The New Way Of Drilling -- July 26, 2017

Be sure to check out the new way of drilling over at Carpe Diem.

Recorded at Muscle Shoals:

Atlantic Crossing, Rod Stewart   Atlantic Crossing refers to the year Rod Stewart left England and applied for US citizenship, just after the Brits raised the highest tax bracket to 83%. This is my wife's favorite album, the slow side only, which starts at 21:25. She first heard it when we were dating, not yet married.

From Forbes, the US is winning the oil war against Saudi Arabia:

This last point is key. Today, spare capacity is less than 2 million barrels per day compared to the 1980’s oil glut when spare capacity was over 15 million barrels per day. This means that small changes in supply or demand can cause large changes in the price of oil. This leads to significant price volatility, which should only increase in the coming years.

The world is producing about 93 million bbl/day, but it is the cost to supply the last barrel needed to meet demand that determines the marginal cost of oil. So, the marginal cost of oil is above the average production cost of that first 92.9 million barrels. The marginal cost is used by oil companies to plan long-range capital budgets and field operations and bankers value assets during acquisitions or divestiture processes. It is also the best guide to what futures prices will be.

The cost of production of a barrel of oil is the most important component of determining the marginal cost. Individual geologic formations and well completion methods vary widely as to the ease of production, particularly for shale. Take, for example, the Bakken formation in North Dakota that has an overall break-even point of about $40/bbl. However, in McKenzie County, the break-even point is only $28/bbl, while Divide County had a break-even point of $85/bbl.

I'm impressed that a writer for Forbes knows the difference between McKenzie County and Divide County.