Oil Prices

More likely the number of oil rigs has becomes less due to shutting down of non profitable ones. Since the cost of running those shale rigs are higher..

sent from my Galaxy Tab S

(03-10-2015, 11:42 PM)cfa Wrote: Can come friends help to explain what does it mean by '' oil rigs fall " ?
Thought oil rigs are  oil drilling  platforms , quantum fell  because some oil rigs were scrapped  or any other reason ?

Many thanks .

Baker Hughes rig count data refers to active rigs, i.e. rigs on contract and drilling actively. If the rigs become inactive, they can just be idle but warm stacked or cold stacked/mothballed/decommissioned. If they are cold stacked, the crew will be laid off. 

Typically, oil producing companies do not own drilling rigs per se, they will hire the rig and crew from the drillers to help them drill a hole in the ground. 

Oil platforms are offshore structures that production, drilling or maintenance activities are carried out.

(04-10-2015, 08:14 PM)HitandRun Wrote:

(03-10-2015, 11:42 PM)cfa Wrote: Can come friends help to explain what does it mean by '' oil rigs fall " ?
Thought oil rigs are  oil drilling  platforms , quantum fell  because some oil rigs were scrapped  or any other reason ?

Many thanks .

Baker Hughes rig count data refers to active rigs, i.e. rigs on contract and drilling actively. If the rigs become inactive, they can just be idle but warm stacked or cold stacked/mothballed/decommissioned. If they are cold stacked, the crew will be laid off. 

Typically, oil producing companies do not own drilling rigs per se, they will hire the rig and crew from the drillers to help them drill a hole in the ground. 

Oil platforms are offshore structures that production, drilling or maintenance activities are carried out.

Thanks for this explanation
i think the more impt metric to monitor though, is the total oil production, which for the U.S. at least, has been constantly rising even now
even though oil rigs has been dropping, the drillers have been finding ways to cut costs to survive by making each well more productive

i have initiated a position in Chesapeake energy, the 2nd largest natural gas producer in US, and the 7th largest oil. I don't think the slump is going over anytime soon, but this slump may be a good thing for certain companies as it forces then to be more productive and cut waste.
for eg. Chesapeake energy has been drilling longer laterals and reducing distances between wells, with gd results thus far. So idling more wells doesn't cut production necessarily
the glut will be here to stay until the production drops (supply) or demand shoots up

Thanks for this explanation
i think the more impt metric to monitor though, is the total oil production, which for the U.S. at least, has been constantly rising even now
even though oil rigs has been dropping, the drillers have been finding ways to cut costs to survive by making each well more productive

i have initiated a position in Chesapeake energy, the 2nd largest natural gas producer in US, and the 7th largest oil. I don't think the slump is going over anytime soon, but this slump may be a good thing for certain companies as it forces then to be more productive and cut waste.
for eg. Chesapeake energy has been drilling longer laterals and reducing distances between wells, with gd results thus far. So idling more wells doesn't cut production necessarily
the glut will be here to stay until the production drops (supply) Or demand shoots up

One other thing to note is that Baker Hughes does not count rigs that are MIRU (moving in and rig up).

(04-10-2015, 09:12 PM)GFG Wrote: Thanks for this explanation
i think the more impt metric to monitor though, is the total oil production, which for the U.S. at least, has been constantly rising even now
even though oil rigs has been dropping, the drillers have been finding ways to cut costs to survive by making each well more productive

i have initiated a position in Chesapeake energy, the 2nd largest natural gas producer in US, and the 7th largest oil. I don't think the slump is going over anytime soon, but this slump may be a good thing for certain companies as it forces then to be more productive and cut waste.
for eg. Chesapeake energy has been drilling longer laterals and reducing distances between wells, with gd results thus far. So idling more wells doesn't cut production necessarily
the glut will be here to stay until the production drops (supply) Or demand shoots up

The caveat that I would like to raise is that the presentations / information provided by such E&P companies should be taken with a huge pinch of salt. My takeaway is that they tend to (A) overstate their well productivity (by giving you only the data from their best wells while conveniently neglecting to reflect the averages) and (B) understate or fudge the actual maintenance capex required to hold their production steady.

Incidentally, based on latest estimated data, oil production in US peaked in 2Q and has declined somewhat in 3Q.....

One of the supports for the recent oil price?

Opec sec-gen wants cooperation with non-members on surplus
06 Oct 2015 20:14
[LONDON] Opec Secretary-General Abdullah al-Badri said on Tuesday the oil exporter group should work together with producers outside Opec to tackle a global surplus of crude. "All of us should work together, Opec and non-Opec - work together to get rid of this overhang," Badri told an industry conference in London. "There is one problem we are facing: the overhang of 200 million barrels," he added.

Non-Opec producers including Russia have refused to cut their output, although forecasters have reduced estimates for supply growth outside the Organization of the Petroleum Exporting Countries because of a slump in oil prices. Crude prices have almost halved from a year ago.

Opec has invited non-Opec countries to attend a technical meeting in October to discuss the market, Badri told reporters, following on from a similar meeting held earlier this year.

Badri said oil supply growth from non-Opec producers might be zero or negative in 2016 because of lower upstream investment. Investment has been cut by around US$130 billion this year from about US$650 billion in 2014, he said. "We will see the effect of the cut on production. This will mean less supply in the near future."

REUTERS

Source: Business Times Breaking News

(05-10-2015, 08:17 AM)HitandRun Wrote:

(04-10-2015, 09:12 PM)GFG Wrote: Thanks for this explanation
i think the more impt metric to monitor though, is the total oil production, which for the U.S. at least, has been constantly rising even now
even though oil rigs has been dropping, the drillers have been finding ways to cut costs to survive by making each well more productive

i have initiated a position in Chesapeake energy, the 2nd largest natural gas producer in US, and the 7th largest oil. I don't think the slump is going over anytime soon, but this slump may be a good thing for certain companies as it forces then to be more productive and cut waste.
for eg. Chesapeake energy has been drilling longer laterals and reducing distances between wells, with gd results thus far. So idling more wells doesn't cut production necessarily
the glut will be here to stay until the production drops (supply) Or demand shoots up

The caveat that I would like to raise is that the presentations / information provided by such E&P companies should be taken with a huge pinch of salt. My takeaway is that they tend to (A) overstate their well productivity (by giving you only the data from their best wells while conveniently neglecting to reflect the averages) and (B) understate or fudge the actual maintenance capex required to hold their production steady.

Incidentally, based on latest estimated data, oil production in US peaked in 2Q and has declined somewhat in 3Q.....

"they tend to (A) overstate their well productivity (by giving you only the data from their best wells while conveniently neglecting to reflect the averages) and (B) understate or fudge the actual maintenance capex required to hold their production steady."

whoa. These are big accusations.

I went to check, here's for just 1 of the companies, chesapeake:
http://www.chk.com/media/news/press-rele...s+8+5+2015+

On that same site there're several other presentations for previous quarters as well.
On the contrary from what you said, for (A), they give ONLY average productivity numbers for each site, as well as a total average. There are no numbers for any 1 or 2 "top" wells. As far as i am aware of, nobody states gas or oil produced PER WELL. It's always an average, which makes sense. I am sure for these well followed large O&G producers, which have to give a public conference call every quarter for their results (the conference call can be listened via podcast by anyone via their websites, and is a 2 way call, that is, analysts can ask questions and expect answers), the management will be called out if they start talking about only a few wells, which is unheard of.
For (B), I am not sure if they understate or how they'd "fudge" the projected capex to keep running the well. I wont be able to tell just by looking at the financials. 
Please do tell if you know any examples or evidence of how this is done

Brent crude oil prices soar 5pc, clear $US50

• DOW JONES
  
• OCTOBER 07, 2015 8:44AM
  

[b]Oil prices rose to a one-month high on hopes for falling supply in both the US and global markets.[/b]
The US Energy Information Administration said domestic crude production fell 120,000 barrels a day from August to September. At 9 million barrels a day last month, the US production hit its lowest level in a year. The agency slightly cut its production forecasts putting it at 8.8 million barrels a day in 2016.
The news raised hopes that a global glut of crude could begin to shrink. U.S. production in recent years has been booming as oil was tapped from shale-rock formations. However, the oversupply has helped push prices below $US50 a barrel, causing some US producers to cut back.
Prices had also received a boost earlier in the day from talk of a meeting between Russia and the Organization of the Petroleum Exporting Countries. Industry executives and reports have mentioned a potential meeting to discuss the conditions on the oil market, causing some to speculate the world’s other largest producers could join the US in a continuing pullback.
“That’s starting to wake up some of the folks out in this space,” Bob Yawger, director of the futures division at Mizuho Securities USA, said.
Light, sweet crude for November delivery settled up $US2.27, or 4.9 per cent, at $US48.53 a barrel on the New York Mercantile Exchange. It was the US benchmark’s largest one-day gains since September 16.
Brent, the global benchmark, settled up $US2.67, or 5.4 per cent, at $US51.92 a barrel on ICE Futures Europe. It was the global benchmark’s largest one-day gain since August 31.
In the past month, money managers have piled up a near-record number of bets that oil prices would fall. They are convinced oil has room to keep falling, despite losses of 55 per cent since 2014, because global supply hasn’t fallen in kind and has barely been impacted by US supply cuts.
But when bearish trades pile up, sharp rebounds can become common, as they have in the oil market this year. Bearish traders are apt to close out bets to protect themselves when small signs suggest oncoming rallies. They buy contracts to close out their bets, and many doing that at once can cause prices to rise quickly, even on tenuous reasons.
Brokers said that has been part of the trend during US crude’s now three-session winning streak. Automated trading systems have been big buyers, clearly pouncing on and adding to a slight shift in momentum, they said.
Prices are now up nearly 9 per cent since Thursday and at their highest settlement since August 31. On Tuesday, the chief executive of Royal Dutch Shell said he saw the first sign of a recovery in oil prices.
“It remains uncertain how fast prices will recover and where they will settle,” Ben van Beurden said at the Oil & Money conference in London.
OPEC’s secretary-general also said that oil prices are set to rebound amid steep cuts in global oil investments. There will be “less supply in the very near future. Less supply means high prices,” Abdalla Salem el-Badri said at the conference.
In November last year, the 12-nation oil producer group embarked on a policy to defend its market share by keeping its output stable despite the slump in prices. OPEC has since indicated it will only consider a cut if other big suppliers, such as Russia, join it.
But any production cuts by Russia remain unlikely, given the country’s current economic situation, said Hamza Khan, head of commodities strategy at ING Bank. Higher production is the only way Russia can keep its revenues stable, he said.
“Short-term supply imbalances remain, with Russia increasing oil production to new highs, while OPEC production cuts are mostly seasonal adjustments and exports are unlikely to be affected,” he added. “While the demand side has been improving, the pace is very gradual and does not provide any material support to short-term forecasts.”
In September, Russia produced oil at levels not seen since the fall of the Soviet Union, pumping an average of 10.74 million barrels a day.
At the same time, US crude stockpiles remain near the highest level in about 80 years. A survey of seven analysts by The Wall Street Journal predicts crude stockpiles increased by an average 2.5 million barrels last week. Gasoline inventories likely fell by 100,000 barrels, and stocks of distillates, which include heating oil and diesel, likely slid by 600,000 barrels.
However, the American Petroleum Institute, an industry group, said in a report today that its survey found US crude supplies fell by 1.2 million barrels in the week ended October 2, according to a source. The group said gasoline supplies rose by 4.7 million barrels and US distillate stocks fell by 2.9 million barrels in the week, according to the source.
The EIA will release its weekly stockpile report tomorrow.

(06-10-2015, 10:36 PM)GFG Wrote: whoa. These are big accusations.

I went to check, here's for just 1 of the companies, chesapeake:
http://www.chk.com/media/news/press-rele...s+8+5+2015+

On that same site there're several other presentations for previous quarters as well.
On the contrary from what you said, for (A), they give ONLY average productivity numbers for each site, as well as a total average. There are no numbers for any 1 or 2 "top" wells. As far as i am aware of, nobody states gas or oil produced PER WELL. It's always an average, which makes sense. I am sure for these well followed large O&G producers, which have to give a public conference call every quarter for their results (the conference call can be listened via podcast by anyone via their websites, and is a 2 way call, that is, analysts can ask questions and expect answers), the management will be called out if they start talking about only a few wells, which is unheard of.
For (B), I am not sure if they understate or how they'd "fudge" the projected capex to keep running the well. I wont be able to tell just by looking at the financials. 
Please do tell if you know any examples or evidence of how this is done

I just checked my North American E&Ps and I have almost 40 companies there. I listen to almost 70% of their earnings webcast.

If you are keen to debate, I suggest that you look at companies like PXD, WLL, CLR, SM, QEP, EOG, HESS, COP etc.

As for my second comment on maintenance capex, if you are able to answer this question: "How much is the capex required to keep year on year production steady?", it will go a long way to understand their presentations and why I think claims that they can make money on $50 or lower oil price is just hogwash (among many other things)