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U.S. shale drillers struggle amid slumping prices: Kemp

Various Halliburton equipment being stored at the equipment yard in Alvarado, Texas June 2, 2015. North America’s shale drillers are struggling with the renewed slump in oil prices, despite cutting costs, boosting output, and in some cases employing hedging to improve realized prices. Stock prices for most of the main shale drillers have fallen faster than the price of U.S. light crude since the middle of April. Spot WTI has fallen 20 percent since mid-April but the share price of Pioneer Natural Resources has dropped 30 percent and Continental Resources is down almost 40 percent over the same period. Both companies increased production during the second quarter. Pioneer produced 197,000 barrels of oil equivalent per day (boepd) in April-June, up from 194,000 in January-March, while Continental reported output of 227,000 boepd, up from 207,000. Pioneer’s production is mostly from the Permian Basin and Eagle Ford in Texas, while Continental’s […]

Posted On : Published By : Tom Whipple
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Global Oil Supply More Fragile Than You Think

Oil pumps image via shutterstock. Reproduced at Resilience.org with permission. Many oil companies had trimmed their budgets heading into 2015 to deal with lower oil prices. But the rebound in April and May to $60 per barrel from the mid-$40s suggested that the severe drop was merely temporary. But the collapse of prices in July – owing to the Iran nuclear deal, an ongoing production surplus, and economic and financial concerns in Greece and China – have darkened the mood. Now a prevailing sense that oil prices may stay lower for longer has hit the markets. Oil futures for delivery in December 2020 are currently trading $8 lower than they were at the beginning of this year even while immediate spot prices are $4 higher today. In other words, oil traders are now feeling much gloomier about oil prices several years out than they were at the beginning of […]

Posted On : Published By : Tom Whipple
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Peak Oil and what our response should be

Peak Oil will change the way the world works and our long-held assumptions about the world around us is going to be overturned. Peak oil will render millions of people jobless. Those who depend on food made thousands of kms away from where they stay will find food very expensive. That includes all of us who stay in big cities. So the future is a bit rocky. What should our response be? The intuitive thing that people think when confronted with the problem of oil depletion is that the answer lies in oil conservation. Oil conservation is a good idea but of little help when it comes to tackling the systemic changes that peak oil brings. Why is peak oil missed by the mainstream? I see two reasons. One is human nature which likes to avoid bad news and always believes in the magical power of science and technology. […]

Posted On : Published By : Tom Whipple
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To Please Investors, Big Oil Makes Deepest Cuts in a Generation

Oil companies are making the largest cost cuts in a generation to reassure investors. They’re risking their own future growth. From Chevron Corp. to Royal Dutch Shell Plc, producers are firing thousands of workers and canceling investments to defend their dividends. Cutbacks across the industry total $180 billion so far this year, the most since the oil crash of 1986, according to Rystad Energy AS, an Oslo-based energy consultant. BP Plc Chief Executive Officer Bob Dudley said last week his “first priority” was payouts to shareholders. Chevron CFO Patricia Yarrington said her company was committed to continuing its 27-year record of annual dividend increases. While the dividend payouts please investors, the producers risk repeating the patterns of 1986 and 1999, when prices slumped and they slashed spending. It took years for them to rebuild their pipelines of production growth. “You need to question whether it’s optimal to base the […]

Posted On : Published By : Tom Whipple
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Oil’s $4.4 Trillion Hole

It rankles when you lose $20. But hey, at least it isn’t $4.4 trillion. That is roughly how much revenue the world’s oil producers will forego over the next three years, based on the current outlook for prices and demand, relative to what was expected just a year ago. With Brent crude having tumbled back below $50 a barrel, the industry has entered a vicious, and spreading, bout of deflation. A year ago, futures indicated an average Brent crude-oil price in 2016 through 2018 of about $101 a barrel. Today, that is just under $60. Estimates of future demand have also been marked down slightly. The implied hit to oil producers’ revenue is about $4.4 trillion spread across those three years. It is a crude metric that, for example, doesn’t take account of different grades of oil commanding different prices. But it does indicate the scale of the hit […]

Posted On : Published By : Tom Whipple
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IHS: Energy explorers face strong headwinds

Analysis finds some energy companies focused on exploration and production might not survive the downturn. UPI/Gary C. Caskey HOUSTON, Aug. 6 (UPI) — The depressed crude oil market could limit the borrowing options for North American exploration and production companies, analysis finds. The price for West Texas Intermediate crude oil, the U.S. benchmark, has struggled in recent trading days to break the $50 mark. In early Thursday trading, WTI was $44.72, more than 50 percent lower than this time last year. Paul O’Donnel, an equity analyst at IHS Energy, said the low price of crude oil, and expectations that the weak market will endure, spells trouble for companies focused on exploration and production. "Prolonged depressed prices for oil are hurting many of the [exploration and production companies] and will begin to limit their borrowing options," he said in a statement. Marathon Oil this week became the latest in a […]

Posted On : Published By : Tom Whipple
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Bakken outperforms for Marathon

Shale oil basin in North Dakota a standout for Marathon Oil as it posts a financial loss for the second quarter. Photo by Calin Tatu/Shutterstock HOUSTON, Aug. 6 (UPI) — Production from the Bakken shale play in North Dakota was a standout in terms of gains for Marathon Oil, which posted a $386 million loss in the second quarter. For all of North America, the company said in its second quarter report net production averaged 274,000 barrels of oil equivalent per day. That represents a 21 percent increase year-on-year, but 3 percent lower than first quarter 2015. Marathon President and Chief Executive Officer Lee Tillman said the net decline was in part because of less spending on exploration and production. "Capital spending in the quarter was down about 40 percent sequentially as we’ve moderated activity levels in the U.S. resource plays," he said in a statement. In North Dakota, […]

Posted On : Published By : Tom Whipple
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U.S. Bankruptcy Filings Jump 77% in July, Paced by Energy Sector

Newly released numbers bear out the feeling that a long-awaited bump in bankruptcy filings has arrived this summer, as submissions under chapter 11 rose 77% in July. There were 637 filings under chapter 11 of the bankruptcy code last month across the U.S., according to statistics from Epiq Systems, compared with 359 at the same time last year. It is the most monthly new chapter 11 filings in nearly three years. That excludes April 2014, an outlier month during a very slow restructuring year, when a spike was driven by Energy Future Holdings Corp.’s massive 71-petition filing. But the summer pickup in filings might not be a permanent return to the time before low-interest rates and high filing costs kept many away from the bankruptcy courts. Shaunna Jones, bankruptcy lawyer at Willkie Farr & Gallagher LLP described this summer as one that has “pockets of business but still feels […]

Posted On : Published By : Tom Whipple
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‘Frack now, pay later,’ top services companies say amid oil crash

The exterior of the Schlumberger Corporation headquarters building is pictured in the Galleria area of Houston January 16, 2015. Business is so tough for oilfield giants Schlumberger NV and Halliburton Co that they have come up with a new sales pitch for crude producers halting work in the worst downturn in years. It amounts to this: "frack now and pay later." The moves by the world’s No. 1 and No. 2 oil services companies show how they are scrambling to book sales of new technologies to customers short of cash after a 60 percent slide in crude to $45 a barrel. In some cases, they are willing to take on the role of traditional lenders, like banks, which have grown reluctant to lend since the price drop that began last summer, or act like producers by taking what are essentially stakes in wells. At Halliburton, some of the capital […]

Posted On : Published By : Tom Whipple
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Despite Glut of Oil, Energy Firms Struggle to Turn Off the Tap

Despite all their spending cutbacks and idle drilling rigs, American energy producers are finding it hard to turn off the taps that have helped lead to a global glut of oil. Rising crude production was a major theme in the past week as shale drillers reported their second-quarter earnings. Analysts say American oil pumpers need to cut their output by at least 500,000 barrels a day to stem the oversupply that has sent oil prices tumbling over the past 14 months to just under $45 a barrel. But monthly oil production rose steadily through March, peaking at a record 9.7 million barrels a day that month and just slightly less in April, before edging down to 9.5 million barrels in May, according to the latest federal data. “We need to cut a whole lot more,” said Jamie Webster, a senior director at IHS Energy, a consultancy. “This industry has […]

Posted On : Published By : Tom Whipple