A Reader Replies To An Earlier Post -- May 1, 2021

In response to an earlier post, this from a reader:

I have been closely tracking the quarterly releases [of the energy companies] these past weeks [generally 1Q21 earnings]. 

There is such a wealth of info revealed with the Conference Call transcripts (freely available through Seeking Alpha and others) that I tend to go over at least a half dozen Appalachian Basin companies each quarter. 

My 'shale' curiosity now primarily revolves around Appalachia as well as the industry's continuing technological advances.

Long story short, there is ongoing activity involving land consolidation, merging and acquisition (M&A), large outfits completely exiting the region, and on and on. 

What didn't hit me (duh) until this morning, was just how profoundly, how powerfully these actions are impacting these emerging companies in the global marketplace.

That is to say, in somewhat similar fashion to big pieces of a jigsaw puzzle continuously self-arranging to more better form a complete picture, these Appalachian Basin companies are buying holdings, selling off or swapping outliers, merging with peers, etc., while employing the ever-improving new technologies and processes that continuously arise.

These (energy companies) are NOT the same outfits of even five years ago.

These (energy companies) are incredibly lean, amazingly productive hydrocarbon-producing machines against which NO big, government owned entity can ever hope to successfully compete.

As just one example, two to three years ago, it would routinely cost over $1,000/lateral foot to drill and complete a horizontal well.

Now, most of these companies have these costs under $700 with some [trending toward] $600/foot.

This, obviously, greatly enhances the economics while continuing to expand the productive footprint in these formations.

Bottom line: the over-hyped 'break even' point for companies in this industry continues to drop.

Foreign entities dependent upon hydrocarbon revenues (looking at you, KSA) are increasingly imperiled. 

(Additional corollary to this, smaller countries dependent upon domestic oil/gas production/revenues are hurting as long term low global prices are stifling local exploration/development.

Countries all over from Bolivia, Pakistan, Philippines, even Australia are being impacted by the recognition that low cost hydrocarbons - especially gas - are available just by 'picking up the phone' and purchasing it.)

Future consequences will be paradigm shattering in many, many yet unforeseen ways.

I agree completely. Much could be written.

We saw the financial results of some of the larger oil companies this past week but look what we're going to see next week: