Yesterday I played "devil's advocate" with regard to The Financial Times story on US shale operators dying on the vine.
A reader responded. I will respond to the reader's response below -- to suggest what this means for those who are curious how I see the reader's very insightful, very prescient comments.
The following was edited slightly for formatting. If there are typographical and/or content errors, they are mine, not the readers, which occurred during my editing:
I had finished poring over the just-released Pennsylvania production numbers for February (most recent) before turning to your blog.To "cut to the chase," several smaller "No-Name" companies - all privately owned - continue to post exceptionally strong numbers from their smallish land holdings. [Connect this line to the concluding statement by the reader.]My "in-a-nutshell" appraisal ...Yes, many moneyed people/institutions are about at the end of their rope looking at these monthly figures while simultaneously seeing no financial returns coming their way.Yes, it would not surprise me that many private companies have been drilling/producing at a fast pace these past 2 years in order to show the Big Boys just how good their potential is.However ... for those of us looking at the Bigger Picture, this might be what to expect in the coming years:
- higher pricing for raw hydrocarbons. ~$70 WTI and ~$3/$3.25 Henry Hub (HH) might be a reasonable assumption.
- this assumption is completely meaningless in the Real World as both you and I know things change with blinding speed.
- (the mere fact that ongoing attacks on Saudi infrastructure and a not-so-low-grade war taking place in the Middle have clearly shown no impact on global pricing is SO far removed from our historical experience as to make future prognostications groundless).
- abundant hydrocarbon resources available for decades to come with remaining US producers doing very well.
- fringier areas in the current basins will be developed by tenacious, risk taking Little Guys as the hardware, technology, and proven processes will be employed to 'wring out' every viable barrel, every cubic foot of hydrocarbons
- if/when prices spike upwards (even temporarily) - say, in the ~$90/$100 bbld range - new plays will be exploited.
- these include - but are not limited to - the Powder River Basin, the Tuscaloosa Marine Shale, the Uinta, the Rogersville, and more
- artificial lift and re-frac'ing technologies will continue to improve so as to upend the standard, current production profiles of many of today's wells
- no one talks about EOR anymore, but there are over a half dozen projects taking place right now with publicised results expected in the next year or two.
- a much higher recovery factor is practically guaranteed, but no operator wants to tout that even MORE oil will be coming to market.
I could go on, but I will stop right there with one recent comparison ... the frenzied boom related to the Dot Bomb phenomenon 20 years ago.Bill Gates said, (2004/5 timeframe, IIRC), that, yes, an over-exuberant atmosphere drew in hundreds of billions of dollars that did not offer a positive financial return.However, Gates continued, a new, paradigm-shattering framework was put into place whereby this new fangled Internet thingy would exert a profound influence across the globe.This is what Harold, Mark Papa, Aubrey McClendon, et al have bequeathed to the world.
Wow, that's a great note.