigs:

$48.738/19/201708/19/201608/19/201508/19/201408/19/2013
Active Rigs533274192183

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The Bubble

I haven't looked at Scott Adams' blog in a long time. A reader linked me to one of his more recent posts which helps me put events of the past week in context.

It also helps explain the action of the stock market this past week. 

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Notes To The Granddaughters 

At DFW on their way to Nashville, via Atlanta, GA, to see the eclipse.  Daughter and two granddaughters. The third granddaughter, Sophia, will remain here in Grapevine (Dallas) to observe the eclipse with me.


4 comments:

  1. So what about Art Berman and the small group of die-hard peak oil faithful that still remain committed to that doctrine? Are they trapped in one of Adam's "mass hysteria bubbles"?

    No reality and no common sense can penetrate their minds.

    ReplyDelete
    Replies
    1. Thank you.

      1. It took decades of fracking and directional (not horizontal) drilling before frackers figured out how to drill/complete tight oil plays.

      2. For all intents and purposes, the first innings of horizontal fracking have only been the last five to seven years.

      3. I'm not convinced operators have learned all there is to learn about fracking tight oil. See comments at this post: https://themilliondollarway.blogspot.com/2017/02/random-updata-of-clr-florida-well-camp.html.

      4. If in fact, this is actually happening, and I'm not imagining things, tight oil has a lot more surprises in store yet.

      5. I plan to write a longer stand-alone post some day, but think about these data points:

      a. in the early days of the Bakken, EURs of 350,000 were the norm or the expectation;

      b. right now, one can argue that EURs of 750,000 are the expectation in the Bakken;

      c. in the early days of the Bakken, they talked about primary recovery of 3%;

      d. I don't know where it is now, but I know some operators are talking about 7% primary recovery, and some operators well above that;

      e. if in fact, older wells can produce one year's worth of oil in one month due to "something new" in the field, that changes things immensely;

      f. if "original" primary recovery is 7% and a re-frack results in a "new" well for all intents and purposes, that makes maybe 10, 12, 14, 15% primary recovery. And 15% primary recovery is still a long way from 30% or 45% primary recovery -- which is a fantasy right now, but when I see what is happening in the field with re-fracking, one begins to wonder what's fantasy and what's possible.

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  2. So, to paraphrase Adams:

    1. The trigger event for cognitive dissonance

    Sometime between the mid-year 2015 and mid-year 2017, the peak oilers learned that everything they believed to be both true and obvious turned out to be wrong. The people who thought US shale was a flash in the pan were under the impression they were smart people who understood the oil business and how it works in general. When the EURs of newly completed wells doubled between 2015 and 2017, they learned they were wrong. They were so very wrong that they reflexively (because this is how all brains work) rewrote the scripts they were seeing in their minds until it all made sense again. The wrong-about-everything crowd decided that the only way their world made sense, with their egos intact, is that either the much greater initial production rates experienced by the newly completed wells would result (in the long run) in diminished EURs, or that shale wells would soon succumb to a "bubble point death" where oil produciton would suddenly fall off a cliff. Those were the seeds of the two mass hysterias we witness today.

    ReplyDelete
    Replies
    1. I agree completely, although you say it much better than I would have been able to say it, and much more "forcibly." My thoughts on the matter don't mean much because I'm inappropriately exuberant about the Bakken, and have no background in the oil industry, so all I can do is report what I see and hope it makes sense some day.

      But I feel strongly that unconventional oil is very different from conventional oil. It might have been easier to sort this out had the price of oil stayed at $100/bbl, but operators have had to change production strategies with oil at $50 and less.

      The "typical" decline rate in the Bakken or shale formations no longer interests me; everybody agrees that there is a "typical" decline. What interests me now is the change in the production curve as wells are re-worked; undergo mini-fracks (which might not be reported in the file reports); re-fracks; and neighboring fracks.

      Mike Filloon has posted a number of articles over at Seeking Alpha that show these remarkable changes in the production curve (to the upside) but he has not yet talked about them.

      There's a possibility I'm seeing things that a) don't exist; or, b) won't move the needle in the big scheme of things, but it certainly looks like older wells are going to have new life going forward which is something we did not see in conventional wells, as far as I know.

      Delete