- internationally: the growing gap in energy growth in the US and energy constraints in the EU
- nationally: the continued success of the US shale revolution
- inter-region (Bakken / Permian): the Oasis decision to expand into the Permian
- the state (North Dakota): the Legacy Fund
- regionally: how long North Dakota crude oil production can remain above one million bopd
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The Oasis Decision To Expand Into The Permian
The bitcoin phenomenon helps me put the Oasis decision to expand into the Permian into perspective. The most perplexing question was not "why did Oasis make the decision to expand into the Permian?" but, rather, "whatever possessed Oasis to pay $50,000 / acre to enter the Permian?"
Corollaries to that question:
- did Oasis overpay?
- what is the value of a Permian mineral acre?
- how does one determine the value of something?
With the bitcoin, we know how low it can go: zero.
With the bitcoin, we have no idea how high it can go.
Not knowing the latter, we can't make any estimate of its intrinsic value.
That's not true of the intrinsic value of the Permian. We don't know how low the value of the Permian will go or how high it might go. But for the Permian, we have models. And from the models, we can at least opine on the intrinsic value of the Permian. For the bitcoin, there are no models.
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Did Oasis Overpay For The Permian?
I've addressed that before and am not going to go into that again. Whether they overpaid or not is in the eye of the beholder, but based on the data we have one can argue it did not cost Oasis all that much.
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Big Fish In A Small Pond,
or
Small Fish In A Big Pond
Two things generally happen to small fish in a big pond: they grow bigger or they get eaten.
A corporation is not a fish, and unlike what might happen to a fish, there are additional "things" that can happen to a corporation. But having said that, in the big scheme of things, oil companies tend to get bigger or they tend to get eaten.
