Oil Prices

http://www.businessinsider.my/crude-oil-...EOrWxscTVI

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(19-10-2014, 07:38 PM)specuvestor Wrote: Gulf budget is more "flexible" in a sense they are infrastructure ramp related rather than maintenance related.

Yea shale dynamics will definitely change. Not sure how Valuebeliever come to $40-60 cost and shale has more variable cost

I guess $40-60 is the inflation adjusted price for WTI crude during the global financial crisis. Impossible for oil to decline that low unless we have another "crisis".

Everyone has a theory and here's one from DB:

Deutsche Bank

Anyhow, I was hoping that crude (WTI) will going below $80 for a sustained period of time, say 6 months, and we can probably find out who has been swimming naked.

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http://www.bloomberg.com/news/2014-10-17...om-it.html

Looks like most of the Shale projects will be wiped out if oil dips below $60 as I am looking forward to.

Up to what the Arabs want to do now. There is a chance they pump more and outcompete US companies just like Aussies and Brazilian doing with iron ore.

(20-10-2014, 09:15 AM)Boon Wrote: [Image: eqtf1j.jpg]

http://www.bloomberg.com/news/2014-10-17...om-it.html

I cant believe anyone would start a shale project based on break even price of $140. That makes no sense whatsoever.

My rough feel is that shale projects break even is roughly $80-90 oil price which is why I posted earlier shale should be losing money at $85 WTI

(20-10-2014, 08:45 AM)HitandRun Wrote: Everyone has a theory and here's one from DB:

Deutsche Bank

Anyhow, I was hoping that crude (WTI) will going below $80 for a sustained period of time, say 6 months, and we can probably find out who has been swimming naked.

What theory. Like good economists they are trying to explain what happened, rather than why.

OPEC Finding U.S. Shale Harder to Crack as Rout Deepens

By Grant Smith and Dan Murtaugh Oct 16, 2014

..........................“There’s a lot of discussion on what is the break-even price for shale, and whatever you believe, the reality is there’s no clear consensus. It gives the Saudis the opportunity to test” that level, he said.

Iran, OPEC’s fifth-biggest supplier, isn’t concerned about the drop in prices, which will pass, Roknoddin Javadi, deputy oil minister and managing director of National Iranian Oil Co., was quoted as saying by Mehr, the state-run news agency.

Break-Even Costs

About 2.6 million barrels of daily production, or 2.8 percent of global output, requires an oil price of $80 a barrel or more to be profitable, the IEA said. Only about 4 percent of U.S. shale output needs prices above that level, it said. Canadian synthetic oil projects are the most dependent on high prices, with about a quarter needing oil to remain above $80, the agency said.

Horizontal drilling and hydraulic fracturing in hydrocarbon-rich underground shale layers have helped U.S. oil production grow 65 percent in the past five years to the highest level since 1986. That’s reduced crude imports by more than 3.1 million barrels a day since peaking in 2005.

Production per well was projected to increase in fields in North Dakota, Texas and Colorado, the Energy Information Administration said yesterday. Companies are getting more oil per dollar spent drilling, driving costs down by as much as $30 a barrel since 2012, Morgan Stanley analyst Adam Longson said in a report Oct. 13.

Lower Prices

“Prices aren’t low enough to put these projects at risk,” Matthew Jurecky, head of oil and gas research for the London-based research company GlobalData Ltd., said by e-mail yesterday from New York. “The profit margin on most commercial unconventional oil plays will support prices as low as $50, many below that even.”

U.S. shale producers could keep pumping oil economically even if Brent dropped to $60 a barrel, Bjornar Tonhaugen, an analyst with Oslo-based Rystad Energy, said in an e-mailed report yesterday. Brent would need to remain at $50 a barrel for 12 months for North American shale output to drop by 500,000 barrels a day, he said. Morgan Stanley (MS) said break-even costs at the Eagle Ford shale formation in Texas range from $30 to $60 a barrel.

“We continue to be impressed by how much operators are improving their operations,” R.T. Dukes, an upstream analyst for Wood Mackenzie Ltd. in Houston, said yesterday by phone. “There’s enough out there that significant development would continue even at $75 or $80.”

Expensive Projects

Oil may have already fallen sufficiently to curb the most expensive shale projects, according to estimates from Goldman Sachs Group Inc. Drilling may slow down in North Dakota with WTI below $90 a barrel, Jeff Currie, the bank’s head of commodities research, said in an interview in London on Oct. 1. Producers in the area decreased activity when WTI plunged below this level in 2012, Currie said.

Jefferies LLC, which advises on mergers and acquisitions, estimates that a drop to $80 a barrel or lower in WTI would trigger a reduction in drilling operations, Ralph Eads, the bank’s vice chairman and global head of energy investment banking, said in an Oct. 1 interview. ........

http://www.bloomberg.com/news/2014-10-15...epens.html

Statoil is the gold standard in oil major. I think this is a death knelt for would be believer that oil can only go up. Its not just an oil price issue. Its a cost issue of operators, contractor and equipment supplier. If oil Co. see their Co. as fulfilling shareholders dividend and capital investment as recycling free cash into higher yield then there is lots of pressure on all the value chain of oil major.

More structure change is underway. PM mention that Keppel is great eg. of an employer, 200k salary package for ITE graduate. Sounds familiar?

http://www.bloomberg.com/news/2014-10-19...crash.html

Until the boom goes bust, we will never know what is the price of oil - isnt that true?

Oil price fall won't break shale industry's back

October 20, 2014

Max Mason

http://www.smh.com.au/business/markets/o...18s2y.html

Falling oil price to cut shale costs

Ed Crooks in New York

October 22, 2014

As oil prices have fallen, the cost of production from US shale has emerged as a critical question for investors.

In a downturn, higher-cost supply is most at risk, and the need for horizontal wells and hydraulic fracturing – “fracking” – in shale reserves means they are more expensive to develop than many oilfields in the Middle East.

If oil prices fall further, however, US production costs are likely to fall too, providing a safety valve to reduce the pressure on producers.

There is no single answer to the break-even price for shale developments: it varies from area to area and well to well.................

http://www.ft.com/intl/cms/s/0/0a25ecf4-...z3GsayiHd3