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Oil Drillers Bet Choking Wells Will Keep Shale From Going Bust

Encana Corp. wants to ensure the shale-oil boom keeps booming. The Canadian producer is among a growing number of companies that are restricting initial output — a process known as choking back — in basins from North Dakota to Texas. They’re conceding huge up-front gushers of crude in exchange for smaller production declines over time so that the wells ultimately generate more oil. The strategy sacrifices one of the biggest benefits from shale. The early gushers paid back investments fast, allowing companies to pour capital into new projects. Instead, Encana and others envision a future with a more stable flow from wells, so that they don’t always have to keep drilling simply to maintain output. “You’re losing a barrel today to get two or three barrels tomorrow,” said Allen Gilmer, chief executive officer of consultant Drilling Info Inc. in Austin. “It’s not a zero-sum game.” Red Queen Curbing initial […]

Posted On : Published By : Tom Whipple
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Miller Energy Files for Bankruptcy in Deal With Apollo, Highbridge

Like a number of other independent oil-company executives who have been forced to put their companies into bankruptcy in recent month, Miller Chief Executive Carl Giesler blamed his company’s financial woes in part on plummeting oil prices. The price of global benchmark Brent crude fell to less than $45 a barrel this summer from more than $100 a barrel a year ago. Miller Energy, a former Tennessee company that shifted its oil and gas drilling to Alaska in recent years, has also been beset by other problems. The Securities and Exchange Commission has accused the company of accounting fraud and in August, a group of companies that said they were owed millions from Miller’s Alaska subsidiary moved to push the unit into bankruptcy. Company officials had recently been in talks with a prospective lender for $165 million capital infusion, Mr. Giesler said in an interview on Friday with The […]

Posted On : Published By : Tom Whipple
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We’re a Long Way From ‘Peak Car’

Many environmentalists hope, and oil producers worry, that we’re entering a post-car era spearheaded by tech-savvy, bike-path-loving, urban-dwelling, Uber-using millennials—leaving behind generations of automobile owners whose thirst for gasoline seemed limitless. “Millennials have been reluctant to buy items such as cars,” a Goldman Sachs GS 1.30 % analysis concludes, turning to “what’s being called a ‘sharing economy.’ ” David Metz, former chief scientist at England’s Department of Transport, claims that the growth of Uber and its competitors guarantees a decline in automobile and fuel use. Thomas Frey, the DaVinci Institute senior futurist, says that “wealthy economies have already hit peak car.” The idea may seem plausible given recent history: tepid new-car sales, fewer miles driven per capita and shrinking gasoline use. In reality, it’s poppycock: The car habits of young adults ages 18-33 simply reflected a lack of jobs and money. Now J.D. Power finds that millennials are the […]

Posted On : Published By : ASPO-USA
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Oil at $30 Would Threaten a Lot of Stripper Wells

The speed at which oil producers shut down wells spitting out their final drops of unprofitable crude may hold the key to an eventual rebound if prices fall further. Crude prices tumbling to $30 a barrel would threaten the profitability of about 206,000 barrels per day of production from older wells that produce minimal amounts of oil, according to a report Thursday from Bloomberg Intelligence. Output from older U.S. wells less profitable as oil prices fall The wells, which are most prevalent in Texas’ Permian Basin, are about 25 years old on average and produce no more than 15 barrels a day. They require regular maintenance to help pump even that much after years of sagging pressure. "These wells dance on the edge of profitability," Peter Pulikkan and William Foiles, analysts at Bloomberg Intelligence, wrote in the report. "The reaction of smaller mom-and-pop operators to sustained low oil prices […]

Posted On : Published By : Tom Whipple
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Chesapeake Wins Bank Reprieve at Higher Risk to Bondholders

Chesapeake Energy Corp. negotiated a reprieve from its banks that comes at the expense of its bondholders. Under a new financing agreement the embattled oil and gas producer’s unsecured $4 billion revolver will be converted into a secured credit line, according to a company statement. Chesapeake also will be able to raise as much as $2 billion in junior-lien debt, pushing its unsecured creditors further down the pecking order in extracting recoveries during a default. The announcement sparked a selloff in the company’s bonds, erasing as much as $285 million in market value. The “junior lien provision provides a liquidity lifeline –- despite further priming for unsecured holders,” Goldman Sachs Group Inc. analyst Jason Gilbert wrote in a report Thursday. The company would still need to “monetize” more than $2 billion of assets to “address upcoming maturities and (maintain) an adequate liquidity cushion,” he said. Prior to the move, […]

Posted On : Published By : Tom Whipple
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Yes, the U.S. Still Produces A Lot of Oil in the Gulf of Mexico

U.S. oil output unexpectedly rose in July, but not where it matters most. After falling between April and June, output rose 1% from June to July, according to Energy Information Administration data released Wednesday. The increase was due to higher output from offshore production in the Gulf of Mexico. Meanwhile, production in the all-important shale-producing states of Texas and North Dakota fell month-over-month. The Gulf of Mexico used to be a major region for domestic oil output, but it has been overshadowed in recent years by new technologies that enabled producers to access oil trapped in shale rocks. Production also slowed following the 2010 Deepwater Horizon explosion and oil spill. But new projects started last year have boosted the region’s output. Analysts say the prevailing narrative that shale production is declining due to sharp cutbacks in new drilling still holds true. The July increase is likely to be a […]

Posted On : Published By : Tom Whipple
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Stripper Wells Burning Cash at $30 Oil to Speed US Output Drop

(Bloomberg) — The speed at which oil producers shut down wells spitting out their final drops of unprofitable crude may speed the drop in U.S. output and hold the key to an eventual rebound if prices fall further. Crude prices tumbling to $30 a barrel would threaten the profitability of about 206,000 barrels per day of production from older wells that produce minimal amounts of oil, according to a report Thursday from Bloomberg Intelligence. The wells, which are most prevalent in Texas’ Permian Basin, are about 25 years old on average and produce no more than 15 barrels a day. They require regular maintenance to help pump even that much after years of sagging pressure. "These wells dance on the edge of profitability," Peter Pulikkan and William Foiles, analysts at Bloomberg Intelligence, wrote in the report. "The reaction of smaller mom-and-pop operators to sustained low oil prices will dictate […]

Posted On : Published By : Tom Whipple
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US Shale Oil too Expensive, Peaks 1H 2015

According to EIA data, monthly US crude oil production peaked in April 2015 at 9.6 mb/d. Fig 1: US crude oil production to June 2015 The above graph shows that US crude production increased by around 4 mb/d between mid 2011 and mid 2015, mostly from shale oil which took off – with a delay – when oil prices exceeded US$ 80-90. That stellar growth has come to an end, also with a delay, after oil prices plummeted. Let’s zoom into the period starting with January 2014: Fig 2: US incremental crude production Jan 2014 – Jun 2015 The April 2015 peak was caused by higher GOM production resulting from production start-ups after lifting the drilling moratorium in 2010. Shale oil peaked one month earlier, after the winter drop. However, month by month production can change and future revisions of data are likely due to reporting delays. What is […]

Posted On : Published By : Tom Whipple
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Peak oil remains an issue

Living Renewable Energy By Robert and Sonia Vogl President and Vice President Illinois Renewable Energy Association We were both surprised and pleased that Chris Schneider of Honda Motorwerks in LaCrosse returned to being an important presence at the annual Renewable Energy and Sustainability Fair. He is a long-standing advocate of hybrid electric vehicles and always provides an up to date presentation on progress in providing cleaner transportation options. His presence supplements the fine presentations by Tom Brunka on electric vehicle conversions, Allen Penticoff on sustainable cars of the future and Jeff Green on amazing batteries in our future. Schneider acknowledged that low gasoline prices are negatively impacting the sales of hybrid and electric vehicles but believes as many others do that low gasoline prices may not last very much longer. He did point out the existence of impressive savings on used electric vehicles. Brunka took advantage of the low […]

Posted On : Published By : ASPO-USA
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$4 Gasoline By May 2016

Summary Expect higher gasoline and oil prices in 200 days. US Peak Oil from Fracking was in July 2015. US Oil Production down 474,000 barrels per day since July 2015. Watch EIA TWIP Report to understand oil inventories. “Glut” of oil to deplete in 200 days. Two forces, acting in opposite directions, will soon align to cause gasoline and oil prices to ratchet much higher. Those two forces can be easily tracked by watching EIA’s “ This Week in Petroleum ” or TWIP. The two forces are: US crude oil domestic production. US crude oil stocks The current TWIP reports a 474,000 barrel per day decrease in US oil production since July 2015. (click to enlarge) seeking alpha 2 Comments on "$4 Gasoline By May 2016" makati1 on Wed, 30th Sep 2015 10:31 pm “Two forces, acting in opposite directions, will soon align to cause gasoline and oil prices […]

Posted On : Published By : ASPO-USA