Tag: oil production

Financial distress in Saudi Arabia and OPEC not likely to end soon

Oil pump jacks in the desert of Bahrain, Middle East. Photo courtesy of Adobe Stock.
Oil pump jacks in the desert of Bahrain, Middle East. Photo courtesy of Adobe Stock.

Keep in mind that U.S. shale drillers will be able to make a lot of money if oil prices go up to $60 as I describe the distress facing Saudi Arabia.

Four articles for your consideration:

  • Shale drillers likely to get busy if oil hit $60
  • Saudi Arabia still in distress in spite of successful bond issue
  • One Saudi official cautions bankruptcy could be a few years off if oil prices continue the way they are
  • Another article describing the distress in Saudi Arabia because of low oil prices

11/16 – Reuters – IEA expects US shale output rise if OPEC pushes oil to $60 – IEA expect there will be a lot more drilling and production coming out of shale fields in the US if prices go up to $60. If OPEC (meaning Saudi Arabia) reduces production sufficiently to drive up prices it will draw shale drillers back to work.

I take exception to one comment made by IEA, specifically that it will take nine months for any new production to get on the market. Continue reading “Financial distress in Saudi Arabia and OPEC not likely to end soon”

Yet more news showing why we will continue to have plenty of oil

I don't know who owns those wells, but use this picture as a visual that shale companies in bankruptcy haven't stopped pumping oil. Photo by James Ulvog.
I don’t know who owns those wells, but use this picture as a visual that shale companies in bankruptcy haven’t stopped pumping oil. Photo by James Ulvog.

The concept that one should not bet against human ingenuity is key to realizing we won’t run out of oil and there won’t be a sustained runup in prices anytime soon. A few articles showing why I say that. Articles also show the severity of the catastrophic mistake made by the Saudi government.

  • There is a difference cutoff for the breakeven price of the company Saudi Aramco and the country Saudi Arabia. US shale producers can crank out tons of oil at prices far below what the Saudi government needs to survive.
  • Huge Kashagan oil field in Kazakhstan starts producing
  • US shale producers in bankruptcy proceedings are producing almost as much oil as the they were before prices collapsed. They didn’t close in their wells.

10/17 – Gary Sernovitz in op-ed at Wall Street Journal – Trimming Oil Output Won’t Keep OPEC States Afloat – Main idea I draw from article is that if OPEC reaches a deal to cut production, and if they get Russia to go along, and if the cut is enough to push prices up the amount they want, and if none of the producers cheat, then it still won’t keep the petrostates funded at the level they need to keep all their social programs going.

That is a lot of ifs and even if they all happen, it won’t matter much.

Amongst the many reasons this is the case, two stand out to me.

First, for the history of oil production, the easiest and cheapest oil to come out of a field is the first drawn. After that, the oil gets more difficult and more expensive. The opposite is happening in the fracking fields. The breakeven price is lower today in Bakken, Permian, and elsewhere than two years ago and the breakeven price looks to be going lower. That means the frackers can keep functioning with low prices and thrive with moderate increases.

Continue reading “Yet more news showing why we will continue to have plenty of oil”

More North Dakota production information

Previous post showed the oil production in North Dakota through August 2016. Here is some more info on production in the state. Data is extracted from the  monthly “Director’s Report” and historical production data.

Average sweet crude prices for North Dakota oil. This reflects a discount from the West Texas Intermediate due to transportation costs.

 

sweet-crude-10-16

Here is the value of monthly production based on actual output multiplied by the average sweet crude price rolled into the preceding graph:

Continue reading “More North Dakota production information”

Oil production in North Dakota drops 4.7% in August, slipping below the 1 million level

state-and-bakken-output-10-16

Above graph shows the average daily production in North Dakota statewide and in the Bakken field. Output in August dropped from 1,029,734 barrels of oil per day (bopd) (revised) to 981,039 bopd (preliminary), a change of 48,695 bopd, or 4.73%.

This is the first month with average daily production below 1 million bopd since March 2014.

Here is the average daily production by month since 2004:

Continue reading “Oil production in North Dakota drops 4.7% in August, slipping below the 1 million level”

Still more amazing news from Bakken

Workover rig in October 2014. Photo by James Ulvog.
Workover rig in October 2014. Photo by James Ulvog.

In contrast to the horrible news mentioned yesterday from Venezuela, consider the the amazing news from the open frontier of energy production. The benefits produced by fracking just don’t seem to stop.

9/23 – The Million Dollar Way –Update On The Bakkan – Lynn Helms – A few highlights in the article from a radio interview I found particularly fascinating:

  • Production in North Dakota will drop below 1M bopd but Mr. Helms does not expected to go below 900K bopd.
  • Initial production rates had been 1100 bopd but are now running 1500 bopd.
  • Estimated Ultimate Recovery amounts have increased one-fourth.
  • There are somewhere between 8000 and 8500 wells that are good candidates for refracking because they are initially drilled with old technology.
  • This is astounding – a drilling rig today drills an average of 25 wells in a year compared to only 8 or 9 wells as recently as 2009. Imagine the improved IRR.
  • Drilling efficiencies have come from multi-well pads, new technology for bits, new technology promoters, and new technology for mud. Ponder the impact of technology.
Closeup of workover rig. Photo by James Ulvog.
Closeup of workover rig. Photo by James Ulvog.

9/23 – The Million Dollar Way – FAQ: How Much Oil Can One Reasonably Expect That A Bakken Well Will Produce Over The Lifetime Of That Well? – Astounding information.

Continue reading “Still more amazing news from Bakken”

Applying discernment to interpret news reports on crude oil

Image courtesy of Adobe Stock.
Image courtesy of Adobe Stock.

After spending several years trying to get my little brain wrapped around energy issues, I’m to the point where I can interpret news reports and figure out for myself what to believe and what reports are just blowing smoke.

Consider the two following articles as illustrations of an article to believe and one that, um, well, ought to be taken with a large grain of salt.

10/2 – Wall Street Journal – An OPEC Output Cut Not Likely to Alter Oil Imbalance – Author cites “many” analysts who think that OPEC cutting production by a mere 700K bopd is not a large enough cut to resolve the oil oversupply, nor will the cut take place quick enough to have any impact.

Previous expectation was oil demand and supply would balance out by the end of 2016. Now the guessing is it will take until mid-2017.

The money quote is from Daniel Yergin (so you know my perspective, I have learned to pay close attention to him anytime he is mentioned):

Continue reading “Applying discernment to interpret news reports on crude oil”

A few updates on energy. Why I am so optimistic for our future energy supply.

Photo by James Ulvog.
North Dakota oil pad. Based on the number of storage tanks, I’ll guess there are going to be a whole lot more than two wells on that site. Photo by James Ulvog.

Here are a few recent energy articles of interest.

  • Saudi government cuts back wages and benefits for government workers because government revenues are down because government drove down oil prices.
  • Tentative deal for OPEC to drop production and why it won’t matter.
  • Shale drillers in the U.S. are ready to increase production.

9/27 – Reuters – Saudi chops wage, benefit bill in delicate pursuit of austerity and Bloomberg – Saudi King Cuts Once Untouchable Wage Bill to Save Money – Bonuses for all government employees will be stopped.

For those at “ministerial” level, pay will be cut 20%. After looking at  a few articles, I’m not sure how many people are at the “ministerial” level.

Purpose seems to be psychological, specifically to tell the financial world that the government is serious about cutting costs.

9/29 – AP at Bakken.com – AP Explains: What does OPEC’s tentative deal mean for oil? – The OPEC producers agreed that they will in the near future agree to a production cut. No cut in sight but they agreed they need to pull back from maximum production by everyone.

Continue reading “A few updates on energy. Why I am so optimistic for our future energy supply.”

A few updates on oil prices and production

What's going to happen on oil prices and production levels? I don't have a clue. Trying to find a clue is why I blog. Image courtesy of Adobe Stock.
What’s going to happen on oil prices and production levels? When will supply and demand balance? My answer above. Trying to find a clue is why I blog.
Image courtesy of Adobe Stock.

Here are a few articles of the last few weeks discussing oil production, possible direction of prices, and possibility of increased turmoil in Middle East.

8/11 – Wall Street Journal – Saudi Oil Output Sets Record Despite Global Glut – Both Saudi Arabia and OPEC hit record production levels in July. Saudi output hit 10.67M bopd, while OPEC hit 33.11M bopd. Eyeball the accompanying graph in the article and you can see output in 2015 and 2016 in total is at the highest level since 2002.

Iran’s output has hit 3.6M bopd, with their announced target of 4M bopd before they will consider discussion to freeze output. Article says speculation says they have likely hit a production ceiling.

Ironically, if Iran and each of the OPEC producers (other than Venezuela) are at maximum production, they might all get together and agree to a production freeze. Not that a freeze while everyone is running at maximum capacity would do any good.

8/11 – Wall Street Journal – IEA: Crude Production to Fall Behind Demand – Continue reading “A few updates on oil prices and production”

North Dakota oil production drops 2% in June

Total crude oil production in the state dropped 20,419 bopd, going from 1,047,003 bopd in May to 1,026,584 bopd in June. That is a decline of 1.95%. I’ll make a guess that another month or two will see production cross the one million point.

The Director’s Cut is guessing the low prices, and consequent low rig count, will last through third quarter this year or second quarter of next year.

Just one graph today:

oil production 08 to 6-16

Rig count in North Dakota during summer of 2016

An increasingly rare sight in North Dakota. Not only the active rig, but the flaring as well. Photo by James Ulvog.
An increasingly rare sight in North Dakota. Not only the active rig, but the flaring as well. Photo by James Ulvog.

Here is a recap of the North Dakota rig count. All of the data is from Million Dollar Way. The number of rigs isn’t as important now as it was a year or three ago, but it is still one indicator of activity. One rig today creates a well that produces a lot more oil that a few years ago, and in less time, and at lower cost.

Some older data repeated for context: Continue reading “Rig count in North Dakota during summer of 2016”

Outlook for oil, some short-term and long-term thoughts

Tight Oil Production - Courtesy of Energy Information Administration
Tight Oil Production – Courtesy of Energy Information Administration

More news on the energy market. Supply and demand may equalize soon. Maybe.

Saudi Arabia may have bit off more than they can chew. The US and world markets will benefit, along with everyone who consumes energy.

7/1 – AP at Bakken.com – US energy secretary sees oil market coming into balance – The Saudi oil minister thinks worldwide demand will catch up with production by around the end of 2016. The US Energy Secretary thinks it will go into 2017, perhaps another year. Prices likely to go up as demand and supply stabilize.

7/18 – Wall Street Journal – Oil Prices Steady but Products Glut Looms – There are hints in the air that several markets, such as gasoline, are oversupplied, which will put downward pressure on crude oil prices. Another indication that nobody can predict the future.

7/31 – Ambrose Evans-Pritchard at the Telegraph – Texas shale oil has fought Saudi Arabia to a standstill – This is a must-read if you follow my blog.

Twenty months ago Saudi Arabia launched a price war, generally considered to be an effort to take out American shale producers.

Didn’t quite work out that way.

Continue reading “Outlook for oil, some short-term and long-term thoughts”

A few more signs of energy recovery

Where crude oil goes for refining so we can have the gas to drive our cars. Photo courtesy of DollarPhotoClub
Where crude oil goes for refining so we can have the gas to drive our cars. Photo courtesy of DollarPhotoClub.

There are some signs that oil production is slowly recovering. Productivity improvements continue. Hints that the US has more oil reserves than Saudi Arabia.

7/1 – The American Interest – Frackers Fix Their Fatal Flaw – A report from Reuters indicates several drillers have figured out how to ease the extreme drop in production early in a shale well’s life.

Continue reading “A few more signs of energy recovery”

North Dakota oil production recovers a bit in May 2016

oil production 08 to 5-16

Oil production in North Dakota dropped about 6.3% in April and recovered a little in May, increasing about 0.5%. Here is the average daily production for last three months:

  • 1,111,544 – March
  • 1,041,981 – April
  • 1,047,364 – May

Here are a few graphs that show the picture:

  • Average production by month statewide and Bakken only since 2008 is shown at the top of this post
  • Average production for the state by month since 1990
  • Crude prices by month, which shows a modest recovery
  • Value of monthly production, which show a faint whiff of a hint in the air that maybe production is coming back to life
  • Fracklog, which is the number of wells drilled to depth but awaiting fracking before production may begin

Continue reading “North Dakota oil production recovers a bit in May 2016”

Timeline of Bakken oil production

ave daily production since 1990

For long-term archive purposes, here is a timeframe for the Bakken boom.

6/28 – The Million Dollar Way – The Bakken Is In Its Manufacturing Stage – Bruce Oksol provides a useful long-term perspective on how Bakken production has developed:

  • 2000: the Bakken boom begins in Montana
  • 2007: the Bakken boom begins in North Dakota
  • 2012: the Bakken hits its stride
  • early 2014: the Bakken setting new records, almost every month
  • late 2014: the Saudi Surge
  • 2015: the Bakken re-trenches
  • 1Q16 taxable sales 50% greater than 1Q10
  • mid-2016: the Bakken bottoms out — at least that is what the tea leaves suggest

For more perspective, here is the average daily production for each of the above years. I calculated the following from data pulled from the state website: Continue reading “Timeline of Bakken oil production”

More followup on multi-well pad drilling. Links for a couple of superb photos.

Multi-well pad being drilled. Photo by James Ulvog.
Multi-well pad being drilled in Williston. Photo by James Ulvog.

Yesterday’s post on multi-well pad drilling saw lots of visitors from The Million Dollar Way. Bruce Oksol linked to the post in his discussion, Multi-Well Pad Drilling In The Bakken.

He has discussed this pad before. See his post for links.

Mr. Oksol links to a photo of the site taken by Vern Whitten: Vern Whitten Fall Portfolio. Since I try really hard to avoid copyright violations, you won’t see his photo on this blog. Instead you can see Mr. Whitten’s photo at this link. It is photo 28 of 39.

Incredible view from an incredible photographer.

Continue reading “More followup on multi-well pad drilling. Links for a couple of superb photos.”