For The Archives: Snapshots In Time -- April 12, 2021

US oil production still two million bpd under pre-pandemic levels. Link to Julianne Geiger, oilprice.  

The EIA’s Monthly Drilling Productivity Report is forecasting that for the nation’s most prolific basin, the Permian, production will return to 4.466 million barrels per day in May.

That compares to 3.918 million bpd in May 2020—but that was hardly prior to the pandemic. In January 2020, the Permian basin’s average oil production was 4.793 million bpd. This means that oil production in the Permian Basin is down 327,000 bpd, or 7% under January levels.

4.8 vs 4.5. I just can't get too excited.

Coincidentally, moments after I posted this link/story, it was noted that the EIA had posted the April, 2021, "dashboards."

• EIA pdf, Bakken: https://www.eia.gov/petroleum/drilling/pdf/bakken.pdf
• EIA, pdf, Permian: https://www.eia.gov/petroleum/drilling/pdf/permian.pdf
• EIA, pdf, Eagle Ford: https://www.eia.gov/petroleum/drilling/pdf/eagleford.pdf

Moving on. 

Big Oil's dwindling reserves are a major problem. Link here to Cyril Widdershoven over at oilprice. I think I've been reading "these stories" or variations thereof over the past several decades. During the Jimmy Carter administration it was downright dire. 

Even before reading the article, I was thinking -- this is going to be a "money" story -- financial, economic, business -- and not a scientific, geologic story. And it was. This is the nub:

As demand recovers and oil prices climb, there are plenty of potential financial windfalls in 2021 for these companies to take advantage of. 

The question remains, however, over whether or not the companies will invest in new production and reserves or will they use it to pay dividends. 

Some analysts have already claimed that the current reserve crisis is no real issue, as most IOCs are going through an energy-transition phase. 

However, to invest in the energy transition these companies need plenty of cash to cope with the planned multi-billion-dollar wind, solar, and hydrogen projects, while also keeping investors and shareholders happy. 

As stated by Citibank, “the latest words from an IOC board chairman, ‘Black pays for green’, refer to the 80% of the CFFO (cash flow from operations) generated from oil and gas activities, which is expected to be above 70% by 2030.” 

If reserves are not high enough to sustain “normal” oil and gas operations, the time frame for energy transition success then becomes a major issue too. 

Again, this seems to be a typical "business" dilemma. Warren Buffett addressed it by simply not paying dividends. Much more to the story, of course. But, wow, how things have changed, comparing the current energy situation with that during the Carter administration, and even the Barack "we can't drill our way to cheaper oil" Obama administration. We're so over-supplied with fossil fuel the US has the luxury of shutting down pipelines even after they’ve been built and are safely transporting oil. 

What a great country.