Today at twitter:
Thursday, May 30, 2019
Rig Counts Are Irrelevant; Producing More With Less -- May 30, 2019
Several years ago I started posting that rig counts were irrelevant for shale oil. Don't take that out of context. Rig counts provide information about level of activity but rig counts don't have the same importance in unconventional oil as in conventional oil. That's been obvious in the Bakken for years now.
Today at twitter:
Today at twitter:
I think the peak oilers are too quick to claim we've run out of sweet spot or that tech improvement is over. But I also would not ignore price impact on shale. $55 is a world of difference from $75 or even from $65.
ReplyDeleteAnd shouldn't ignore rig count drops either. Yes, each rig is more productive. But it sends a message when their are rigs ready to roll...but not getting called up. Means there are not good projects for them.
Also, really production has stalled last few months.
Yes, $55 will truly test the shale operators. Most have hedged and a slump in prices will be manageable for three to six months but then a challenge. The bigger issue is that banks financing the smaller shale operators will start getting nervous, and make borrowing terms more difficult. Banks review borrowing terms every six months in general, and the schedules are already set. I assume there will be meetings in June just as we start testing $55 (or lower).
DeleteOf course, Saudi Arabia and Russia have to be very alarmed also.