Don’t bet against shale oil

So many articles are pointing toward the idea that shale will be a major player for a long time.

What do you suppose would happen to new and used car dealers if automobile prices dropped by 50% in the next 6 months with no indication when (or even if) the prices will recover? What would happen to retail bookstores if prices of books dropped by half?

How many new car lots, used car dealers, or bookstores would be open after 6 months?

A few articles on shale in general and Williston in particular:

6/15 (guess on exact date) – World Oil – ShaleTech: Bakken / Three Forks Resilient play takes a licking, but keeps on pumping crude – In-depth survey of where things stand now. Amazing thing for me is to ponder how little of this I would have understood three years ago. Now, I think I get most of it.

Opening sentence is yet one more reminder that OPEC may have not quite known what a challenge they were taking on:

If the Saudis thought they could shut down the Bakken/Three Forks play by flooding the global market with crude, they don’t know about Yankee ingenuity and the spirit of independence that drives U.S. shale operators.

Impact of the drillers pulling back to the core areas of Mountrail and McKenzie counties is shown by a statistic I didn’t even know about. Something called the median IP30 measures the 30 day initial production amount. That is averaging 550 bopd in those two counties, which seems to me quite amazing. That production level is somewhere between 17% up to 50% above the other counties in the Bakken field.

Some producers have swaps that protect their sales prices for another six years.

Some drillers think they will be able to make as much or more money at $65 a barrel than the distant days of last year when prices were at $95, according to the article.

Continental Resources says their cost per well was 9.6M at the end of 2014 and they expect a 20% reduction this year. With the reduction they expect a 42% return on revenue. Astounding. A mere 42%.

Their laterals are 9800 feet. They have a target EUR (I know that acronym!  – means estimated ultimate recovery, the total number of barrels expected from one well) of 800,000 barrels. They plan to drill 191 wells in 2015.

Lots of technical update that is a bit over my head. General backgrounds on crude by rail, crude exports, various regulatory ideas.

6/14 – Dickinson Press – Williston Café no longer nervous about slowdown – In March, Lonnie’s Roadhouse expanded into a new building adjacent to the gas station it previously was attached to.

I ate there last month while on vacation. It is a fun restaurant.

The female owner says the restaurant has been busy even with the slowdown in drilling. The restaurant was packed out when we were there. The change from a year ago is there wasn’t a line out the door of people waiting for a table. Restaurants in California would looooove to have every table full at lunch during the middle of the week.

Packed during all meals – Is that what a slowdown looks like in your part of the country? That’s what it’s like in Williston.

6/13 – Bismarck Tribune – Evolution of man camps may be ending – Watford City has given notice to holders of 10 conditional use permits with 100 buildings on their locations that their CUPs will be reviewed this year and phased out at some point. The mayor says the 1500 housing units (apartment & duplex) coming online this year will replace those units. He says typical rent for one-bedroom units have dropped from the $2,000 or $2,400 range down to around $1,600.

The infrastructure is starting to catch up with the permanent employment.

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